Tips to Stay Motivated During the Crush of Tax Season
If you’re a small business owner, tax season can be hectic and overwhelming. While there’s not much that can be done to change the tax filing process, there are actions you can take to make it less of a burden. The following are some simple tips for easing stress and staying motivated through even the busiest of tax seasons:
Understand the process
Filing your taxes will seem much less intimidating if you take it upon yourself to learn as much about the process as possible. Seek online resources or consult friends or acquaintances who are experts in the field. The more you understand, the more you will feel prepared to take on whatever challenges may arise.
Start early
While it might be tempting to postpone the unpleasant tax-filing-process until the last minute, it will only magnify your stress and anxiety. Set a deadline for yourself that’s at least one or two weeks earlier than the actual deadline. That way, if any problems come up, you’ll have plenty of time to deal with them. The sooner you complete the process, the sooner you can direct your attention to other areas of your business.
Take small steps and set goals
In the business world, it’s likely that your tax situation is somewhat complicated. If that’s the case, it can be helpful to break up the project into smaller parts and tackle them one at a time. For example, you might assign yourself one small task to work on each night over the course of a week or two, rather than being forced to surrender an entire day to working on the project all at once. For some, it might feel more satisfying to achieve several small goals rather than a single large one.
Make it fun
Yes, even doing your taxes can be fun! After setting your goals, decide on a reward for reaching each milestone. It might be more effective to reward yourself with small treats for each task you complete, or you might prefer to do something bigger — say, going out of town for the weekend — as soon as you finish the entire project. Taking pride in each accomplishment, no matter how small, will help keep you motivated.
Get help from an expert
For those with more complex tax situations, the best option might be to hire a CPA to prepare your taxes. While this will not completely eliminate the work on your end, it will significantly minimize it. The extra relief will likely be worth the additional expense, and the money spent on hiring an accounting professional may be offset or completely eclipsed by the money you save through expert-recommended deductions you might have missed on your own.
The Basics of the IRS
We all know that the Internal Revenue Service (IRS) is the organization that enforces tax laws. But how much do you know about the organization itself? The IRS — or at least one of its earlier forms — actually dates back to the mid-1800s! Yes, there is quite a history to this ever-so-popular federal agency.
Beginnings and growth
Until the U.S. Civil War, individual states were responsible for collecting their own taxes. When President Abraham Lincoln instituted the nation’s first income tax, however, it became clear that an agency was required to enforce and collect these taxes. This was how the first federal tax collection agency, the Bureau of Internal Revenue (BIR), was born.
Income tax had disappeared again by 1872, but was reinstituted in 1913 along with a tax on corporations. The BIR grew along with the tax increases and implementation of payroll withholdings and quarterly tax payments. In the 1950s, the BIR was reorganized and renamed the Internal Revenue Service.
As the agency grew, it struggled with corruption. The organization’s restructuring in the 1950s was part of a far-reaching effort to instigate reform. These reforms purged the agency of many officials, eliminated patronage in hiring and dramatically decentralized the organization of the agency. The new name was created to emphasize the agency’s focus on being a service provider to the taxpayer.
Another reform effort took place in the 1990s as part of the IRS Restructuring and Reform Act, aimed at modernizing and automating tax processing.
Organization and enforcement
The IRS is estimated to be the largest federal bureaucracy, employing about 115,000 people. The agency falls under the Department of the Treasury. Although its national headquarters is in Washington, D.C., much of the collections and auditing happens in regional offices across the country. Since its reorganization, the IRS has been divided into four main operating divisions: Wage and Investment, Small Business/Self-Employed, Large/Midsize Businesses and Tax-Exempt/Government Entities.
When confusion and disputes arise, the IRS also manages the IRS Appeals Office, which attempts to provide an impartial resolution to tax disputes without having to go to court. There is also the National Taxpayer Advocate Office, which assists taxpayers when it comes to IRS problems, and the Criminal Investigation Unit, which investigates violations of the tax code.
