We want to wish all our friends, clients, vendors and employees a happy healthy new year. A business is not built nor does it grow through the work of the founders and owners alone. It is the work of dedicated employees, clients and vendors all working together. So our thanks to our great employees that work hard to not only exceed our expectation but also the expectation of our clients. Thanks as well to our clients new and old who have not only placed their trust and confidence in us but who have also referred their friends, relatives and business associates contributing to our growth and stability. Thanks to the many vendors who have helped us improve our process and provided us with the products and services we needed to service our clients.
The standard mileage rates for 2015 have been announced by the IRS. The deduction for business use of auto for 2015 is 57. 5 cents per mile (an increase of 1.5 cents per mile over the 2014 rate of 56 cents per mile). With gas prices so low, we are not sure how IRS came to this conclusion. We do know sometimes it’s best not to ask the government to explain their actions. Strangely enough the rate for medical and moving mileage is down .5 cents per mile for 2015 to 23 cents per mile.
The extenders act passed by congress and signed by the president contained some good news for tax payers, but it also included some bad news for those that run afoul of the tax code by increasing certain penalties by indexing them for inflation beginning 1/1/15. These include the Failure to File, Failure to Pay Penalties along with the penalties for Failure to File Certain Information Return. On the bright side all you have to do to avoid these increased penalties is to file and pay your taxes on time.
The recently passed Tax Increase Prevention Act restores the ability of those over 70 ½ to make distributions from their IRA directly to a qualified charitable organization instead of taking the Required Minimum Distribution (RMD) for 2014. If you are one of the few taxpayers that are 70 ½ or older and have not yet taken your RMD you have until 12/31/14 to make a distribution directly to a qualified charitable organization. It’s important to remember that while this strategy avoids tax on the distribution, it also makes the contribution non-deductible.
No matter what you believe in, may this holiday season bring you Peace, Happiness and Love for these should be the universal goals of all mankind.
Congress passed and the president signed the “Tax Increase Prevention Act of 2014,” This law restores many expiring tax previsions but only for 2014. It may also be the shortest lived law in the history of our country as it will be in affect less than two weeks from approval to expiration. For Individuals the law extends until the end of 2014; Nonbusiness Energy Property Credits, Above-the-Line Deduction for Educator Expenses, Exclusion for Discharge of Home Mortgage Debt, Mortgage Insurance Premiums as Deductible Qualified Residence Interest, State and Local Sales Tax Deduction, Above-the-Line Deduction for Higher Education Expenses and Nontaxable IRA Transfers to Eligible Charities. For business it extends the Research Credit, Work Opportunity Tax Credit, Indian Employment Credit, The Reduction of Built In Gains Period for S Corporation along with many other credits and other provisions.
It’s all in your perspective; client visited me this week to do some tax planning for their business. While reviewing their business we found a number of steps that could reduce their corporate tax bill from $400,000 plus to just over $200,000. I thought we were doing great but their comment was you mean we are going to still have to pay over $200,000 in taxes?
Did you know that you can be a non-resident alien for the purpose of living legally in the U.S. while being a resident for the purpose of filing a U.S. tax return? To be a resident for tax filing you must simply meet the physical presence test. The test makes you a resident for tax purposes if: You lived in the U.S. for at least 31 days in the current year and 183 days for a three year period that (1) includes all days in the current year (2) 1/3 of the days in the first prior year and (3) 1/6 of the days in the second prior year. To make matters even more interesting you may be able to avoid this test if you can show “a closer connection” to another country. Sound complicated it is and getting it right can make becoming a legal resident less painful (but not pain less).
Think filing bankruptcy solved all your problems? When tax time comes you may find you no longer owe your creditors but filing your return is much more complex. Was a bankruptcy estate created? If so what assets and what liabilities were part of the bankruptcy estate? Adjustments will need to be made to basis and other tax attributes, making your tax return much more complex this year.
We can’t help you if you don’t tell us why you are calling. I am constantly amazed that people call our office and either refuse to give the receptionist the information she needs to get them the help they are looking for. They are offended when asked the reason for their call or what it is regarding. They often refuse to provide their full name and or a phone number in case of a disconnection or because someone might need to get back to them. Our firm policy is very clear any one that answers the phone is to provide you with their name and ask you for yours. They are to get a phone number and the reason for the call. You don’t have to provide confidential information, stating something as simple as, I am a client with a tax question or I have something to go over about my payables is enough to get your call roughed to the right person. Its simple telephone courtesy when we call you we tell you who we are and why we are calling when you call us we ask that you do the same.
If you get a notice from the IRS, do not worry do not shout, send it to your accountant and let him tell you what it’s all about.
When is the last time you really took a look at the financial statements for your business? Do you know how the year will compare to last year? How strong the cash position of your business is? Are your collections keeping pace with your sales? Has the value of your business increased or decreased over the last twelve months?
Santa is not the only one that should be making a list and checking it twice. Financial success requires planning. Your planning list should include reviewing: saving, investing, being tax smart and controlling spending.
I am often asked by marketing consultants who our most important competitor is? For me this is a very difficult question as I never think about outside competitors, I have always considered that the most important competition is that we have with ourselves. This internal competition makes us work hard to constantly look for better ways to serve our customers and to make our employees more effective and better at that they do. It also means we have to work to be the best place to work for our employees for if our employees are unhappy then you can bet our customer will also be unhappy.
You can contribute up to $5,000 to an individual retirement account or Roth IRA for 2014 and, if you’re 50 or older, make catch-up contributions of an additional $1,500. You also have until April 15, 2015, to make an IRA contribution for 2014.
Did you get married or divorced? Change jobs or retire? Now is the time to review events in 2014. A change in employment, for example, may bring about severance pay, sign-on bonuses, stock options, moving expenses, and COBRA health benefits, among other changes that affect your taxes.
Self-employed filing on schedule C, you can deduct the premiums for medical, dental and long term care insurance coverage for yourself, your spouse, your dependents and non-dependent children under 27 years of age at year end. Bonus this deduction comes right off your adjusted gross income on page 1 of your 1040 tax return.
The expenses of almost, but not quite, business acquisitions are deductible as miscellaneous itemized deductions on schedule A of your tax return; these are things like legal expenses and commitment fees for obtaining financing. But the expenses of travel and audits investigating possible business acquisitions is considered a personal expense and are not deductible if the business is never acquired.
Did you start a new business this year? If so you can deduct up to $5,000 of startup costs. Startup costs in excess of $5,000 must be amortized over 180 months. Startup costs are the costs of investigating and or setting up a business before the actual operation begin.
If you own rental property that you want to replace it with a more expensive rental property or turn the equity in one property into several properties, think about making a Like-Kind Exchange. By doing this you can avoid paying the tax on any gain when you sell your original property until you sell the replacement property. These exchanges can be complicated so if you think this strategy may help you consult your tax advisor for guidance before taking any action.
Because a sale is an installment sales does not prevent you from electing out of the installment method and reporting all of your gain in the year of the sale. This would mean that only the interest portion of collections would be taxable in future years. This is sometimes helpful to avoid making larger portions of your Social Security taxable in future years or to avoid a multiple year of inflated AGI (Adjusted Gross Income) due to installment collections that will make thresholds higher for itemized deductions or phase our certain tax credits.
Installment sales of real property can delay paying the tax on the portion of the sale that is not collected in the current year. This can be helpful in lowering AGI (Adjusted Gross Income) to avoid NIIT (Net Investment Income Tax), protect certain itemized deductions or protect tax credits which may phase out at higher AGI. But remember if capital gains rates increase you could end up paying tax on the collections of the gain which are delayed at a higher rate.
Making an installment sale of real property then undercharging from interest on the sale to try to take advantage of the lower long term capital gains rate and avoid paying the higher ordinary tax rates on the interest will not save you anything. The tax code requires that if the interest rate is below the AFR (Applicable Federal Rate) the principal and interest portion of the sale must be recomputed to take into account what would have been the interest at the AFR.
Need more tax write off on your rental property? Cost Segregation might help get it for you. Cost Segregation can increase current depreciation deduction by reclassing what would normally be depreciated as 27.5 or 39 year real property to equipment, fixtures, and mechanical systems with depreciation lives as short as 5 or 7 years. But be careful rental losses are generally only deductible against passive activity income and depreciation claimed today will not be available later in the activities life, it will also have to be recaptured on sale of the rental activity.
