No one wants to go through an IRS audit. These days, an audit happens when the IRS thinks that the tax money they could recoup from an audit exceeds the cost of performing the audit itself, or if they believe there may be criminal activity involved. As long as you’re doing everything right, there’s no specific reason to worry about an audit. However, sometimes even if you think you’re doing everything right, you may accidentally raise some red flags. Following are seven things that could inadvertently trigger an IRS audit.
1. Unusual Business Expenses
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What are your 2020 small business goals? Do you want to increase revenues by 20%, decrease employee turnover, or launch a new product line? While making New Year’s resolutions, you’ve probably either thought of a direction for your business or made a detailed plan.
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The first month of the New Year can be slow for a small business, particularly seasonal businesses. While you may be glad for a chance to take a break after the holiday rush, now is a good time to take stock of several key aspects of your business.
There’s more to running and growing a successful business than keeping the lights on, but many small business owners get so wrapped up in daily operations that they don’t have time to analyze their business. If business has slowed in the first month of 2020, here’s everything that you should evaluate before going into the new year.
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As a business owner, you know first-hand that taxes can take a big chunk out of your pocket. No matter how small your business is or how large you grow, you’ll always be on the hook for some kind of taxes. However, the tax code is such that there is always room for strategic tax savings as long as you operate within the laws. Your CPA is the best source of tax-saving strategies, but it can help if you present some of your own ideas, too. Here are some that are worth considering.
1. Consider Hiring Independent Contractors Instead of Employees
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Cash flow is one of the most common problems that all businesses face. It’s also one of the most crippling financial situations that business owners contend with. There are several steps you can take to reduce or eliminate your business cash flow issues. One or more of the following ideas will likely help your situation.
Invoice Immediately
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Whether it’s carols blasting in the malls, or menorahs in the window, the holiday season is upon us. For small businesses, it can be a great time to say “thank you” to the clients who’ve helped you have a successful year. Some companies choose to send holiday cards, which only cost pennies, but others want to go above and beyond. Sending a gift can make a deeper impression.
When planning your holiday shopping, should you add your clients to your list?
Reasons to Give Clients Gifts
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Whether you’re setting up your new business for the first time or simply switching financial institutions, choosing a business bank account is an important decision. It can affect everything from how long it takes you to travel to your branch to your business’ cash flow. It’s not a decision to be taken lightly or made based on some temporary advertising gimmick. We’ve all seen those fliers in the mail touting 3 free months of checking or a one-time deposit bonus. As a business owner, you need to look beyond the surface and dig deeper.
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The deadline for implementing the FASB’s new leases accounting standard, ASC 842, is fast approaching. Many private companies are only just now realizing that they need to examine their leases in light of the new requirements to bring most leases on-balance sheet. Adding right-of-use assets and corresponding liabilities could change important ratios and impact lending agreements, and more.
If you haven’t already, now is the time to think about how you will ensure compliance in 2020.
Overview of the Standard
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How to accept payments for your business is always of great concern to businesses. Of course, you need to accept credit card payments so that you can offer your products or services to a broader range of customers. But there are many different options for accepting credit card payments. It’s important that you understand how the options compare with each other so you can ensure that you’re using the best choice for you and your customers.
Why Credit Card Payment Options Matter
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Getting a divorce can be one of the most stressful times in your life. In addition to the emotional toll, it costs, on average, $15,500. As you split your assets, including cars, homes, and retirement accounts, don’t forget to think about the financial implication of your custody decree.
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In business, risk is anything that could negatively impact your revenues, reputation, or future operations. When you try a new vendor, you take on risk. Their products or services could be below your standards, and cost you customers. When you expand an existing business line, there’s the risk that new products and services could not sell. Think of business risk in terms of exposure to anything that could cause your company to fail.
Risk is an evitable part of running and growing a business, but smart business owners try to minimize and hedge against it.
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If you ever want to apply for a small business loan, the lenders will want to see your business plan. Your business plan gives lenders a concise snapshot of your business model. Having a small business plan also gives the owner added benefits. Often, business owners refer back to their business plan to ensure that they are holding true to the foundations of the business. A well-written business plan can help you stay on track to reach business goals for years to come.
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In these days of the gig economy, more business owners are leveraging the affordability and convenience of hiring freelancers (independent contractors) instead of regular employees. It makes sense. There are some tremendous benefits to hiring independent contractors (ICs), including not having to pay for insurance and payroll taxes. Another huge benefit to hiring ICs is that business owners can’t always predict busy times and downtimes. When seasonal shifts in business necessitate extra help, the business owner can bring on more staff without making any long-term commitments.
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Just because there’s a positive balance in your checking account doesn’t mean that your business is making money. Checks that you’ve written for expenses may not have cleared yet, or customers could have paid in advance. Relying on a positive balance to determine if your business is solvent could be dangerous.
Cashflow represents the movement of cash in and out of your business. Cashflow management seeks to match the inflows and outflows so that you’re never short-handed, though sometimes business owners must borrow to cover gaps.
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Discounts have become a way of life in the American marketplace. You can’t drive down the street without seeing a sign in a retailer’s window blaring, “50% off!” Coupons arrive in your inbox offering discounts for every occasion – even National Cheese Day.
If you’re a business owner, long-standing customers might have asked for a reduction to your goods or services to reward their loyalty. While you might be inclined to say “yes,” think about the pros and cons of discounts first.
