Blog

Always Follow the Rules...

Author: Keith Huggett

In addition to keeping track of receiving and sending out payroll tax statements, 1099-MISCs and other tax season paperwork, there is another 1099 form that you will have to watch out for: the 1099-K. The 1099-K form is an informational return that your payment processor may send you to detail the payments that they process for you. This additional reporting document adds complexity to your tax preparation and may increase your risk of an IRS audit.

Here are three issues that deserve your attention:

1. Not every business will receive a 1099-K form: Merchant providers will send you one if you do at least $600 in transactions per year. Third-party settlement organizations, the most common of which is PayPal, will send you one if you do at least $20,000 of business over a series of at least 200 transactions.
2. 1099-K forms reflect gross payments: When your payment provider sends you a 1099-K, it will reflect the gross payment that they send you before subtracting fees. If you are only accounting for net payments after the settlement company's fees, your tax returns will not match the 1099 and you will be at risk of an audit. 
3. You might get fewer 1099-MISC forms: Clients who were reporting transactions to you on a 1099-MISC form may not send you one this year. If they are paying you through a third-party settlement organization, they should not send you a 1099-MISC. Their payments will be included in aggregate with other entity's payments on the 1099-K form that you get from your payment provider. This is an IRS regulation to prevent payments from being double reported.

With all of the 1099 forms that your business both receives and sends out, tax filing is getting even more complicated. The Tax Office, Inc. has a full staff of accountants and bookkeepers who can help you make sense of every tax form that you receive. Please contact us to get started.

It's Almost That Time of Year Again...

Author: Keith Huggett

If you've received money from just about any source other than work, you'll probably be receiving a 1099 form this year. These forms are informational returns that let you and the IRS know how much money you received, and since the IRS gets a copy, they are major audit fodder. 

Here are three major red flags for which you should pay close attention. 

1. Write-offs - If your 1099s come from self-employment income and you file a Schedule C, your return is more likely to be audited. The IRS audits small business people because they expect to find overstated expenses. As such, you should be very careful to ensure that you can document all of your write-offs.
2. Ensure that every 1099 is reflected on your return - A few years ago, the IRS invested in new computer technology that automatically matched returns to 1099s. This technology makes it very easy for them to spot discrepancies and flag your return for an immediate audit. Reporting more gross income than comes in on 1099s will usually not be a problem, since the IRS knows that you might receive income from payers that don't send a 1099.
3. PayPal fee deductions - Third-party payment services like PayPal are now required to file 1099s for income that they send you. Because of this, you may not be receiving a 1099 from vendors that pay through PayPal. Where the problem occurs is if you've been recording your income after PayPal takes its fee. PayPal will report the income that they paid you before their fee, and you will need to subtract those fees as expenses. If you don't, your return won't match your 1099.

Whether or not you pay close attention to these considerations, the IRS will. Given the large number of different 1099s and their complexity, keeping them straight can be hard. The Tax Office, Inc., knows how to handle them, report them and protect you from an unpleasant and expensive audit. If you expect to be receiving a 1099 form this year, it's a great time to contact us and get started on your taxes. If you would be interested in learning more about 1099s in general there is an informational white paper available, entitled Form 1099-Misc, The Good, The Bad, & The Ugly.

Are You Certain of Your Answer?

Author: Keith Huggett 

If you are an owner of a small or medium sized business, you may think you are certain of your answer. But for most of us, the answer is often "No, I am not certain of my answer."  The reason for this is because we often hand over the controls to our financial department to what we consider to be our "financial staff" which consists of one or two trusted individuals and never think twice about it.  This can lead to employee theft. We're not saying that it always will, just that it can. Like everyone else, we like to look on the bright and shiny side of life too, and hope that the people we work with are honest and dependable, but you never know what can happen. Sometime life throws you something bad, and people are driven to desperate measures. So today, we have some tips for you that may help you prevent employee theft.

