Do You Need to Worry About Being Audited?

The question has probably crossed your mind this tax season. What’s the reality?

Unless you filed an extension, it’s likely that your annual tax preparation marathon is over. Whether you did your taxes yourself or had a professional complete your return, you probably breathed a sigh of relief as they were filed.

At the same time, you may have been thinking about some tax-related issues that weren’t so pleasant. Did I declare all my income? Was I entitled to the deductions I claimed? What about credits? Should I really have taken them?

And then the big, ugly one hits: What if I get audited?

Multiple Reasons

Even if you are certain you completed your forms and schedules with absolute accuracy, here’s some bad news: You can be audited if your return is chosen at random, or as the result of the IRS’s computer screening. The latter looks at your numbers and compares them to what is considered the “norm” for returns similar to yours.

Hopefully, you won’t have to revisit your 2016 tax return. A random audit is possible, though.

You can be audited if you have investors or business partners who’ve been selected for audits. The IRS also looks for specific red flags, such as unusually high or low numbers in certain areas, as well as other situations.

Communicating with the IRS

If you’re selected for an audit, how will you find out? The answer to that question is very important. The IRS will only notify you via a letter that arrives in the U.S. Mail. The IRS will not email you nor call you on the phone.

Imposters claiming to represent the IRS have scammed hundreds if not thousands of people via phone or email contact. These scammers often insist that you owe money (even if you don’t believe you do) and that you must settle your debt immediately or face dire penalties.

In the case of email, scammers may not even ask for money. They want any personal information they can get about you, especially your Social Security number. For example, they may ask you to  validate your personal information. Never click on any links or open any attachments in such messages. If you’d like, you can report it to

How Audits Work

You won’t necessarily be sitting across a desk from an IRS agent for an audit, though you may be. Some audits are conducted in person, at places like:

  • An IRS field office
  • An accountant’s office
  • Your home, or
  • Your place of business

Sometimes, audits are even conducted long distance through the mail.

What You’ll Need

Obviously, the IRS is going to want to see documentation for the information you provided on your tax return, records of income, expenses, itemized deductions, etc. This is why you’re urged to take such care with your historical tax returns. The IRS recommends that you keep copies of everything for at least three years from the date of filing. This includes things like receipts and bills, canceled checks, medical and dental records, and legal papers.

The IRS can require a six-year history for audits if it finds what it calls a “substantial error.” But if you’re going to be audited, it’s more likely to be within two years.

Three Possible Conclusions

What happens when the audit is complete?

  • No Change. The IRS determines that there were no errors or misstatements in your return.
  • The IRS finds reason to make changes to your return, and you agree that they’re warranted.
  • The IRS finds reason to make changes to your return, but you don’t agree with their findings.

With the third situation, you have three options. You can go through the IRS’s Alternative Dispute Resolution (ADR) program, which provides mediation services. You can file an appeal. You can also simply request a conference with an IRS manager.

Regardless, don’t attempt to  go through an IRS audit alone. If you’re selected, Squire can walk you through the entire process and give you the professional representation you should have.

Paying Estimated Taxes? When You Should

It’s not just the self-employed who must submit estimated taxes. IRS obligations are pay-as-you-go.

Much as we may grumble about them, estimated taxes and payroll withholding are good things. Imagine preparing your taxes in April having not paid in anything through the 12-month tax period. Chances are, a large percentage of taxpayers would be filing extensions (which doesn’t get you off the hook for paying by the April deadline: You’re still expected to submit an estimate of the tax due).

If you’re a salaried or hourly employee of a company, it’s up to your employer to collect and submit an estimate of your income tax obligation every pay period, based on the withholding information you provided on your W-4.

1040-es 2017

The number of allowances you claim affects how much money is taken from each paycheck for taxes. If an insufficient amount is withheld, you may need to pay estimated taxes to avoid penalties.

But if you’re a freelancer or contractor who has no money withheld, the burden is on you. The IRS expects you to do the same thing an employer would: periodically (every three months) make a payment that approximates what you would owe for that quarter. Then, like everyone else, you’ll include that information when you prepare your income taxes, at which time you’ll either get a refund or have to pay in.

