Category Archives: Information

Money Mistakes You Might Be Making – 360 Degrees of Financial Literacy

Posted on May 31, 2013 | Leave a comment

Mistake 1: Only saving what’s left over

Do you continue to worry that you’re not saving enough? Do you routinely rely on credit rather than cash to pay for the things you want or need? Rather than blame your financial inertia on your income, look a bit deeper, because the real culprit may be the lack of financial priorities. If you don’t know exactly how you’re spending your money and you haven’t set financial goals, it’s unlikely that you’ll see much financial progress.

Go back to basics by preparing (or reviewing) your budget. If you tend to save only what you have left over every month, you can put yourself on a more disciplined course by having a fixed amount taken out of your paycheck automatically for retirement. Or, you can set up automatic transfers from your checking account to a savings or investment account.

Mistake 2: Not having an emergency fund

One lesson that you may have learned over the past few years is that the job market isn’t stable. That’s a major reason why one of your savings priorities should be an emergency fund. While it isn’t glamorous, this underappreciated workhorse really pulls its weight during hard times. Having cash on hand that you can use for an unexpected expense, or to pay bills if you lose your job, is vital because it can help you avoid having to rely on credit or tap your retirement savings. If you don’t have emergency savings to fall back on, a minor money shortfall can quickly turn into a major cash crisis.

Mistake 3: Not asking for help

Even if your finances are in good shape right now, you may be overdue for a checkup. Reviewing your finances is especially important during periods of volatility because it can help reveal potential strengths and weaknesses, and identify changes you might need to make to adjust to the current economic climate. And if you’re already in financial trouble, don’t let fear or shame prevent you from asking for help. Facing financial problems early may help you make a full recovery. Many creditors are willing to work with you, but this may be much easier while your credit is still good, and while you still have time to turn things around.

via Four Money Mistakes You Might Be Making – 360 Degrees of Financial Literacy.

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Internet Sensation Charles Ramsey Gets Free Food From McDonald’s: Do You Want Taxes To Go With That? – Forbes

Posted on May 28, 2013 | Leave a comment

On May 6, 2013, Charles Ramsey made national news – all while eating a hamburger. His 9-1-1 call was instrumental in the rescue of kidnapping victim Amanda Berry and two other women, Michelle Knight and Gina DeJesus. Berry had been missing since 2003; Knight and DeJesus disappeared in 2002 and 2004, respectively.

Ramsey had just returned from McDonald’s when he heard a scream and noticed Berry trying to escape from the house next door. He ran from his living room and together with a neighbor, Angel Cordero, he broke down the door and let her out. Berry explained who she was and Ramsey called 9-1-1. He was remarkably calm while offering her description to the dispatcher and confirming that she needed an ambulance. Ramsey couldn’t answer whether the captor was still in the house, saying “I don’t have a fuckin’ clue, bro. I’m just standing here with my McDonald’s.” That line went viral as news of the remarkable discovery of the girls spread like wildfire on the internet.

Please read the rest at Internet Sensation Charles Ramsey Gets Free Food From McDonald’s: Do You Want Taxes To Go With That? – Forbes. Wonderful story.

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Keep Track of Your Receipts!

Posted on May 24, 2013 | Leave a comment

auditKeep track of your receipts!

Businessman claimed he ran a proprietorship and filed a Schedule C showing a substantial loss for the year. The IRS denied most of the deductions on the return because the taxpayer lacked sufficient records to support them. The taxpayer appealed to the Tax Court.

Held: Mostly for the IRS. Under §162, Trade or business expenses, a taxpayer must prove that the expense was ordinary and necessary for carrying on a trade or business; and the expense was paid.

For many of the expenses, the taxpayer proved one of the elements but not the other, providing bank statements showing checks written to office supply stores and the USPS — but no  detailed record of items purchased  and how they related to the business. For other expenses, the taxpayer had invoices showing the amount due and how these items related to the business —but no proof the invoices actually were paid.

Acceptable proof could include receipts, cancelled checks or credit card statements. The court ruled the evidence provided by the taxpayer was so scant that the court could not even estimate deductions under the Cohan rule.* The court denied most of the deductions because the taxpayer did not prove both key elements for each deduction.

* The Cohan rule lets the IRS and courts use other sources to estimate expenses and amounts, if the evidence is both credible and sufficiently detailed to verify the deduction and to make a reasonable estimate of the amount.