• Match up your client payments to your client invoices.
• Call your clients to make certain that payments haven't been sent that haven't been credited against their account.
• Use an expense account for each employee.
• Use online banking.
• Don't share passwords.
• Watch for dates being changed on transactions.
• Keep track of inventory by holding random inventory checks.
• Keep complete vendor records. Collect W-9s from each vendor prior to making payments to them.  Having complete W-9s is a good policy for tax time as well, as you may need this information at the end of the year should you need to send out 1099s.

There are many more tips and tricks to keeping track of the employees handling your financial data. For more in depth information, you can download this free whitepaper To Catch A Thief, Is Your Bookkeeper Stealing? Because small businesses are just that, small, they often lack the large financial staff and sophisticated controll systems inherent with large companies which makes it easier for employees to steal.  The United States Chamber of Commerce estimates that $50 billion dollars are lost annually to employee theft.  The FBI arrested 21,300 people in 2012 for embezzlement.

If you are concerned about the numbers shown above, and you suspect that maybe you have encountered theft in your office, now is the time to act.  The bookkeeping specialists at The Tax Office, Inc. can help you.  We specialize in outsourced bookkeeping, where you will have 24/7 access to your financial data. Contact us today.

Year End is Coming, Have You Planned For It?

Author: Keith Huggett 

Back in January, our Congress and President worked together to put into place the American Taxpayer Relief Act of 2012. With it, they extended several tax credits through the end of December 2013.  Unless they act again, many credits will expire at the end of this year.  Are you prepared for how this may affect your tax return?  Some of the expiring credits include:

• Qualified Mortgage Debt- up to $2 million dollars (married filing jointly) or $1 million for married filing separately, could be excluded from income.
• Educator Expenses - Teachers, instructors, counselors, principals and aides for kindergarten through 12th grade, can deduct up to $250 of out-of-pocket costs.
• State & Local Taxes can be deducted in lieu of State Income Tax.
• Fringe benefits for mass transit were made equal to those of parking, allowing you to exclude from your income a certain amount for transportation.
• Making your home more energy efficient and "going green" allowed a credit of 10% of the amount paid for structural improvements to your home.
• If you have hired an employee in 2012 from a specific targeted group, you may qualify for the Work Opportunity Tax Credit (WOTC). 
• Research & Development Credit
• Tuition & Fees - Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.
• The 100% exclusion on the gain from the sale of small business stock has been retroactively reinstated and extended through December 31. 2103.
  

All of these credits and more expire on December 31, 2013. If you were not aware of this, or haven't planned for it. Now is the time. Unless extensions are made, these credits will run out.  Be proactive and plan ahead.  The tax planning specialists at The Tax Office, Inc. can assist you with planning for the future. Contact us today for a no cost, no obligation consultation.

Using Your Fax To Generate New Business

Author: Allyson Huggett 

While most faxes are sent and received via email these days, it is still possible to generate new business using your old, reliable fax machine. Over the years, we have sent well over 10 million faxes, proof that you are getting your message out to the people you are contacting.  So why not use your fax machine/e-fax to send out your marketing materials? While effective, there are laws governing using your fax for advertising purposes. Here are some reasons why fax advertising is effective...

• Delivery is instant.
• You can use a "fax bureau or bulk fax service" to send your fax.  In 30 minutes 200,000 faxes can be delivered.
• A bulk fax service also has their own list of companies which can be broken down by industry, postal code, number of employees, etc...
• Depending on the volume of faxes you send at any one time, you can pay as little as a few cents per fax. So for 10,000 faxes you could pay less than $100.
• Because delivery is instant, you can expect to receive responses within minutes of the faxes being delivered.

How does this differ from an email blast?  Some people still don't use email, believe it or not. However, they may have a fax machine.  You also do not need someone's email address to send to. All you need is a fax number.  You should never send out a "fax blast" on a Monday or a Friday, and time the fax to be sent between 11 am and 3 pm. For maximum success, your marketing piece should look like it has been "ripped out" of a publication and sent by a friend.

Don't forget your customers either run companies or work for them. Send the fax to companies where your target market work and you can still generate good results.

Should you have any questions, please contact the specialists at The Tax Office, Inc.  We can help you determine your target market, design your marketing materials, headlines, or discuss your marketing plan.

