Keep Your Options Open by Planning Ahead

Okay, you’ve heard me say it before, but getting ready for next tax season NOW, is imperative.  By this time you’ve already gotten past the elation of a sizable return or the drudgery of paying that surprise lump sum.  So, begin to direct your attention to being the best proactive business owner you possibly can be.

Purchasing sophisticated accounting software to help keep you organized does you no good if you’re scrambling to enter your shoebox of receipts at the last minute.  Keeping your records up to date not only helps you rest easier at night, it helps keep an eye on the vitals of your business, which also helps you rest easier.  It’s a vicious cycle.  Doing this will help you make decisions in real time, rather than hindsight.  Updating your books with regularity, at least once a week, is like going to the gym.  You know it’s a good idea, but you put it off until eventually the paperwork (or pounds) pile up, then it seems an even more unsurmountable task.  Think of it as part of your overall financial health and just DO IT for the longevity of your business.

     To Do:

• Document invoices, bank statements and receipts.  Expenses for travel and entertainment are the most reviewed by the IRS so make an extra note on it’s business purpose and who attended the event.
• Always have an updated record of accounts receivable and accounts payable.
• A Form 1099 must be filed for any contractor you pay over $600 in a year.  This needs to be done in January, not at the last minute.  You should be able to predict by June if you will pay a subcontractor more than $600 by the end of the year.  You need their current address, tax ID number, and proof that they are a subcontractor to your business and not an employee.  This includes invoices or business cards.
• If you are the subcontractor paid more than $600 in a year, be sure to include that amount in your taxable income.  June is also a good milestone month to consider year-end bonuses or seasonal hires as they can both affect your tax liability.
• If you are audited, you are responsible for at least 3 years of previous tax and income records.  If they believe fraud is involved, that time period could be extended to 6 years.
• Check for accuracy; reconcile bank accounts and income statements.

  

Remember, having tax questions and asking about options in February is not really setting yourself up for success.  Last minute scrambles to save severely limit your options.  Ask your accountant about some of the things you can do to reduce your tax bill.  If it looks like your revenue is sky-rocketing, it might be a good time to purchase that large piece of equipment you’ve been wanting, therefore decreasing your income.  Also, keeping tabs throughout the year will help your liability be less of a surprise when the time comes, meaning you can accurately predict how much money you need to set aside.

5 Apps to Bolster Productivity

(Image Courtesy of Venmo)

     There are many arguments back and forth about technology in the workplace.  Some say it’s a distraction, others a new way of doing business.  It’s no longer a faux pas to have your phone out at a meeting.  Updating calendars to quickly taking notes, we use our phones for everything.  Why not use the technology to our advantage by having a customized set of tools at our fingertips!  

1. Venmo—  If you need to make payments on the go, this app is for you!  There are no fees and no forms.  It’s a fast way to split lunch meetings, cover client’s travel, etc.  This is a top notch alternative to PayPal.

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2. TripIt— An organizational tool that puts all of your travel bookings in one app, it also helps keep track of expenses for tax filing as well!

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3. Contactually— This app helps you manage existing contacts and leads.  It helps you maintain relationships with them through daily follow-up reminders as well as track progress with weekly statistics.  Set up due dates within the app, or notifications for any contact leads.  This app really helps you get the most out of your connections.

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4. Invoice2Go— End the moments of headslapping when you forget to invoice a customer!  Do it on the go with this app that sends professional looking invoices, fast.  Don’t let forgotten amounts due slip through the cracks.

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5. EchoSign— You don’t have to wait for a scanner anymore.  Adobe, using pdf technology,  sends esignatures on important documents through your mobile device or tablet.  These documents are stored using cloud technology and speeds up the pace of your day to day business.

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     Used wisely, technology can help any entrepreneur be a resourceful powerhouse.  These apps hopefully simplify the process and paperwork of daily business so you can focus on your product and productivity. 

Small Business on the Rise

     Small business is booming.  In recent years access to credit and hiring capabilities have improved.  While trends are not as strong yet as they were in 2014, the first positive trend for this year happened in March.  There are many reasons why this might be, but a lot of people are worried about the effect of the Affordable Care Act when considering hiring more staff.  

