Five Bad Money Habits Your CPA Can Help You Break
Money Habits
Let’s face it, we all have bad money habits that we need to break. While we may not want to admit it, it’s a reality that many of us face every day. If you want to know whether someone has bad money habits, the best place to check is their bank account. If their account is always in the red, you’ve definitely found a bad money habit.
Having bad money habits does not mean you are a bad person, nor does it necessarily indicate that you’re a bad business person either. What it does say is that you lack self-control as it relates to your finances. Sadly, this is a flaw many business owners across America share.
Here are five bad money habits your CPA can help you break. Breaking these bad habits can help get business on the right path.
- Spending Money Before You Get it
- Spending Money You Don’t Have
- Spending Money on Unnecessary Purchases
- High Interest Rate Credit Card Usage
- Failing to Calculate Taxes
Do any of these bad money habits sound like the habits of your business? Don’t worry, you’re not alone. 75% of businesses have one or more bad financial habits. With diligence and perseverance, these habits can be broken.
These bad money habits are exactly why it’s imperative to have a CPA on your team to help you break the bad financial habits which are extremely hard to break all on your own.
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How Hiring a CPA Will Positively Impact Your Business
CPAs & Business Growth
Hiring a CPA could singlehandedly be the best decision you ever make as a business owner. While you may not necessarily understand everything that the CPA does, you do understand that without a financially sound person on your team you may be putting your business in financial jeopardy.
Here are just a few ways a CPA can positively impact your business:
Eliminate Stress
The number one stressor for most businesses is, yes you guessed it, finances. Adding a CPA to your team will eliminate this source of stress by placing a trusted individual in care of your business finances to ensure you are making better financial decisions every day.
You Will Gain More Time
Much of the time wasted by small business owners is the time they waste doing things they aren’t equipped to do, such as financial planning and forecasting. By hiring a CPA, you instantly gain more time to focus on the things you care about most, growing your business and doing what you’re good at.
Your Company Will Begin to Grow
Having someone on your team manage your finances will put your company in a position to grow financially because you have someone who’s always watching and monitoring your finances. Not to mention, a CPA can also help manage the payroll for your company and show you if and when you’re ready to bring more employees onto your team.
Teaches the Importance of Collaboration
Teamwork makes the dream work and hiring a CPA could be the beginning of fostering that type of collaboration. Having a designated CPA proves not only to others but also to yourself that you’re willing to place your finances into someone else’s hands in order to grow in areas you’ve previously been unsuccessful in.
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Four Ways to Know When It’s Time To Hire a CPA
Hiring a CPA
In the course of running a business, usually there comes a time when it is necessary to hire an accountant. While you may feel as though your company cannot afford to hire a CPA, it is often better to make an investment before you need to hire one as opposed to waiting until you desperately need to. Here are just a few ways to identify when it’s time to hire a CPA.
Your Business Always Owes Back Taxes
Notice that you always owe money at the end of each year? Perhaps you are doing something wrong. Hiring a CPA will not only help you manage your budget better throughout the year but it will also help you with your end of the year taxes.
You Never Have Money To Pay Your Employees
Being unable to pay your employees could literally break your company into pieces. In a generation where practically everything is accessible online, when you choose not to pay your employees (or just can’t afford to) you can almost always expect online backlash.
You Don’t Know How to Manage Money
Don’t know how to manage money? Now more than ever is the time for you to invest in a CPA. While a CPA can’t make you manage money well, a CPA can easily guide you in the right direction to insure you are making good decisions for not only yourself but also for your business.
You want to Improve Your Credit Rating
Improving your credit rating can be a daunting tax especially if you don’t really know what you’re doing. Hiring a CPA can help you improve your rating by making sure you pay all of your bills on time. There are also several other tactics that CPAs can help you with in order to make sure our credit rating gets better before it gets worse.
Reducing Debt
Getting out of debt can be extremely challenging, especially if you don’t know how to negotiate with creditors. Serving as the middle man between you and creditors will not only save you time but is also one of the greatest assets that CPAs bring to the table.
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4 Deductions Self-Employed Professionals Should Utilize
Being self-employed can often feel like having two jobs rolled into one: not only do you have your work or service you provide, but you often have to solicit new business, do your own marketing, bookkeeping, expense tracking and so on. Although you’d likely be best served by a CPA, here are a few deductions to help maximize your tax return.