Warning: We’ll tell you up front: Calculating estimated taxes is difficult, and the IRS rules and exceptions are complex. If you’ve never gone through this process before, or if your financial situation is changing in 2017, we recommend you gather up your income and expenses, and let us help you with this.

Everyone Is Subject

What this means is that the IRS expects all taxpayers to keep up with their taxes throughout the year. If you’re not having enough taken out of your paycheck, you should be submitting estimated taxes. You’ll avoid paying penalties, and you probably won’t have to file an extension.

Even if your withholding is working well for you, there may be times when you have extra money coming in because of things like alimony, interest and dividends, and prizes. You’ll need to factor this into your income. If you’re a sole proprietor, partner, or S corporation shareholder, and you believe you will owe $1,000 or more in taxes for the 2017 tax year, you’re expected to make quarterly payments. For corporations, the cutoff amount is $500.

Note: The IRS has different requirements for farmers, fishermen, certain household employers, and some high-income taxpayers.


Unless you’re paying electronically, you’ll need to visit this IRS page to print your estimated tax vouchers.

A Complex Calculation

Unfortunately, there’s no magic formula for calculating the estimated taxes you should pay every quarter. That’s why they call them “estimated.” And changes to the tax code aren’t finalized by Congress until the end of the year, by which time you should have made three payments (April 18, June 15, and September 15, 2017; your final quarterly payment is due January 16, 2018).

You can use the worksheet that the IRS supplies (you’ll find payment vouchers here, too). If you’re using accounting software or a website, it’ll be much easier to assemble the numbers. (And if you’re still doing your accounting manually, we can help get you set up with a solution that works for you.) If your financial situation hasn’t changed much since the previous year, you could use your most recent return as a model.

The IRS offers multiple ways to make your quarterly estimated payments electronically. In fact, the agency encourages it.


Don’t Forget State

Do you live in a state that requires you to pay income taxes? If so, you’ll need to check with your state tax agency to see how to handle state estimated taxes. The Small Business Administration (SBA) maintains an online directory that you can consult to locate the appropriate website.

There’s no reason to add penalties to your tax bill when paying estimated taxes can help you avoid that. We’ll be happy to consult with you so you understand your obligation and can fulfill it.



Squire & Company, PC Announces Managing Partner Change And New Partner Additions

Press Release

OREM, UT – MARCH 8, 2017:  Squire and Company, PC has recently announced a Managing Partner change this upcoming year, and the addition of two new Partners effective immediately. Squire and Company is pleased to announce that Jonyce J. Bullock, CPA will assume the position of Managing Partner, effective January 1, 2018. Bullock succeeds K. Tim Larsen, CPA, who has led Squire and Company as its Managing Partner since 2004.  Tim Larsen will continue with the firm as an Advisory and Tax Partner.

Jonyce J. Bullock, CPA


K. Tim Larsen, CPA


“It has been an honor to serve as Managing Partner for the past 13 years,” says Larsen. “The growth and progression of the firm have been outstanding the past 43 years, and I know it will continue to make leaps and bounds under the direction of Jonyce Bullock.”

As the new Managing Partner, Jonyce will play a key role in the strategic direction of the firm, as well as implement new plans for growth and development for the firm and its employees. “I started with Squire as an intern 17 years ago,” says Bullock. “As I have grown with the firm it has been amazing to see the firm stay true to its core values while maintaining a competitive edge in the accounting world. I want to continue to maintain the core values at Squire while finding new ways to provide better service to our partners and clients.”

Bullock now 39, is a member of the American Institute of Certified Public Accountants (AICPA) and the Utah Association of Certified Public Accountants (UACPA). Jonyce recently completed four years of service on the Executive Board of the UACPA, including a term as the President.  She also serves on the AICPA Champions Task Force for the Women’s Initiatives Executive Committee. In 2011, Jonyce was awarded the AICPA Women to Watch – Emerging Leader Award.  She has also been recognized by Utah Business Magazine as a 30 Women to Watch leader, and a Top 40 under 40 Accountant by CPA Practice Advisor. Jonyce holds a Masters of Accountancy from Brigham Young University.