The IRS collects more than $2 trillion in revenue every year. Much of the tax system relies on people’s willingness to voluntarily comply. If failure or suspected failure to comply with tax laws has occurred, the IRS uses audits — which are thorough examinations of tax records — to investigate.
If it’s clear you have failed to pay all you owe or claim that you cannot afford to pay your tax debt, the IRS may send tax collectors to your home or place of business. These collectors will assess your situation and decide whether or not to take a lien on something of value you own to settle your debt. Generally, if you cannot afford to pay, collectors are willing to negotiate to find a plan that works.
Small Business Bookkeeping: 5 Steps to Staying Organized
Is an organized filing system the week link in your business? End the year on a strong note by starting new organizational practices.
1. Organize documents by date and client (if applicable) as they come in, on a daily, bi-weekly, or weekly basis, depending on the size of your business and whether or not your business has a dedicated bookkeeper.
Whether you receive documents electronically or by mail (sometimes both), you need to have a filing system that works to keep things organized. There is nothing worse than frantically looking for the scrap of paper that you remember touching or seeing, but it has now mysteriously vanished. If a document is electronic, put it immediately in the appropriate file on your computer and in the cloud (it is important to always have, and use, back up files). Have all physical mail delivered to an inbox, and go through it once per day. Make sure that you reserve enough time to file as you sort. Try to touch a piece of mail only one time. Open the mail, evaluate what needs to be done, and then file it in the appropriate file. It is when we set things down, in between, that they can easily get lost.
2. Use an easy to use and appropriate naming scheme for your files. There is nothing worse than spending productive hours searching for mislabeled files.
Be clear about the names you choose for your files. Don’t just leave them as “new file.” Put the name of the client and the year that the file contains. Each year, start a new file; both on the computer and in physical files.
3. Make a clear separation between business and personal finances.
This is hard for small-business, especially home-based, small businesses, but it is necessary for healthy, organized bookkeeping. It’s important to keep a clear delineation between the finances. If you depend on funds from the business to keep your personal life afloat, pay yourself first. Write yourself a check or put yourself on the payroll, so you still have the money that you need, but there is a clear separation between business and personal finances.
Have a credit card and bank account that you only use for business. Conversely, if you use your personal account for a business expense (emergencies happen), make sure that you document that clearly as a business expense.
4. Make sure you have clear categories and everything is in the right category. You may have to consult with a bookkeeper or accountant to set these categories up.
You don’t have to have a huge amount of categories in your accounting, but they do have to be clear, and they have to make sense to whomever is doing your accounting and bookkeeping! This is what called a chart of accounts or COA. Many times, a COA is represented by numbers. They do represent real accounts though. Some examples would be:
Asset Accounts: Different types of resources owned or controlled by the business (such as cash, real estate, inventory, accounts receivable).
Liability Accounts: This represents what a business owes, or their financial obligations (such as loans, accounts payable, and rent or mortgage).
Equity Accounts: This is the residual equity of a business (after deducting the liabilities from the Assets).
Revenue Accounts: This represents the business’s gross earnings (income, sales, and interest on accounts).
Expense Accounts: The outflow it costs to keep the business running (such as electricity, water, rental, insurance and taxes).
5. Transfer files to a cloud/online server. This it makes it easier to collaborate and share files with your professional bookkeeper and accountant.
Quickbooks online allows a business to have direct communication of accounts with their bookkeeper and accountant. A business has other options though, such as Dropbox, Evernote, Google drive, SkyDrive, SugarSync, and Bitcasa. Bitcasa offers one of the best deals. For $99/year, you can have unlimited storage of files. If you don’t get any bells and whistles, but if storage is what you are offer, Bitcasa offers it.
As I write this, I am sitting in Arizona enjoying some sunny 85 degree fall weather. I have my laptop on my lap and I am working outside, enjoying the sunshine. I am thankful that I am able to work like this, because I have a sick parent that I am helping with. How can I do this? I can do this by keeping my information organized and accessible. Whether you keep your records and business tools in a more traditional way, or you are embracing “the cloud” approach, organization is the key.