Using your auto for business is not enough to ensure a deduction for business use of auto. You must also keep records of the business use of your auto which can be used to support your deduction. These records must be kept at or near the time of business use. It needs to include the business miles driven, date driven and business purpose. Records are required to support a business deduction regardless of whether the deduction is related to a self-employed business or the expenses of an employee that are not reimbursed by the employer. Be prepared. There are two questions which must be answered on a tax return any time business use of auto is deducted. They are (1) do you have a log to support your deduction and (2) is it written. It is perfectly acceptable to keep your log with your appointment calendar. Simply add to appointment names and dates the number of miles driven.
Tax exempt income makes the most sense for tax payers in the highest income tax brackets. 1.00% tax free is equivalent of 1.18% if your tax bracket is 15% but if your tax bracket is 39.6% and you are subject to the additional NIIT of 3.8% bringing your tax rate on investment income to 43.4% your 1.00% tax free yield becomes the equivalent of a 1.77% taxable yield.
This year the maximum tax rate on long term capital gains from investments is no longer 15%. Instead for those in the top 39.65 tax bracket, the capital gains rate is 20%. Those in the 25% through 35% tax brackets will be subject to a long term capital gains rate of 15% and those in the 10% and 15% tax brackets get a 0% long term capital gains rate this year. This means that by properly timing the sales of appreciated investment into years you are in a lower tax bracket, you get to keep more of your gains because you pay less in tax.
The Supremes are at it again. In a case that could change how states tax business located in there state last week, the Supreme Court heard the case of Comptroller of the Treasury of Maryland v. Wynne, which involved a Maryland resident, Brian Wynne, who is part owner of Maxim Healthcare Services — a nationwide health care company that is based in Columbia, Md., but is also taxed in many other states where it operates. Wynne and his wife Karen’s attorneys argued that Maryland’s income tax laws violate the Commerce Clause of the Constitution.
During the oral arguments, the justices challenged attorneys for both sides, so it is difficult to predict what the outcome will be. But it could affect how states tax out of state business activities.
Thinking about buying a business, make sure to let the professionals check it out before you sign on the dotted line. Business acquisitions are complex and failure to make sure you are getting what you think you’re getting can be very costly. Things like unpaid sales taxes of the prior owner can become your responsibility. You could also find that revenues and profits are not what was represented or that payroll taxes were unpaid. These are just a few of the pitfalls business buyers find everyday–often after the purchase is closed and the seller has been paid in full. Don’t let yourself be pressed into a rapid closing that prevents you from doing your due diligence. Often times when a seller is in a hurry to close the sale and collect the money there is a good reason for them being in a hurry. That reason does not bode well for the buyer.
Want to retire with enough money to live without worrying about running out of money? How much you save each month for retirement is much less important than when you start saving for retirement. For example if your were to start saving $50.00 per week at age 25 and keep this up for 40 years until you were 65 and earned you earned 5% on your savings you would have $370,585 at 65 to use in retirement but if you put off starting for 20 years and put away $100 per week for 20 years earning the same 5% you would only have $178,566. At $50 per week for 40 years you will have put in $109,000 while at $100 per week over 20 years you will have put in $104,000. This proves that time really is money and that the sooner you start saving, the more secure you will be in retirement!
I often receive emails from clients with questions like “I am collecting long term disability, how much tax will I have to pay?” The problem is the answer requires more information. Without complete information, it’s impossible to give a meaningful answer. In this case I needed to know: was the disability insurance purchased using after tax dollars or was it purchased by an employer using employer or other pretax dollars. That is not the end of it–depending on the answers to these questions, there is other information I need to advise them properly. Like anything in life the answer almost always depends on many factors and answering without knowing all the required information does not do anyone any good.
Thinking about taking your business to the next level in the coming year? Then quit wasting your time doing things that you can have others do more efficiently and/or don’t create the growth and profitability your desire. Get back to what is important, serving your customers better and finding more customers to serve.
There is still time for some traditional year-end tax strategies. The election results are in, so it’s a good bet tax rates at least won’t be increasing in the near future. This makes income deferral an old strategy that will still work for you. Selling Real Property–think about an installment sale. This will delay collection of the tax until you collect the money. The stockmarket has reacted favorably to the election, so put off selling those appreciated stocks until you hold them at least a year or better yet until next year. Thinking about a ROTH conversion, wait till January and you will delay the tax on the conversion for a full year. A little planning now can really reduce your tax bill for this year, so schedule an appointment to see your tax advisor and review the steps that make sense for you this year.
Put your children to work. If you have a business, why not put your children to work? Even young children can often preform services like stuffing envelopes, taking out the trash, cleaning up around the office, or other activities that will help teach them a work ethic and let you pay them; moving income from your tax bracket to theirs. You can use this as an opportunity not only to teach them the value of work but also the value of savings by setting up a ROTH IRA for them to put their earnings into. As an added bonus as long as their ROTH IRA is open at least 5 years they can withdraw the money they put in (their basis) when it comes time for college to help with that incidental expenses that come up, things like spring break trips, dating and more, without penalty.
ALERT a little know provision of the ACA (Affordable Care Act) creates a penalty for businesses that reimburse health insurance expenses directly to their employees or by making a payment to their employees’ health insurance provider for a non-employer group health insurance. This penalty kicks in if you have more than ONE employee and do not include these payments in taxable income and pay the required Social Security and Medicare taxes. It must be reported as payroll on the employees W-2. WARNING the penalty is $100.00 per day per employee and can be as much as $36,500.00 per employee per year.
Year End Tax Planning Strategy – Maximize “above-the-line” deductions. Above-the-line deductions are valuable because you deduct them before you calculate your AGI. They are allowed in full and make it less likely that your other tax benefits will be limited. Common above-the-line deductions include traditional IRA and health savings account (HSA) contributions, moving expenses, self-employed health insurance costs and alimony payments. Want to know more download our 2014 Tax Planner athttps://www.rmsaccounting.com/2014-tax-planner/
Year End Tax Planning Strategy – Don’t squander your gift tax exclusion. You can give up to $14,000 to as many people as you wish in 2014, free of gift or estate tax. You get a new annual gift tax exclusion every year, so don’t let it go to waste. If you combine gifts with a spouse, you can give up to $28,000 per beneficiary, per year. For example, a couple with three grown children who are married could give each couple $56,000 each and remove a total of $168,000 gift tax free in a single year. Even more could be given tax free if grandchildren are included. Want to know more download our 2014 Tax Planner at https://www.rmsaccounting.com/2014-tax-planner/
Year End Tax Planning Strategy – Reconsider a Roth IRA Rollover. It has become very popular in recent years to convert a traditional IRA into a Roth IRA. This type of rollover allows you to pay tax on the conversion in exchange for no taxes in the future (if withdrawals are made properly). If you converted your account this year, reexamine the rollover. If the value went down, you have until your extended filing deadline to reverse the conversion. That way, you may be able to perform a conversion later and pay less tax. Want to learn more join just for a Year End Tax Planning Seminar. https://www.rmsaccounting.com/free-year-end-tax-planning/
Year End Tax Planning Strategy – Leverage retirement account tax savings. It’s not too late to increase contributions to a retirement account. Traditional retirement accounts like a 401(k) or individual retirement account still offer some of the best tax savings. Contributions reduce taxable income at the time that you make them, and you don’t pay taxes until you take the money out at retirement. The 2014 contribution limits are $17,500 for a 401(k) and $5,500 for an IRA (not including catch-up contributions for those 50 years of age and older). Want to learn more join just for a Year End Tax Planning Seminar. https://www.rmsaccounting.com/free-year-end-tax-planning/
Year End Tax Planning Strategy – Make up a tax shortfall with increased withholding. Don’t forget that taxes are due throughout the year. Check your withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty, try to make up the shortfall through increased withholding on your salary or bonuses. A bigger estimated tax payment can still leave you exposed to penalties for previous quarters, while withholding is considered to have been paid ratably throughout the year. Want to learn more join just for a Year End Tax Planning Seminar. https://www.rmsaccounting.com/free-year-end-tax-planning/
Year End Tax Planning Strategy – Bunch those deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income. Bunching itemized deductible expenses into one year can help you exceed these AGI floors. Consider scheduling your costly non-urgent medical procedures in a single year to exceed the 10 percent AGI floor for medical expenses (7.5 percent for taxpayers age 65 and older). This may mean moving up a procedure into this year or postponing it until next year, when you’ll have more medical expenses. To exceed the 2 percent AGI floor for miscellaneous expenses, bunch professional fees like legal advice and tax planning, as well as unreimbursed business expenses such as travel and vehicle costs. Want to learn more join just for a Year End Tax Planning Seminar. https://www.rmsaccounting.com/free-year-end-tax-planning/
Year End Tax Planning Strategy — Deferring tax is a cornerstone of tax planning. Generally, this means accelerating deductions into the current year and deferring income into next year. There are plenty of income items and expenses you may be able to control. Consider deferring bonuses, consulting income or self-employment income. On the deduction side, you may be able to accelerate state and local income taxes, interest payments and real estate taxes. Want to learn more, join just for a Year End Tax Planning Seminar. https://www.rmsaccounting.com/free-year-end-tax-planning/
Beware of Expiring Tax Breaks — More than 50 popular tax provisions expired at the end of 2013. Without legislative action, businesses won’t get a credit for research activities or be able to immediately deduct one-half of the cost of new business equipment. Individuals would lose benefits like the ability to deduct tuition and state and local sales taxes. Want to know more? Download our 2014 Tax Planner at https://www.rmsaccounting.com/2014-tax-planner/
Ever wonder how much of those tax deductible contributions you make to charity really go to work supporting the cause? Each year Americans donate HUNDREDS OF BILLIONS of dollars to charity, but not all that money goes directly to support the cause. Some of it goes to administration, salaries, marketing and other expenses that have little or nothing to do with helping the homeless, supporting education or whatever other purpose of the charity. But how much or what percentage actually goes to the cause depends on how efficient the charity is. Want to know how efficient your choice is? Check them out at http://www.charitynavigator.org
If you think income tax rules are convoluted just take a look at the Florida Sales Tax Code. Taxable or not taxable often depends on the facts and circumstances. For example ice cream—if you buy a gallon and it’s a food no sales tax, buy a Dixie cup and it’s a prepared food subject to sales tax. Water no tax add, add a flavor and its taxable. Services are not taxed in Florida right? Maybe and sometimes. For example, get someone to clean your residence its tax free, but have them clean your office or commercial building it’s now taxable. Get your car washed no sales tax; add a little spray on wax and wamo the whole transaction is taxable. When it comes to sales tax, getting qualified professional advice that is on point and specific can help you make sure to collect the right tax on the correct items. Failure to collect the right tax, does not absolve you from the responsibility for paying it over to the Florida Department of Revenue.
