First State CPAs and Associates

8 hours ago

𝗪𝗵𝘆 𝗱𝗼𝗲𝘀 𝗺𝘆 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗹𝗼𝗼𝗸 𝗽𝗿𝗼𝗳𝗶𝘁𝗮𝗯𝗹𝗲 𝘄𝗵𝗲𝗻 𝗺𝘆 𝗯𝗮𝗻𝗸 𝗮𝗰𝗰𝗼𝘂𝗻𝘁 𝘀𝗮𝘆𝘀 𝗼𝘁𝗵𝗲𝗿𝘄𝗶𝘀𝗲?

Your business can show a profit on paper even when you haven't actually collected all of that money from your customers.

If you use accrual-basis accounting, revenue gets recorded when you issue an invoice, not when the customer actually pays you.

That means your Profit & Loss statement can include revenue you haven't collected yet.

So you might see a healthy profit number while a chunk of that money is still sitting in Accounts Receivable.

This is why your P&L and bank balance tell you different things about your business.

Your P&L shows financial performance based on your accounting method. Your bank account shows the cash you actually have available.

If there's a big gap between the two, pull your Accounts Receivable aging report and look at how much of your revenue is tied up in unpaid invoices, especially those that are 90+ days past due.

𝘞𝘩𝘦𝘯 𝘸𝘢𝘴 𝘵𝘩𝘦 𝘭𝘢𝘴𝘵 𝘵𝘪𝘮𝘦 𝘺𝘰𝘶 𝘤𝘩𝘦𝘤𝘬𝘦𝘥 𝘩𝘰𝘸 𝘮𝘶𝘤𝘩 𝘳𝘦𝘷𝘦𝘯𝘶𝘦 𝘪𝘴 𝘵𝘪𝘦𝘥 𝘶𝘱 𝘪𝘯 𝘶𝘯𝘱𝘢𝘪𝘥 𝘪𝘯𝘷𝘰𝘪𝘤𝘦𝘴?
DM us if you want clearer visibility into your true cash position. ... See MoreSee Less

First State CPAs and Associates

1 day ago

Top financial moves in the last few months of the year...GO ... See MoreSee Less

First State CPAs and Associates

2 days ago

𝗖𝗮𝗻 𝘁𝗮𝗸𝗶𝗻𝗴 𝗺𝗼𝗿𝗲 𝗺𝗼𝗻𝗲𝘆 𝗼𝘂𝘁 𝗼𝗳 𝗺𝘆 𝗜𝗥𝗔 𝗺𝗮𝗸𝗲 𝗺𝘆 𝗦𝗼𝗰𝗶𝗮𝗹 𝗦𝗲𝗰𝘂𝗿𝗶𝘁𝘆 𝘁𝗮𝘅𝗮𝗯𝗹𝗲?

Yes, IRA withdrawals can increase what the IRS calls your provisional income, which determines how much of your Social Security benefits become taxable.

The IRS calculates provisional income using:
• Your Adjusted Gross Income (AGI)
• Tax-exempt interest
• 50% of your Social Security benefits

Depending on that total, your Social Security falls into one of three ranges: none of your benefits are taxable, up to 50% can be taxable, or up to 85% can be taxable.

But that doesn't mean you're paying an 85% tax rate on Social Security. Instead, up to 85% of the benefits you received could be included in your taxable income and then taxed at your ordinary income tax rate.

𝘖𝘯𝘦 𝘪𝘮𝘱𝘰𝘳𝘵𝘢𝘯𝘵 𝘥𝘦𝘵𝘢𝘪𝘭: Even tax-exempt interest counts in this calculation.

For example, interest from municipal bonds may not be taxable itself, but the IRS still adds it when calculating your provisional income. That additional income could push you across a threshold where a larger portion of your Social Security becomes taxable.

The same thing can happen when you take additional taxable withdrawals from a Traditional IRA. A larger withdrawal raises your AGI, which can raise your provisional income and potentially make more of your Social Security taxable too.

𝘏𝘢𝘷𝘦 𝘺𝘰𝘶 𝘤𝘩𝘦𝘤𝘬𝘦𝘥 𝘸𝘩𝘢𝘵’𝘴 𝘱𝘶𝘴𝘩𝘪𝘯𝘨 𝘶𝘱 𝘺𝘰𝘶𝘳 𝘱𝘳𝘰𝘷𝘪𝘴𝘪𝘰𝘯𝘢𝘭 𝘪𝘯𝘤𝘰𝘮𝘦? ... See MoreSee Less