W-2 Forms Explained
When the New Year comes around and it’s time to send out W-2 forms, you may have some questions—especially as the Affordable Care Act has resulted in some changes when it comes to the information that must be included on the W-2.
The following are some tips for meeting your W-2 reporting obligations and an explanation of when and how to file the correct forms.
Reporting employee wages and taxes
You must issue an annual W-2 form if you paid an employee any amount in wages during the previous year. This form reports the employee’s wages, income tax and FICA tax withholding, as well as certain other employment-related payments. The form also contains information on any deferred taxes from retirement contributions, untaxed moving expenses and tips for individuals in service industries.
However, as a result of the Affordable Care Act, businesses that provide health insurance to their employees must now report the cost of coverage on employee W-2 forms. The reported amount should include both the employee and employer contribution to the health care premium.
In addition to all employee-related information, W-2 forms must include the employer’s business name, address and federal ID number.
Know the mailing dates
Once all of the necessary information has been entered onto the W-2 form, you must provide copies of the form to both your employees and the Social Security Administration (SSA).
By law, you are required to provide W-2 forms to employees by January 31, 2014. However, you have until February 28 to send paper copies of the forms to the SSA, or March 31 if you choose to file electronically. Keep in mind that you will only qualify to e-file if your business has fewer than 20 employees.
Once you’ve given your employees their W-2s, ask them to check and make sure the information is correct. If any inaccuracies are found, corrections may be submitted using form W-2c.
In the event of non-receipt
It is important that you adhere to the mailing deadlines for both your employees and the SSA. If you choose to ignore these deadlines, you may be subject to penalties, including fines or even imprisonment.
Let your employees know they should contact you directly if they do not receive their W-2 form in the mail, as this will make the process easier for everyone involved. If this happens, verify the employee’s mailing address. You might have W-2s returned to you if the mailing information is wrong, in which case you can attempt to resend using the correct address or ask the employee to pick it up from you.
If you already have the correct mailing address on file, you may choose to wait about 7–10 days to allow for slow mail delivery to catch up to the recipient. If the employee still has not received the W-2 at this point, send a duplicate copy.
If necessary, the employee may also contact the IRS if they have not received their W-2. The IRS will likely ask the employee to wait until February 14 to allow for slow delivery time. After that, the IRS will contact the employer and ask that the employee receive a duplicate W-2.
For more information about W-2 forms, deadlines or required information, consult the IRS website at http://www.irs.gov.
5 Important Tax Laws for Growing Businesses Defined
If you’re a small business owner, you may find yourself negotiating the world of tax laws with little or no help. With tax season coming up, it’s important to understand some recent major tax law changes, proposed changes for the coming year and existing laws.
You should know, at least generally, what these laws really mean and how they affect your business.
The U.S. House Ways and Means Committee recently released a draft of some proposed tax law revisions. If these changes go into effect, they may have a significant impact on companies large and small across the country.
One of the most noteworthy changes proposed, is a permanent extension of the “Section 179 deduction,” which permits businesses to deduct equipment expenses and doubles the current deduction for startup costs from $5,000 to $10,000. If you are a startup, you will now be able to claim significantly more in tax deductions. This will cover all types of startup costs, including advertising, employee training, employee retention, legal expenses and business travel.
When it comes to deductions for equipment expenses, the proposed changes would make it possible to claim bigger deductions for more or upgraded equipment. Extending the Section 179 deduction would allow small business to continually acquire essential machinery, and would also cover certain office equipment, like computers and furniture, up to $250,000 per year.
Existing deductions and credits
Since 2009, President Barack Obama has signed legislation that includes 18 different cuts for small businesses. Here are some of the most significant ones:
Affordable Care Act
This law, passed in 2010, awards a small business tax credit of up to 35 percent to companies that provide health insurance to fewer than 25 full-time employees. The tax credit helps to offset the cost of insurance, and next year will increase to a maximum of 50 percent.