To qualify, a home office must meet three tests. 1) It must be a principal place of business. If you are any employee, it must exist for the convenience of your employer, not as an alternative working space to one provided by your employer. 2) It must be used as a place to meet or deal with customers or clients in the normal course of your business or “in connection with” the business, if the space is a separate structure from the residence, like a detached garage. 3) The space must be used regularly and exclusively for the business activity of the tax payer or be the only place available for the storage of inventory for sale. If you meet these requirements you can deduct the actual expenses of your home office. This includes the percentage of the following items that matches the percentage of space your office in the home represents. For example it you have a 10 square foot office in a 1000 square foot home you can deduct 10% of the expenses associated with your home such as; utilities, maintenance, real estate taxes, mortgage interest and depreciation. You may also choose to use the optional method of deducting up to $5.00 per square foot of office space not to exceed $1,500.00 annually. To protect the deduction, keep good records of your office use and make sure you have pictures to show the office use area. As with all things tax related, it’s the documentation that protects the deduction.
U.S. residents and citizens with Canadian RSPs have been granted automatic relief from the IRS requirement that they make a timely election under the U.S. – Canada Income Treaty to defer U.S. tax on income earned in their Canadian retirement plans until a distribution is made. This relief goes back to the first year in which they would have had to make the election, which is the year in which the Canadian plan first had earnings. Rev Proc 2014-55, 2014-44 IRB, IR 2014-97
Good news from the IRS for home owners that converted their home to a rental. They may still be able to claim the tax exclusion from gain on the sale of a principal residence of up to $500,000 for a married couple filing joint and $250,000 for non-joint filers. This could be a win-win, if you also use any unused passive losses to reduce other income at the time of the sale. But it’s important to remember the home must still have been your residence two or more years of the last five years and all the other rules of Code Sec. 121 also apply. CCA 201428008
One of the things that scares me is how easy it is to hit the send button and send an email on it’s way. All of my other correspondence goes through a strict review process. First my staff checks for spelling (something that has always been difficult for me). Then they check grammar and content. While this slows everything down, it also give me time to rethink my message and make sure that I really mean what I am saying. If I feel I was short, or that my message is reactionary I can reword it and even if it has already been sealed in an envelope, as long as the mail has not been picked up there is always time to make a change. But with email it seems to be a matter of speed: get it, answer it, send it and this means that sometime you also have to add regret it, because it’s gone before you really have a chance to think about it.
One of the most important things to learn in business is how to listen; it’s also one of the most difficult. Most of us start thinking about what we are going to say as soon as an employee or customer starts to talk, when in truth what they are saying is almost always more important than what our reply will be.
Sometimes a good deed can have a bad result. I met with a new client today that received a dreaded CP-2000 letter from the IRS assessing more tax due to unreported gambling winnings. It seems that when he was at the race track a he was asked by a stranger to help cash a winning ticket as the stranger said he did not have a Social Security number and therefore could not collect his winnings and offered to pay my new client 20% of the winning if he would cash the ticket for him. Problem is that my new client did not report these winning and worse yet the additional income is at a 25% tax rate as he already maxed out the 15% bracket. So not only will the $6,000 he got to keep, go to the IRS but so will another $1,500 of his hard earned money, not to mention penalties and interest.
It’s budget time again and while no one want to pay more, it’s important to remember association budgets are based on the costs of operating and maintaining the association’s property. Add to this the cost of amenities and you get what is needed for the coming year. From this you can then deduct any non-owner revenue the association will be receiving, such as laundry money, rents and other fees. The balance of what is needed will have to come from owner maintenance assessments. Want to lower the assessments, you will have to find something on the expense list your can reduce or eliminate.
If you have seen the show Shark Tank you know that passion is an important business quality along with a product or service that is hard to duplicate (protected by a patent) and that has a large enough market along with staying power to attract the Sharks attention and money. But no matter how much passion or how good the product nothing happens if the business owners don’t know the numbers. This includes cost to produce, customer acquisition costs and net profit. As a business owner there is a lesson to be learned from Shark Tank–what your business is worth depends on the numbers.
Growth is a wonderful thing when it’s in the right direction. When it is not in the right direction, bad things can happen just like when you wake up one morning and your pants no longer button. Is your business growing in the right direction? How do you track business growth? Do you know how growth is affecting other important factors like cash flow and profitability?
Three simple rules for business calls. 1) Treat the gate keeper well. If you give the receptionist a hard time, the person you are calling is going to know about it. 2) If you have to leave a message, always leave a call back number, don’t assume the person you are calling will have you number handy when they have time to get back to you. 3) When asked for the reason for your call, give a short explanation. You don’t have to give the secret recipe to the Colonel’s chicken to let someone know you are calling about cooking a chicken.
Want to reduce your 2014 tax bill? You will need to take action before the year ends. Both business owners and individuals can take steps to lower their tax bill. Some of the steps are simple like setting up and funding an IRA or retirement account. Others are more complex, like shifting income to family members in a lower tax bracket or setting up charitable remainder trusts. There are more than 73,000 pages in the US tax code. Buried in these pages are lots of deductions, credits and exemptions just waiting to be used, but you have to know about them to use them and you have to take action. Now is the time to visit your tax advisor to talk about strategies that will help you reduce your taxes.
Remember all employers must include the cost of employer provided health insurance coverage on W-2 forms this year. If you use a payroll service, you need to make sure they have this information for every employee before they prepare your W-2 forms. If you do your own payroll you will need to make sure your payroll software allows you enter the necessary information into your system.
I just finished responding to an IRS notice for a new client who bought their first home in 2012. This client had filed all of their own taxes up until now because “all they had was a W-2, so it was easy”. During the purchase of their home, the mortgage broker told them they “could take $10,000 out of their IRA and not pay any tax as a first time home buyer.” This information was just wrong but they used it and left the IRA distribution off their tax return which generated a notice and additional tax assessment from the IRS. Had they asked a tax professional they would have been told that the $10,000 taken from their IRA was taxable but the 10% early withdrawal penalty would not apply, as long as the transaction was properly reported on their tax return. The moral of the story is don’t take tax advice from someone that is not a tax professional.
Some companies spend their time and money telling you how great their technology is. We think great technology has very little meaning without great people. Want to experience the world’s greatest people just give us a call.
I recently heard a large payroll company advertising on the radio that “all their services were available on the web, you simply had to enter your payroll information & print your checks”. “All this without ever talking to a live human being. While I understand that this may keep their costs down, I am not sure why anyone would want to use a service that eliminates the human element. One of the things we like most about providing payroll services to our clients is that it allows us to have even more regular personal contact with them. This means we can help them spot issues before they become serious problems, offer advice and even remind them when it’s time to get their payroll information to us with a friendly phone call.