Pros of Offering a Discount
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Does it sometimes feel like your accountant is speaking an alien language? You hired a CPA in the first place so you could benefit from their many years of experience and expertise. Obviously your CPA knows more than you do when it comes to taxes and taking advantage of the most beneficial financial strategies. But at the same time, you do want to understand what they’re trying to help you with and what they need you to do on your end of the finances.
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If you own your own business you already know the joys of being your own boss. You may even have thought about bringing your spouse and/or children into the fold. There are definitely some benefits to hiring your spouse or children. Here are some to consider.
Tax Advantages of Hiring Children Under 18
There are several tax benefits when business owners hire children under 18, as long as the child is still a dependent. If the child is 18 or older and not a dependent, they’re treated no differently than if you hired a job candidate off the street, tax-wise.
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It may be the first gorgeous day of fall, but it won’t be long until April 15 comes knocking. Be prepared for next year’s tax deadline by beginning your preparations today. That means, as a small business owner, now is the perfect time to begin organizing receipts, collecting owed payments and deciding on year-end purchases. Do it now, and you won’t have to dread facing it in the spring. And if the task seems too overwhelming, remember – we’re just a phone call away to help you get through it.
Clear Outstanding Invoices
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Small strategies make big impacts when it comes to figuring out the year’s deductions. Sadly, many small business owners never get the help they need because they’re simply unaware of the many tax deductions available to them. This is where a good, knowledgeable CPA is invaluable. And since you’re hiring your CPA to help you organize and prepare your taxes – he or she becomes a deductible business expense, too. Tons of little-known, obscure strategies will help pull you out of the hole come tax time; it’s just a matter of discovering what they are and how best to take advantage of them.
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Financial Considerations in Refinancing your House: Pros and Cons
If you’ve owned your home for a couple of years, you might have started thinking about refinancing. Maybe interest rates have dropped, and you want to save money, or you want to tap into your home’s equity to remodel your kitchen.
Learn about the pros and cons of refinancing your house and how it could impact your financial situation so you can make the best decision for your family.
Pros of Refinancing your House
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Which Items are Tax Deductible when Selling a House?
When you list your house on the market, you’re probably thinking about how much money you’ll make or where you want to move next, not about your taxes. A home sale does have tax implications which can either help or hurt you in April.
Find out everything you need to know about selling a house and personal income taxes before you plan on spending the profits from selling your home.
Which Common Home Selling Costs are Deductible?
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Change is a constant part of life. With each change, adjustments have to be made. Certain changes in our lives puts us in a different tax category or changes how we need to file our taxes. Legally, we may come under different rules and requirements. There are tax advantages or credits that come with some of life's changes. Below are a few events that can take place in your life where you may need some professional guidance with the filing of your taxes.
Getting Married
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A non-profit organization can have several definitions depending on the perspective of the people discussing the matter and the context of the discussion. To the layman, the term generally means a charitable institution or perhaps a church, or an organization which provides assistance to the community which isn't provided by the government.
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To succeed in business, small business owners must keep a close eye on expenses. Poor expense management can destroy your profit on a project or business venture. A component of expense management is expense tracking.
If you’re not keeping track of your expenses, it’s easy to go over budget. Even if you’re still making a profit and don’t think you need to pay close attention to them, if you don’t have good records you won’t be able to take all your allowable deductions on your taxes.
How important is it to Track Business Expenses?
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Going into business with a partner can be a great way to spread risk, to draw on each other’s skill sets, and to combine resources to grow your business. But, at some point, the partnership may not be serving either you or the business well. It might be time to dissolve it.
Dissolving a partnership is a delicate affair. It should be done in a respectful but efficient manner, and in a way that won’t hurt the surviving business.
Signs that it’s Time to Dissolve a Partnership
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Many small businesses open business credit cards to help meet their capital needs. Roughly 67% of business owners have business credit cards, but less than half of them use them as their primary spending source.
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Don’t Mix the Personal and the Business; Keeping Finances Separate
When you launched your business you might not have paid much attention to keeping your personal and business finances separate. If a vendor needed to be paid you grabbed the closest checkbook and wrote out a check, even if it was a personal account. It’s not a big deal since it’s all yours, right?
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Travel and entertainment are legitimate deductions, but few business owners take full advantage of them. One reason may be that they fear that the deduction will be challenged by the IRS and they’ll have to undergo the scrutiny of an audit. Another reason may be because the owner is unsure of how to take the deductions or what’s allowed and what’s not allowed. To be clear, travel and entertainment are allowable deductions. the IRS understands that much of business is conducted over drinks, meals or on the golf course. Travel is also an obvious necessary to conduct business.
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A recent study confirmed that over 16 million people were the victims of identity theft in the span of one year in America alone, which resulted in $16.8 billion in stolen money. Identity theft is dangerous to your wallet and to your credit. Identity thieves use your information to take out loans, obtain credit cards, make purchases, get apartment leases and much more.
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If you’re a small business owner struggling to make payments on credit cards and loans you might have been wondering if consolidating your debt would be a good idea. Debt consolidation companies often target those with high balances, sending letters and calling with promises to lower your monthly payments and save you money.
But do these companies really do what they promise, and can they help your business? Here’s everything you should know before applying to take out a debt consolidation loan.
What is Debt Consolidation?
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