9 Avoidable Payroll Mistakes

Engaging employees allows your company to function and grow. But doing so puts employer responsibilities on your shoulders. Running afoul of these responsibilities can trigger penalties, and failing to take advantage of opportunities can cost you taxes, both of which can hurt your bottom line. Here are 10 payroll mistakes to avoid.

Payroll Mistakes to Avoid
Small Business Trends |  Nov 2, 2017  |  By Barbara Weltman

Giving Comp Time
When your non-exempt employees (generally hourly workers) work more than 40 hours in a workweek, you owe them time and a half. You can’t sidestep this obligation by giving them comp time (allowing them to take off the overtime hours worked). Doing so violates the federal Fair Labor Standards Act (FLSA).

Classifying Workers Improperly
If workers are your employees, you owe payroll taxes on their wages and taxable benefits. You can’t avoid these taxes by labeling workers as independent contractors if they truly are employees. Doing so can result in serious tax penalties as well as penalties from other federal and state agencies.  Check IRS guidance on worker classification.

Delaying Last Paycheck
When you terminate a worker or he or she quits, you owe a final payment. While federal law doesn’t require that you pay the worker immediately, state law may. Review the rules in your state. Violating these rules can result in penalties or even legal action.

Reimbursing Travel and Entertainment Under a Non-accountable Plan
If you reimburse employees for the cost of traveling or entertaining on company business, you may be incurring needless employment taxes if you don’t arrange the reimbursement properly. If they simply ask for reimbursement and you pay it, the reimbursement is taxable to them and subject to payroll taxes. If, however, you adopt an “accountable plan,” the reimbursement isn’t taxable to them and you don’t owe payroll taxes; you deduct the T&E expenses. To be an accountable plan, you need to follow IRS guidelines.

Paying Creditors Before the Government
If you’re experiencing a cash crunch, be sure to put the IRS at the top of your list. If you choose to pay the landlord or other creditors instead of first paying payroll taxes, you can become personally liable for all of these outstanding taxes, even if your business is incorporated or a limited liability company. Make payroll taxes a priority so you don’t trigger a trust fund recovery penalty.

Ignoring Unemployment Claims
When a worker leaves the company, he or she may apply for unemployment compensation. If the departure is voluntary, or the worker was terminated for serious misconduct (e.g., sexual harassment of a co-worker, being intoxicated on the job, stealing from the company), he or she isn’t entitled to unemployment compensation. If you fail to challenge erroneous claims, you may needlessly be paying higher state unemployment tax. Check with your state about how to challenge a worker’s erroneous claim for benefits.

Being a Bad Record Keeper
The law requires you to maintain payroll records and make them available to the IRS under certain circumstances. Usually, you must keep records for at least four years. These records include time sheets or other records of hours worked, expense accounts, copies of W-2s and I-9s, accident reports, and any other relevant payroll information.

Failing to Have New Employees Complete Form 8850
You can tell by looking at a new employee whether he or she is from a targeted group that would entitle you to claim the work opportunity credit. Have each new worker complete Form 8850, an IRS form. It is used to pre-screen workers for purposes of the credit. The form must be submitted to your state employment security agency (SESA) no later than the 28th calendar day after the date the member of a targeted group begins working for you. If you don’t, you can’t take the work opportunity credit even if you’d otherwise be entitled to it.

Missing Employment Posters
You are required to display posters for certain federal and state employment laws. If you fail to do so, you can be penalized. The amount depends on the type of poster that’s required to be displayed. Find the federal posters you need from the DOL’s Poster Advisor. Your state labor department can tell you which state law posters to use. Don’t pay an outside company for them. Download required posters from government websites.

Tax Planning Options for Year-End

Here are some great options for individuals looking to maximize their year-end tax planning!

With 2018 Fast Approaching, It's Time for Some Year-End Tax Planning Tips 

By Amy Neifeld Shkedy and Rebecca Rosenberger Smolen | November 02, 2017

As we approach the end of 2017, it’s a great time to start thinking about year-end tax planning issues. Rather than wait until the end of December, getting a head start on planning can improve your chances of concluding matters by Dec. 31. Here are some options that we suggest you consider before the end of 2017 to enable you to start 2018 in the best wealth planning shape possible:

• Annual Exclusion Gifts. Each individual can make a cumulative annual gift tax exclusion gift of $14,000 per donee during 2017, without using any portion of his federal estate and gift tax exemption. This annual gift tax exclusion amount is set to increase for the first time since 2013 to $15,000 in 2018. The federal estate and gift tax exemption is also set to increase from $5.49 million per individual this year, to $5.6 million in 2018 (allowing a married couple to shield $11.2 million from federal estate and gift taxes). Annual exclusion gifts can be made outright, through 529 Plan benefits (education savings accounts), or in special qualifying trust structures. For those still considering such gifts, it may be worthwhile to plan for 2017 and 2018 at the same time (noting the $1,000 increase in the exclusion amount for 2018), keeping in mind that gifts for 2018 can be made effective as of Jan. 1.
• Accelerate Deductions. Prepay deductible expenses due in January (including state and local income tax estimated payments which may not be due until January).
• Loss Harvesting. Harvest tax deductible losses to offset taxable gains for 2017. However, be mindful of the 30 day wash sale rule of Internal Revenue Code Section 1091, which could disqualify a deduction of the capital loss if the same, or substantially identical, security is purchased within 30 days after selling at a loss.
• Required Minimum Distributions. For those who have reached their required beginning date or who hold inherited IRA accounts, be sure to take your required minimum distribution for 2017 from your traditional IRA or qualified plan account by Dec. 31. Note that taxpayers who are 70 ½ or older are able to transfer up to $100,000 from an IRA (other than an inherited IRA) directly to a qualifying charity (a charitable rollover) in partial or full satisfaction of their required minimum distribution for 2017. This IRA charitable rollover law, which had formerly been a temporary measure, was passed permanently as of Dec. 18, 2015, by its inclusion in the Protecting Americans from Tax Hikes (PATH) Act of 2015.
• Qualified Retirement Plan Establishment. Business owners who are considering funding a new retirement plan have the opportunity to establish a qualified retirement plan by the end of the year but defer the decision about the funding amount (and the actual contribution) until later during 2018 (contributions can generally be delayed until at least Sept. 15). The limitation for tax deductible contributions for 2017 is $54,000 per participant for defined contribution plans (or up to $60,000 when including the $6,000 catch-up contribution for a participant who has reached the age of 50). Next year this cap will be increased to $55,000 (or $61,000 when including the $6,000 catch-up).
• Roth IRA Conversion. Convert a traditional IRA to a Roth IRA to take advantage of lower brackets or absorb excess deductions. All or any portion of the converted amount can be recharacterized to a traditional IRA on or before Oct. 15, 2018.
• Basis Step-Up Planning. For individuals who have funded “grantor” trusts for their families, year-end is a good time to consider swapping back low basis assets (e.g., appreciated stock) for high basis assets (e.g., cash) to help make tax reporting after the swap cleaner (rather than switch tax identification numbers in the middle of a tax year). It’s better to own the lower basis assets at death because of the opportunity for a basis step-up to fair market value under Internal Revenue Code Section 1014.
• Charitable Giving. If you are in a high income year, consider “prepaying” future charitable contributions to generate current income tax deductions. This can be accomplished simply by increasing the contributions to your favorite charities, in general, or you can defer the receipt by the charitable organizations you wish to benefit (or even defer the decision as to which ones to benefit) by contributing to a donor advised fund, a private foundation, charitable lead trust or charitable remainder trust or purchasing a charitable gift annuity.  Both the charitable gift annuity and charitable remainder trust options allow you to retain an income stream for life and defer the transfer of the remaining funds to the charity until after your death.
• IRAs and HSAs. While you technically have until April 15, 2018 to fund your Individual Retirement Account and Health Savings Account for 2017, it’s always a good idea to start planning for such funding at year end. Consider helping your children (to the extent that they have earned income) to fund tax favored Roth IRAs if at all possible. The maximum contributions for IRAs for both 2017 and 2018 is $5,500 ($6,500 for those who have reached the age of 50). The maximum family contribution for an HSA in 2017 is $6,750 (or $3,400 for individuals), with an extra $1,000 available for those who have reached the age of 55. For 2018, the maximum family contribution will increase to $6,900 (or $3,450 for individuals).
• Trust Income Tax Planning. While a trustee will generally have until 65 days after the end of the tax year to shift trust taxable income to a beneficiary, it’s worthwhile to monitor the issue at year end to get a jump start on evaluating the issue. This is becoming a more consequential issue with the Medicare tax imposed at 3.8 percent and the extra 5 percent tax which is imposed on dividends and capital gains at the higher brackets (which are reached pretty quickly for a trust).
• Estate Plan Review. Although it’s not necessarily year-end sensitive, the end of the year is a great time to review your estate plan to see if changes might be in order (whether because of changes in the tax law, your wealth, your chosen fiduciaries, or objects of your bounty). If you don’t review it at year-end, you might never review it before it’s too late, since you may not have any advance notice of the actual deadline.

Rebecca Rosenberger Smolen and Amy Neifeld Shkedy are members and co-founders of Bala Law Group. They focus their practices on tax and estate planning.

To view the original blog visit Law.com

A Small Business Owner's Guide to FLSA rules

As a small business owner, it's a big part of running your company to be current with fair labor laws and operational compliance - on top of everything else you have to do!  Instead of putting more on your plate, why not just have a reliable team of experts in your corner to ensure you're up-to-date with all your payroll compliance needs? From the HR Blog at Fuse, here are a few basics on Federal Labor Standard Act regulations.

What is FLSA coverage? Who is covered?

The Fair Labor Standards Act covers certain employees entitled to labor law standards like overtime pay and minimum wage. Employees with FLSA coverage have FLSA non-exempt status. Employees without FLSA coverage have FLSA exempt status. 

Employers pay exempt employees for the job duties they perform, not the hours it takes them to do the work. Therefore, exempt employees are not eligible for FLSA coverage and are not entitled to certain labor standards like overtime pay and minimum wage. There are several considerations that determine employee FLSA status including salary basis, salary level, and duties performed. 

How do you define FLSA status classifications?

FLSA NON-EXEMPT: The provisions of the FLSA cover non-exempt workers for minimum wage standards, overtime pay, and other labor standard protections. Employers must pay their FLSA non-exempt employees the federal minimum wage (at least) for hours worked. For all hours worked over 40 hours in a workweek, the employer must pay non-exempt employees overtime (time and one-half the regular rate of pay).

FLSA EXEMPT: Unlike non-exempt workers, FLSA coverage does not protect exempt workers. Employers pay exempt employees for the job they do, not the hours it takes them to do the work. Simply put, exempt employees are exempt from coverage.

In some cases, other federal labor laws override the FLSA. As a general rule, if another federal labor law governs a job, the FLSA does not apply.

How do you determine FLSA status?

First, you should determine whether the worker is an employee or independent contractor. If you define your workers incorrectly, you could be liable for unpaid taxes and fines.

The IRS provides three Common Law Rules for determining worker status. Is the worker an independent contractor or employee? Ask these questions:

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If the answer is ‘yes’ to these questions, your worker is probably an employee, not an independent contractor. Though, the IRS says there is no magic formula that determines status. The most important thing to look at when identifying a worker is the entire relationship between the worker and employer. Then, document all information about this relationship.

Once you have determined that your employees, you must now identify their FLSA status: exempt or nonexempt.

There are several considerations that determine employee FLSA status including salary basis, salary level, and duties performed. In order to determine employee FLSA status classification, an employer must answer the questions about the employee and his or her duties. The Department of Labor calls these questions the FLSA exemption test.  

FLSA Exemption Test

To classify employee FLSA status, you must answer the following questions:

1. Does the employee earn a salary?
2. How much does the employee earn per week or per year?
3. Does the employee’s role require certain responsibilities or functions that the Department of Labor considers exempt duties?