     Businesses need to figure out where their employees fall when it comes to providing coverage.  Small businesses employing over 99 people are required this year ( last year it was mandatory) to file forms at the end of the year and smaller business sizing between 50-99 employees still have until 2016.  Most healthcare costs for businesses have gone up over the past year and that means hesitation when looking to hire that 50th person.

     While there are ways to decrease liability, such as hour cuts, this change in health care structure is making sweeping changes in the small business arena.  Know what category your business falls in and prepare for the upcoming changes.  While it’s not mandatory until next year for businesses with less than 50 employees, doing a practice run for healthcare expenses this year could be to your benefit.

5 Things To Do To Avoid A Post-Traumatic #TaxSeason

     Everyone finally gets to take a moment to catch their breath after all the preparation they put into (or paid for) preparing their tax return.  Finalizing the paperwork is both scary and relieving.  But now that it’s over, what to do next?  Just sit around for another 12 months until it's time to start scrambling forms together again?  No. Whether you are stressed about your tax liability or wondering what to do with that large sum of money, here are 5 things you can do to prepare for next year.

Refinancing

The Real Estate industry is all abuzz about how low the rates are starting off 2015.  Remember though, a financial move that could reduce your payments or interest affects your tax liability at the end of the year.  Reducing your interest rate reduces your itemized deductions, this could lead to a larger amount owed to Uncle Sam come next April 15.  If you do some preemptive accounting, you can suitably tailor your withholdings or estimated tax payments throughout the year.  Avoiding that jaw dropping liability takes a little more planning than crossing your fingers and hoping for the best.

Installments

If your tax bill is too large for you to be able to pay it all in one lump sum, you can request an installment agreement or payment plan.  If you’re unable to pay your tax bill because of a singular event, filling out the proper forms should be enough.  If you often find yourself falling short of your tax bill, it’s time to start thinking of increasing your estimated payments or withholdings.  The IRS has been willing to combine previous installment plans with new ones, but the third time is not the charm in this case.  To read about these plans visit http://www.irs.gov/Individuals/Payment-Plans-Installment-Agreements.

Secure Your Income for Retirement

Why not make the maximum contribution to your retirement fund.  Whichever works best for you, either a traditional IRA or a Roth IRA, you’ll save money in taxes by allocating the funds to your retirement.  A Health Savings Account (HSA) is also a savvy way to increase your deductions and put your hard earned money to work for you.

Unintended Savings 

Keep saving that big return!  Uncle Sam held on to it for you all year,   if you can live without it, a big return can be good for putting away in your emergency fund, college savings for your child or a large home repair you know is coming down the road.

Unemployment

Unfortunately, if you’re collecting unemployment checks, you still have to pay taxes on that income.  You can request federal withholding from these checks to cover that amount.

     As long as you do a little preparation throughout the year, paying taxes won’t be as much of a burden come April.  Tax laws are ever-changing, so being up to date on what’s relevant this year will help you plan according to their benefits or disadvantages.

Starting A New Business? Beware of Any Old Business Debts

     Making the move from a sole proprietorship or partnership to an LLC or Corporation is a smart business move.  It protects your personal assets from being threatened against business debts.  Unfortunately, any old business debts accrued before the conversion means your personal assets can still be threatened from that time.  Often if you don’t pay off your old debts before forming the new corporation or LLC, or pay them down in a timely fashion after the conversion, creditors could potentially go after your newly formed business to pay off your old debts.

What’s in a name?

     Being adamant about only using your new corporate or LLC name for business transactions is essential.  Sign all contracts and checks under your new name.  In order to fully establish all that’s required to retain the benefits of LLC status, call the bank where your business holds an account to learn exactly how to endorse your checks.  It is usually using the company’s name, or your current position.

     Its also a very crucial step to change your letterhead, any marketing materials, business licenses and permits, etc. to clearly state your new status.

Notify Clients and Suppliers.

     As soon as the conversion to a corporation or LLC is completed, your new priority is to send a notification letter to your customers, suppliers and clients notifying them of your new business structure.  Make note in the letter that business conducted moving forward should be done using your new name, which can be the same as your old, just tacking “LLC" or “Inc." to the end.

Formalities, please.