Squire and Company, PC is also pleased to announce the addition of two new Partners; Reuben M. Cook and Joe B. Hillstead.


Reuben Cook

Reuben Cook, CPA, CGMA, CITP

Reuben M. Cook, CPA, CGMA, CITP has recently been named as an Advisory Partner at Squire & Company, PC. He is the chair of Squire’s Wholesale and Distribution industry group and co-leads the firm’s NetSuite services.  Reuben primarily provides CFO Services, ERP Services, and best practice Process Consulting from both a business and technology perspective.  He is known for advising wholesale and distribution companies through their rapid growth, global expansion, and ERP advancements; and syncing the processes between accounting and operations.  Reuben holds a Masters of Accountancy from Brigham Young University.




Joe Hillstead

Joe B. Hillstead, CPA

Joe B. Hillstead, CPA has recently been named as a Tax Partner at Squire & Company, PC. Joe has over 12 years of experience working with clients on a broad range of tax issues and specializes in corporate income tax matters including mergers, acquisitions, and reorganizations.  He also specializes in the U.S. taxation of international transactions, including transfer pricing.  Joe provides consulting and compliance services, primarily focusing on federal and state income taxes for public and private companies, including accounting for income taxes under ASC 740.  Joe received his Bachelors and Masters of Accountancy from Brigham Young University and joined Squire in 2014. Prior to working at Squire, Joe worked for ten years with PwC in Southern California and Washington D.C. serving clients in multiple industries.



About Squire and Company, PC:

Located in Orem, Utah – Squire and Company, PC or Squire, is a forward-thinking CPA firm dedicated to serving businesses in the Mountain West. Squire is a privately held accounting firm that has been voted one of the Best Firms to Work For by Accounting Today. Squire has also been voted one of the Top 25 Accounting Firms in Utah as well as one of the Best Utah Businesses to Work For. For over four decades, Squire has focused their strategies and experience on providing a higher perspective and smarter vision.


Christopher Miller

1329 S. 800 E. Orem, Utah, 84097



House Border Adjustment Tax


President Trump has taken a populist approach to tax reform by linking pro-growth tax reform and regulatory relief to a preservation of U.S. domestic manufacturing jobs.

In addition, House Republicans released a 35-page tax reform plan (the “Blueprint”) that proposes to lower corporate and pass-through business tax rates, reduce individual tax rates, and provide full expensing for certain business costs under a border-adjustable destination-based cash-flow business tax system (“House Border Adjustment Tax”). In addition, the Blueprint would move the United States from a worldwide international tax system to a “territorial” dividend-exemption system.


House Border Adjustment Tax

As it currently stands, the United States assesses income tax on a worldwide basis for domestic taxpayers. By imposing a Border Adjustment Tax, the United States would shift towards a territorial taxing system and potentially lower the corporate tax rate to 20 percent.
Goods produced domestically in the United States and then exported would no longer be subject to income tax in the United States. However, foreign goods that were produced internationally and imported to the United States for sale would be subject to U.S. income tax. Under the Blueprint, all capital expenses would be fully expensed and net interest payments would not be deductible,eliminating a preference for debt financing instead of equity financing. The domestic production activities deduction would also be eliminated. However, the Blueprint maintains the current law for the research credit.
The policy behind the tax is that profits would more accurately reflect the location of the goods consumed. This would reduce the incentive for U.S. companies to create tax inversions in order to shift profits to low-tax countries.
The shift in tax is illustrated in the table below:

Current Tax Code

Tax Code with Border Adjustment Tax

Importing Foreign Goods to Sell in the United States

Not Taxed


Exporting Goods Produced in the United States to sell in Foreign Countries


Not Taxed




Despite similarities, the Border Adjustment Tax is not the same reform that President Trump has considered implementing. However, due to the movement that the proposal has had within the House of Representatives, it has received a large amount of attention. The theory behind President Trump’s proposal is much like that of the Border Adjustment Tax except that his reform is applied by a different tax that would be imposed on foreign goods sold in the United States.
The border adjustment proposal has faced criticism from import-dependent industries concerned that the border adjustment would increase the price of their products to U.S. consumers. Many market analysts believe the Border Adjustment Tax would strengthen the value of the U.S. dollar, thereby lowering the cost of imported products so that there could be little or no net change in the after-tax cost of imports, and thus no significant increase in consumer costs arising from the border adjustment.
The Border Adjustment Tax would remove current law incentives to locate business activities outside of the United States in an effort to reduce U.S. tax liability. In combination with full expensing, the Blueprint could provide strong incentives for businesses to increase their U.S. activities, both for production of goods and services for U.S. consumers and for exporting to foreign customers. However, the effectiveness of the Border Adjustment Tax remains the subject of much debate.



Waiting Game

The Border Adjustment Tax is not currently in place. In fact, there isn’t even a legislative bill yet. It is currently a proposal in the House of Representatives. Orrin Hatch stated “We’ll basically need universal Republican support to pass anything through reconciliation. That’s difficult to accomplish under any circumstances, let alone on something as complicated as tax reform.” Currently, U.S. importers are watching to see if the proposal will progress through the House.


Let’s Talk

If you believe this issue may directly affect your business, please contact:

Benjamin Everitt

Tax Senior Associate

+1 (801) 494-6098


Joe Spillner

Tax Supervisor

+1 (801) 494-6088


Joe Hillstead

Tax Partner

+1 (801) 494-6072

Best of Utah Valley Voting 2017



It’s that time of year for you to vote for your favorite businesses and services in Utah Valley! Voting is now open for the “2017 Best of Utah Valley” awards sponsored by Utah Valley Magazine and Squire would LOVE to have your vote for:

  • Best Accountant
  • Best Financial Advisor (Squire Wealth Advisors)
  • Best Payroll Service (write-in)
  • Best Place to Work For (write-in)

Voting is open until February 28th, so we would appreciate it if you will vote for us as soon as possible! To vote, visit this website and scroll down and click on the ‘Best Professional Services’  link and then start voting for Squire … and your other favorite Utah Valley Professional Services. 😉

Please VOTE TODAY and Share Widely! Thank you Utah Valley for your support all these years!



Are Your Social Security Payments Taxable?

They may be. The IRS’s rules for taxing Social Security benefits could require some studying on your part.

If you’ve received Social Security benefits for more than a year, you probably already know the answer to this question. But if you started receiving those government-issued checks or direct deposits in 2016, now’s the time to find out.

As you know, many IRS rules are absolutely cut-and-dried. But there are many others with exceptions, and this is one of them. Numerous factors are involved in determining whether your Social Security benefits are taxable.

Here’s some of what the IRS considers. (To get the whole picture and find out how these regulations apply to you, contact us at 801-225-6900.)

Way to check if your benefits are taxable

This worksheet displays the formula you can use to determine whether your Social Security Benefits may be taxable. It doesn’t tell the whole story, though. You may owe tax on only part of your payments.

By now, you should have received a Form SSA-1099, the Social Security Benefit Statement. Using the information reported there, you can use the IRS formula that helps determine whether your benefits may be taxable (it’s possible that they won’t be). The worksheet above illustrates this.

If it looks like your benefits are taxable, you will have to determine how much of your distributions are affected. The IRS looks at the combination of your Social Security benefits and your other income. The higher that number is, the more likely it is that you’ll have to pay taxes on a larger percentage of your benefits.


Complex Calculations

In most cases, the maximum taxable portion of your Social Security benefit distributions is 50 percent. You could, though, be taxed on up to 85 percent in one of two scenarios:

  • You add one half of your benefits to the total of all your other income and come up with more than $34,000 ($44,000 if married filing jointly).
  • Your return will report that your status will be married filing separately and you lived with your spouse for any length of time during the year.

Now comes the tricky part: calculating exactly what percentage of your Social Security benefits is taxable. Your 1040 or 1040A instructions should contain a very complex worksheet that can help you. But this, like any other element of your income tax return, must be absolutely correct, or you’ll be receiving post-filing correspondence from the IRS.