While there are a few exceptions, employees must meet all three of the tests above to be considered exempt from FLSA coverage (meaning NOT covered by the FLSA). There are some exceptions, however, where other federal labor laws override FLSA coverage. The FLSA states that, as a general rule, if a job is governed by another federal labor law, the FLSA does not apply. 

An employee passes the FLSA exemption test if:

• The employee receives pay on a salary basis.
• The employee earns at least $23,600 per year or $455 per week. (If the DOL's Final Rule takes effect, the threshold will increase to $47,476 per year or $913 per week.)
• The employee performs exempt job duties.

The DOL’s exempt duties typically include these roles:

• Executive
• Administrative
• Learned Professional
• Creative Professional
• Computer Professional
• Outside Sales

Salary Basis Test

Is the employee paid on a salary basis?

An employee paid on a salary basis earns a guaranteed minimum amount of payment for any amount of work done in a given week. This minimum payment includes accrued PTO days for vacation and sick days. Salaried employees may earn above the guaranteed minimum amount of pay through bonuses or other incentives but they may never earn less. 

There are permissable and impermissable reductions in salary basis level for employees. Permissable reductions could include docked pay due to disciplinary suspension or an employee taking more sick/personal days than he/she has accrued. This does not affect an employee's FLSA exempt status. If an employer docks an employee's pay for impermissable reasons (and the employee does not reach the guaranteed minimum amount of payment), it would have an effect on that employee's FLSA status and the employee would be classified with FLSA nonexempt status. 

Salary Level Test

Does the employee earn above the salary threshold? 

If an employee earns a salary above the FLSA threshold of $23,600 per year ($455 per week), the employee is exempt from overtime pay and other FLSA coverage. Remember, if the DOL's new overtime rule takes effect, it will increase this threshold to $47,476 per year ($913 per week).

Duties Test

Does the employee perform "white collar" exempt duties?

The Department of Labor determines exempt duties based on the primary duty and other duties the employee does in his or her job. This is not determined by the employee's job title or description but by the actual work performed. White collar exempt duties typically fall under roles such as executives, administrators, and other professional positions requiring certain degree levels or high-level work.

“Primary duty” as stated by the Depratment of Labor means the principal, main, major, or most important duty the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.

Executive Exemption

The Executive Exemption includes the following responsibilities:

• Regular supervision of at least two or more other full-time employees.
• Management as the primary duty of the job.
• Has input in other workers' employment such as hiring, firing, and promotions.

Some examples include CEOs, mid-level managers, and shift managers.

Learned Professional Exemption

The Learned Professional Exemption includes primary duties which require advanced knowledge in order to perform including:

• Consistent exercise of judgment and discretion
• Advanced knowledge in the field of science or learning (including law, medicine, accounting, theology, actuarial computation, teaching, architecture, pharmacy, and other occupations distinguished from mechanical arts or skilled trades)
• Advanced knowledge acquired by a prolonged course of specialized instruction.
• Required to analyze, interpret, or make deductions from varying facts or circumstances. 

Note: The DOL states that advanced knowledge cannot be attained at the high school level.

Some examples include lawyers, doctors, teachers, accountants, and clergy.

Administrative Exemption

The Administrative Exemption includes the following primary duties:

• Office or non-manual work directly related to business operations or management
• Exercise of judgement and discretion 
• Support production or line employees and keep the business running without engaging in the production or sales of the actual product or service of the business.

Some examples include Human Resources, Payroll, Benefits Management, Marketing, Public Relations, and certain computer-related jobs. Read more about the FLSA Computer Exemption here.

FLSA and overtime rules FAQs

What is Back Pay?

Back pay is a retrospective payment relating to a prior pay period. This typically happens due to salary increase or incorrect rate of pay in the cases of minimum wage and overtime pay.

Here is a guide from the Department of Labor on FLSA methods employees may take to recover unpaid minimum wage or overtime pay:

(1) The Wage and Hour Division may supervise payment of back wages.

(2) The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages.

(3) An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney's fees and court costs.

(4) The Secretary of Labor may obtain an injunction to restrain any person from violating the FLSA, including the unlawful withholding of proper minimum wage and overtime pay.

If an employee has received any back pay wages under the Wage and Hour Division or the Secretary of Labor has filed suit to recover lost wages, the employee may not bring suit under the FLSA.

What is considered work?

According to the FLSA (and the courts), “work” includes all time spent performing job-related activities which (a) genuinely benefit the employer, (b) which the employer "knows or has reason to believe" are being performed by an employee, and (c) which the employer does not prohibit the employee from performing. These can include activities performed during "off-the-clock" time, at the job site or elsewhere, whether "voluntary" or not.

What is overtime?

FLSA sets a threshold of hours to be worked in a single seven-day workweek at 40 hours. Any time worked over the threshold is considered overtime. Some jobs like, medical or government, may have different thresholds.

When should overtime be paid?

Unless an employee is exempt from FLSA coverage, an employee must receive overtime pay at the rate of time and one-half the regular rate of pay for any amount of time worked over 40 hours in a single workweek. Overtime pay is due in the corresponding pay period for which the overtime work was performed.

Is it illegal to work ‘off-the-clock”?

Yes! Any work performed off-the-clock is illegal. Workers should be paid for any hours worked, whether or not that work is counted on a timesheet. Even work that is not specifically requested but allowed must be compensated. Some of the most common types of the off-the-clock work include:

• Preparation like prep work to open a restaurant before a shift begins or transferring equipment to a worksite.
• Post-shift work that “should have” been completed during the time of the shift.
• Rework a project to correct errors or when project objectives change.
• Administrative work such as paperwork or follow up, even employee training.
• Waiting for work when nothing is immediately available and workers are required to wait for a task.

Under the FLSA Statute of Limitations, how long does an employee have to file a claim for unpaid overtime wages?

With the impending changes to overtime rules, employers and HR managers should be familiar with the rules of FLSA procedures, specifically the FLSA statute of limitations. Do you know how long your employees have to file a lawsuit for unpaid overtime wages?