I am often asked. “Should I incorporate my business.” Those asking think that there should be a simple answer to this question but that is just not true. The answer depends on many factors. Some dealing with liabilities the business may create which could put other assets at risk. Some dealing with ownership issues and long term growth planning and other dealing with tax treatment of both profits and losses the business will have in the coming years. Another important consideration is the actual costs and additional accounting and recordkeeping requirements being incorporated brings. By now I hope that you understand that while incorporation can be the right answer in many cases, it is not the correct answer for everyone and every business. The best way to know what is best for your business is to discuss these issues with a qualified professional so that they can help you pick the entity that best serves your needs not only today but well into the future. For more information on business entities see the “Information” page on our web site “WWW.RMSAccounting.com” and check the white paper on “Business Entity Choices”.
It’s a common myth that doing business online will let you reduce personal service and make your business simpler to operate. While going on line can allow you to expand, customer service and customer satisfaction become even more important in online transactions as you tend to lose the benefit of personal relationships and the lengths people will go to do business with those they like, even when they are not delivering all that was expected. Online competition is often all about price and delivery and if you don’t have the best price or quickest delivery you can be left out in the cold. While doing business on line can add to your customer base it’s important to remember what is important is not how many customers your get it’s how many customers your keep.
I am often asked what makes us different. The answer is we learn your industry and your business so we can help you spot opportunities and avoid pitfalls. We understand that it’s about more than just the numbers to you.
It seems there are a lot of people sending out resumes, looking for work or who only have part time jobs but although they send out resumes they just don’t show after scheduling an interview. Add to this the people that apply for a job that advertises a set salary range and then want substantially more than the amount offered, yet they are currently earning noting. What ever happened to joining a company, proving that you could add value and getting pay increases because you add value to the company?
Looking for a job? Make sure your phone number is on your resume. For some reason some people don’t include this basic information on their resume, now they may have included it in their cover letter or in the email they sent with their resume but often times these things don’t get sent on the person that call and sets up the job interview so their movement up the hiring chain just stall and their resume goes from the call this person stack to the trash.
Trusts they are not just for the rich. While it’s true that a trust can help avoid the legal hassles and costs of probate they can also help protect you while you are alive and breathing. For example they can make sure that the person you choose has control of you assets if you suffer from a mental disability or illness. They can allow you to provide financial security for a loved while protecting that loved one from themselves or other in their life that make take advantage of them should they inherit your assets. You can still maintain control of your assets with a trust but add additional levels of protection for yourself and those you live. Trusts are not only an important part of an estate plan they are an important part of a plan for living.
Lois Lerner said “I know I did the best I could….and am not sorry for anything I did” not something I would recommend that you tell the IRS when they audit you and question your expenses or find unreported income. Why is it that the government does not have to meet the same standards that they hold private citizens to?
If you have employees, now is the time to get your ducks in a row and make sure your payroll information is up to date and ready for year end. This could end up being more important than ever, if the Government Accounting Office (GAO) gets its way and convinces the IRS to push the due date for sending W-2 information up to January 31. It is hoped this would help reduce the claims for fraudulent refunds by allowing the IRS to match W-2 information much sooner.
As we move into the final quarter of the year, it’s important for those who are 70 ½ or older to remember to take the Required Minimum Distribution from their regular IRA or pension accounts. Failure to take your Required Minimum Distribution will result in a penalty equal to 50% of the Required Minimum Distribution amount or shortfall in distribution. If you need help computing your Required Minimum Distribution give us a call.
For a small business, growth can be a friend or an enemy. Controlled growth that maximizes the use of your capital and strengthens your customer base by making it more broad will not only make your profit increase but will also make your business stronger. Uncontrolled growth that is driven by the demands of one or a few customers can weaken your position, use up capital resources and leave you at the mercy of one or a few large customers. It’s important to control growth and develop a large enough customer and vendor base to prevent one or a few large customers or vendors from being able to exert too much control over your business.
Yesterday one of my clients stopped by and was frantic because he received a message that the IRS called and that if he did not return the call and make a payment of $5,000.00 today they were going to send the police. They left a phone number with a family member and told them that if they did not hear from him, they would send the local police to arrest him. Now this client owes no taxes, has received no notices and was smart enough to come see me before making any calls or sending any payments. The call was a total scam from someone trying to get his bank information or have him send money. A few things you should know about the IRS: They don’t use the police to collect taxes. You will always get notices in writing with plenty of time to respond if you owe money. You can always check the identity of an IRS employee by calling the IRS at 800-829-1040 so don’t trust the phone number someone claiming to be from the IRS leaves for you without checking them out first. Don’t fall victim to this scam that is being used to steal identities and money by thieves.
When you use RMS Accounting for accounting, bookkeeping, payroll and tax needs you get more than just financial information you can depend on. You get us as a member of your team, working hard to help you succeed. We are more than just service providers, we are true partners helping you to be more successful.
Old tax laws are never forgotten, they are simply misquoted and misunderstood. A client asked me about why he had to pay tax on the sale of a business property today as he thought he had two years to reinvest the money. While this might have been true in had it been the sale of his principal residence and had it taken place before 1997, this treatment was never allowed for business property. Changes to the law in 1997 created an exclusion of $250,000 in gains for taxpayers that do not file married filing jointly and $500,000 in gains for taxpayer that file a joint return on the sale of their primary residence subject to specific rules and conditions. The moral of the story is ask first. What was is not always what is. Ask a tax professional.
I had a call from a client the other day that wanted to know what I thought they should do as one of the customers of their business had offered them a “full time position”. My client explained that in the five years he had been in business he had made less that the full time position that he had held before he started his company, found he was working more hours and was never certain of how much he would be able to take home. He said that he had just started to make steady profits and take home a steady paycheck, and his customer was offering him more money and fringe benefits and he wanted to know what to do. I told him that it was not my job to tell him what to do but I would be happy to help him explore his options. I explained that his business had a value and that if he chose to sell it he could. I explained that in addition to the compensation he was receiving each year, the value of his business was growing and although he could not spend this increase in value, he could someday receive it by selling the business. I explained that his business allowed him to have control of his Destiny, but that in exchange for this control he had to work harder and sometimes get paid less. In the end I explained that he would have to make the choice but it should be an informed choice.
Who had the most influence on you and your success? For me, one of the people that had the most influence on my life and my success was a man I will always remember, and often look back to the example he set. His name is David Lieberman. Some of you will remember back to the days that our firm was affiliated with Triple Check as a franchisee. Back then I had a lot to learn about how the turn my small professional office into a real business that not only served my clients but also made a good living for my family. David was president of Triple Check, and he taught me what it meant to grow a business with systems in place to insure that we always delivered quality to our clients. Even more important, was the lesson he taught by example of how people should be treated. Every franchisee was important to him and he made it his mission to make each of us successful. His company had its share of superstars, but he never paid them more attention than those that were small and needed his help to grow and develop. Most important of all he was a man you could trust, he told you something you could bank on it. If there was a misunderstanding over something he looked for a fair way to settle it, not to what the contract said. I have learned in life that there are few men like him, whose handshake is their bond and that you could always rely on to do the right thing. But I am grateful to him to this day and try hard to live my life by the example he set. Thank you David.
Do you get full value from your accounting and tax professionals? Do you just drop off your paperwork or tax papers and get back a financial statement or tax return. To get full value you must sit down with these professionals and discuss your goals, objectives, problems and plans. A good accountant is like a sponge that sucks up knowledge and information from every client they work with and then uses that information along with their professional knowledge to help other clients. But to get the true benefits that will help you to be more successful, you have to make the time to squeeze them every once in a while.
If you are a 2% or greater shareholder in an S-Corporation that provides you with health insurance, be sure that the cost of insurance is included in your taxable income and properly reported on your W-2 at year end, as the cost of health insurance for 2% or greater owners is not deductible by S-Corporations but can be deducted directly on your individual tax return if it is properly reported and included on your W-2. This direct deduction is taken on your 1040 so it does not require you to itemize and is not influenced by the rule limiting medical expense deductibles to only those over 10% of your Adjusted Gross Income (7.5% of AGI for those over 65).
Have a tax problem? Forgot to file returns for a few years? Owe the IRS more than you can ever hope to pay? Now is the time to clean up these problems and get back on track. Remember that the statute of limitations for filing a tax return does not even begin to run until the return is filed. The IRS can seize bank accounts and other assets to settle tax debts, but there are things you can do reduce the debt and avoid seizure of assets. It’s won’t be painless, and it won’t make what you owe just go away, but we can help you get back on track. The first step is to acknowledge the problem and get professional help.