Way to check if your benefits are taxable

It’s no small task to do the calculations and reporting required to find out what—if any—percentage of your Social Security benefits are taxable.

There are many exceptions to the rules and formulas we’ve discussed here. And you must fully understand them to come up with the right answer. This will involve poring over IRS instructions that may be difficult for you to decipher.


Start Now

If you know that you’ll start receiving Social Security benefits in 2017, it would be a good idea to start thinking soon about how this will affect your overall income tax obligation. We always advise year-round tax planning. Such an approach not only helps you avoid unpleasant surprises at filing time – it may also help you take action before the end of the year to minimize what you owe. We’d be happy to meet with you and get you started on better, smarter preparation for taxes.

The Ultimate 1099 Guide

As you start this new year, we know that your list of important “to‐do’s” is long. Between chaos of the holidays and year‐end closing processes, it’s easy to miss some of the various required IRS filings. One filing that sometimes slips through the cracks is the 1099. We’ve prepared this guide to help you in gathering the information needed to file your 1099s. It also includes some tips on how to prepare for your 1099 filings and avoid last‐minute stress.

Included in this guide:

  • 1099 Basics – What are 1099s and who do you need to provide them to?
  • Data to Gather – What information do you need from those receiving 1099s?
  • TIN Verification Process
  • Squire Services

If you have any further questions, please feel free to contact us at 801‐225‐6900.

1099 Basics

What is a 1099?

A 1099 is a form of information return required by the IRS. There are several different types of 1099 forms, the most common being a 1099‐MISC which is required for independent contractors. This form is similar an employee’s W‐2. Other common 1099 form types include a 1099‐INT and 1099‐DIV. A 1099‐INT is required to be sent to a business or individual to which you paid at least $10 of interest to during the year. A 1099‐DIV is required to be sent to individuals which you have paid at least $10 in dividends during the year. For more information on the different types of 1099 forms that may be required, please visit or contact Squire at 801‐225‐6900.
Please note, as you file your business tax return you are attesting to the IRS that all appropriate 1099 forms have been filed.

Due Dates:
January 31, 2017 – 1099‐MISC form mailed out to contractors
January 31, 2017* – Electronic or paper filing with the IRS

*Please note that this date has changed for the 2016 filing year. In an effort to reduce identity fraud, the IRS is requiring that all 1099s be mailed and filed by January 31, with increased penalties for late filing.

Who receives a 1099‐MISC?

  • Independent contractors
    • Any contractors you have paid $600 or more during the year. This includes:
      • Money paid
      • Value of services exchanged
      • Value of prizes and awards
      • Any other income payments
    • Includes companies that are sole proprietors, partnerships, or LLCs
    • Does not include incorporated companies
  • Lawyers
    • You are required to send a 1099‐MISC to all lawyers/law firms, even if they are incorporated
  • Rents
    • Any company who you paid $600 or more in rents to throughout the year


Data To Gather

For every independent contractor, you need to collect a W‐9 Form* which includes:

  • Company/individual name, address and TIN (tax identification number)
    • Although TIN verification is not required, we highly recommend verifying each vendor’s TIN with the IRS. If a submitted 1099 does not match IRS records, you will receive a notice from the IRS. See below for steps on how to register for TIN verification with the IRS.
    • Company type (LLC, Corporation, Partnership, Sole Proprietorship)
    • Signature and date of company/individual
*Note: A W‐9 form should be collected for all independent contractors, even if they are incorporated, as proof of entity type. Link to download Form W‐9 can be found here.

TIP: We have found it useful to require receipt of a W‐9 form for any new vendor before first payment is remitted. For existing vendors for whom you do not have a W‐9, it may be a good idea to require one before issuing their next payment. It is also a best practice to verify all vendor TINs and other information throughout the year rather than during 1099 preparation.
From your financial records, you will then need to have the total amount paid to that individual/company for the applicable tax year.


