Category: Individual Finances

Navigating Financial Reporting: Understanding the Essentials

Financial reporting is crucial for businesses of all sizes in understanding their financial health. Even if you’re the sole employee, generating financial reports helps you stay on top of your goals and can expedite your growth. 

Financial reporting are standard accounting reports that offer detail into how much money a business has, where the money is coming from and how it’s being spent over a fixed amount of time, such as quarterly or annually. 

Why Financial Reporting Matters

By interpreting and analyzing financial reports, managers can assess a business’s performance in real time, make informed decisions about the business and support everything from tax filings to compliance with financial regulations.

Financial reports help you avoid being caught by surprise. They provide credible documentation for regulators, banks, potential investors and other external stakeholders. 

3 Key Financial Reports You Need to Know

The income statement, also called a profit and loss statement, shows all revenue, expenses, gains and losses during a specific period of time. It starts with revenues and calculates the amount of money a business earned or lost during the period by listing and subtracting expenses and then taxes paid.

The term “bottom line” comes from the last line of the income statement, which calculates profit — the net income — for the business for that period. 

The balance sheet shows assets and liabilities and calculates the difference between the two, which is your equity. Overall, it illustrates how well a business can meet its financial obligations at a given point in time. 

It’s called a balance sheet because the two sides of the equation — assets = liabilities + equity — must balance. Balance sheets are used to determine the book value, or net worth, of a business.

The cash flow statement does exactly what it sounds like. It shows cash moving in and out of the business during a determined time period. This documents liquidity — how well a business can pay bills and fund future growth. 

Cash flow is the movement of money and is different than profit, which is what remains after business expenses are subtracted from revenues. It’s useful for managing budgets and assessing business performance. 

Stay on Top of Financial Reporting Standards with Neely’s

Financial reporting requirements do change often, and the team at Neely’s can keep your business ahead of the changes and trends with our expert outsourced accounting or bookkeeping services. Reach out to us today to get started on the best accounting solution for you.

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Enjoy Your Summer Break but Remember: Tax Planning is a Year-Round Adventure!

Now that the April filing deadline has passed, most people are happily shifting their focus from taxes to summer vacations. However, summer is actually a great time to review your withholding and see how your warm-weather plans might affect your tax return next year.

If this feels overwhelming, don’t worry. We’re here to help! At Neely’s Accounting Services, we want you to enjoy your summer AND set yourself up for financial success.  We’ve compiled some common summertime tax situations and tips to help you stay prepared stress-free.

Summer Wedding = Tax Implications

Getting married? Congratulations! Enjoy your wedded bliss while you add a few important items to your to-do list. If you have name or address changes, it’s important to report it to the appropriate entities. Alert Social Security Administration of name changes and update your address with the United States Postal Service, your employers, and the IRS. To change your address for federal tax purposes, simply complete Form 8822, Change of Address, and send it over to the IRS. This way, you’ll make sure to receive all the necessary documents for filing your taxes smoothly.

Day Camp for Kids = Possible Tax Credit

If you’re sending your kids to summer day camp, it’s good to know that unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit. That means you could potentially get a nice tax credit to help with those expenses.

Part time Work = Filing a Return

Are you working part-time during the summer? Even if you don’t earn enough to owe federal income tax, don’t forget to file a return. Filing early next year will actually allow you to get a refund for any taxes withheld from your paychecks this year. It’s like a little bonus!

Seasonal Work = W2s

Ah, the gig economy! If you’re earning some extra cash this summer by providing on-demand work, services, or goods through digital platforms like apps or websites, we’ve got some great news. You can head over to the Gig Economy Tax Center at IRS.gov to learn more about how participating in the gig economy can affect your taxes.

Employees usually receive a Form W-2, Wage and Tax Statement, from their employers to keep track of their summer work. You’ll need this form when preparing your tax return, and you should expect to receive it by January 31 next year. And remember, if you’re an independent contractor, you won’t have taxes withheld from your earnings, so you’ll be responsible for paying your own income taxes, as well as Social Security and Medicare taxes. Even if you’re no longer working for your summer employer, they should still send you the W-2 so you (or your local CPA) can prepare your taxes properly.  

Tax Extension = More Time to File

For those of you who requested an extension or missed the April deadline, you still have a chance to file your return. If you’re not sure where to start, reach out to us! Our individual services are tailormade to help you fight disorganization and overwhelm and get your taxes filed correctly and on time. And we’re local, which means we’re always available to help answer questions and guide you through the process. Which leaves you more time to enjoy your summer.

