http://MorelandandAssociates.com Small Business Accounting, Bookkeeping Services McLean Virginia, Northern Virginia Thu, 27 Aug 2009 10:17:00 +0000 http://snappages.com en http://MorelandandAssociates.com/blog/2009/08/27/extension-filing-ideas http://MorelandandAssociates.com/blog/2009/08/27/extension-filing-ideas Thu, 27 Aug 2009 10:17:00 +0000 http://MorelandandAssociates.com/blog/2009/08/27/extension-filing-ideas
Entrepreneurs
Last-Minute Small-Business Tax Tips
Jay Akasie 04.06.09, 7:00 PM ET

Uncle Sam is calling, and cash and time are in short supply.

Entrepreneurs have plenty on their plates this tax season without having to ferret out every last loophole in the tortuous U.S. Tax Code. With less than two [...]]]>
Entrepreneurs
Last-Minute Small-Business Tax Tips
Jay Akasie 04.06.09, 7:00 PM ET

Uncle Sam is calling, and cash and time are in short supply.

Entrepreneurs have plenty on their plates this tax season without having to ferret out every last loophole in the tortuous U.S. Tax Code. With less than two weeks left before April 15, we can only hope you've secured a competent accountant, or at least know you're way around Intuit's Turbo Tax. (Still debating which preperation method is better? Check out "Should You Do Your Own Taxes?")

For those procrastinators out there (and you know who you are), we've assembled some last-minute tax tips--from capturing accelerated depreciation and avoiding taxes on out-of-state income to hiring offspring and installing solar panels. Thinking about throwing in the towel? We'll even show you how to abandon a mortally wounded business in a tax-efficient way.

A word of warning off the bat: The IRS knows that small-business owners are looking for every deduction they can find in this economy. While a formal audit is unlikely, be sure to have a pristine, itemized paper trail of all business-related expenses just in case, says Chas Roy-Chowdhury, head of Global Taxation for the Association of Chartered Certified Accountants.

Curatorial zeal will come in especially handy in light of an aspect of last fall's economic-stimulus package, which allows business owners now to deduct as much as 100% of capital expenditures up to $250,000--up from a $125,000 limit prior to the new law.

With that, here are some more timely tips:

Don't Pay Tax on Out-Of-State Sales to Your Home State

If you do business outside of your home state, you may not have to pay taxes on that income. Say you sell $1 million worth of widgets in 10 states, and each state accounts for an equal 10% of the revenue pie. As long you only sell the widgets (as opposed to providing after-sale service or support), Public Law 86-272 says that you don't have to pay taxes on 90% of that income--known affectionately in tax planning circles as "nowhere income." This strategy works in about half the states, so ask your tax adviser about it.

Shield Income With Today's Losses

Losing money stings, but at least it reduces your tax bill. Say your business posted a taxable loss of $100,000 this year, but in 2006 and 2007 had taxable income of $30,000 and $40,000, respectively. Suppose, too, that your corporate tax rate is 30%. You can use this year's loss to offset your tax bill from the previous two years and put money back in your pocket today--in this case, $21,000, or 30% of $70,000. As for that remaining $30,000, you can use it to shield income in the future.

Note: You have to make an election upon filing to forgo the carry-back, says Kathleen Barrett, partner with AGH, LLC, an accounting firm in Atlanta. Sometimes a smallish loss this year isn't worth the cost of the accounting gymnastics.

Go Green

Federal and state governments are throwing money at small businesses in the form of tax incentives for environmentally friendly initiatives--from solar panels to energy-efficient washers and dryers. In Georgia, for example, a new Clean Energy Property Tax Credit program will dole out $2.5 million a year over the next five years, says Peter Stathopolous, a director at accounting firm Bennett Thrasher PC in Atlanta.

In some states, small-business owners can use green credits to offset both corporate and personal tax bills. For a comprehensive list of incentives, check out the Database for State Incentives for Renewables and Efficiency.

Go Diving for Depreciation

Different equipment deteriorates at different rates, and your books should reflect that. If you want to conserve the most cash, make sure to tag and depreciate every last printer, light fixture and rug separately, says Cindy Buie, another partner at AGH in Atlanta.

Don't forget, too, about Section 179 of the Tax Code, which allows you to deduct $100,000 worth of qualifying assets during the first year, as opposed to stretching things out over a longer period. Note: Section 179 write-offs cannot exceed taxable income. So, if your company posted taxable income of $100,000 but you bought $400,000 in new equipment, you might better off taking advantage of accelerated depreciation rather than Section 179, notes Richard Zuckerman, partner with Lesser Leff & Co., a New York accounting firm.