IRS TIN Verification Process

User Information

Getting setup

  1. (Click on “REGISTER” on IRS Login page to access form)
    • Some required info:
      • AGI for one of the last three years.
    • No access fee.
    • Available 24 hours a day.
    • Adding Authorized Users
      • See p. 13 of IRS Publication 2108A (link below)
  2. Using the system
    • IRS e‐services login page
      • > For Tax Pros (Drop‐down menu, top right) > Access e‐Services (Mid‐page leftside) > Login or Register (Mid‐page left side)
    • Select TIN Matching
      • 1. Accept terms (after each log in)
    • Two options for submission
      • 1. Individual TIN Verify Session
        • a. Enter each name and TIN one at a time, submit as a batch.
        • b. Instant response
      • 2. Bulk TIN Verify Session
        • a. Must be in .txt format
        • b. .txt file must contain the following information (TIN TYPE; TIN NUMBER;NAME)
          • i. TIN Type
          • 1. “1” represents and Employer Identification Number (EIN)
          • 2. “2” represents a Social Security Number (SSN)
          • 3. “3” represents an unknown TIN type.
            • ii. TIN Number (Must be 9 digits)
            • iii. Name
              • 1. Omit any special characters that are part of the business namewith the exception of hyphens (‐) and ampersands (&).
              • 2. Enter a minimum of 1 and a maximum of 40 alphanumeric characters.
        • c. Takes up to 24 hours to get a response
        • d. Bulk TIN Matching files may contain up to 100,000 name/TIN combinations.
  3. FAQs/Tips
    a. Passwords expire every 6 months.
    b. PINs never expire.
    c. Complete guide: IRS Publication 2108A


Squire Services

Services offered:

  • TIN Verification
  • Preparation of 1099 forms
  • Mailing of 1099 forms
  • Electronic filing of 1099 forms
Any additional services, such as research for vendor information, data migration, or rejected TIN verification issues, will be charged by the hour.



Please contact Squire at 801‐225‐6900 for a quote regarding 1099 pricing.
1099 information is required to be remitted to Squire by Wednesday, January 25th to guarantee an ontime filing. Rush fees may apply to any information received after the 25th.

We cannot guarantee on‐time filing if information is received after Wednesday, January 25th.


NOTE: Missing W9/Vendor Info
We are aware that there are circumstances in which you may have difficulty in receiving a W9 or other 1099 information from a vendor. Please note that you may still take advantage of the discount if all other 1099 information is submitted to us before the deadline. If you have any questions, feel free to contact us.

If you plan to use Squire’s 1099 services, please notify us as soon as possible so we can plan accordingly.

Get Ready for Tax Preparation: What You Should Do

April 17 is still months away, but now’s the time to start preparing.

You’re undoubtedly very busy right now. It’s the middle of the holiday season and moving quickly toward the end of the year, so you probably have reports and other documents to prepare. Perhaps you’re running sales or offering discounts to pare down your inventory before December 31.

Why should you be thinking about something that’s not due until next spring?

Two reasons. First, there are tax-related activities you may want to know about and take care of before the calendar flips over to January. And second, you’re already deep into year-end wrap-ups of one kind or another. Some of your tasks may be able to do double duty.

Give your accounting application a workout.

You’ll want to have all of your 2016 expenses recorded, your bills paid up, and all income entered.

  • Pay special attention to expenses, many of which will be tax-deductible. What about employee expense reports? Ask your staff to submit expenses quickly or risk not getting paid in 2016. Same goes for any billable time they may have forgotten. Have you or your employees bought anything that needs to be charged to a customer?
  • You’ll find a lot of your expenses in your bills.
  • How do your aged receivables look? Although December is a terrible time to try to collect outstanding debts, at least get on past-due customers’ radar. You may not get paid until January, but you’ll have started the conversation.

Stress the importance of accurate, promptly-submitted timesheets. If you have full-time or contract employees, you’ll have to prepare and dispatch 1040s and/or 1099s in January. Since people will be coming and going during December, send out an email or otherwise remind your employees they’ll need to take care of timesheets before December’s end. You’ll want a solid year of payroll information when tax time rolls around.

Check your estimated tax payment history for 2016.