Adjust Withholding = Avoid Surprises

Avoid a tax surprise next filing season by reviewing your withholding now. Life events like marriage, divorce, having a child, or changes in income can all affect your taxes, and you’ll want to be prepared before tax time next year. If you need help determining how much withholding is best for you, give us a call. Our friendly, Roanoke CPAs are standing by to help.

Let Neely’s take the stress out of preparing for tax season! Our clients have trusted us with their personal income tax needs since 2007 because we deliver big-city service with hometown values. Contact us today and let us set yourself up for tax time success.

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What’s The Smartest Thing to Do with Your Tax Refund?

Now that tax season is over, you’re probably looking forward to receiving your tax refund. In 2022, over 96 million people were refunded with an average payment of $3,039.

That’s no small chunk of change, and the last thing you want to do is absorb it by making small purchases over time. A windfall like a refund is a great opportunity to set yourself up for a better financial future. While there’s nothing wrong with spending some on a little fun, consider using the money wisely and get ahead financially. Need some ideas? We’ve put together a list of 8 smart things you can do with your tax refund.

1. Build an Emergency Fund

As the adage says, “Anything that can go wrong will go wrong.” Build a little cushion against Murphy’s Law with an emergency fund. The money in this savings account is tucked away for the day when the unexpected happens. Having the funds to address the unexpected can make a stressful situation much easier.

How much should you save? Most financial experts recommend saving between 3-6 months’ worth of expenses. However, it’s always much better to have something rather than nothing so even socking away $500 is a great start. High-yield savings accounts are a great place to keep your money until you need it.

2. Pay Off Debt

Paying off debt can feel decidedly un-fun in the moment, but it can free you up to have more fun in the future. When you pay down debt, (especially the high interest kind) you’re freeing up more of your future income and creating greater flexibility for yourself down the road. If you’re not sure where to start, consider these two popular strategies for tackling debt:

  • Avalanche Method: This involves paying off your debt with the highest interest rate first, so you minimize the amount of interest you pay over time and save money in the long run.
  • Debt Snowball Method: This involves paying off your debts in order from smallest to largest balance, using the money you save to apply to bigger and bigger balances. This method gives you some momentum to keep paying down debt.

3. Fund Your Retirement

Opening a retirement account, or maxing out your yearly contributions, is a fantastic way to invest your refund. Depending on the type of account you have, your contributions can grow tax deferred and when it comes time to enjoy your golden years, you’ll have a healthy nest egg to rely on.

4. Invest In the Stock Market

Use your money to make more money! When you invest in the stock market, whether it’s through mutual funds, stocks, bonds, or ETFs, investing in the stock market allows you to take advantage of compound interest. A disciplined approach to investing, where you tuck away funds year after year, is a great way to achieve financial freedom.

5. Invest in Yourself

You are your greatest asset. Your education, talent, expertise, experience, and work ethic all influence your rate of return through improving your earning potential on the job market.

With more skills, you can expect bigger paychecks and greater job stability. Consider using your tax return to pay for training, tuition, or professional memberships that will yield dividends as you chart your career course.

6. Make an Extra Mortgage Payment

If you own a home, you can make an extra mortgage payment or two and get one step closer to actually owning your home. Paying an extra principal payment on your house builds equity. The more equity you have in your home, the more purchasing (or saving) power you have if you choose to sell down the road. Plus, paying down the principal on a home works like paying down debt. The sooner you pay off the loan amount, the less money you’ll spend on interest.

7. Make a Major Purchase

Maybe it’s time to upgrade your vehicle, buy more energy efficient kitchen appliances, or do some home improvements. Consider using your refund to start a savings account toward these major purchases. We recommend high-yield savings accounts to keep the savings separate from your everyday spending cash.

8. Donate To a Cause You’re Passionate About

Charitable giving makes a big impact in more ways than one. Your donation benefits those in need, improves your community, and gives you the satisfaction that you’re helping make the world a better place. Charitable giving also sets you up for a potential donation deduction on next year’s taxes. When you combine your giving with volunteer work (and maybe invite a loved one to tag along!) you’ve got a solid win-win strategy.

Contact Neely’s Accounting Services

Tax season may be over for 2023, but there’s always another one right around the corner. It’s never too early to begin preparing for tax season (including smart spending). Our Roanoke CPAs are ready to help you craft the perfect tax strategy for your personal or business taxes so you can get every deduction you deserve and make the most out of your refund every year. Contact us today to get started.

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What Documents Should I Bring to a Tax Appointment?