Work Opportunity Tax Credit
This tax credit was recently extended through 2013. It is designed to encourage employers to hire military veterans or those from under-served communities who have encountered significant barriers when it comes to finding a job. This credit has the positive effect of helping to decrease jobless rates, while also benefiting small businesses.
Small Business Jobs Act
This act includes eight new tax cuts designed to help small businesses. It also includes provisions that enhance small business loan provisions, increase loan limits and promote small business exporting.
The Hiring Incentives to Restore Unemployment (HIRE) Act
If you choose to hire individuals who were previously unemployed, you may benefit from the HIRE Act. It provides incentives such as a payroll tax exemption and a general business tax credit, referred to as the new hire retention credit.
Bonus Depreciation
Bonus depreciation allows small businesses and startups to more quickly reclaim the costs of qualifying new equipment. It does this by permitting the depreciation of 50 percent of the cost to be claimed within the first year. Recently, this credit was extended through the end of 2013, and through 2014 for certain qualified investments.
Internet sales tax issues
This is a piece of proposed legislation that small business owners should keep watching. Currently, many states already require small businesses to collect sales tax for online sales. Recently, there has been a push to expand this policy to a nationwide sales tax. The proposed legislation is called the Marketplace Fairness Act, and would require any business earning more than $1 million from online sales, to collect tax on every purchase.
Although some of these tax laws are beneficial to small businesses, it is important to understand how they are being implemented and what their implications are for your business. Work with an accountant to learn more about your opportunities and obligations. Contact Kristina’s Abacus today to find out more.
Small Business Social Media Marketing 101
Welcome to Small Business Social Media Marketing 101. In this blog post we’ll discuss how to develop a social media strategy, why it’s important, and three tips for how you can start using social media marketing effectively for your small business.
Developing a Social Media Marketing Strategy
It’s important to first determine what you want to accomplish with your social media marketing program. Do you want to increase traffic to your site via social referrals? Do you want to earn more customers through social media? Do you want to improve customer loyalty? Or do you simply want to increase “likes”, “shares”, and followers to increase your social media reach and brand awareness? Once you’ve answered what you expect to get out of social media marketing you can begin to develop a strategy to accomplish those goals. For example, if you want to increase your social media reach and brand awareness your strategy should include something about consistently getting in front of your customers (be it via their news feeds, Twitter streams, etc.).
Why You Should Develop a Social Media Marketing Strategy
Social media is becoming more and more of a key player in digital marketing. And so, it’s not only important that you ‘just do it’, but that you have set clear goals for yourself against which you can measure your program’s progress, success, and effectiveness. You should be testing and tracking the different approaches you take to your own social media marketing in order to figure out what resonates best with your target audience.
3 Tips for Successful Social Media Marketing
Always include opportunities to visit the website!
It’s great to have a bunch of Facebook likes or Twitter followers, but what we really want is to get those people to the website so that they can buy our products, hire our services, etc. Make sure that you are consistently providing links to your website in your social media posts so that visitors have plenty of opportunities to go to your website.
Share engaging, relevant content – don’t spam your friends
It’s important that you don’t just share content to share content. Ask yourself, “Who cares?” If you’re a restaurant owner your Facebook fans most likely don’t want to hear from you about a sale on shoes at The Bon (oh I just dated myself). But they’ll absolutely want to hear about happy hour specials or any new additions to the menu.
Test posting at different times of the day
A question we get a lot is, “what is the best time of day to post and promote content?” The truth is it depends. Look into the demographics of your social media followers and friends and see where they’re located, what times of day they engage with your content, and test out different posting times and styles. Track which times and styles resonate with clients most and replicate.