You should have made three payments by now. If you need to catch up, try to do so before the end of the year. You may still be penalized, but make a good-faith effort to have fulfilled your 2016 quarterly IRS obligations.

Designate a special place for all tax-related information. This is more applicable if you do your accounting tasks using paper and/or Excel, since accounting applications serve as clearinghouses for all of your financial information. If you do a lot of your financial tracking in Excel, be sure that those spreadsheets are saved to one folder, with nothing extraneous included. Store papers in folders with flaps, not file folders that can spill critical documents.

Shoot for an early filing. You can’t, of course, actually file your taxes until sometime in mid-January, when the IRS releases its finalized forms and opens the official filing season. If you find out in January that you’re going to owe money, you still have almost three months to pull that together.

Make your to-do list for January.

Again, January will fly by because of the holiday slow-down. Remember to:

  • Make your fourth quarterly estimated payment by January 17, 2017.
  • Create and distribute 1099s and W2s.
  • Educate yourself on any end-of-year tax laws changes from 2016. It’s a good idea to do this throughout the year so you can do any financial planning necessary, but certainly see if anything slipped in under the wire.

Squire can help by answering any last-minute tax questions, and we’d be happy to work with you on preparation. Either way, January is a good time to start thinking about your 2017 income taxes, as odd as that sounds. Year-round tax planning gives you peace of mind throughout the year, and can help you minimize your tax obligation.

Last-Minute 2016 Tax Tips

April 17, 2017, sounds like it’s a long way off. But December 31, 2016, isn’t. If you haven’t given much thought to your 2016 income tax obligation, it’s time.

The holiday season has begun, and the end of the year is approaching. You probably have personal and business to-do lists a mile long. Gifts to buy. Friends and family to visit. Gatherings to plan, and customers to thank for another year of their patronage.

Somewhere in there, though, we highly recommend that you add a few more items related to your 2016 income taxes. There’s still time to reduce your financial obligation to the IRS.

Ask yourself these questions:

Have you been generous enough this year?

You surely know that you can deduct cash and non-cash contributions that you make to qualified organizations. This includes things like churches, nonprofit schools and hospitals, veterans’ groups, and the Salvation Army. You can also claim out-of-pocket expenses incurred if you did volunteer work for a qualified organization.

The IRS has many rules—and exceptions—governing these donations, so if you’re not sure about the status of a group or institution, ask. In some cases, you may need to get a letter from that organization documenting your contribution.

Tip: You can also consult an online IRS tool called Exempt Organizations Select Check.

You may also be able to “gift” money or property worth up to $14,000 ($28,000 for a married couple) to someone without having to pay the IRS’s gift tax. Again, there are numerous rules and exceptions.

Have you paid all estimated taxes due to date?

By now, you should have made three estimated tax payments for 2016; the final one will be due in January 2017. If you forgot, or if you fear you may not have paid enough, the IRS will accept those quarterly payments any time, even if they occur outside of the stated deadlines (though you may face a penalty).

Have you been tracking your company’s income and expenses carefully?

Here’s where Squire can pitch in a lot. If you let Squire work with you throughout the year—starting now, even—we can help you with the complex financial reports that you need to really understand the status of your company’s finances.

You should be creating reports regularly on your own to keep an eye on things like aged receivables and payables, sales, inventory levels, and expenses. If you’re using an accounting application, this is easy. You can also set up Excel to display report data. And you can even pull together numbers manually, but it’s not a simple, automated process.

Bottom line: We know what information you need in order to stay on top of your income tax obligation year-round and avoid filing-time surprises.

Have you generated a lot of revenue without a lot of expenses to offset it?

We have two suggestions here. First, have you been putting off a major acquisition like equipment, vehicles, property, or technology tools? If so, consider following through on one or more of those purchases before December 31. Second, can you defer some income to 2017? Call us for tips on both of those tax-savings ideas.

Have you been contributing regularly to your retirement plan?

The money you’ve been putting away to use after you stop working is financially advantageous in two ways. You’ll be more secure in your retirement years, of course. But depending on the type of plan you’re enrolled in, it could make good income tax sense to max out your contributions before the end of 2016. Don’t know the limits of your particular plan, or not sure how your taxes are affected? We can help.