     It is important now to distinguish your new corporation or LLC as a separate entity from you.  One of the main guidelines is to have regular meetings as per your structure’s bylaws or operating agreement and to document these meetings.  Following the formalities of your business operation deters creditors from potentially claiming your new structure as a sham to avoid them.

Build your Business’s Credit

     It may be hard to get a credit line or take a loan out from a bank without making a personal guarantee, which is something you want to avoid.  Unless you can prove to the bank that your cooperation or LLC has enough assets to cover the debt, they may want to have your personal signature.  Just as you would work to build your personal credit, you can establish your corporation’s or LLC’s credit.  You can either take out a couple business credit cards, or establish a trade lines of credit with your suppliers.  If a vendor won’t work with you without a personal guarantee, you can usually find someone else who will, especially if you can offer an upfront payment for the first few transactions.

     There are a few ins and outs to operating as a corporate or LLC business structure.  As long as you are aware of the regulations and operate accordingly, you can enjoy the benefits of a corporate or LLC structure and your personal assets will remain protected.

Money Mistakes By Companies - Scrapping For Cash

Being a small business owner can be extremely rewarding….and extremely daunting.  You are responsible for generating revenue for your company, yourself and your employees, working hard for every dollar.  With your laundry list of things to get done every day, week or month, having enough money to pay your bills and your employees should not be one of them.   Having started your business with sufficient funds and a plan, here are a few reasons why money issues might still be nipping at your heels.

1. Poor Accounting Management— Most business owners have a “can-do” attitude towards things like finance and try to tackle accounting themselves, or hire the cheapest person available that knows something about numbers.  This is not the way to handle your livelihood and the life-blood of your business.  Ultimately cutting corners like this to save money will end up costing you more.  Hire a professional and have them set up user-friendly accounting system software that’s right for your business.  Being conscientious about recording expenses and income into your software is key to knowing where the money goes at the end of your financial year.

2.  Cheating on Your Budget— Not taking the time to draw up an annual or even monthly budget means unpredictable spending.  Don’t spend your working capital on a long term investment, or miss out on lower tax rates by not planning your spending.  Covering the long and short term of your business can be handled by creating a yearly budget as well as a monthly budget.  Having an over arching guideline for your finances considers the longevity of your business and a month to month plan incorporates day to day realities like slow sales months in the winter.  The key is to prioritize your company’s spending.

3. Impulse Purchases— Lots of business owners make impulse buys either out of a “stroke of genius” for the company or to reward themselves for all their hard work.  Either in the form of a new computer, or a company car, these kinds of purchases dip into your emergency funds.  Don't rely on these funds for impulse buys that aren’t a part of your business plan for the year.  These kinds of purchases dry up your business’s funds, what happens in a real emergency?

4.  Underpricing Services— So many new businesses try to break into the market by undercutting their competition.  While this may work for a little while, it is no sustainable business practice.  Under quoting just to win over a new client can bring doubts about the quality of your service.  If you truly believe in the quality of the work you do, the work will speak for itself and your customer will be satisfied.

Ultimately creating a budget and sticking to it will do your business a great service.  Having a professional help you keep track of your financial health is an investment you will see a return on.

3 Things To Remember When Filing An Extension

April 15 is fast approaching and some might not be ready to file yet.  Fear not, anyone can apply for an extension. Yes, even you.  There are a three things to know first before filing for an extension. 

1.  Form 4868 is what you need to file in lieu of your Federal Income Tax Return.  You can file it by mail or electronically, as long as it’s in by April 15 you will have an automatic 6 month extension to file.

2.  Remember that this form is just an extension to file, not an extension to pay taxes.  You must have an estimate of the amount you owe and send it when filing for an extension to avoid any late fees or penalties.  Any underpayment of taxes not paid by April 15 is subject to late fees and interest.

3.  The purpose of this form isn’t just to procrastinate until October.  The time is meant to allow for complete and accurate filing without assessing a late filing penalty.  The extra time granted is usually used to seek professional advice about your financial situation.

There are many benefits to requesting an extension to file your income taxes.  It’s a great way to avoid the busy rush of tax season and your tax professional will more likely have time after mid-April.  The most important thing to remember is that it’s an extension of time to file your return, not to pay taxes due. 

To find out more information about filing an extension please visit this link with some really great information provided by the IRS