The basic answer is two years-to-date after the wage violation, unless the employer willfully violated the FLSA, in which case the employee has three years to file.

If the employee experienced ongoing wage violations (not just one time), he or she will only be able to recover unpaid wages (called back pay) for the two years prior to filing the claim.

What is the difference between a wage claim and a lawsuit?

Employees may file a wage claim with the Wage and Hour Division of the DOL and, in some states, employees may be able to file with their state department of labor. A claim does not involve the court system, whereas a lawsuit does. If the claim cannot be resolved, the employee may file a lawsuit—if there is still time under the FLSA statute of limitations. A lawsuit may occur if the claim could not be resolved or if the claim was impractical, in which case an employer may take the suit to court.

Note that some states have different requirements for filing wage claims. In Delaware, for example, employees must file wage claims at least 90 days before the FLSA statute of limitations ends. In New Jersey, employees may claim wages worth $30,000 or less.

FLSA changes to overtime rules have consequences for many businesses in the U.S. Human Resources needs to know all the ways employees may claim back pay for overtime or off-the-clock work and what they could be entitled to under the FLSA statute of limitations.

The original article can be found here!

The Small Business Owner in One Infographic

A great overview of what the small business owner deals with every day! They are pulled in a million different directions on a daily basis - putting out fires, daily operations, employee management, customer service, overworked and not enough time in the day!  According to this infographic from Small Business Trends, 39% of owners find paperwork to be the biggest time waster.  However, it's a necessary evil that no one escapes from! Make it easier on yourself and hire an accounting firm that has your back!

National Payroll Week Offer for Small Business

We are continuing to expand our services even broader to be THE full-service small business accounting firm preferred by RVA!  Payroll is a must with most small businesses and also one of the biggest hassles.  A time-consuming and often costly task that won't go away week after week.  Which is why, in honor of National Payroll Week (September 4-8), we will be offering a special promotion to new Payroll clients and those that refer them to us!

New Clients:

• If you sign up before September 30th your one-time setup fee of $150 will be waived!

Referrals:

• If you refer a small business to us for Payroll Services and they sign up by September 30th, we will send you a $50 rebate check!

We work with our clients to maintain a payroll system that gets our clients as close to a “push button” payroll as possible.

Our clients submit their employee hours, change in pay or new hires in a variety of ways and combinations.  We’re set up to work with them all: e-mail, fax, phone, mail, online entry, and even by stopping by our Richmond office.

Employers have online access to a variety of reports and activities.  Employees have online access to their individual pay stubs and W-2’s.  Everyone can pick up the phone and get a prompt and professional response to any payroll related question that arises.  Here are many of the commonly used features that we offer:    

• We can receive and distribute information via an online portal, e-mail, phone, fax, or in person at our office
• Pay employees with paper checks or direct deposit
• Automated filing of all quarterly and annual reports
• Automated payment via bank draft for tax remittance
• Both you and your employees have access to custom online dashboards
• We handle all types of employee deductions including pre/after tax health insurance, employee advance repayments, garnishments
• Tip reporting
• Compliance with tip-to-minimum

Basic Fees and Pricing:

$150       Setup Fee

$125       Monthly Payroll

$155       Semi-Monthly/Bi-Weekly Payroll

$195       Weekly Payroll

$3           Per employee, per month fee for total monthly employees over 10

$50         Annual W-2 base fee

$7           W-2 fee per employee 

The Many Hats of an Accountant

There are so many facets of an accountant's role in Small Business, the first of which is to get to know yours!  Understanding the different needs of different small businesses is vital to our role in helping them be successful - there is no one-size-fits-all solution as you can read about in the unique solutions we found for Paisley & Jade.  This article sheds light on the many ways we can help you!

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It's a Bird, It's a Plane: The Four Financial Superheroes That Will Benefit Your Small Business
By: Bryce Welker
Forbes.com

Accountants are no longer confined to “bean-counting” tasks. The days of pocket protectors and short-sleeved shirts with ties are long gone. Now, accountants are viewed as superheroes (or violent hitmen if you’ve seen the Ben Affleck movie, The Accountant) who save businesses from financial risks and lead monetization efforts.

Having an accountant by your side as you make business plans for the future is the best way to ensure you are protected from any potential financial dangers. An accountant’s detailed knowledge of trends or tax laws, and his or her fiscal expertise, in general, will take down any villainous threats that could be looming on the horizon.

Not all businesses need a traditional accountant but having someone on your team who really knows finance can help you in a variety of ways. They can act as an advisor who can improve ineffective operational systems that cut company margins. If you are showing quarter-over-quarter growth, you may not be aware of any waste in the design of company procedures. An expert in money management will be able to easily spot inefficiencies and find ways to lower expenses or increase sales.

I realized my accountant was my hero when I began to have more and more time at work after delegating to him. Even though I had accounting knowledge, I needed to concentrate on running other areas of the company. As a CPA and CEO, I knew I had an advantage over other CEOs when it came to financial planning, but I didn’t want to devote too much of my workday to those tasks. An accountant can help with anything from preparing client proposals to pinpointing risks in need of mitigation. A skilled accountant can find missed deductions or help avoid a costly audit by carefully preparing tax filings. And with the changing times, accountants’ roles are also evolving every day.

The Changing Role Of The Accountant

Obviously, key accounting tasks like bookkeeping remain a focus. But technological advancement has prompted a shift away from strictly dealing with numbers to providing broader services that not only calculate, but also analyze. Now, accountants can act as specialists in many areas of business, and clients are welcoming this type of support.

Not all accountants wear capes and wield calculators. Let’s look at some of the undercover financial superheroes:

1. Business Analysts: Accountants are constantly working with data, like the company’s profits and losses. This data is one part of a larger puzzle. Look for a specialist who has the ability to see the details and the bigger picture. The powers of a business analyst can help you synthesize the company’s data and determine how different initiatives fit together. A good business analyst needs to have a strong background in accounting and a knowledge of programming languages like Python.

