Articles Tagged ‘Taxes’

What Small Business Owners Can Expect from Obama’s 2nd Term

Tuesday, November 27th, 2012

President Obama’s successful re-election to a seconded term is now a fact. No matter who you voted for, the election takes away some of the uncertainty that businesses have been carrying around for the last four years. I have talked with scores of business owners since the election and they are not happy with the fact that Obama was able to win another election; but facts are facts and we have to deal with the hand we are dealt.

Based on available research, there are 4 areas that we need to keep our eye on:

Taxes: Congress will battle over Obama’s request to raise the top tax rate to 39.6% but it is highly likely that Republicans will cave and those taxes will be raised. After re-election, one of Obama’s first meetings was with the head of the AFL-CIO and that outtake was continued spending and increased taxes. The new definition of rich is those with taxable income of $250,000 which will impact many small business owners that file taxes as an S corporation. The Bottom line is small business owners have got to become more effective and efficient.

Health care: Obama’s re-election means the overhaul will continue to be implemented, but small businesses still must wait to find out how much it will eat into profits.

Key provisions of the law go into effect in 2014, including the requirement that businesses with 50 or more employees provide affordable health insurance for their workers. What employers don’t know yet is how much that insurance will cost. That won’t be determined until states set up exchanges where individuals and companies can buy coverage.

Economy/federal budget: The federal deficit is a big problem and if the Obama administration continues to spend like the last four years, taxes will increase and small businesses will have less money to invest in growth and their businesses.

That’s according to a survey of business owners conducted by American City Business Journals between Nov. 7th and 15th. More than 200 business owners, randomly sampled from nationally representative Dun and Bradstreet lists, completed the survey.

When asked about the election’s impact, 54 percent said the outcome “will impede the ongoing recovery of small and mid-sized businesses.” The survey found that 24 percent thought Obama’s re-election would have a positive impact on business. The remainder were either uncertain or felt the election would have no impact on the business climate.

Most owners of small and medium-size businesses think President Barack Obama’s re-election will have a negative impact on the business climate.

Regulation: Look for Obama to continue a mixed record – creating more rules that small businesses will need to follow. Some industries are going to be hit hard by regulations and others are going to be over-looked. Just keep an eye on your industry for out of the ordinary government oversight.

Final thoughts: The next four years are going to be more like the last four years without much improvement in the economy. It is critical that business become more focused on growing revenue and operating more efficiently: operations, finance, marketing, sales and management strength.

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
dan@dynastybuilder.com
phone: 765-644-8887

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9 Reasons You Should Change Your Accountant

Tuesday, May 3rd, 2011

Good financial information is critical to a success of any business, particularly a small business. The financial statement is the business owners’ report card on how the business is doing. This report card is used regularly by bankers, shareholders, investors, taxing authorities and by anybody looking to purchase or value the company.

The outside CPA firm is the source small business people look to for guidance in tax preparation, preparation of accurate data for their lenders, shareholders and numerous other entities. They are the go-to people that provide creditability, accurate and objective information relative to the subject company. How does one know when it is time to change accountants? Here are red flags that will give you clues:

1. It’s your money. Knowing the daily, weekly and monthly financial condition of your company is critical (business owners have 70% to 90% of their personal net worth tied up in their business). Many business owners have tried to delegate this responsibility to their outside accountant, controller or even the bookkeeper with devastating consequences. Financial management is not something that most business owners want to do; but it is your money; you need to understand everything you can about improving it. If your accountant is not helping you toward that end, then you have the wrong person. This is your report card; it tells the outside world how you are doing in business. You need to be very knowledgeable and conversant with your income statement, balance sheet and statement of cash flows.

2. Tax surprises. You have finished out the year and feel pretty good about what you accomplished. Your accountant is busy and doesn’t tell you the consequences of your performance until April 10 and then explains that you have a large tax payment to make prior to April 15. You don’t have the cash then you spend the next week trying to solve the problem. Your accountant needs to be engaged with your business in the last quarter of the year, asking questions about your projected profit for the year (if you don’t do this, call me for guidance) and helping you define your future tax liability. If your accountant doesn’t do this for you, ask him to get involved or find someone that will.

3. Large adjustments at year-end made by your accountant that are not clear as to why there were made. This can be an issue with deprecation, inventory and/or work-in-progress adjustments. This just happened 60 days ago, a business owner was pretty confident that their profit for the year was $150,000 and he was happy to explain to his banker about the improvement in the company’s performance; but when the year end adjustments were made, he now showed a loss. The accountant explained year end adjustments, prior year adjustments, all of which were unclear. Not a good deal.

4. Two sets of books. This happens too many times. You have an accounting system in your company with a set of books and your accountant has another one in his office. Yours is designed to do everything an accounting system can do; but you are only writing checks, balancing the check book and keeping track of accounts receivable and payable. At the end of every month you send your accountant a bunch of information (including data from your accounting system) for him to enter it into his system. A few weeks later he creates your monthly financial statements from his set of books which he returns to you. This is a duplication of effort, time and money and slows down information you need to run your company. It is a great set up for your accountant, not a good one for you.

5. Too busy. Your accountant is not easily reached and doesn’t return phone calls in a timely manner, especially in tax season. Most decent accountants are very busy in the first quarter of the year; but realize that businesses run 12 months out of the year and are available to answer your questions. Find another accountant if yours doesn’t return calls within a 24 hour period.

6. Over billing.
read full article »

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How long should you keep your financial records?

Friday, November 26th, 2010


  

If you have ever inquired around about how long to keep your financial records, you have probably gotten a number of different answers.

Per the IRS, you must keep your records as long as they may be
needed for the administration. Generally, this means you must keep records that support an item
of income or deduction on a return until the period of limitations for
that return runs out.

The period of limitations is the period of
time in which you can amend your return to claim a credit or refund, or
the IRS can assess additional tax. The following contains the period of
limitations that apply to income tax returns. Unless otherwise stated,
the years refer to the period after the return was filed. Returns filed
before the due date are treated as filed on the due date.

In the following situations: The period of limitations is:
You owe additional tax and situations (2), (3), and (4), below, do not apply to you. 3 years
You do not report income that you should report, and it is more than 25% of the gross income shown on your return. 6 years
You file a fraudulent income tax return. No limit
You do not file a return. No limit
You file a claim for credit or refund after you file your return by filing Form 1040X. Later of: 3 years, or 2 years after tax was paid
Your claim is due to a bad debt deduction. 7 years
Your claim is due to a loss from worthless securities. 7 years

  
A few other resources that I have enjoyed reading on the length to keep financial records.

Suze Ormon ~ Financial Clutter, What To Keep And What To Get Rid Of
Professional Organizer M. Martone ~ Handy Reference Guide

Brook M. Avey, CPA
President
www.brooksideaccounting.com
888-317-4835

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