Virtual Bookkeeping Full of Advantages for Businesses

Author: Paul Cantelli

As a small-business executive, you're probably used to doing a lot of things for yourself. Thanks to  the advent of cloud computing, you can shed some of your IT management duties. One of the most exciting applications of cloud computing is in cloud-based accounting. Moving your books to the cloud will help your business in three different ways.

Increased security

How secure is the server that holds your accounting system? Do you have all of the latest computer security tools and software to keep hackers away from your business' most sensitive data? Is your server located in a weather-proofed building with backup generators and multiple layers of physical security to keep criminals from stealing it?  If you're using cloud-based accounting, the answer to every question is a resounding "yes." One of the key benefits of transitioning to the cloud is that your data gets access to the kind of multi-layered security that only the largest companies can afford on their own.

Better access

Cloud-based accounting makes it easier for everyone who needs access to get to your accounting data. This means that your employees can get access to the applications that they need wherever they are, you can access your reports when you are out of the office on business and your accountant can log in to review, complete and correct your books without you having to send them a data file. Many cloud accounting systems even offer access through secure smartphone and tablet apps, letting you truly have anytime, anywhere access.

Lower cost

As you know, traditional accounting software requires the purchase of an expensive software license, a server to run the software and additional cost to keep the server running and upgrade the software periodically. Cloud-based accounting bundles all of these services into a single low cost, usually billed monthly.

The tax and accounting professionals at The Tax Office Inc. have considerable expertise with today's cloud-based accounting systems. Contact us for help deciding if moving your accounting to the cloud is right for you and, if so, how to accomplish the transition.

Cloud Technology Can Streamline Business Management

Author: Paul Cantelli

Anyone responsible for running a business can feel chronically frazzled – there are just too many things that need your attention. You can’t do it all and do it well, too. Switching to outsourced accounting can save valuable time that you could – and probably should – be spending on your most critical activities.

Especially when it comes to managing your financials you can’t afford missteps. You need accuracy and timeliness to effectively direct daily operations and make smart decisions.

Outsourced accounting ties it all together.

Working in the cloud allows you to streamline all aspects of your accounting – data capture, retrieval, calculations and reporting. Cloud-based outsourced accounting easily integrates QuickBooks and Intacct accounting functions, accounts receivable and payable, payroll and periodic taxes and reporting, ensuring compliance with no slip-ups or risk of penalties.

You’ll have information at your fingertips to support annual and long-term tax planning as well as ongoing business performance analysis. That can help save money at tax time and improve your day-to-day operations.

Outsourced accounting does more than efficiently keep your finances on track.

Working in the cloud is faster and more accurate. You’ll benefit from:

• Uploading data or accessing files 24/7, from anywhere, assuring the mobility and flexibility essential to effectively manage any type or size of business these days.
• Top-flight security that safeguards your confidential or proprietary information.
• Automatic back-up and easy retrieval.
• Increased productivity, replacing manual labor with automation that eliminates mistakes, duplication of effort and time wasted on mundane, repetitive tasks.

You’ll save time on meeting travel and document transport and save money by eliminating the need for new technology, software, upgrades, IT time, storage, even office space. And you can hire the very best people, regardless of their location, because you’re working in the cloud.

The cloud may be invisible but it’s a solid business management tool, especially when it comes to accounting. Contact our experienced professionals at The Tax Office Inc., who can advise you about the most advantageous ways to adopt outsourced accounting, freeing you up to refocus your time and energy on your most important job -- running your business. 

Clarifying the Muddy Waters

Author: Keith Huggett

You have two ways to treat the people who help you run your business. You can hire them as employees, with all the legal and financial commitments “employment” carries. Or you can engage them as independent contractors. Here’s how they differ:

• Hiring employees makes you responsible for FICA (Social Security), FUTA (unemployment) and state unemployment and worker’s compensation costs. You have to include them in benefit programs like health insurance, medical expense reimbursement, and retirement plans. You’re subject to various federal, state, and local employment laws. And you’re vicariously liable for employees’ errors and omissions.
• Engaging contractors avoids FICA, unemployment, and worker’s compensation costs. You can exclude contractors from employee benefit plans. You’ll avoid much of the legal and regulatory oversight. And you’re less responsible for contractors’ errors and omissions.