If you pay someone to do your taxes they must include their information: name, address and IPIN on the return. They must also sign the return. This allows the IRS to track tax preparers that do not follow the law and hold them responsible. Tax preparers may not charge for return preparation based on the amount of the refund, as this violates the IRS rules for paid preparers. All returns are subject to audit for 3 years from the later of the date the return was filed or the tax was paid, so hold on to your receipts and records. While the law does not limited or set qualifications for who can prepare a return for pay, only Enrolled Agents, CPAs and Attorneys can represent clients before the IRS in tax matters and audits.
Do you have systems in place to make your business run better and help your people make the right decisions? Now I know many business owners will say yes we have a systems for how we do things and my people know what I want, but if your systems are not clear, written down and available for your employees to review whenever questions arise or conflicts come up you don’t have a system in place. It’s very important to put your policies and procedure in writing and for that written material to be in the hands of your employees. This will allow you to grow your business and spend less time and effort covering the same ground over and over.
Is this the government we want for our children and our children’s children? Do we want them to inherit a world where individual responsibility is just a memory? Do we want them to live in a world in which the sins of the past are more important than the promises of the future? It’s time to stop talking about what others have or don’t have and understand that it is individual achievement that made our country great, not government intervention. In a truly free society not only do people have the right to succeed but they also have the right to fail. The strong see failure as one more step toward success. The weak see it as an excuse and a reason to blame others for their failure.
We know that as a business owner you have many demands on your time. The important question is which of these is the best use of your time? Remember no matter how hard you work, time is the one thing that you can never get more of. Are you spending your time doing the truly important things that will grow your business, like developing new clients or customers or are you spending your time on tasks that could easily be done by others like bookkeeping and office work?
One of the important lessons I have learned from my clients is that saving for retirement matters less about how much you make than it does about the priorities you set. I have seen clients that make hundreds of thousands of dollars with little savings and those who make much less than fifty per year their whole lives, retire with over a million dollars. Ask them how they did it and they all tell you the same thing. “I started early and always put savings first!”
As we get older we worry more about being unable to care for our self’s at some point in the future. One of the ways to reduce this worrying is through the purchase of Long Term Care Insurance. Remember, that like most insurance products it’s too late to make a purchase once you need the coverage. While all or part of the premiums may be deductible, you must itemize your deductions to benefit from this deduction. Your medical expenses including the premiums must also exceed 10% of your adjusted gross income is you are under 65 or 7.5% of your adjusted gross income if you are 65 or older. How much can be deducted for Long Term Care is also limited by your age. For more information be sure to ask your tax professional.
Do you ever wonder what your business is worth? Would you be interested in knowing how your business profitability compares to others in your industry? If you answered yes to either of these questions, we can help.
Today is a double header. I will be a guest on Community News and Review on Clear Channel 1230AM WBZT Talk Radio and on iHeart HD Radio Nationally and World Wide on the Web between 6PM and 7PM tonight. Tune in–better yet stop by the Palm Beach County Expo at the Embassy Suites Boca Raton Hotel, 661 NW 53rd St, Boca Raton, FL 33487 I-95 & Yamato Road. The show will be broadcast from there tonight and we will be joining a host of other local businesses for a trade show.
Just because you call it something other than wages does not mean you can exclude it from payroll and payroll taxes. Employers often try to find ways around including part of the compensation they pay to their employees in wages and salaries. Things like auto allowances, housing allowances, reimbursements for an individual’s personal medical insurance and gas allowances made to employees but not included in their payroll. These should all be part of the employees’ taxable compensation. While there items that can be excluded like, group medical insurance and group term life insurance of up to $50,000 when provided by and paid for by the employer. There are also items which may be reimbursed and not included in the employees’ pay, as long as the employee provides proper substantiation to the employer. These include business use of auto based on the standard mileage rate, business travel, business meals and entertainment and many other items advanced by the employee on behalf of the employer. It’s important for the employer to require proper documentation for these items and to keep this documentation as it will be required in the event of a IRS or State payroll audit.
Will you be ready when it’s time to get your money out of your business? One of the best things about being a business owner is that in addition to the money you take out as salary and profit distributions you build equity in your business. Every profitable business has a value and like the trees on a tree farm the value grows over time if it is nurtured. While it’s hard to think about, for many of us, at some point, we or our families are going to want to cash in or transfer this value. Whether it’s selling the business and using the money to retire or transferring the business to the next generation, careful planning in advance can help leverage the value of your business and insure its continuation. The earlier you start working on your exit plan the better your chance to maximize what you get when it’s time to sell.
As your accountants and tax advisors our job requires us to do more than just record what you have done and complete tax return. Our job is to educate you so that you can get the most out of your business, understand the past and use it to pay for the future and take actions to lower your tax liability. In short we want to provide you with the knowledge that helps you make your life better. We are here ready, willing and able to provide this for you, but we can’t do it alone you have to make the time to share your concerns, questions and desires with us.
Ramification of the Supreme Court’s DOMA decision are affecting every area of federal law. Some of these effects are small, some not some small. On the tax front if you are a same-sex couple that is married under state or foreign law, you now must file your federal tax return as Married Filing Jointly or Married Filing Separately, you may no longer file as single or head of household unless you did not live with your spouse the last six months of the year and provide a home for one or more minor children. The law also effects estate taxes and estate tax planning and in some states federal treatment of an estate may differ from the treatment under state law. Because of these and other complication it’s important to stay informed and to have a tax professional that understand the complex rules along with your individual situation.
Domestic manufacturers can take advantage of the Section 199 deduction. Qualified activities include certain types of film and video, computer software, and energy production, as well as certain agricultural processing, construction, engineering, and architectural activities. To learn more about this credit and find our if you can take advantage of it visit our offices for a FREE Consultation.
You can get a tax break for donating excess inventory to a charity. Businesses may donate surplus inventory to charitable organizations and receive a tax deduction. For example, if you contribute food or medical supplies to a charity that provides for the homeless, you may deduct not only the cost of the goods, but also half of the lost profit (not to exceed twice the cost). Deductions are of course limited based on taxable income so check with your accountant before taking any action.
Saving for retirement is less about how much you squirrel away and more about when you start squirreling it away. If you get in the habit of “paying yourself first” your nest egg will grow. If you wait to save till you can afford it or “you have some extra money”, chances are you will never be able to retire.
Want to trade up your investment real estate and avoid the tax on the gain on the old property? You may qualify for a 1031 Like Kind Exchange. While an exchange does not eliminate the tax on the gain it does delay it until you sell the replacement property leaving you more cash to use toward your replacement purchase. Note exchanges are subject to complex rules that require some advance planning so don’t wait until you sell the property you are trading out of to speak to a tax professional, by then it may be too late.
There are several strategies for those saving for a child’s education, such as 529 plans, Coverdell Education Savings Accounts (ESAs), and education tax credits. Navigating the different options and the temporary nature of some opportunities, however, can be challenging. If you need help understanding the options and choosing the one that is best for you and your family, we would be happy to help you.
Little known fact–they cannot put you in jail for failure to pay your income taxes, but they can put you in jail for failure to file your tax return or for lying on a return you file. This is not to say it’s a good idea not to pay because while they can’t put you in jail, they can take your money and other assets.
Don’t understand business bookkeeping? QuickBooks alone will not solve your problems. There is an old saying about computers and computer software “garbage in-garbage out. It’s too bad that we often find that business owners don’t understand this and buy QuickBooks of some other accounting software, then hand it to a secretary or clerk and expect then to set it up and do the bookkeeping. The problem is the person they give this project to has no understanding of basic accounting. They don’t know enough to keep personal expenses off the books, nor so do they know the difference between an asset, a liability or a deductible expense vs personal expenses. All of these problems can be resolved by getting a little help with the set-up, some training and some ongoing support from a professional that can guide you along the way.
Yesterday I had a new client come in and ask for my help. The conversation started with the “Do you remember me?” When I said no he told me he came in a few years ago but decided not to use us as I told him that the people he had working in his business should be treated as employees and not as independent contractors. He asked if I remembered the horror stories I him about what could happen and how his friends in the business told him I was just trying to scare him. Then he said the reason I am here is because everything you said has come to pass and the he needed help dealing with requests from the IRS and State of Florida regarding payroll tax liabilities. The good news is we now have a new client the bad news is that instead of helping him build his business we are working on helping him save it from IRS ad State auditors.