2. Entrepreneurs: Throughout an accountant’s career, they will experience different business needs and meet all sort of clients. An accountant will start to see the gaps for products or services that don’t exist. And that’s exactly what happened to me: I was a CPA and entrepreneur when I saw a niche that had a need. By having a strong understanding of financial implications when starting a business, accountants can become very successful entrepreneurs. So if you have aspirations to become a entrepreneur, start with a foundation in finance.

3. Investor Relations Specialists: Accountants make great investor relations specialists because of their background in finance and their ability to quickly understand and strategically communicate all elements of the company to different audiences. Look for an investor relations specialist with top-notch communication, analytical and reporting skills if you struggle with clear communication between your company and investors. Not all businesses need this type of specialist.

4. IT Specialists: Like many other things in this world, a lot has changed with technological advancements. Software and information systems play a critical role now more than ever. And in order for any business to be efficient, they need to integrate IT into their business. An accountant's knowledge and experience with multiple IT systems can offer companies valuable insight that can increase efficiency. IT specialists can advise and guide a business on its IT choices and ultimately save the company money by creating more effective systems.

You might not think you need an accountant in the traditional sense. But there are so many ways financial know-how can benefit your company. A CPA will be able to fit into most positions, given their experience and expertise. Even if you don’t have an immediate need, consider opening a line of communication with a CPA who you may want to bring on in the future, at least part time. If your business is growing, it's a smart choice.

10 Questions to Ask Your Accountant

A few of the questions from this article are about how the client can accommodate the accountant. At Accounting Works, we more often than not work the other way around.  Small businesses are so important to us, (in fact, we are a small business ourselves) that we know there is not one template that fits all of our clients' needs.  Working with clients on their current state of affairs as well as reaching toward future business goals is as important to us as it is to you!

10 Questions to Ask When Working With an Accountant

By Kim Lance Shandrow
Entrepreneur.com

Solely relying on free or inexpensive online small-business accounting tools instead of investing the services of a trained professional accountant can be a costly mistake that entrepreneurs make all too often. Don’t be one of them.

Springing for a licensed accountant can be worth every extra penny you spend, says ff Venture Capital chief financial officer Alex Katz. A qualified, certified public accountant (CPA) can tip you off to potentially irreversible financial missteps and brand new tax savings opportunities that you might not know exist. And we doubt most barebones digital accounting solutions could bring red flags like these to your attention as effectively as an accountant.

When you do invest in the services of a reputable accountant, it’s important to know what to ask and when -- not only to be sure you’re getting your money’s worth, but also to ensure he or she helps you do what’s best for your business and your bottom line.

1. What’s the best way to contact you and how often should we be in touch?

This might seem like too simple a question, but clear, effective and frequent communication is the key to a healthy, beneficial relationship with your accountant. Establish early on how often you’ll connect, either in person, on the phone or online (via a video chat app like Skype, Google Hangouts or Facetime). Decide together if you’ll meet weekly, monthly or bimonthly.

2. How can you help me prepare for (and survive) tax season?

Untangling the time-sucking tedium of tax prep is often the number-one reason small businesses hire an accountant in the first place. You’ll want to ask yours which tax credits and deductions you should claim. Also ask him or her if there are any new tax laws you should take advantage of to maximize write-offs.

“Tax opportunities, such as the R&D credit, accelerated depreciation or panoply of state and local tax opportunities, including tax forgiveness and outright grants or refundable credits, can even be applied for as part of the tax return process,” Katz says.

He suggests that you get answers to all of your tax questions long before the April 15 filing deadline. To avoid the year-end rush, get your accountant involved in helping you gather all of the necessary accounting documents and data all throughout year.

3. What are some considerations I should consult with you about on an ongoing basis?

A skilled accountant should get to know you and your business well enough to regularly keep you aware of -- and swiftly and appropriately reacting to -- an array of factors that could effect your bottom line, for better or for worse.

Your accountant should be well-versed in several disciplines, “including but not limited to GAAP [generally accepted accounting principles], corporate and individual tax, retirement planning and financial planning," Katz says.

He or she should also be open to assisting you in weighing the financial ramifications of certain decisions, like whether or not to hire an independent contractor or a full-time employee, buy or rent an office space, or rent or lease a company car and much more.

Your accountant should also work collaboratively with you in a way that makes it easy for you to consider and understand which actions you need to take now and in the future, ideally without the usual confusing accounting jargon. “If an entrepreneur in unable to develop that type of relationship with her accountant, it may be time to look for a new one,” Katz warns.

4. How can you help me grow my business?

A qualified accountant absolutely can help small-business owners expand over time, that is if have the right groundwork in place with you, Katz says.

To grow, you must start with a financial model that is “honest and built on a granular basis from the ground up.” Remember to update your plan on a monthly basis (or ask your accountant to) with actual results. Doing so can help you hone in on opportunities for growth in your market.

5. How can you help me clamp down on my cash flow?

Properly projecting your business’s cash flow is as essential as creating an effective mission statement and living up to it. Tedious, detailed flow projections aren’t easy to wrangle, but that’s what you have an accountant for.

Your accountant should be able to help you develop an organized, effective cash flow model that allows you to adjust your operations in ways that help you survive shortfalls, as well as improve receivables and manage payables.

6. What is my break-even point? 

Your account should be able to analyze a number of metrics to calculate whether your business is making a profit or a loss. Knowing your break-even point is crucial to determining your business’s pricing structure and profitability. Once your accountant helps you identify yours, you should have a strong estimate of how many products or hours of service you have to sell to cover your costs.

7. Can you assess the overall value of my business?

Your accountant should be up to the task of estimating your company’s fair market value in excess of your tangible assets. He or she should start by examining your financial plan and then execute a discounted cash flow (DCF) analysis, a common but effective valuation method.

Another way your accountant can help nail down your business’s value is by deeply understanding what you do and the industry in which you operate, Katz says. “In so doing, an accountant can help the entrepreneur understand which aspects of the comparable companies drive their value, and can work with the entrepreneur to steer the company toward maximizing those aspects of their business.”

8. Can you help me review and negotiate business contracts before I sign them? 

This is a common question for accountants, one that’s probably better to ask your attorney.