In some industries, custom dictates hiring employees. In others, “recognized industry practice” lets you treat staff as employees or contractors. Contractors are easier and cheaper to hire and manage. Of course, the IRS knows this too. And they’re on the lookout for businesses that classify employees as contractors to avoid employment obligations. They use a 20-factor test to determine employment, including factors such as:

• Do you give specific instructions for completing tasks?
• Do you offer training?
• Do you specify work hours?
• Do you pay flat compensation classifiable as salary?
• Do you reimburse expenses?

If the IRS recharacterizes your contractors as employees, you’ll be liable for FICA and FUTA taxes plus stiff penalties and interest. Here are four steps to take to protect yourself:

1. Have each contractor sign a written agreement specifying they will be treated as contractors, responsible for paying their own taxes, and not covered by workers’ compensation.
2. Have each contractor complete Form W-9 to accept their responsibility for paying required taxes.
3. Treat all workers providing the same service consistently.
4. Issue Form 1099-MISC for all contractors earning more than $600 annually.

If you fear the IRS might reclassify your contractors as employees, you can file Form SS-8, “Determination of Employee Work Status for Purposes of Federal Unemployment Taxes and Income Tax Withholding.” There’s no charge, and you can file a single form for an entire class of employees. But many advisors recommend not filing this form, preferring not to alert the IRS to the issue.  

If you would like more information on employee status, 1099 Misc forms, Independent Contractors, or general tax information, please contact us, The Tax Office Inc.  Our specialists are highly trained in all matters tax related and can answer your questions as they arise.

Is Your Business On Track?

Author: Keith Huggett

Many business people write a business plan, start a business and then put that business plan in the filing cabinet. If you are doing this, you're wasting your business' greatest asset. Your plan is more than a tool you use to get started. It's a living document that helps keep you accountable, guides you as you grow your business and provides you with inspiration as to how you can evolve your business.

Now that we are entering the fourth quarter, dig out your business plan. See how your company is doing relative to the goals found in your plan. If you haven't reached all of your goals, figure out why. This exercise will help you look at your business not from a day-to-day operational perspective, but by comparing it to the big-picture goals that you set when you wrote the plan.

If you're ahead of your goals, do the same thing. If you're ahead of your plan because of good luck or outside influences, you know that you may not be able to plan on that in the future. On the other hand, if your business is performing better than you have expected, figure out where and why, and use what you learn to focus your improvement efforts for the rest of your business. It may be time to expand into a new business structure.  The Tax Office, Inc. is presenting Destination: Incorporation, a seminar on the A-Z's of Incorporating your Business at the end of October.

Analyzing your business can also help you plan what you will need in the coming year. You might be able to shift capital expenditures or other expenses to better plan your cash flow or manage your tax liabilities. If your company needs additional help, you can also get started on recruiting new employees or contractors.

When you are done with the process, update your business plan. Your plan isn't set in stone -- it should represent where your business is and where it's going, and those things can, and should, change. For help updating your business plan, talk to the business and accounting experts at The Tax Office, Inc. Getting professional input can help you better ground your plan in your business' operating and accounting realities.

Don't Miss This Exciting Seminar on Incorporating your Business!

Author: Keith Huggett

Ever wondered if you should incorporate your business? Now's the time to find out. What are the benefits of incorporating? If you are like most small businesses, you may be growing past the point of being a sole proprietorship but are unsure of what comes next. 

Luckily for you, some of the best minds in the business are coming together October 29, 2013 to help you.  Not only will they be discussing the how's and why's of incorporating your business, they will be presenting information on:

• Legal issues 
• Tax issues, 
• The benefits of outsourcing your payroll and accounting, human resources, IT, and other topics
• The affects of misunderstanding corporate payroll
• Tax free retirement and
• 401 K plans 

Now's your chance to register early for this exciting event. Contact the Tax Office, Inc., at (916) 773-7053(916) 773-7053 or email us at marketing@plan4tax.com to register now.