When it comes to Tax Planning, being proactive pays. Being vigilant and precise with your tax reporting and expenses can minimize your tax liabilities- and save you money at year’s end. Tax prep and documentation should not be something that only occurs at tax-time; proactive tax planning is something that happens year-round to avoid nasty penalties and maximize deductions.
Some tax planning tips include:
Provide Proof
Prepare to be vigilant about keeping track of business expenses- which can be a bear! A good rule of thumb is that if you plan to deduct an expense, you will need some sort of proof of the purchase, like a receipt, invoice, or canceled check. You can also use bank records, if needed, to document purchases related to business that you do not have an actual receipt for when it comes time to complete or file your taxes and reports.
Document Diligently
Always save invoices or receipts for all your business-related purchases. It helps to write and attach a note explaining the purchase for documenting later, when you may have forgotten the specifics surrounding the expense.
Segregate Accounts
Make sure to keep personal accounts separate from business accounts whenever possible. It can make accurate record-keeping nearly impossible and you could suffer by missing out on certain business deductions this way.
Classify Carefully
Don’t misclassify your workers as the income-tax withholding and employment taxes are quite different. While you do withhold federal income tax and FICA taxes from your employees, you also are responsible for unemployment taxes and your own share of FICA. When you are dealing with staff that are actually independent contractors, you are not required to withhold taxes, making the individual responsible for their own self-employment tax liability. This also eliminates the need to pay separate FICA or unemployment taxes. Talk to your accounting professional to learn more.
Pay Promptly
Pay the employment taxes that you collect from the wages of your employees and staff for federal income tax and FICA (Social Security and Medicare) taxes promptly. The IRS is not tolerant of delayed payment and noncompliance penalties can be severe.
Industry experts offer tax tips for small businesses, including that you need to be careful and cautious when making tax deductions. This may look suspicious and trigger an audit, further reinforcing the need for organized documentation. The IRS frequently assesses business tax deductions, like vehicle use and travel expenses, to ensure you are sticking to their guidelines and limits.
Consider Hiring Help
Take the worry out of your business taxes with some professional help from BMH Accounting. If you own or operate a company or brand, outsourcing your financials and tax reports to a certified accountant makes good business sense. Don’t risk penalties and fines by going it alone; hire a tax professional today.
A small business failure can be surprising in terms of what led to the demise and how it may have been avoided. There are some common errors that many small business owners and entrepreneurs make that lead to problems that cannot be overcome. Subsequently, it is these errors that often lead to the end of the company or business.
Avoid these 5 key mistakes that lead to a small business failure:
Money Issues
Probably the biggest reason for small business failure is money; aim to keep your overhead as low as possible and track all your expenses. Be frugal, even when you don’t need to be and be on the lookout for ways to monetize and further improve your bottom-line. Always have a goal of streamlining your operations in efforts of curbing costs and improving revenues to succeed.
Too Big, Too Fast
Another reason small companies don’t succeed is that they try to take on too much, too fast. Start small, such as a pop-up shop or an event like a festival or fair to learn the market. Some businesses assume there is a market for something only to discover that there simply is not; know the market before investing.
No Back-up Plan
Have you heard the expression, ‘prepare for the worst but hope for the best’? That should be your mantra when it comes to your small business. Always have a back-up plan and anticipate, even expect, things to occasionally go wrong or askew. That is simply part of doing business. Make sure that you are fully covered in areas like insurance, staffing, and that you have a slush fund ready for a rainy day.
Lack of Business or Industry Experience
Are you sure that you fully understand the market that you are taking part in? Surprisingly, many businesses fail due to a lack of understanding of their market. For example, some restauranteurs may not understand the time, commitment, and money that it takes to open a restaurant in a specific area. Many successful companies encourage entrepreneurs to go with what they know.
Underestimate the Undertaking
Speaking of underestimation, make sure that you are well-aware of the effort and time that go into making a business successful. Remember that you will have a wide range of obligations, from marketing and human resources to serving clients and keeping facilities clean. Make sure that you never minimize the work that it will take to make your endeavor a success.
These common issues are not always a result of the business owner making rash or compulsive decisions, but rather may be related to the industry, current market, or other unforeseeable circumstances that impact revenues and force closure.
For help keeping your business matters precise and timely, reach out to BMH Accounting, Don’t let mismanagement be the reason your business fails to thrive and succeed; get the accounting assistance that you need.
A successful business or company leader knows when and what to delegate, and this includes outsourcing payroll and taxation tasks to someone else. Ideally, the leader of the team can put their focus into business operations but payroll is something that simply should be handed-off to a professional accounting firm, company, or site.
Ideally, outsourcing achieves three main goals:
1. Time and Attention
Outsourcing frees up your most important resource: your time. This allows you more availability to focus on your core tasks related to the business. Furthermore, hurrying through chores like payroll can have negative repercussions. While it doesn’t necessarily help improve revenues or your bottom line, failure to maintain a precise payroll can cause big headaches and hassles later.
Payroll takes time and includes efforts to complete taxes, too. Do yourself a favor and outsource your payroll.
2. Technology and Expertise
Don’t let your company be at a disadvantage by not offering employees and staff high-tech options when it comes to payroll. To complete payroll well, you need expertise in areas that include, but are not limited to, direct deposit and self-service access to their payroll info. Employers rely on technology for other perks, such as maintaining employee records and taxation reports. If you want your business to grow, you need to fully-invest in the technology needed to get there. Laws change and are complex; outsourcing payroll provides you with the latest and greatest in terms of technology and expertise that helps your business run smoothly and that satisfies your entire team. Companies and businesses that can’t keep up may be at a significant disadvantage when it comes to hiring and retaining a solid workforce.