Yesterday I had a new client come in and ask for my help. The conversation started with “Do you remember me?” When I said no he told me he came in a few years ago but decided not to use us as I told him that the people he had working in his business should be treated as employees and not as independent contractors. He asked if I remembered the horror stories I told him about what could happen and how his friends in the business told him I was just trying to scare him. Then he said the reason I am here is because everything you said has come to pass and he needed help dealing with requests from the IRS and State of Florida regarding payroll tax liabilities. The good news is we now have a new client, the bad news is that instead of helping him build his business we are working on helping him save it from IRS and State auditors.
When to file for Social Security is a complex question. While you can begin taking benefits as early as age 62, full retirement age varies from between 65 to 67 years of age depending on when you were born, beginning benefits early can reduce the amount you receive each month by up to 30%. This does not mean you should not take benefits early but it does mean that you need to take into account many things including needs, life expectancy, health and other sources of assets available. In addition, some or all of amounts received before full retirement may have to be repaid to Social Security if you have earned income exceeding certain thresholds.
Banking today can be very expensive for small business, in addition to the costs of check clearing, making deposits, credit card fees and interest, one of the most expensive charges in the banking world is the overdraft fee. We sometimes see clients that are spending hundreds or even a thousand dollars or more on over draft charges. While no one plans to spend more than is in their bank account, sometimes they just don’t realize that deposits are not credited as soon as they are made and in some cases it may take several days for funds to clear. This problem is often compounded when a large check creates an overdraft and a number of smaller checks then not only overdraw the account, but also create NSF fees of up to $30.00 each. Keeping a close watch on your bank account to make sure funds are available for all the checks you write along with an overdraft protection plan (some banks offer to link your account to a loan or line of credit feature) can help reduce these costs that steal critical dollars from your bottom line.
Thinking about buying a business? Your first step should be developing a relationship with an accountant. Think of the accountant as a guide on a mountain road, where finding the gold mine is a little less important than not falling off the edge to your death on the rocks below before you get there. It’s a business broker’s job to find a buyer for the seller, while it’s your accountant’s job to make sure you don’t run into the unexpected.
One of the most expensive things you can do is to get divorced. Not only can this mean a separation of assets and property, it can have very large tax consequences. While no one can make divorce painless, speaking with a tax professional may help reduce the tax bite or at least make sure you don’t get hit with any surprises when tax time comes around.
One of the advantages of owing your own business is that most business are or can be saleable. This means when you are ready to retire or move on you should be able to get a substantial sum for your business but doing this requires several things; You must have systems in place that can be duplicated; you must have good records that show how much money the business takes in and what it costs to run it; you must not have tax or other outstanding liabilities and you must have time to find the right buyer. If you are curious about the value of your business, we can help you to get an idea of how much it is worth.
A lot of people just don’t enjoy bookkeeping and the work that goes with it, but it you are in business it is necessary like it or not, state and federal tax authorities require lots of record keeping. No matter how much your hate it there are only two solutions you do it or your get someone else to do it for you. We would be more than happy to be that someone else. We get it done No Worries, Just Be Happy.
I recently had a tax client come in to talk to me about starting a business. He wanted ideas on what kind of business to start and how he would go about it. When I asked him why he wanted to start a business he said, “I hate my boss and am tired of taking orders and working so hard. If I go into business for myself I can work less and won’t have to let anyone tell me what to do.” I suggested that these were the wrong reasons and that starting a business meant working harder, for less money and more hours than he has ever worked before. He would also be risking his own money and he may not even get a paid for a year or more and that although he would be his own boss, that does not mean he was not going to have to please customers and suppliers or deal with the demands of others. While I love working with new business owners and believe there is nothing more rewarding than starting and growing a business, it’s hard work and you need to do it for the right reasons.
Don’t let basic accounting confuse you it’s nothing more than keeping a list and a little adding and subtracting. Like operating an auto, although it might be nice to understand the workings of the internal combustion engine, it’s not a requirement to drive one. So if you don’t understand an accounting or tax matter ask and if you still don’t understand after your accountant explains it maybe you need a new accountant.
When considering a professional to assist you, knowledge is important, but not quite as important as how they share that knowledge with you. In the right relationship there are no dumb questions, and answers are both understandable and actionable.
It’s always important to remember why you work so hard.
One way to get into business, but not have to do all the heavy lifting of coming up with a concept, testing the concept, finding suppliers and then getting customer recognition, is to purchase a franchise. Franchises exist in many shapes and sizes, some are great, some not so great. The idea here is that you get a proven model with the guides, support and training to help make you successful. But since not all franchises are alike, it’s important to pick the right one for you and to do the due diligence to make sure that the model works, the existing franchisees are profitable and that it fits with your goals and objectives.
Thinking about starting a new business? Here are some important questions to ask yourself: What will I sell? How will I get it or who will perform the service? Who will I sell it to? How will I reach my prospective customers and what will it cost? How much will I make on each sale? How much will the minimum overhead be to support my business? How much am I willing to invest and risk in my vision? Don’t waste money on accountants or attorneys until you can answer these questions.
SCAM ALERT! You are at your business or home and receive a call from someone claiming to be with the IRS or the state tax department, your caller ID reads Government and the caller wants to meet you at the bank or asks for information on your bank account because you owe taxes of some kind you are not aware of. They threaten that if you don’t comply, they can take all your money or that you will be arrested. This is the jist of a new SCAM that is making the rounds, don’t give them any information. Get their name, ID and phone number and tell them you will give it to your accountant, then hang up. The IRS and or state tax authorities do not contact taxpayers by phone unless they have already done so by mail. No government employee state or federal has the right to harass or threaten you, so chances are it’s a scammer looking for a fast score. Don’t be a victim, hang up and then call your accountant or the police with any information you have about the caller.
Thought for Today – What was the primary reason you purchased in your condominium association or HOA? Was it: the amenities, the maintenance, rules, or something else? We want your comments so please tell us why below.
Employers can prevent penalties for incorrect Social Security Numbers on employee W-2s and from hiring those that are not eligible to work in the U.S. It is as simple as using the E-Verify system. This free, voluntary, Internet-based system that allows participating employers to determine the employment eligibility of new hires by comparing information from the new hire’s Form I-9, Employment Eligibility Verification, with Department of Homeland Security (DHS) and Social Security Administration (SSA) records. http://www.uscis.gov/e-verify
Not all tax deductions make the cut, take for example the man who deducted his new bed as a job related expense, because he “needed to get a good night’s sleep because his boss told him he needed to stop falling asleep on the job”. The deduction was disallowed by the IRS along with the deductions for his sleep mask and down comforter.
Bookkeeping and accounting should be about more than just filing tax returns and knowing your bank balance. The information produced can be used in business planning, understanding what products or services are profitable and what products or services are not profitable. It can be used to compare current performance against past performance and for hundreds of others things. But it can’t help with any of these if you don’t take the time to review and understand it. Block some time every month to review the financial statements and other accounting reports from your business, and use the information to find ways to make your business better.
The best time to get help with your business finances is when you don’t yet feel you need help. In the complex world of business finance (accounting, bookkeeping, cash flow, funding, payroll & taxes) an ounce of prevention is worth a pound of cure. A regular visit to your accountant can help prevent problems, implement tax saving strategies and develop paths to growing your business.
Have a new baby? It’s a shame that the best time to start planning for your child’s college education is also the time most new parents have the least money to do anything about it, when the child is born. The good news is that Coverdell Education Savings accounts and 529 plans can be funded by grandparents and or gifts from family. Even an investment account in your Childs’ name to which birthday and other gifts are deposited over time will add up to a tidy sum when college time comes around.
Does your bookkeeper know more about your company’s finances than you do? If so, don’t be surprised when they make themselves a partner. Good bookkeeping systems include good controls that separate the bookkeeper from the reconciliation process and make sure more than one set of eyes is looking at every transaction. You may not be a fraud victim but how would you know for sure?
Don’t be fooled by the many “Tax Resolution Firms” that promise to resolve your tax problems for “Pennies on the Dollar” or tout “New IRS Debt Settlement Programs.” In most cases these companies do little more than separate you from your money, making it even more difficult to deal with what you owe the IRS. While there are ways to help those that can’t pay, they don’t just wipe out what you owe because it would be hard or inconvenient for you to pay. No one can guarantee what the IRS will accept, but it is often possible to work out an “Installment Agreement” that allows you to pay what you owe over time or in some limited cases to do an “Offer In Compromise” and reduce what it owed. In some cases it is even possible to wipe out taxes in “Bankruptcy.” As tax professionals, we are often called on to help tax payers get back on track, what we can’t do is make it painless and neither can anyone else.
