a bookkeeper or accountant recording information in a notebook and discussing graphs and charts with another professional

What Is the Difference Between Bookkeeping and Accounting?

While bookkeeping and accounting both support healthy finances and accurate financial records for businesses, they are not the same thing. Although they work together, they perform separate functions and require different skillsets. And if you want to make wise financial decisions (and avoid costly tax penalties), you need both.

Bookkeeping is actually a building block for good accounting. With greater accuracy and organization in your ledger, you set yourself up for greater success with accounting.

If you find that your business is struggling with financial forecasting and analysis, you might benefit from stronger foundational bookkeeping. Hiring a bookkeeping service can be a great way to strengthen your business’s finances. While many small business owners start out handling the finances themselves, hiring financial professionals can bring huge benefits for their business. The knowledge of financial best practices can help keep your business healthy and growing.

However, you may not know what kind of financial help you need. If that is the case, let’s dive deeper into the differences between bookkeeping and accounting.

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a student carrying her books and walking

Are Student Loans Tax Deductible?

Going to college can be a time of growth and excitement, not to mention set you up for a productive career. But for many graduates, student loans are the college hangover that just won’t go away.

Student loan debt can follow you around for most of your adult life, causing financial stress and impacting your daily decisions. Yes, the Biden Administration has recently made some key changes to help borrowers of federal student loans, including up to $10,000 in debt cancellation (or $20,000 for Pell Grant recipients) for low- and middle-income households. But that may be just a drop in the bucket for borrowers who still owe significantly more than these caps.

While student loan repayments are not tax deductible, the IRS does offer some relief by letting you deduct student loan interest from your federal taxes. No matter how long it takes you to pay off your student loans, if you pay loan interest, you may be eligible for a deduction on your tax return. There is no limit to how many years you can take that deduction.

If you are just learning about this now, and are kicking yourself for not taking this deduction in previous years, there’s good news there as well: you can file an amended tax return to fix any mistakes made on prior returns, and potentially get back an extra refund.

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an adult child discussing financial matters with a parent

Can I Claim My Parents or an Adult Child as Dependents?

With many families seeing the economic benefit of multi-generational households, there’s another benefit you may be wondering about: tax breaks.

If you support someone in your family financially, such as a parent or adult child, you may be able to claim them as a dependent even if you don’t live in the same household.

The IRS has a few tests to help you determine if your financial support allows you to claim a qualifying child or a qualifying relative. The tax credit depends on how your dependent is qualified; the credit for a qualifying child is $2,000 and the credit for a qualifying relative is $500.

Figuring out whether your support qualifies you to claim a dependent can be a little tricky in some cases.

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reviewing Venmo and Zelle payments while filling out a package address

Do You Have to Pay Taxes on Venmo and Zelle Payments?

Payment apps have made it easier than ever to split the bill when you go out with friends, but new rules in the tax code might add some extra complication to apps like Venmo and Zelle.

You can still split the bill with friends without any tax implications, but if you receive $600 or more tagged as “goods and services,” or if you have a business account with a payment processing app, you will receive a Form 1099-K for reporting this income to the Internal Revenue Service on your 2022 income tax return.

If you use multiple payment platforms to receive payments, you may not receive a 1099-K tax form, but that doesn’t mean you don’t have to report this income on your taxes. Keep reading to see what rules apply to you, and how this change will affect your payments and taxes. If there is any confusion, you should talk to a tax professional about your specific situation.

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crypto and irs questions

Crypto and IRS: How Will My Cryptocurrency Sales Affect My Taxes?

Cryptocurrencies (also called altcoins or virtual currency) have seen some wild fluctuations in the recent past. For example, the value of a single full Bitcoin went from $10,000 to nearly $70,000 and then back down to $20,000, all within the span of two years.

Some people have realized huge profits and others have lost thousands (or more), but not everyone has considered the tax ramifications of those sales. The Internal Revenue Service considers cryptocurrencies to be property. That means a variety of taxes likely apply to your altcoin transactions, whether you sell your virtual currencies or use them to pay for goods or services.

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Protect Your Family With Effective Estate Administration and Planning

Protect Your Family With Effective Estate Administration and Planning

If you intend on leaving assets that need to be distributed to your heirs after you pass—whenever that may be—estate planning is an incredibly valuable endeavor.

This is not something to be ignored until your golden years, particularly if you have minor children. If the unthinkable happens, you want to make absolutely sure your family members will be well cared for.

Making an estate plan gives you a chance to convey your final wishes. Then, the act of estate administration, which is the reconciliation of debts, filing of forms, and distribution of your assets, will happen in accordance with your desires—rather than state law.

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making an appointment for tax audit representation

How to Find the Right Tax Audit Representation

Most taxpayers will never get audited. In 2021, the audit rate for taxpayers with income under $1 million was less than 1 percent. But tax audits have a reputation that precedes them, and getting an audit notice in the mail is enough to make a person’s blood run cold. If you’re one of the unlucky few, you may not know what to expect from an IRS tax audit or state audit.

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cp2000 notice

What Does a CP2000 Notice From the IRS Mean for You?

Getting mail from the IRS can be a headache for even the most stalwart of taxpayers. However, a CP2000 notice is a fairly common, auto-generated letter that is typically not too troublesome to resolve. Basically, when the system finds a mismatch between your reported income and the income listed on your tax return, it generates a CP2000 letter to notify you of the discrepancy and provide a proposed solution.

This notice does not mean you are being audited. While one of the most common reasons for an IRS audit is underreporting income, an audit notice is different from a CP2000 notice. For Americans with income under $1 million, the audit rate is less than 1%, so audits don’t happen very often. While it’s a very good idea to enlist the services of a tax lawyer for an audit, you may be able to resolve a CP2000 notice on your own.

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tax fraud jail time

Is Tax Fraud Jail Time Still Sentenced?

Al Capone, the notorious gangster and bootlegger, knew that image is everything. His charismatic demeanor and charitable donations kept him in favor with the public, despite his violent crimes and ruthless corruption. However, no amount of charisma could ultimately save him from the IRS.

The Prohibition-era crime boss was brought down and imprisoned for tax evasion – not murder, not robbery, not bribery, not operating illegal saloons, but evading his income taxes.

Of course, that was the 1920s. Things are different today!

Life has certainly changed profoundly in the last hundred years, but tax fraud could still be worthy of jailtime. While not all tax violations result in imprisonment, the IRS will impose heavy fines on those who deliberately avoid paying taxes.

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oic meaning

What Does OIC Mean? 

In 2011, the IRS launched a new program call the IRS Fresh Start Program. That was really a collection of changes to the tax code to make it easier for people to get relief from tax debt and penalties. Since then, the IRS has added occasional updates to allow for easier tax debt relief. Believe it or not, the IRS doesn’t want you to be buried in debt, they’d like to see you solve your financial problems and get a fresh start. 

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