There’s a lot to social media marketing and social media is constantly evolving as a marketing channel. More and more businesses are using social media marketing to drive traffic to their websites, improve customer loyalty and increase brand awareness. It’s inexpensive, but it takes commitment, and used properly it can be extremely effective in accomplishing your marketing goals.
How do you use social media marketing? What’s your favorite social media channel for marketing your small business?
Small Business Blogging Tips for Creating Content
Everyone keeps telling you that you should be blogging for your business. But what should you be blogging about? And how can you consistently generate new ideas and content? Once you’ve created the content how do you distribute and promote it so potential customers can see it? In this blog post, we’ve put together five tips for how to consistently create original content for your small business blog.
1. Use questions from customers as inspiration.
If you own or run a business you’ve undoubtedly received questions from customers at some point. Putting together a well-researched and easy to understand response is important in order to keep your customers happy. In doing so, you’ve also started a blog post that you know at least one person will be interested in reading. Keep track of those questions and use them as inspiration when coming up with ideas for content.
2. Commit to consistency
This is definitely one of the most difficult aspects of blogging. There are two major reasons why small businesses keep blogs: A). To attract visitors to their website and B). To maintain good SEO value as the originality and freshness of content on a site is considered in SEO. However, regularly producing fresh, original content on your site is time-consuming. That’s why creating habits like committing to writing one blog post a week, or one a month is important. Make consistency a priority!
3. Promote your content on social media
If you’re a small business with a blog, odds are people won’t regularly check your site directly for fresh content. In order to keep your current readers aware of new content, setup social media profiles that your current and potential customers can connect to, and promote your content on those channels. By consistently creating new content you can also consistently promote new content on your social media channels, and get in front of your target audience on a regular basis.
4. Repurpose old blog content
Just because you’ve written and published a blog doesn’t mean you’re finished with it yet. Some content is dated and will need to be updated into a new blog post in the future. Some content can be used as inspiration for creating a blog series or creating other types of content like infographics and web graphics. Revisit your old blog posts and see which ones can be revamped or turned into something else.
5. Use relevant keywords
Why are you blogging in the first place? Mostly likely, it’s to gain more relevant readers, more qualified leads, and drive them to convert for you in one way or another. So how do you find relevant, qualified leads? Start talking about what they want to hear about! Do some keyword research to figure out what your target customers care about and what they’re looking for online. Be a resource that’s easy to find, because you’re using the exact same language that your customers are using in their searches.
These five tips should help you get started blogging for your business and help you setup different goals and ways of keeping yourself on track. How do you come up with ideas for blog posts? Where do you look for inspiration when creating content?
5 Online Accounting Programs for Accountants
by Tabitha Reimer
More and more Small Businesses are needing online Accounting programs that can track expenses, record income, and give instant mobile updates. Some of the more popular are SageOne, FreshBooks, Harvest, FreeAgent and QuickBooks Online.
SageOne has one of the highest ratings in online reviews. At $29 for the Admin, five users and five invoices, and only $10 for each additional user, it is one of the more reasonably priced programs. It offers unlimited customers and unlimited number of collaborators. It is however, very limited on the number of invoice templates and preconfigured reports it offers (only 3). It does offer excellent tracking capabilities and is fully accessible from all brands of mobile devices.
Fresh Books also has high ratings. At $69.95, it is considerably pricier than SageOne and it only allows three customers and does not allow collaborators. It only offers 2 invoice templates but it does offer 15 preconfigured reports. It falls flat on mobility however because it does not support Android devices.
Harvest is $32 . It offers unlimited customers but does not allow collaborators. It scores high on mobility, but it is extremely limited in the number of invoice templates (1) and preconfigured reports. It also falls short by not offering free access to project tracking.
Free Agent is the most economical option in the top five at $24. It offers great access with unlimited users, unlimited customers and unlimited collaborators. However, it only offers one invoice template and seven preconfigured reports. It also falls short in project tracking capability; it does not allow emails of task assignments and you cannot attach files. It also does not support Android devices for mobility.