“An accountant should not practice law without a license,” Katz says. “They can work collaboratively with your attorney to add color and tax and commercial issues about which the attorney may not be experienced.”

9. What are some special considerations for my particular industry?

Businesses in different industries come with their own unique accounting issues. Your accountant should be knowledgeable about the various ones that specifically apply to yours.

For instance, if you own a startup that builds wearable tech, your CPA should be well-versed at identifying tax opportunities specific to the emerging technology industry, like potential R&D, facilities and training tax credits, as well as applicable manufacturing and sales tax exemptions, etc.

10. What are some common mistakes that I should avoid when working with you?

Not being 100 percent honest with your accountant is the worst mistake you could make, Katz says. “The truth will come out, either in the planning stage or in front of the IRS auditor.”

Failing to follow the advice of your accountant is another common mistake Katz sees. The whole point of hiring an accountant is for their expert advice. Thoughtfully consider it, then use it to make reasoned, balanced judgments.


Click here for the original article.

Paisley & Jade: Unique Solutions for a Unique Business!

Paisley & Jade, a vintage and specialty rental company, will celebrate their 5th Anniversary of being in business this summer. As a specialty prop house their warehouse stores furniture, accessories, some in-house made specialty items, and lots and lots of chairs! Annually, they supply a gamut of events from weddings, to trade shows, to film, theatre and ads.  Perkins Morgan and Morgan Montgomery, the co-owners of P&J call it, “Hoarding with a business license.” Now that Spring has arrived and events are around every corner, their feet barely hit the ground.  With schedules, logistics and a warehouse of goodies to keep track of, it left the owners little time to worry about their small business accounting needs. After going through a “handful of doozies,” they reached out to Accounting Works owner, Stephen Fishel, to find the solutions they desperately needed.

Photo Credit: Michael Thompson, RichmondBizSense.com

With such a unique and seasonal business, they had some interesting accounting challenges to face. Both Morgan and Perkins knew Stephen as the accountant for a local catering company, where the pair worked prior to starting P&J. After being frustrated with previous accounting firms’ approach, they contacted Accounting Works.




"Something he said always stuck with me," recalled Morgan, “He said that he could always advise on what the right financial decision is, but that might not be the right business decision.”

A custom table top designed and fabricated in-house.

They’ve been working with him for over a year now and couldn’t be happier.

“Off the bat, he offered to come to us, which is huge.” Said Perkins, their previous experience had been with accountants trying to stuff their business model into the rigid guidelines of the way they did things, not the other way around. They recalled a placard mounted in one office that read ‘You can’t fix stupid.’ And that’s how they felt, “They hated questions, they thought we ‘didn’t get it,” and after contacting Stephen, he “apologized for our bad experience,” they said laughing. “We just love Stephen, our meetings with him he makes really fun, jovial and personable.”

Photo Credit: KatelynJamesBlog.com

Morgan had a two-page bullet point list of things they needed to change or fix with their accounting practices.  “We struggled with HOW to do our bookkeeping,” they said, “one trip to Lowe’s could have 10 different categories on one receipt; asset purchase, office supply, warehouse supply…” but after working with Stephen, they came up with a custom method that was much more streamlined, with “way less of a delay to crunch month-end numbers.”

According to the P&J duo, their cash flow improved as well, “he did a great job researching because it’s such a niche business.”  Cash flow is critical to year-long survival for any business with seasonal variability.  “Other accountants blindly guessed, but he took the time to get to know us.”  They noticed an immediate flexibility of resources once they started working with Stephen and implementing the systems they put in place.

A wall of decorative accessories is every designer's dream.

Like Paisley & Jade, many small businesses struggle to find accounting solutions to fit their needs.  And like Paisley & Jade, it’s okay not to fit in one particular box or another! Diversity is the spice of our Richmond community, which is why Stephen of Accounting Works has dedicated his practice to finding practical solutions for small businesses!

To LLC or not to LLC?

If you're thinking about taking the leap this year and finally organizing your business as an LLC, now is a great time to consider it!  It can protect your business as well as offer tax incentives for its members.  Here are some points to consider when deciding how to structure your small business.

LLC: Pros and Cons of a Limited Liability Corporation
By Andrew L. Wang
Nerdwallet.com


The limited liability company was first offered as an option for structuring businesses 40 years ago in Wyoming. By the late 1990s, all states had laws authorizing the organizing of businesses under the hybrid structure. Today, LLCs are growing faster than any other business type, according to the IRS.

What is an LLC?
An LLC is a business structure that combines the simplicity, flexibility and tax advantages of a partnership with the liability protection of a corporation. An LLC can have one or many “members,” the official term for its owners. Members can be individuals or other businesses, and there is no limit to the number of members an LLC can have.

About 2.4 million U.S. businesses identified as LLCs in 2014, according to the latest figures available from the IRS. Take a look at these advantages and disadvantages to help you decide whether an LLC is the right structure for your business.
Small Business LLC Pros and Cons

LLC: The Pros
Choosing to structure your business as an LLC offers a number of advantages:

Limited Liability
Members aren’t personally liable for actions of the company. This means that the members’ personal assets — homes, cars, bank accounts, investments — are protected from creditors seeking to collect from the business. This protection remains in place so long as you run your business on the up-and-up and keep business and personal financials separate.

Pass-Through Federal Taxation On Profits
Unless it opts otherwise, an LLC is a pass-through entity, meaning its profits go directly to its members without being taxed by the government on the company level. Instead, they’re taxed on members’ federal income tax returns. This makes filing taxes easier than if your business were taxed on the corporate level. And if your business loses money, you and other members can shoulder the hit on your returns and lower your tax burdens.

Management Flexibility
An LLC can opt to be managed by its members, which allows all owners to share in the business’s day-to-day decision-making, or by managers, who can be either members or outsiders. This is helpful if members aren’t experienced in running a business and want to hire people who are. In many states, an LLC is member-managed by default unless explicitly stated otherwise in filings with the secretary of state or the equivalent agency.