The one thing we find that small business owners need most is someone to go to that they can bounce ideas off of and get a fresh perspective from. Especially in the early stages, many of the new small business owners we see today come from the ranks of upper and middle management at large companies and although these people have great skills and lots of passion, they are used to having a support system that included company CFOs, Accountants, Legal Counsel, HR Departments and much more. Having an outside adviser can make all the difference in the early stages by giving them someone to talk to who is not an employee, spouse or relative.
College planning: new numbers from the federal government show that what your kids study in college, their Major, is much more important than what college they study at. There really is no reason to spend a lot of money for an expensive private school when those graduating from a state school earn as much and don’t run up near the debt.
The question is not “can you do your own bookkeeping”? It’s “is bookkeeping the best use of your time”?
Do you treat your business like a job? A job is someplace you go to get a paycheck, you put in the hours required and do what is required of you. A business is a place you build equity by investing your time and money, including part of the profits earned so that it can grow and prosper. When you leave a job, the paychecks stop. When you leave your business, either the income stream continues or you sell it and get a payout for all your hard work. Don’t treat your business like a job.
You have filed your taxes and received your refund and then it happens your go to the mail box and find a letter from the IRS, now what. Don’t panic, the IRS send out lots of notices and some of them are correct are some not correct. Step one open the letter. Step two breath, Step three mail, fax or email a copy of the letter to your accountant, then give them a call. Most IRS notices are easily handled by a tax professional and nothing to worry about but it is important that these letters and notices are replied to in a timely manner. At RMS Accounting we never charge a client for handling a notice about a tax return we prepared for them. If we prepare your return we stand behind it.
In business unlike with fireworks its staying power that is most important not just how much noise you make or how brightly you burn up.
Don’t let the tax tail wag the dog. I get lots of calls this time of year from clients that are thinking about starting a business or making an investment “because it will reduce their taxes”. While both going into business and making investments can be good things, doing either because of the tax savings alone is foolish.
When you hire a bookkeeper you have to train them, supervise them, and give them days off. You also have to include them in your pension and other company benefits. Then you have to pay them for all the hours they work including overtime hours, even if they are not productive. When you outsource your bookkeeping to us, we handle all of these things and you pay a flat fee that insures you get what you need at a known rather than unknown cost.
As much as most of us hate to receive complaints from our customers the truth is we should be thankful to those customers that complain as more often than not instead of complaining customers just go elsewhere and don’t bother to tell us why. When a customer complains we have an opportunity not only to keep the client but also to fix a problem they may be costing us other customers.
In business there is often a difference between how we perceive we are doing and how our customers / client perceive we are doing. When is the last time you really listened to what your customers were saying?
We know over the years many business have purchased QuickBooks or some other accounting software only to find that having a box of software did not get their bookkeeping done. For some reason they just don’t understand why the mess of receipts, checks, credit card receipts, and other important financial information did not organize itself not that they had accounting software. If you are one of these business owners maybe you should trade your software for one of our living breathing bookkeepers that will not only keep you organized and up to date but will also provide meaningful information you can use to help your business grow.
Are you spending too much time on bookkeeping and other clerical duties? Worse yet are you failing to keep your books up to date? If you answered yes maybe you should think about outsourcing these responsibilities so that you can get back to building your business.
The best way to be successful in business is to make sure you give your customers more value than anyone else. Please note I did not say the cheapest price.
It’s important to understand that selling more does not necessarily equate to making more! Before you thinking about increasing sales, you need to make sure the sales you do have are profitable, and that an increase in sales will not reduce profitability or require additional working capital that is not available.
Is a franchise for you? The franchise industry offers many options for those looking to own a business without being on their own. The world is full of Franchise Millionaires and Franchise Failures, which one a franchisee becomes depends on many factors. When you buy a franchise you give up part of your revenue to get proven systems, name recognition, purchasing power and assistance building your business. Not all franchises deliver all of these things and some do it better than others. If you want to be in business without being on your own, you should investigate the many franchise opportunities that are available.
Is it truly a Right-wing conspiracy and did the computer really eat all the non-profit division of the IRS supervisory emails?
In life they say stop and smell the roses, while in business we often have to remind our clients that it’s just as important to work on their business as in their business. When is the last time you spent some time reviewing the processes, procedure, customer needs and all the other things that can make your business more successful?
Have unreported offshore accounts? Now may be the may be the time to come clean. The IRS announced yesterday that it would make major changes in its voluntary compliance programs to provide new options to help both taxpayers residing overseas and those residing in the United States.
The changes are expected to provide thousands of people a new way to come into compliance with U.S. tax obligations. The changes include an expansion of the streamlined filing compliance procedures that were announced in 2012 and important modifications to the 2012 Offshore Voluntary Disclosure Program, or OVDP. The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful. If you have an offshore accounts you failed to report, now is the time to contact your tax professional.
Under the heading if only I could get away with this, is the recent claim by the IRS that a “computer crash” caused the loss of all of the Lois Learner emails. If only tax payers could blame missing records on their computer crashing? Add to this, it took a year for the IRS to figure out this brilliant excuse. Just don’t try asking the IRS to wait a year when they ask you for information.
If you want to get the most out of your accountant, you need to talk to them before you make important business, investment and tax decisions.
The IRS recently announced that it has adopted a new “Taxpayer Bill of Rights”, which includes the following: “The Right to Be Informed, The Right to Quality Service, The Right to Pay No More than the Correct Amount of Tax, The Right to Challenge the IRS’s Position and Be Heard, The Right to Appeal an IRS Decision in an Independent Forum, The Right to Finality, The Right to Privacy, The Right to Confidentiality, The Right to Retain Representation, The Right to a Fair and Just Tax System”. Do you think that this is just so much new paint on an old jalopy or has a true restoration taken place?
Best business advice I ever received: Do the right thing no matter what it costs you. Admit your mistakes. Spend your time looking forward instead of looking back.
It’s summer, and as many parents send the kids off to camp, business owners may want to think about taking the kids to work and making them punch a time card. If your child is old enough to provide a useful service to your business like filing, copying, answering phones, stuffing mailers; putting them on the payroll will give them valuable work experience while moving a little money out of your tax bracket into theirs. It may also teach them the value of a dollar and give you an opportunity to open a ROTH IRA account for them and teach them a little about savings and investment.
We see lots of government numbers that are supposed to tell us how the economy is doing, but to us, the real key to economic conditions is how our clients and their customers are doing. Are you: Optimistic that the economy is getting better? Pessimistic and think things have gotten worse? Or do you think things are about the same and we are just getting used to them?
While it’s great for an Entrepreneur to have both passion and ability; ability without passion often ends up as wasted ability.
There is still time to claim a tax credit for health insurance provided to employees of small business with less than 25 employees, for 2011, 2012 and 2013 if you failed to take advantage of the credit when you filed your return. The credit can be up to 35% of the premiums paid for employee coverage and is completely refundable. (If all your taxes are paid or you owe no tax the government sends you a check.)
I often get calls from people asking me how to set-up a Corporation or an LLC for their new business. While calling to get advice is a good thing, it’s important that you ask the right questions. Instead of how do I…? A better question would be “What would the best business entity be to set-up for a new business that (fill in some information about the kind of business, number of owners, initial investment, vision for the future)?”
Forget about using foreign banks to hide income and assets from the IRS. Over 77,000 banks and over 70 foreign countries have agreed to supply information about the accounts of U.S. tax payers to the IRS. In recent year the IRS has been spending more time and resources to ferret U.S. Tax payers that are fraudulently hiding assets and income using foreign banks and investment firms. These new agreements will make these accounts easy to find. There are amnesty programs in place for those that want to come forward pay the tax and penalties, but to take advantage of these programs you must do before the IRS initiates contact with you.
It’s Friday so we thought today would be a good day to play a little game of bad boss and we invite you to join us by answering the following question as a comment on this post. The worst thing my boss ever asked me to do was?
The Supreme Court’s ruling last year, which expands the federal definition of marriage to include same-gender spouses, has a significant effect on federal laws including payroll taxes and health insurance, and employment laws such as the Family Medical Leave Act (FMLA). Affected employees are now eligible to pay for same-gender spousal benefits such as health insurance premiums and FSA/Section 125 participation on a pretax basis for federal taxes. Individuals whose legal spousal status was changed by the ruling also have the option to claim refunds and/or request adjustments due to overpayment of FICA taxes.
Get more bang for your buck when moving up in the rental real estate business. Increasing real estate values make “like kind exchanges” (section 1031) a timely option again. An exchange allows property owners to delay paying tax on the gains from a sale, creating more cash for investment in a new property. For realtors they can create the ability to double down, creating the need for a client to close both a sale and a purchase in a limited time frame. Remember if you are considering an exchange it’s important to see your tax advisor early, it’s also important to follow all the rules carefully.
