Archive for July, 2010
Hire Your Kids, Cut Your Taxes
Jul 30th
The keys to success:
- Your business is not incorporated.
- You hire your children to work for you in your business.
- You pay them reasonable wages.
If you do those three things, you can deduct their wages from your income and shift the money to your children who will be in much-lower tax brackets.
Here’s how my three-step hiring process works:
To read the rest of this article by Jeff Schnepper, MSN Money, please go to http://bit.ly/b2SJkr.
How to Put the Life Back into Your Company
Jul 29th
After the past two years of the recession – watching expenses like a hawk and keeping a close eye on receivables – it wouldn’t be surprising if you ended up with a bunker mentality.
Maybe you don’t embrace new opportunities with the same enthusiasm any more. The business just doesn’t hold the excitement it used to have. You and your team may find your creative edge dulled. Those would be natural feelings after the rough economy we’ve been through.
But here are five ways to bring the life back into your company so you and your staff begin to approach each day with renewed excitement and a burning desire to grow the business:
To read the rest of this article by Anita Campbell, founder of Small Business Trends, please go to http://bit.ly/clZwra.
What is Considered “Bad Debt” and How Do I Claim It for My Business?
Jul 28th
Credit enables many customer transactions that would not otherwise be possible. If your business offers customer credit, you’ve most likely had someone unable to repay their debt. If you report these sales as income but cannot collect, the IRS calls this “business bad debt.” In these cases, the IRS allows you to deduct those debts to decrease your federal tax liability. These frequently asked questions will help you understand how to proceed if this happens to your business.
When is a business debt considered “bad”?
There are two kinds of bad debts — business and personal. Business “bad debt” is a loss from an uncollectible loan. These loans can be from clients or suppliers, previous partners, or political parties.
Depending on your accounting practices, credit sales for goods or services that have not been paid in a reasonable period of time may be considered bad debt. If your business uses a cash accounting method, you only report the income once you receive it; therefore, you cannot claim a bad debt because you did not yet count the sale as income. If your business uses accrual accounting, you may have already included the sale as income. In that case, the sales would be classified as bad debts and are subject to deductions.
Not only do some credit sales lead to bad debt, but also debts from a former business, debt acquired from a decedent, and liquidation of a business. If you retained your receivables from a previous business, but then you were unable to collect, those can be considered bad debt. This is the same if you liquidate your business and you do not collect on all of the accounts receivable.
For the rest of the article by Jim D of Business.gov, please go to http://bit.ly/cmqrtG
Six Tax Tips for New Business Owners
Jul 27th
We at Criser, Gough and Parrish help our clients navigate starting new business. The following free resources can help focus your attention on what needs to be done to get started. Of course, we believe that good professional advice goes along way. The following can be used as great talking points when meeting with your tax advisor.
IRS Summertime Tax Tip 2010-05
Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know.
- First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
- The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
- An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
- Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
- Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
- Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.
Links:
Publication 583, Starting a Business and Keeping Records
Employer ID Numbers (EINs)
How to Choose Between Lump Sum and Financing
Jul 26th
When selling a business, you might be expecting to get one big payment for your company. But there are actually two main strategies that buyers rely on to pay for a company: lump sums and financing.
With a lump sum, the seller receives payment in full for the company before handing over control. With financing, however, the buyer makes regular payments for the company after taking control, effectively putting you in the position of a lender. Choosing between these two options can make or break a deal.
Choosing Between Lump Sums and Financing
The decision between a lump sum and financing the purchase of your business can be a difficult question for many sellers. Kumi Bradshaw provides help with appraising businesses for sale and completing the sale process. Bradshaw describes the situation and potential problem:
To read the rest of this article by Thursday Bram, a writer for Wise Bread, a personal finance community, please go to http://bit.ly/bnKKVY.
Financial Benefits of Decluttering
Jul 23rd
I have been in a decluttering mode lately. It was sparked by moving my mom from her three-bedroom home to a one-bedroom apartment in my house — and having to pare down her belongings. Spending weeks going through all her stuff to figure out what she did and didn’t need (then selling and donating the unneccesary items) made me want to remove all the clutter from my life, too. A few articles I recently read fueled this desire even more.
My husband and I usually go through our closet once a year to clear out clothes we no longer wear. But an article in the New York Times about people who decided to wear only six items for a month made me aware that there still is a lot in my closet that I don’t need.
We occasionally go through other closets, cabinets and drawers to rid them of items that don’t get used and just take up space. After reading G.E. Miller’s 3 Guerilla Tactics to Get Rid of Clutter on 20somethingfinance, I realized my haphazard keep-or-toss tactics weren’t cutting it.
What resonated with me most, though, was a reader comment on the Opinionator blog post How to Lose a Legacy. The reader wrote about cleaning out his (or her) parents’ home after his mother died and father moved out: “I wonder why we (me) hang on to stuff that really just takes up physical and emotional “room” in our lives; I s’pose it’s because the “stuff” (as George Carlin so aptly and comically put it) signifies a longing to hang on to, or dare I say, cling, to memories using physical things … even if we actually wish we could just throw a lot of it in the trash.”
It feels good to get rid of the clutter. This is a personal finance column, so I won’t advocate just throwing your stuff in the trash because you’d miss out on the financial benefits of decluttering. Here’s what getting rid of things you don’t need can do for your finances:
To read the rest of this article by Cameron Huddleston, Contributing Editor to Kiplinger.com, please go to http://bit.ly/aHXTs8
Can You Answer These 10 Planning Questions?
Jul 22nd
How well are you managing your business? Is your planning helping you steer the business well? Are you controlling your own destiny? Are you satisfied with the business as is, or do you think you can do better?
Starting, growing and even surviving in business is a matter of navigating through the tough times and steering in the right direction. And that’s planning.
It may not be a formal business or marketing plan document, but it better be planning and tracking and reviewing; or else you’re not really managing.
With that in mind, test yourself on your planning and planning process by answering these 10 questions for your business. And unless you’re a one-person business, ask yourself whether all the key players will answer these questions:
To read the rest of this article by Tim Berry of Duct Tape Marketing, please go to
Your 5-Minute Guide to Protecting Your Identity
Jul 21st
Life Events Present Financial-Planning Opportunities
Jul 20th
In June, I discussed the myriad issues clients often overlook or ignore that require changes in their estate plans. That column mentioned key life events that may necessitate estate plan updates. I merely listed them because the implications for planning seemed obvious. But on further reflection, I realized that some changes, such as the birth of a new child, have implications that are not always obvious. Although parts may seem basic, the list contains good talking points for advisors and clients.
To read the entire article by Martin Shankman, an estate planner in Paramus, N.J., please go to http://bit.ly/dx7Hte.
4 Tips to Get the Most From Your Tax Planning
Jul 19th
I need to begin the article by explaining how many times I have heard a company’s tax adviser make a comment like this after the year is over for which they are preparing the taxes: “If only you would have talked to me last year we could have saved you some taxes.”
In addition to this reality, I have yet to see a business that faithfully and correctly engages in tax planning that does not save a significant amount of money—far in excess of any costs inherent to this planning.
Most entrepreneurs and business owners do not engage in tax planning in a meaningful and high-impact way. To help you overcome the barriers to completing this activity as well as to ensure it is effectively executed, here are four tips to implement to make your tax planning efforts fruitful:
To read the rest of this article by Ken Kaufman, Founder and CEO of CFOwise (R), please go to http://bit.ly/d6zWzB.
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