When it’s time to file your taxes, it can be overwhelming to figure out what documents and information you need to bring to your tax appointment. Neely’s Accounting Services has been providing businesses and individuals in the Roanoke area with trusted accounting services since 2007. We’re here to take the overwhelm out of tax season. 

To help you get organized, we’ve compiled a list of the essential items to bring with you when you meet with your Roanoke CPA to file taxes.

Personal Information

Before you get into the specific tax-related documents, make sure to bring some basic personal information to your appointment. This includes your social security number, your spouse’s social security number (if filing jointly), and the social security numbers of any dependents you’re claiming. Additionally, you should bring a valid photo ID and your previous year’s tax return.

Income Documents

The most critical documents you’ll need when you file your taxes are those that show how much money you made during the most recent tax year. The type of documents you’ll need depends on what and how many income streams you have and the list can look different for everyone. Take a look at the different types of income documents and see which ones apply to you:

  • W-2s: This form shows your annual earnings from an employer.
  • 1099s: These forms show income from sources other than an employer, such as freelance work or investment income. These are common for self-employed people or freelancers.
  • Schedule K-1: If you own a business or partnership, you’ll need to bring this document.
  • Rental income: If you own rental property, bring a summary of your rental income and expenses.
  • Social Security benefits: If you received Social Security benefits, you’ll need to bring Form SSA-1099.

Deduction Documents

If you plan on itemizing your deductions, it’s important to bring documentation to support your claims. The list below outlines some of the most common deduction documents you’ll need to gather before your tax appointment:

  • Mortgage interest statement: This document shows how much interest you paid on your mortgage.
  • Property tax statements: If you own property, you’ll need to bring statements that show how much you paid in property taxes.
  • Charitable donations: Bring receipts or other proof of donations you made to charities throughout the year.
  • Medical expenses: Bring documentation of medical expenses that you paid out of pocket, including receipts and bills.
  • Student loan interest: If you paid interest on a student loan, be sure to bring Form 1098-E.

Additional Information

In addition to personal, income, and deduction documents, there are a few additional items you may need to bring to your tax appointment:

  • Bank account information: If you’re expecting a refund, bring your bank account information so it can be deposited directly into your account.
  • Estimated tax payments: If you made estimated tax payments throughout the year, bring documentation that shows how much you paid.
  • Business expenses: If you own a business, bring documentation of your business expenses.
  • Capital gains and losses: If you sold stocks or other investments, bring documentation of your capital gains and losses.
  • Alimony payments: If you paid or received alimony, bring documentation that shows how much you paid or received.

Contact Neely’s Accounting to Schedule Your Tax Appointment

Everyone has a unique financial story. At Neely’s Accounting, our friendly Roanoke CPAs get to know you and your finances to make sure you don’t overpay. We’ll help you get the credits you’re entitled to through the individual attention you deserve. Give us a call or visit us today.

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The Ultimate Age-Based Guide to Retirement Savings

It’s never too early to plan for retirement. No matter where you are on your journey, there are smart decisions you can make today that will pay dividends tomorrow. We’ve outlined a basic financial to-do list for every decade of your life so you can enjoy your golden years in comfort. If you haven’t accomplished everything in each decade, don’t worry! Today is the perfect time to start.

Savings Goals for Your 20s

  • Start an emergency fund. Open a savings account and aim to save enough money to cover 3 to 6 months of expenses. This way, if you lose your job or get sick, you’re less likely to accumulate credit card debt, default on student loans, or dip into other savings (like retirement).
  • In your 20s, you’ve likely aged out of your parent’s insurance coverage and now it’s time to secure some of your own. Common ways to acquire insurance are through your school, job, or through the health insurance marketplace.
  • Set up a retirement account and start saving. You can sign up for your employer’s 401K plan, or enroll in a Roth IRA. The important thing is to be consistent. Have a set amount automatically drafted from your account so you won’t’ be tempted to skip a month. Even as little as $5 will add up, thanks to compound interest.

Savings Goals for Your 30s

  • In your 30s, you’ve likely spent 5 or more years establishing your career. Now it’s time to look at any remaining student loans and create a plan to pay them off. You can use a loan payment calculator to estimate how much you can afford to pay each month and how long it will take to pay the loan in full.
  • If you’re currently renting, chances are you’ve dreamed about purchasing your own home. Now is the time save for a down payment. Your goal should be 10-20% of the cost so you can have immediate equity and avoid private mortgage insurance.
  • In addition to your health insurance, you should add life insurance and a will. Life insurance may be offered through your employer, and a simple will can cost as little as $200-300 to establish.
  • Revisit the amount you save for retirement each month. In your 30s, it’s likely that your income is a bit more consistent. Most experts recommend saving between 10-15% of your pretax income in your established accounts each month.