Easy Startup and Upkeep
Initial paperwork and fees for an LLC are relatively light, though there is wide variation in what states charge in fees and taxes. For example, Arizona’s filing fee for articles of organization is $50, while the fee in Illinois is $500. These variations aside, the process is simple enough for owners to handle without special expertise, though it’s a good idea to consult a lawyer or an accountant for help. Ongoing requirements usually come on an annual basis.

LLC: The cons
Before registering your business as an LLC, consider these possible drawbacks:

Limited Liability has Limits
In a court proceeding, a judge can rule that your LLC structure doesn’t protect your personal assets. The action is called “piercing the corporate veil,” and you can be at risk for it if, for example, you don’t clearly separate business transactions from personal, or if you’ve been shown to have run the business fraudulently in ways that resulted in losses for others.

Self-Employment Tax
By default, the IRS considers LLCs the same as partnerships for tax purposes, unless members opt to be taxed as a corporation. If your LLC is taxed as a partnership, the government considers members who work for the business to be self-employed. This means those members are personally responsible for paying Social Security and Medicare taxes, which are collectively known as self-employment tax and based on the business’s total net earnings.

On the other hand, if your LLC files forms with the IRS to be taxed as an S corporation, you and other owners who work for the company pay Social Security and Medicare taxes only on actual compensation, not the whole of the company’s pretax profits.

Consequence of Member Turnover
In many states, if a member leaves the company, goes bankrupt or dies, the LLC must be dissolved and the remaining members are responsible for all remaining legal and financial obligations necessary to terminate the business. These members can still do business, of course; they’ll just have to start a whole new LLC from scratch.

How to Start Your LLC

• Choose a name: Register a unique name in the state where you plan to do business. To make sure someone else doesn’t have your business name, do a thorough search of online directories, county clerks’ offices and the secretary of state’s website in your state — and any others in which you plan to do business. For a fee, many states let applicants reserve an LLC name for a set period of time before filing articles of organization.
• Choose a registered agent: The registered agent is the person you designate to receive all official correspondence for the LLC. It’s crucial that you nail down who this person will be before filing articles of organization, because states generally require you to list a registered agent’s name and address on the form. Though people within the company are usually allowed to serve in this role, states maintain lists of third-party companies that perform registered-agent services.
• File articles of organization: This is the step that essentially brings your LLC into existence. States request basic pieces of information about your business, which, if you’ve thought through your business plan and structure, should not be hard to provide. You’ll be asked to supply details like name, principal place of business and management type.
• Get an employer identification number: The IRS requires any business that has employees or operates as a corporation or partnership to have an EIN, a nine-digit number assigned to businesses for tax purposes. The rule applies to LLCs because, as creations of state laws, they’re classified for federal tax purposes as either a corporation or a partnership.
• Draw up an operating agreement: Your operating agreement should include specific information about your management structure, including an ownership breakdown, member voting rights, powers and duties of members and managers, and how profits and losses are distributed. Depending on the state, you can have either a written or oral agreement. Many states don’t require one, but they’re a useful thing to have.
• Establish a business checking account: It’s generally good housekeeping to keep business and personal affairs separate. Having a separate checking account draws a bright line between the two. This is critical if you want to mitigate any potential risk to your personal assets if a lawsuit calls into question your business practices.

To view the original article, click here.

Employee Benefits that Count as Taxable Income

As a small business owner, you always want to save wherever you can, but that doesn't mean cutting corners.  Cutting corners, like NOT hiring a professional to do your taxes or payroll could end up in either losing you money or making an error like deducting employee benefits you shouldn't (Number 6!).  That's why Accounting Works is offering affordable and competitive prices on Payroll Services to all small businesses.  With accounting software that allows employees to download their own W2s and Paystubs, you don't have to worry about going back and forth.  Not to mention our tax expertise to find you opportunities to save money and grow your business.

Credit: Getty Images

7 Employee Benefits You Didn't Know Were Taxable Income
With tax season upon us, it's important to understand what employee perks and benefits will count towards your employees' taxable income.

By Rebecca Wessell

With more perks and benefits becoming standard (and with tax day coming up), it's important to know which perks are considered taxable income for your employees. Here are some perks you may not realized are considered taxable by the IRS:

1. Gym or health memberships
I didn't know this one until recently (when our company offered us gym memberships), but the IRS considers a gym or health membership a fringe benefit, and therefore taxable income. The IRS will tax you on the fair market value of the gym membership, so if the gym membership is $50 per month, your employees will be taxed on that extra $600 per year.

One exception to this is if the gym facility is on-premise or employer-owned. In this case, employees won't typically be taxed on the gym, and the employer can usually write it off as a deduction. This is how big companies like Google can provide truly free gym memberships for their employees.

2. Business frequent flyer miles converted to cash
You probably knew that cash gifts to employees are considered taxable income, but you probably didn't know that the IRS doesn't care how the cash becomes cash in your employee's hands.

If you have a small business or corporate credit card and you allow employees to convert your business's points or frequent flyer miles for cash, that may be considered taxable income.

3. Season tickets
While providing infrequent or one-off tickets to events is considered a "de minimis" fringe benefit (and not taxable), providing season tickets can taxable. Depending on how expensive the season tickets are, this could be a pretty considerable tax burden to your employees.

It may be more cost-effective to your employees to provide the occasional ticket rather than a season pass.

4. Clothing
If you provide clothing to your employee that can replace everyday clothing (i.e., not a uniform), this may also be taxable. This doesn't include providing company t-shirts once a year or small value items.

However, if you frequently give your employees clothing and it amounts to a significant amount, they may need to pay taxes on them.

5. Vacation expenses
With some companies now providing "paid paid vacation" for their employees, you should also know that the IRS considers that a taxable fringe benefit. If your business pays for any vacation expenses for its employees, whether airfare, hotels or meals, this must be included in the employee's gross income.

Another kicker? None of these expenses is deductible to you as the employer.

6. Spousal travel or meals
There are some exceptions to this rule. Namely, the exceptions are if the spouse is also an employee or is there for a genuine business purpose, or if the expense would be deductible by your employee anyway.