More requirements: Some expenses, such as travel, meals, entertainment and auto expenses, require more proof under §274, Disallowance of certain entertainment, etc., expenses. The IRS and courts have no flexibility on these items and deny deductions unless all of the substantiation required by the regulations is provided. [Fleming v. Commissioner, T.C. Memo. 2010-60]

–American Institute of Professional Bookkeepers

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Posted in Information, Tax Time Prep, The IRS

Analyzing Business Expenses

Posted on May 22, 2013 | Leave a comment

budgetTracking business expenses is essential for staying profitable and predicting future income and expenses. Whether you’re doing the analysis or leaving that to your financial person, it’s important to know what’s going on with the finances of your business.

1.         Compare the budgeted numbers to the actual numbers.

If you don’t have a budget, create one based on past years’ data and soldier on from there. Knowing what you plan to make and spend over a year’s time and tracking that plan against actual spending month by month is very helpful in forecasting what lies ahead and how to fix it.

2.         Analyze the income statement.

Accounting software (such as QuickBooks) provides a report of operating expenses called the Profit & Loss Statement or Income Statement. Compare the operating expense figures to last month, last quarter, the average of the last three months, average year to date, and the same month last year. By doing this, expense trends can be identified making it easier to see if a particular expense has increased. This provides the chance to find out what’s happening before it gets out of control.

3.         Understand the business’ fixed and variable costs.

You’ll always have an electric bill, but maybe you only have to buy milk for your ice cream business in the spring and summer months (since ice cream sales are zip in the winter). This is the difference between fixed and variable costs. Fixed costs are always there, whether you have income or not—variable costs depend on the amount you’re selling.

4.         Breakeven analysis.

This is the volume of sales needed to cover all costs. A breakeven point can be determined once the variable and fixed costs for the business are known.

To have a strong and successful business it is imperative to have a clear understanding of the financial impact that the most basic business decisions have. Analyzing business expenses is critical to making informed and profitable decisions for your business’ future.

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Posted in Budgeting, Information, Quickbooks, Saving money, Tax Time Prep

A 30 Point Checklist for Your Startup | Small Business Trends

Posted on May 20, 2013 | Leave a comment

So you want to start a business – congratulations! Once you get over the initial excitement, it’s time to break down the process of launching your startup into manageable chunks. You might get overwhelmed with the sheer number of items on your to-do list. But not to worry; I’ve broken it down into the primary tasks you need to do now, and those that you can defer until later.

read more of this great article via A 30 Point Checklist for Your Startup | Small Business Trends.

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The Top 5 Documents Your Accountant Needs to Do Your Small-Business Taxes | Intuit Small Business Blog

Posted on May 13, 2013 | Leave a comment

signatureAs a small-business owner, tax time can be stressful, as you scurry to pull together all of your receipts and try to remember everything you did last year.Although accountants can help you sort and summarize, it’s a lot less expensive if you do that part yourself.

Here are the top five things that your accountant really needs to do your taxes.

1. Financial Statements — A basic set of financial documents comprises a balance sheet, an income statement, and a cash-flow statement. For tax purposes, the income statement is the one most used by your accountant, but she will also want to see the company’s assets and liabilities.

2. List of Capital Asset Activity — If you bought, sold, or disposed of any capital assets in the company during the year, you must account for it in your tax return. Your accounting software will allow you to print out a list of all of your capital-asset activity for the year, and this will give your accountant enough detail to classify any changes. If your listing does not specify the exact nature of the assets being bought and sold, make notes in the margin.

3. Vehicle Log — If you sometimes use your own car for business purposes, you can claim a portion of the car’s operating expenses as a tax deduction against your business income. The IRS allows you to calculate this one of two ways: The detailed method starts with adding up all of your vehicle operating expenses (loan interest, lease costs, gas, repairs and maintenance, and insurance). Next, divide the miles driven for business by the total miles driven in the year and apply the resulting percentage to the operating costs. This is your allowable deduction. The simplified method allows you to apply an IRS-mandated mileage rate to the total business miles driven in the year. Under both methods, you are required to keep track of your business mileage in a vehicle log. This can be as simple as jotting dates, descriptions, and miles into a blank notebook. Give this log to your accountant.