3. Reduced Risks
If you lose focus, make mistakes, or fail to complete timely payroll, the risks are great. Outsourcing payroll helps to reduce costs and risks- which may help some managers and supervisors sleep better at night! A great payroll provider offers options and capabilities that you simply may not have independently. Consider some of these options and talk with some reputable payroll providers. See what they have to offer and how their expertise can create a more user-friendly experience for your staff seeking payroll information or your supervisors who are looking to review employee records. Put your time and energy into your core business operations and outsource your payroll today. It simply makes good sense.
Ready to learn more about outsourcing your payroll? Talk to the experts at BMH Accounting; they want to alleviate the many tasks on your plate and free-up your supervisory team for other things. This includes actively managing your staff, launching new products or provisions, and serving your consumer audience. Call to find out how outsourcing payroll can be beneficial and advantageous for your business operations.
When it comes to employee reimbursements, you must be careful that they comply with current tax law and IRS tax regulations. If not documented and posted correctly, expense reimbursements may get confused for income, which can create a mess. Furthermore, when your staff struggles for prompt and accurate reimbursements, it can create hostility and angst at the workplace; make things a lot easier with the services of a tax or accounting professional and a solid accountable plan.
Employee Reimbursements
Using an accountable plan to document and pay employee expense reimbursements means that the payment is not part of your employees’ wages which makes them exempt from taxation, like federal income or employment taxes. This has benefits for both the employee and your company, as well. If you choose not to use an accountable plan for reimbursements, the payments are subject to taxes and considered part of your staff’s taxable income.
Business Connections
Remember and remind employees as needed that each reimbursed expense under your accountable plan needs to be connected to business; the definition of a business connection is that it is a legitimate expense- allowable as a deduction- and covered or incurred by your employee while they are performing services, tasks, or work for your company. Some examples might be hotel accommodations during a business trip, meals during work-related events, or gas driving to job sites or to visit clients. These expenses should be easily documented with receipts, bills, or statements.
Employee Accountability
Depending on the accountability system that you have in place for your Employee Reimbursements, it is key that a paper-trail documents the expenses and that any excesses are accounted for and paid-back. There are some IRS guidelines that can be adapted and adopted to your workplace- or you can set your own parameters for reimbursing employees quickly and also tracking expenses accurately. It is key to keep these matters clear and concise for when tax time rolls around.
Prompt Payment
Just as it is important for your employees to substantiate expenses promptly, it is important that you do what you can to expedite reimbursements, too. A reasonable time frame for substantiation of expenses is within 60 days, and any overage should be paid within 120 days, in most cases.
Tax Tips
Your employees may deduct their work-related expenses, but it requires itemization.
The deduction for these expenditures is limited to the amount that is more than 2% of their adjusted gross income.
Make sure that your reimbursement arrangements meet IRS requirements for an accountable plan, which may have potential tax advantages for you.
The safest way to deal with employee reimbursements is with a reputable and reliable tax or accounting professional. Talk to the experts at BMH Accounting to learn more and escape the worry surrounding employee reimbursements.
If you own a small business, you know the importance of tracking your finances and expenditures. This provides a clear view of your cash flow, while also increasing your ability to make efficient and cost-effective business decisions. One way to do this is with QuickBooks; QuickBooks is the most common accounting software program among small businesses for several reasons:
Time
QuickBooks is a program that connects and syncs with your bank and business accounts to help track the flow of money in – and out – of your company. It eliminates the rigorous job of entering data and updating ledgers that can take time away from other important tasks, like managing your business. QuickBooks provides the ability to itemize and categorize, making it easy to use and implement.
Intuition
It is fascinating how intuitive QuickBooks is; the program gleans which categories are most used and automatically categorizes your popular entries. Pay your bills, compile mileage, manage any contractors from the comfort of your keyboard with the QuickBooks accounting program. You may also be able to garner ways to save money by assessing where your revenues are going, which can put more money back in your company.
Reports
What good is the information gained when tracking if you can’t read or understand it? Don’t worry; QuickBooks offers various reports for businesses to gain a new insight and garner control over their finances. You will be able to review profit and loss statements, customer history and invoices, outstanding bills or accounts, stock and inventory reports. This puts you back in control of your company’s money, which can prove invaluable as you prepare and plan your operating budget and project your business revenues. Even better, you have the option of readable, summarized reports with as much detail, graphics, and information as you choose, which may help when comprehending the information that you see.
Taxes
Stressed about trying to complete your company’s taxes? QuickBooks can make this necessary process a whole lot simpler and more streamlined. Since you are tracking daily sales, invoices, and expenses, it is easy to transfer this information to tax forms and vital documentation. QuickBooks offers options and products that serve to solve tax time dilemmas for consumers, from small businesses that are struggling to gain traction to established brands with a loyal consumer audience and following.
The most important data in a new company is likely the flow of finances; make sure that you are tracking these expenditures accurately, using a program that is user-friendly. Regardless of what you do, your revenues and profits are paramount in daily operations as well as in long-term growth and success.
Ready to start tracking your company’s finances? Start with QuickBooks and reach out to BMH Accounting if you find yourself in need of any of our extensive QuickBooks services!