Employ Your Children

Doing business with family has its challenges, but at least it comes with a tax benefit or two. Putting Junior on the payroll means he's qualified to begin contributing to a Roth IRA, a smart way for him to start saving for retirement. Another perk: Assuming your boy stays in the business, by putting him on the payroll you are essentially shifting a portion of the company's income into a lower tax bracket--his. You also receive a larger tax deduction for a dependent earning a wage than one who doesn't, notes Richard Dauman, a principle at Bessemer Trust.

Report Large Cash Payments

Listen up, members of the under-the-table crowd: Cash transactions greater than $10,000 must be reported to the IRS, via Form 8300, say AGH's Blue. That mandate goes for payments with cashier's checks, traveler's checks and money orders as well. Part of the information you'll need to complete a Form 8300 is the social security number of the buyer. (Beware buyers that give you push back--they may not want to be on the IRS' radar screen.)

One weird caveat: While selling personal real estate doesn't require a Form 8300 filing, selling a mobile home does.

Pay Dividends This Year

With government deficits mounting, there's a good chance that the current 15% dividend tax rate will jump in the near future. "None of us has a crystal ball, but maybe we're looking at a 20% dividend rate down the line," says AGC's Barrett. The mechanics of these distributions are slightly different for C corporations and subchapter S corporations, so be sure to huddle with your accountant.

"Abandon" Your Business For the Right Deduction

Say your company has suffered a mortal blow. You could spend the time and money to sell it off in pieces, or you could simply walk away (in legal jargon, that's called "abandoning" the business). Abandon it right, and you just might trigger a tax benefit that's greater than the sum of all the pieces in liquidation.

If you go the abandonment route, be sure to generate an "ordinary" loss versus a "capital" loss, says attorney Norman Lencz, partner at Venable LLP in Baltimore. Ordinary losses are unrestricted--meaning that you can use the entire loss to offset any other personal income (rent, salary, etc.); capital losses, on the other hand, can only be used to reduce certain sources of income, up to a limit, before being carried forward to future years.

]]> http://MorelandandAssociates.com/blog/2009/08/27/5-tips-to-better-accounting http://MorelandandAssociates.com/blog/2009/08/27/5-tips-to-better-accounting Thu, 27 Aug 2009 10:00:00 +0000 http://MorelandandAssociates.com/blog/2009/08/27/5-tips-to-better-accounting
Too many business owners mix and mingle their personal and professional finances. Even if you are a sole proprietor keep you business business, and your personal personal. Set up separate checking accounts and if you need some funds from your small business, write yourself a check, or make a cash withdrawal. [...]]]>
Too many business owners mix and mingle their personal and professional finances. Even if you are a sole proprietor keep you business business, and your personal personal. Set up separate checking accounts and if you need some funds from your small business, write yourself a check, or make a cash withdrawal. This will help come tax time when you need to separate business expenses. Even though the form of business is a path-through, you should still make sure a separation takes place. This will make expense tracking and budgeting much easier on you.

Tip #2: Keep Up to Date

Falling behind on your bookkeeping will only make matters worse. Set a specific time aside to deal primarily with recordkeeping. This will make tax time easier and quicker for you or your accountant. If you simply do not have the time necessary to complete the task, then look at outsourcing the work, or bringing in a part-time bookkeeper. This necessary function of business is so crucial to the success of the business that if cannot be put off and forgotten.

Tip #3: Use Your Numbers

Your financials can tell you a lot about your business, you just have to know what to look for. Check with your financial guru (CPA, bookkeeper, financial analyst, and/or consultant) at least quarterly and have them give you a thorough breakdown of your financial position. These individuals should be able to give you a written and oral report on how your business is functioning. Which areas are weak, and which are strong. Along with that they should also provide advice and an action plan on how you can go about strengthening your financial position.

Tip #4: Know When to Recognize

Recognizing revenue and expenses can make a difference in how your business performs month-to-month and how your taxes are calculated. If you use the accrual basis accounting system your year and month end numbers will be quite different then the cash basis accounting. Be sure you know what accounting method you are using, and how to recognize revenues and expenses correctly.

Tip #5: Check, Check, and Double Check

If you do not use an automated accounting software program (QuickBooks, Peachtree, Great Plains, etc) then there is a chance you will not balanced at the end of every period. By using a Trial Balance you can catch mistakes early and often, this saves from year-end headaches and added expense from your CPA while he/she finds the problem associated with your calculation error. Even if you use accounting software you can still enter erroneous information, be sure to reconcile your bank account against the program every month, this will allow you to catch errors that may have happened when filling out checks, invoices, or journals entries.

]]>