4. Summary of Home-Office Expenses — If your home office is your sole place of business, or if you regularly meet clients or customers there, you can generally claim home-office expenses. These include a percentage of your utilities, repairs and maintenance, home insurance, and mortgage interest or rent. You may calculate your home-office deduction by dividing the square footage of your office space by the livable square footage of your house or by dividing the number of rooms your home-office occupies by the total number of rooms in the house. Using either formula, multiply your total home expenses by the home-office percentage. Some accountants will ask you for all of your original receipts and others will only want the summary; be sure to ask which she expects you to provide. Note: Starting with the 2013 tax year, the IRS will allow an alternative simplified method of calculating home office expenses.

5. 1098 Forms for Mortgage Interest and Property Taxes — Your mortgage company likely issued you a Form 1098 at the end of 2012 that summarizes your mortgage-interest and property-tax payments in the year. Your accountant may ask you for this form to claim the mortgage-interest deduction that all homeowners are entitled to, and she will also need them as part of your home-office deduction. If you carry multiple mortgages, be sure to provide 1098 forms for each one.

The Top 5 Documents Your Accountant Needs to Do Your Small-Business Taxes | Intuit Small Business Blog.

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Senate approves Internet sales tax bill – The Hill’s Floor Action

Posted on May 8, 2013 | Leave a comment

The Senate on Monday approved legislation that would for the first time allow states to collect billions of dollars in online sales tax revenue from out-of-state purchases.The 69-27 vote is a major victory for retail groups and state governments, who for years have fought to close what they see as a loophole that allows as much as $23 billion in annual taxes from online sales to go uncollected.

“I’ve been saying it for the past 12 years,” lead sponsor Sen. Mike Enzi (R-Wyo.) said ahead of the vote. “This bill is about fairness, it’s about leveling the playing field for brick-and-mortar shops.”

The measure split Republicans senators, as 22 Republicans voted no in addition to five Democrats. Nineteen Republicans supported the measure.

via Senate approves Internet sales tax bill – The Hill’s Floor Action.

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Posted in Information, Tax Time Prep

Payroll Taxes and Personal Liability

Posted on April 25, 2013 | Leave a comment

Problem: Although the employer is responsible for depositing federal and state taxes, the person who actually remits the taxes can be held personally liable for monies withheld but not deposited.

In other words, personal liability can be imposed upon the person “responsible” for paying them to the government, including, in certain cases, the bookkeeper.

Internal Revenue Code Sec. 6672(a), referred to as the “100% penalty,” is used to recover employer payroll taxes from bookkeepers responsible for withholding and paying them.

Even check-signing authority not involving payroll or payroll taxes can trigger personal liability if the signer’s job includes paying creditors and tax authorities deem that such funds “came from” payroll taxes withheld and therefore “belong” to them.

If the IRS thinks it can’t recover from a firm, it may sue the employee. The IRS may even sue the employee before (or instead of) attempting to recover from the firm, because anyone responsible for withholding and paying taxes is as liable as the employer.

Solution: Don’t be the only signature on checks. Authority to sign a check represents authority to disburse funds and can trigger personal liability if withheld taxes are not paid. You are protected against the liability of “final authority” if your firm requires all checks to have a second signature of a supervisor or corporate officer after you have signed it.

Note: If you have to sign paychecks, temporarily (an owner is out of town) or permanently (you are at a remote location), your only protection may be to have your employer give someone else “final authority.”

–AIPB Bookkeeping Tips

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Social Security – Who gets it and when? A Full Explanation!

Posted on April 11, 2013 | Leave a comment

sscardFor those born in 1942, full retirement age is 65 and 10 mos.;

in 1943, 66;

gradually rising to 67 for those born in 1960 and later.

If full retirement age is reached:

•          Before 2013. Recipients born in 1937 or earlier receive full benefits at age 65. No limit on earnings, no reduction in benefits for those at full-retirement age.

•          In 2013. Recipients can earn up to $40,080, then lose $1 in benefits for each additional $3 earned. From month of full retirement age on, there is no earnings limit.

•          After 2013. Recipients can earn $15,120 in 2013 before losing $1 in benefits for each $2 earned.

Age 50.  Benefits start for disabled surviving spouse.

Age 60.  Benefits start for nondisabled surviving spouse.

Age 62.  Reduced benefits for employee’s spouse or former spouse (if still alive).