Savings Goals for Your 40s

  • Perhaps you’ve purchased a home and have set up your retirement funds. To increase your available savings, eliminate any non-mortgage debt like credit cards or student loans. If this feels daunting, consider using the snowball or avalanche method to tackle the task.
  • Give your budget a second look and see if you have any extra cash to throw toward your mortgage principal every month. Paying extra on the principal will increase your equity and shorten the life of your mortgage, saving you money on interest in the long term.
  • If you have children, set up a college savings account. College may seem like a long way off, especially if your little ones are still in grade school, but it will be here before you know it and having some funds tucked away can make a big difference.

Savings Goals for Your 50s

  • Now that you’re on the home stretch toward retirement, maxing out your retirement contributions is a great idea. Saving the maximum amount allowed each year will ensure you stay on track with your goals.
  • Create a living trust. A living trust directs your assets if you become ill, disabled, or impaired by the symptoms of aging. A designated trustee executes the trust to your benefit and the benefit of your family while you are living.
  • Research long-term care insurance and secure the option that’s best for you. Planning for retirement is all about preparing for the unknown. Long-term care insurance helps you pay for care services you may need while protecting your nest egg.

Savings Goals for Your 60s

  • Retirement is right around the corner — and you’ve earned it! Meet regularly with your financial advisor to refine your goals and avoid surprises so you can retire with confidence.
  • You’ve worked hard to set up financial stability for yourself and your family. Review your life insurance and will to make sure it’s current with your situation and wishes.

Get Help to Retire with Confidence

Whether you’re just starting out, or are approaching retirement years, Neely’s can help you stay on track. Don’t be afraid to ask for help — Neely’s has been Roanoke’s trusted source of financial expertise since 2007. Our friendly professionals are standing by! Contact us or stop by our office in Roanoke.

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Emergency Funds: Preparing for the Unexpected

It can feel hard to pay bills each month, much less save for something that may or may not occur. But If the Covid-19 pandemic has taught us anything, it’s that the unexpected can and does happen. That’s why you need an emergency fund.

Experts suggest saving 3 to 6 months of expenses in an emergency fund. This kind of savings may feel like an unattainable luxury (especially during a period of inflation) but having even $500 tucked away can make a big difference in your financial stability. No one likes to think about potential crisis, but it’s even worse to be unprepared. Read on to learn 5 ways an emergency fund could help you in the future.

Unexpected Medical Bills

In 2020, 17% of adults had major, unexpected medical bills with the median cost between $1,000-$1,999. Dealing with a health emergency is one of the top stressors in life. Adding financial strain to an already stressful situation can make your health outcomes worse. An emergency fund can give you peace of mind while you or a loved one recovers.

Personal Property Repairs

If you’re a homeowner or have ever purchased a new car, you probably remember how it felt to be handed the keys to your new property. The possibilities and the sense of accomplishment make it a thrilling experience. However, ownership often comes with maintenance costs. Perhaps you need to replace the roof, or your car needs a new set of tires. Being able to draw on an emergency fund can take some the stress out infrequent but routine upkeep.

Unemployment

An estimated 23 million people lost their jobs in April of 2020. Many wouldn’t have predicted this record number of layoffs just a year prior. Job loss can be scary but having a financial cushion can help you bridge the gap between jobs. One way to be prepared is to add all your monthly expenses like housing, food, and transportation. Then strive to save enough to cover three months, giving you time to find a new job without taking on debt.

Travel to Attend Family Emergencies

What if you had a family emergency or death that required travel? Would you be able to purchase a last-minute plane ticket or hotel? Knowing you can cover these costs can be a huge relief in a time of potential stress and grief.

Pet Health Emergency

According to the National Pet Owners Survey, conducted by the America Pet Products Association, 70% of U.S. homes owned a pet in 2021. Even the most pampered pets can have health emergencies that require surgery. It’s always a good idea to save money in case your beloved animal companion requires unexpected veterinary care.

The reasons to start an emergency fund are numerous and there are ways to make saving easy. Begin by opening a dedicated savings account and set up an automatic contribution each month. You’ll love the peace of mind you gain as your savings grows. As a trusted local provider of accounting and financial services, Neely’s Accounting is here to help. We’ve assisted countless clients in the Roanoke region. Call or contact us today to let us support you as you build your financial safety net.

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