QuickBooks Online is $39.95, but this is only for one user. The cost per month for additional users is $39.95-$84.95. This program offers unlimited customers but does not allow collaboration. They offer great invoice and billing but you should be aware that they do not accept PayPal payments within the program (the previous four online programs do). They offer the most invoice templates and preconfigured reports (12/40). Mobility is available on all devices. Where this program still seems to be lacking is in project tracking capability. It is very probable that this deficit will be remedied in future software updates.
It is important, when looking at software reviews, to keep in mind the elements that are most important for your particular business. QuickBooks is still the gold standard for record keeping, invoicing and keeping track of your books on a mobile device. If a majority of your business is going through PayPal though, it may be hard to justify the expense of a program that doesn’t support that platform. Also, keep in mind, that programs are changing and adapting all the time. Keep looking at the comparisons and find what works best for your Small Business and your bookkeeping and accounting needs. Please contact Kristina’s Abacus if you have any questions. As a QuickBooks Pro Advisor, they will be able to offer further insight into the QuickBooks online program and how it can best work for you.
Hiring an Accountant for Tax Season
Hiring an accountant specifically for managing your taxes is a great way for small businesses to make sure they are meeting all of their tax requirements. However, how do you know when it’s time to hire a tax accountant? Tax season can be a huge headache for many small business owners who decide to do all of their own taxes. So, in this blog post we’ve included three things to consider before hiring an accountant to manage your taxes, as well as what to look for when hiring one.
Do I need an accountant to do my taxes?
Well, do you? This is the first question you should be asking yourself. Do you need an accountant to handle your taxes? How much time do you spend trying to manage them yourself? Is the time you spend on taxes taking away from time you’ve allotted for managing other aspects of your business? Whether you’re too busy to handle taxes or if it’s just not your area of expertise, you may want to consider hiring an accountant to do them for you.
What to Look for When Hiring an Accountant to do Your Taxe
- Referrals! Do you know anyone who’s hired an accountant specifically for tax season? What was their experience like? Would they recommend that accountant to you? Do you have business colleagues or acquaintances in similar financial situations as yourself that have used similar services that they’d recommend?
- Certification. This is especially important if you’ve never worked with the accountant before. Accountants collect a wide range of your confidential financial information, and so, hiring an accountant who is certified is one way to make sure you are hiring a legitimate professional.
- Specialty. Not all accountants are alike, many have different areas of expertise and so it’s important when looking to hire an accountant to handle your taxes that you hire an accountant that specializes in taxes. A certified accountant that specializes in small business taxes already has a majority of the knowledge they need to in order to handle your accounts wisely.
Making sure your accountant has a good reputation, is certified, and specializes in the areas you’re looking to have managed, should help streamline the process to hire one.
Leave any questions about small business taxes in the comments!
3 Great Online Bookkeeping Resources
Bookkeeping is an extremely important aspect to running a small business. Whether you’re a bookkeeper by trade or by default, knowing which online bookkeeping resources are valuable can be helpful. And so, in this blog post we’ve listed three online bookkeeping resources to keep you up-to-date on the latest in bookkeeping for small businesses.
1. National Bookkeepers Association – if you’re looking to get certified in bookkeeping this is a great place to start. The NBA provides information and resources for learning bookkeeping, improving your bookkeeping skills, and certification.
2. National Association of Certified Bookkeepers – this resource is specifically for public bookkeepers that have been certified. Members include freelancers, outsource bookkeepers, CPAs and other certified accounting professionals. A one-stop shop for finding information on public bookkeeping services.
3. National Federation of Independent Business Budgeting & Bookkeeping – Find a wide variety of articles and resources on budgeting and bookkeeping for your business. Learn everything from what a balance sheet looks like to profit sharing to when to use a notary, all in one place.
These resources should help guide you to whatever information you need on bookkeeping and bookkeeping services. If you’re a bookkeeper, which resources do you use? And which do you find to be most helpful?
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