In business cash is king. Many businesses operate for years without making a profit, but run out of cash and it’s all over. The most important resource your business has is its cash flow. If you are not keeping a close eye on your cash flow, projecting future cash needs and cash receipts, it could all be over before you know what hit you.
Have a foreign account and willfully fail to file the required FBAR disclosures can cost you. In a May 29, 2014 release, the United States Department of Justice has announced that a Florida district court jury has found that a U.S. citizen willfully failed to file required Reports of Foreign Bank and Financial Accounts (FBARs) for tax years 2004 through 2006 with respect to a Swiss bank account that he controlled. The judge in the case will later determine the amount of the penalty which could be as high as 150% of the bank account balance.
Sometimes the best place to look for a solution to a problem is in the mirror. What you think is often much less important than what your customers, employees or vendors think of you.
Sometimes the best place to look for a solution to a problem is in the mirror. What you think is often much less important than what your customers, employees or vendors think of you.
Check your pay stub. Make sure that your name is spelled correctly and matches what is on file with social security. Make sure your employer has the correct address and social security number on file. It’s also a good idea to make sure that enough is being withheld for income tax. Checking things now will help avoid unpleasant surprises when tax time comes around again.
Don’t let receiving a form 5498 from your IRA custodian or financial instruction that says “IMPORTANT TAX INFORMATION” scare you into thinking you may have missed something on your 2013 tax return. These forms are sent out in May to provide you with verification of IRA contributions for the prior year along with the value of your account at year end. Since IRA contributions can be made up until April 15 of 2014 for 2013, the forms cannot be sent until after the tax filing deadline. You can check the form to make sure all your 2013 contributions were properly applied to the correct year and contact the provider if any contributions were not properly treated. There is no need to contact your accountant when you get this form. After you review it simply store it with the copy of your 2013 tax return.
Is getting married in your future? If so here are 5 things you should discuss with your intended before you tie the knot. 1) How much debt do you have? 2) What’s your credit score? 3) What kind of lifestyle do you see us living? 4) What are your financial goals? 5) Are we going to manage our investments ourselves or hire someone to do it for us? Love may be blind, but money is still the number one cause of divorce and the best secret to being financially successful is marry once and stay married. Two may not be able to live as cheaply as one, but divorce is expensive and requires support for four–the two of you and the two lawyers.
Congress again is talking about having IRS return to the failed past practice of using private debt collectors to recover unpaid taxes. The EXPIRE Act, introduced last month by Senate Finance Committee chairman Ron Wyden, D-Ore., would restore the private debt collection program that the IRS discontinued in 2009. According to the IRS oversight board and tax advocate Nina Olson This concept has already failed twice in the past.
I am often called by clients that have a collection problem with one or more of their customers. In most cases they have extended credit to customers that have gotten behind in their payments and the amount has increased to the point where it has put their business in jeopardy. The problem is that they have known for some time the customer was having problems making payments but because it was a “good customer” and “they did not want to lose the business” they failed to take action. It’s important to set credit limits and cut off credit when customer starts to develop payment problem. It’s also important to never allow one or a few customer to own you enough to put your business at risk.
Don’t let those auto recurring charges get the best of you. We often find clients have signed up to have advertising or other services automatically charged to a credit card each month. Many time these charges are forgotten about by the client who may no longer need or be using the service but the charge just continues to merrily recur on their credit card unnoticed by the client. If you as still using the service this is fine but if you are no longer using the service it’s a shame to let the money just disappear because you failed to review your charges.
If you have partners of other shareholders in your business you should have a buy-Sell agreement. Having an agreement in place will help insure that you don’t end up being in business with a wife, husband or child of your partner or fellow shareholder.
When you shop what is most important to you price or quality? How does this affect the products and services your business offers to your customers?
Good record keeping pays off in lower taxes, less stress and the ability to defend your position should the IRS choose to audit your tax return.
Three important tips for those who missed the tax filing deadline. 1) File as soon as you can. If you owe taxes, you should file and pay as soon as you can. This will help minimize the interest and penalty charges. 2) If owe tax and don’t have all you owe, pay as much as you can when you file your return and make arrangements to pay the remaining balance as fast as you can manage. 3) Don’t wait too long if you if you have a refund coming. While the statute of limitations for filing and paying taxes does not even start running till you file your return, you only have three years from the due date of a return to claim a refund.
Don’t lose sight of the bottom line. Often time, we find business owners can get caught up in building a bigger organization, looking for more sales, customers or employees while losing site of the bottom line. Too much growth, to fast, can actually reduce profits and put your business at risk. I am not suggesting that you should not grow your business, but I am suggesting that growth should be both controlled and planned so that it makes your business stronger and adds to the bottom line.
The most expensive money you can borrow is the money you withhold from your employees payroll checks. Failure to pay over the payroll taxes you withhold from employee pay checks can not only result in high penalties and interest, it also creates a personal liability for anyone that can be considered a responsible party (corporate officers and anyone who had check signing privileges). In addition it could also result in criminal charges. The IRS makes a poor creditor and has the power to make a loan sharks collections methods look civilized and friendly.
Job search hint 201. You got the interview. Don’t blow it before you get started. Leave the perfume and cologne in a bottle and stick to soap and water. We should not smell you coming and you don’t want the thing we remember about you to be the scent that lingers after you leave.
Complaining never solved a problem or made anything better. It’s simply a waste of energy that could be devoted to change. Action is the key to change. The sooner you take action the sooner change can happen.
Job search hint 102, when you get an interview be careful not to exaggerate your ability and knowledge to the point that your employer’s expectations will exceed your abilities. It is better to stress your ability to learn and adapt than your ability to do something you don’t know how to do.
One of the least expensive things to give away is credit for a job well done or a problem solved. The best leaders know how to give credit for success to others while hording blame on any failures to themselves.
Businesses that sell a product or service to those who want it are not near as successful as businesses that that see the needs of their customers and develop products and services that meet those needs.
Have more business than you can handle? Maybe your price is too low. We often run into clients that are working around the clock and still making little or no profit. The more work they get the less time they have and the harder they work. There is often a simple solution to this. Increase your prices and you may get less work, but you will make more on the work you do get and maybe even get a little time to spend with your family.
Tax rules are complex. In order to deduct an expense for your business it must be ordinary and necessary. While this may sound simple, it’s important. What is ordinary and necessary for one business may not be for another. An example the tax court case of Cynthia Hess also known as “Chesty Love”: the IRS disallowed the deductions for her breast enlargement surgery as a business expense (she is a top less dancer) but tax court allowed it. While cosmetic surgery is not deductible even as a medical expense under most circumstances “Chesty Love” was able to show that her enhancement had a direct link to her income and business. http://www.woodllp.com/Publications/Articles/pdf/Hess.pdf
Our businesses most valuable asset is our people. Many business owners fail to recognize this important fact. The truth is your people hold the institutional memory of your business. They are the receptacle of all the training you do and they are the face your customers see and trust.
Just an F.Y.I., I have put three children through college, mostly on the extra fees generated by people that thought they could save a little money by handling things on their own instead of hiring a professional.
When it comes time to pay taxes, no one ever says “I make too much, I need to pay more.”
One of the most complicated taxes of all is the sales tax. Sales tax rules contain many all kinds of exemptions and special tax rules. Get these rules wrong and you can be liable for tens of thousands of dollars in tax. When is the last time your business had a sales tax checkup?
Many Tax-Exempt Organizations Must File with IRS by May 15 to Preserve Tax-Exempt Status. Remember to file your 990, if required, to avoid penalties or worse yet loss of your tax exempt status.
Had a visit from a prospective client that has visited us several years ago. He wanted to know about opening a new corporation as his old corporation had been subject to several audits, assessed lots of additional taxes and been subject to all kinds of penalties. When asked why the additional taxes had been assessed he had no idea. What he did know was that the accountant he had been working with was “very inexpensive” but had never explained anything to him so he did not know why he was subject to two audits. He wanted to make a change but price was still his number one consideration. Just a reminder when choosing accountants and brain surgeons, price should not be your number one consideration.
Unfiled tax returns don’t go away. If you have neglected to file past tax returns it’s important to remember for the statute of limitations to run, your returns must be filed. This means that no matter how long ago you failed to file a return the IRS can still come looking for the return along with the taxes interest and penalties due. While failure to file means you never get off the hook no matter how long you wait, the same is not true for your right to claim a refund due on an unfiled tax return. You have only 3 years from the date the return was originally due to claim your refund.