Important: 40 earned credits (generally 10 years of work) will make a person eligible for benefits at a certain age—but not necessarily maximum benefits. Credits are unrelated to the amount of the benefits.

Social Security benefits are based on average earnings of the best 35 years of work—not just the last 10 years, as many think. An adjustment is made to account for changes in average wages since the year the earnings were received. SSA then calculates average monthly adjusted earnings over those 35 years when the worker earned the most money.

Handy new Website. The SSA’s new “my Social Security account” is a personalized online account that replaces the annual paper statement mailed to workers. When employees have questions about their future benefits, send them to the site below.

The new site lets you access your payment history, earnings record and a benefits verification letter. The letter can be used to prove income to secure a loan, mortgage, housing, state or local benefits, or to prove your age for Medicare health insurance coverage, retirement or disability status. The letter can be customized and printed. You can also change your address and sign up for direct deposit.

Anyone 18 or older can sign up at http://www.socialsecurity.gov/myaccount/. Be ready with data about yourself.

On the same Website, those not yet receiving benefits can access their Social Security statement of earnings, benefits information and estimates of future benefits and link to online services such as applications for retirement disability or Medicare.

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Stress Free Bookkeeping

Posted on April 2, 2013 | Leave a comment

Managing your books is a cumbersome but critical task for any business. It is very time-consuming, frustrating, and could mean working late hours. However, it has to be done to know the worth of your business and to satisfy the government for taxes. You also need to do this on a regular basis to get an accurate idea of your financial health.

How do you make this stress-free task work for you?

Some small and medium businesses either employ part-time bookkeepers or do the work themselves. No matter how it is done it is still a mundane task involving shuffling papers and working extra hours. Often there is a twinge of doubt that you are not doing something quite right or are missing important information.

Ask any entrepreneur why they went into business and you’ll get a hundred different answers. Odds are that “do bookkeeping” was not on the list even though bookkeeping is the core of any successful business. It is the way to measure growth, keep cash flow positive and track expenses.

Bookkeeping is like learning to play a musical instrument. The secret is to learn the fundamentals and create a system that works for the company.

Here are a few tips that could prove helpful to make the right decision for bookkeeping and accounting needs:

Don’t mix business and pleasure:

Get a business credit card to enable you to separate your business expenses from your personal. By this time you have already started your business checking account. So adding that business credit card will help you establish and build business credit and points. Co-mingling funds between personal and business is not a productive or efficient way of doing business and can prove to be a headache at tax time.

Keep it simple:

When creating your business in your accounting software doesn’t create too many categories in the chart of accounts. For example, office supplies will be a sufficient category rather than separate categories for paper, letterhead, printer supplies, etc. This complicates profit and loss and adds time to the day-to-day activities when items are being expensed.

Automate your invoicing:

There are many online invoicing services that allow you to schedule invoices for clients who are charged on a regular basis. You will find that most accounting software has the ability to memorize invoices that reoccur monthly. The day of the re-occurrence can even be set such as the first of the month.

Use the right accounting software:

There are many accounting software packages out there that you can use to assist you with your accounting and bookkeeping needs. Of course, I highly recommend QuickBooks but there is also a wide variety of Open Source software which is free to download. Additionally there are a wide variety of free manuals and tutorials online.

Outsource to a virtual bookkeeper:

Outsourcing to a virtual bookkeeper saves time, money, worry, and headaches. Many business owners take two common approaches to tackling the issue of bookkeeping. They try to do it themselves – which is time consuming and can lead to costly mistakes. They pay large firms to do it – which is unnecessarily expensive. A professional bookkeeper has the skills and experience to do the job right. There are many advantages to outsourcing your books. Save money, save time, and the need for extra help. The biggest benefit is your bottom line.

  • Books that are inaccurate do not reflect the true health of the business
  • Being clueless at any level about where the money is going is not being in control of your business.

Business people need to focus on the business:

There are many aspects to running a business and the most important is earning money. Some things just have to be delegated in order to maximize time and productivity. Bookkeeping can be a painful and time consuming process and many business owners do not have the expertise or knowledge to get the job done right. Time spent on bookkeeping activities is time away from making money.

–Fran McCully, Your Administrative Solutions

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Posted in Budgeting, Information, Quickbooks, Timesaver