Have you been following the possible tax law changes for 2016?

Much of this information, of course, isn’t final yet. And it’s hard to tell from just watching the TV news or reading the newspaper just what might have impact on your 2016 income tax obligation. We follow tax law closely, and we know what you might be able to anticipate.

The best time to start planning for the next year’s income taxes, frankly, is any time. November and early December, though, are especially critical in terms of taking any action you need to before December 31. So let Squire help you minimize your tax obligation for this year.


New to Estimated Taxes? The Rules

We’re into the fourth quarter of 2016: Have you been keeping up with your estimated income taxes?

There are a lot of advantages to being self-employed, like—usually—no designated times you must be in an office somewhere. No dress code. Running to Costco when it’s not jammed. Having your dog as your administrative assistant and non-judgmental co-worker.

But if 2016 was your first year of being your own boss, we hope that you’ve acquainted yourself with the most onerous disadvantage to being self-employed: the self-employment tax. We hope, too, that you’ve already made three estimated tax payments on your 2016 taxes, and you’re planning for the fourth, which is due on January 17, 2017.

Not the Only Ones

It’s not just the self-employed who must pay estimated taxes. U.S. taxpayers who don’t have the requisite funds deducted regularly from their paychecks are expected to submit a payment four times a year on dates determined by the Internal Revenue Service (usually the 15th of April, June, and September, and January of the following year, unless those days fall on a weekend or holiday). This applies to anyone who expects to owe $1,000 or more in taxes at filing time, including people who:

  • Receive interest or dividends,
  • Receive rent from tenants,
  • Sold an asset, or,
  • Are living on a combination of Social Security and pensions, and don’t have enough withheld to cover their tax bills.

Note: Farmers, fishermen, and some high-income earners may have special rules applied to them. If you have non-W2 income and are at all uncertain of your estimated tax obligation, please talk to us.

Quarterly Forms

The IRS provides printable vouchers on its website that you can complete and mail in to the agency, accompanied by a check or money order. Be sure to submit your payments to the address assigned to your state; you’ll find this information on the Form 1040-ES, the same page where vouchers are located. If your business is a corporation, you’ll usually use Form 1120.



If you want to pay your estimated taxes by check or money order, print out these vouchers on the IRS Form 1040-ES and mail them to the correct address for your state.



You can also pay by debit or credit card over the phone or online through one of the IRS’s approved payment processors. These incur additional fees. Or you can use the IRS’s own phone and online system, the Electronic Federal Tax Payment System (EFTPS). This is a free U.S. Department of Treasury service, but you’ll have to enroll to use it.

Note: If you absolutely can’t pay or want to consider an annualized alternative, we can tell you about your options.

If you think you should have been submitting tax payments throughout 2016 and haven’t, you should by all means try to catch up as soon as possible. You may be subject to some penalties, but the sooner you attend to your obligation, the better. If you wait until you file to pay what you should have been paying throughout the year, you may find it difficult to pay your entire tax obligation all at once. And you’ll need to start paying the next year’s estimated taxes at the same time.

Calculating Your Estimated Tax

This, of course, is the hard part. The IRS provides a very complex worksheet for corporations, and the Form 1040-ES offers some help to other taxpayers. If you are an individual or business whose adjusted gross income, taxable income, taxes, deductions, and credits haven’t changed that much from the previous year, you might use that return as a model as you begin to estimate.

But tax law changes from year to year. And especially if you’re self-employed, work in a seasonal business, or have an unexpected windfall or financial crisis, coming up with a good estimate that neither leaves you with a lot to pay at filing time nor unnecessarily ties up funds in taxes can be quite a challenge.

So if you have income beyond W-2 compensation and you want to be in compliance with IRS requirements, what’s the answer? Year-round tax planning. Tracking cash in and out month by month and quarter by quarter is the only way to ensure that you’re not in for a big surprise when you file. So contact us, and together we can put together a strategy for dealing with your estimated taxes.