Otherwise, any expenses, such as food, lodging or travel, covered for your employee's spouse will be taxed come April.

7. Personal use of employer vehicle
If you provide cars or other vehicles for employees, the employee's personal use of the vehicle will be taxed. This includes commuting to and from work, running personal errands or letting a non-employee use the vehicle.

And it's important to keep good records. Because if you don't keep records on when the employee uses the vehicle for business or personal purposes, then all of the usage will be taxed.

To view original article visit Inc.com

Tax Extension Deadline!

If you filed for an extension, Monday, October 17th is the deadline to file your Individual Tax Return (1040, 1040A, or 1040EZ) for 2015!  

October 17th is also the date for Electing Large Partnerships that have filed for an extension (Form 1065-B).

Think Ahead:

December 15th is the deadline for Corporations to make 2016 estimated payments.

For a list of all tax deadlines by quarter click here.

Streamline Your Invoicing Process

From the founder of the popular online payments company, Due, comes these 6 tips to streamline invoicing for your business.  A big portion of invoicing has to do with consistency in billing, clarity on your invoices, and making your system paperless can help a lot as well!

6 Ways to Simplify Your Invoicing Process
By: John Rampton

How many times have you forgotten to send an invoice? How about having an invoice getting lost? Are you getting overwhelmed with this additional accounting task?

If you said ‘yes’ to any of those questions then it’s time for you to simplify your invoicing process. Not only will it guarantee that you’ll get paid on-time, it will also alleviate all of that additional stress that small businesses always dream accomplishing.

Sound too good to be true?

It’s not by using the following six techniques.

1. Create an Agreement

As a business owner you should already know how important agreements are. Without them, you could be greatly increasing your chances of getting stiffed. For example, if you were a contractor, you wouldn't agree to reinventing an entire office building without a contract in place prior to work. But, let’s say that you did and the job is finished. The problem? The person who hired has skipped town and is nowhere to be found. Without an agreement, there’s else you can do.

No matter what industry you’re in, you and the clients should be both agree on terms like;

• Your hourly/project fees or how much the job is going to cost.
• The scope of the project.
• How long the job will take.
• What types of payments you accept.
• The deposit amount.
• How long the client has to pay after the invoice has been sent.
• The penalties or interest that incur if the invoice hasn’t been paid.

Having an agreement not only protects you and the client, it also speeds up the payment process. In fact, those with invoice terms are 1.5x more likely to get paid on time than those without.

When the clients has this information, they’re less likely to ask any further questions when they receive the invoice. It may take a little work in the beginning, but it saves you a lot of time and financial headaches when you and the clients are going back and forth.

2. Easy-to-Understand Invoices

Another delay when it comes to invoicing is when the client has questions regarding what they’re being charged because the invoice is too vague or confusing.

That’s why you should keep your invoices simple, yet detailed.

Use a clean design and layout that is easy-to-read and contains information like;

• Your contact information.
• Invoice number - this a touch of professionalism, it will also make it easier for both you and the client track during tax time.
• Itemized description of your work - instead of “Wrote 10 Articles,” list each article title, when it was written, and how much each piece cost.
• Final cost.
• The due date.

Again, this takes a little extra work on your end, but it makes sure that the client doesn’t have any questions to ask when they review the bill.

3. Be Consistent When Sending Out Invoices

In a perfect world you would send out an invoice immediately following the completion of a project. However, that’s not always the case.

For example, you client may only do their bookkeeping one the first of each month, so it’s pointless to invoice them weekly. In other situations, you may not have the time to invoice daily - plus that makes it a mess when tracking which invoices have been paid and the ones that haven’t.

Instead, set aside a specific day and time to invoice your clients. It could be every Friday morning, every other week, or the first of each month. Whatever works best for you and your clients. This makes managing your invoices a whole lot easier and keeps the cash flowing back into your business.

Just remember though, the longer you want to invoice, the longer it takes for you to get paid. So try to invoice as frequently as possible.

4. Replace Paper-Based Systems

If you’re still using a paper-based system you’re doing yourself a huge disservice. These relics of the invoicing-world are frustrating, time-consuming, and can be easily misplaced. That’s why you need to make the move to a cloud-based invoicing system.

With online invoicing tools, you can send professional looking emails to your clients electronically. That means that they’ll pay you faster since you no longer have to use snail mail to send invoices and receive a check.

Speaking of payments, cloud-based tools allow you to accept multiple ways of getting paid, such as via credit card, direct deposit to your bank account, or third party payment gateway like PayPal.

Here’s some other awesome features that come with online invoicing software;

• You can create estimates and quotes and then convert them into an actual invoice.
• Set-up recurring or automated payments for recurring clients.
• Knowing when the invoice has been paid - or even viewed in some cases.
• Send automated reminders when an invoice is past.
• Customize invoices by adding your logo, brand’s colors, payment terms, and personalized messages.

These tools can also be used to track your income and expenses so that you can create an accurate budget and files your taxes painlessly.

In short, cloud-based invoicing software handles all of your invoicing needs in one convenient dashboard.

5. Outsource

I understand that money can get tight when running a small business. But, we live in an interconnected world where you no longer have to rely on the local town accountant to handle all of your accounting needs.

There are now freelance accountants who can manage your books - like creating, sending, and following-up on all of your invoices. While there are great sites to find these type of freelancers, try going the word-of-mouth route first. Maybe a friend, family member, or fellow business owner can refer you to someone who can take over your books. Remember, they’re having access to important financial information, so you want to make sure that you can trust them 100%.

6. Limit the Amount of People Managing the Account

I know. I just recommend that you consider outsourcing your invoicing. The thing is, that’s still limited to just two people - you and the person you hired. By limiting the amount of people who have access to your invoices prevents any accounting issues like sending duplicates of the invoice, leaving out certain items on the invoice, or human error like not properly calculating the final amount due or taxes.

With less hands involved, the less likely you’ll run into any severe invoicing mistakes. Still need help? Here is a complete invoicing guide I put together with every step you need detailed out in a 6000 word guide!

To view the original article, click here.