Tax Deductions
Business travel costs
Track everything when you travel for work! This includes gas, meals, lodging, airfare, train tickets, even regular maintenance on a work vehicle. Remember that any non-business activities along the route cannot be deducted as a business expense. That means if you take a detour to see your parents on the way to a business conference, you cannot deduct any expenses incurred related to your detour.
Social security taxes
You can write off half of what you pay in social security taxes. This is only applicable if you’re self-employed and thus are paying the full 15.3% tax by yourself, instead of splitting the cost with an employer.
The home office deduction
Your business may have an office or facility, but odds are if you’re self-employed you do at least some work at home. While no one really enjoys bringing their work home, the good news is that if you have a dedicated business work space in your home, you can deduct that from your tax liability. This includes part of your rent, any associated utilities (e.g., your internet service fee), or you can use the simplified method: deduct $5 for every square foot that qualifies for the deduction.
Health insurance premiums
If you’re self-employed you can deduct medical insurance premiums for yourself and your family. Further this applies whether or not you itemize your deductions, but you’re automatically disqualified for the deduction if you are eligible for employer-sponsored health insurance through another job.
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Working From Home: Taxes in the Home Office
Home Office
If you often or exclusively work from home, you have likely carved out a productive space for your work. Although there are some specific criteria you have to satisfy, you may be able to write off some of your operating expenses for that home office.
Here are a few things you should know:
Size doesn’t matter
There’s no size requirement. Your designated space can literally be a desk, or it can be an entire portion of your home. So long as the space is distinct, identifiable, and used exclusively for business.
Exclusive doesn’t mean completely exclusive
If you frequently work from the dining room table, or the couch from which you normally watch TV, you cannot claim that space for the deduction. The space you claim must be specifically used for business purposes.
Business storage and daycares have a different set of criteria
If you operate a daycare or use your home to store goods for your business, you can ignore the previous point. Storage space has to be used only for product that you intend to sell, and your home has to be the only “fixed location” of your business. So if you’re just storing some extra business equipment or stock, your home space doesn’t qualify.
Employees can also deduct home office expenses
You can only qualify for this deduction if the office exists for your employer’s convenience. An office remodel or lack of space at the usual office location would apply in this instance. However, if you’re renting out the space to your employer, you cannot claim the deduction.
If you work in multiple locations you can still claim the deduction
You can only claim the home office deduction if your home is where you do the majority of your work, or your home office is where you perform specific tasks that are a necessary function of your job. If you use a part of your home exclusively and regularly to meet with clients, customers, or patients, it does qualify for the deduction
Even if it is not your primary place of business, you can still claim the deduction. However, just because you take the occasional phone call or meeting in the space does not mean it qualifies; you have to be conducting regular in-person meetings. There’s also a partial deduction in the event that you only meet the criteria for part of the year.
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How Artists Can Benefit from a CPA
Freelance Artists
Freelancers tend to be busy in general, and freelance artists are perhaps even more busy than the average freelancer. When you’re a freelance artist, you’re simultaneously your own employee, manager, PR agency and HR representative. This means that you’re likely super busy. Because time is important to artists, organization is key and a good CPA can help you stay manage your affairs. Here’s a few specific benefits a CPA can bring to the table:
A CPA can help you make sense of your earnings and expenses: you’ve got clients, vendor fees, invoices, and supply costs to worry about. All of this is in addition to creating your art! Brutal! However, a CPA can help you put all of that in order to ensure that you claim appropriate deductions and credits, and pay the correct amount of taxes, which gives you fewer things to worry about.
Tax recommendations: you spend time performing, practicing, or creating, so you might not always be thinking about expense tracking. A good CPA can make recommendations on deductions and tax credits, which will help you know what expenses you should track for tax purposes. Doing so can help maximize your tax return, which in turn can give you more to reinvest into your art. Or use it to take some well-deserved time off.
They can free up your time so you can focus on your art: you’re busy maintaining all aspects of your business. Moreover, certain art mediums are not immediately replicable and serviceable as many hourly or salaried job tasks, meaning that artists tend to work odd, long, and inconsistent hours. Along with properly maintained records, a good CPA can help free up your time so you can focus on doing what you love.
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Four Tax Facts You Should Know Before Starting a Business
There is more to income taxes as a business owner than you might think. Many business owners do not realize that filing personal income taxes is required, which can get them into deep financial trouble. Below are a few facts which will help you start your new business.
Business Type Determines Tax Liability
Choose how you classify your business carefully as it will determine the tax burden for your new business. S corporations, for example, pay taxes at shareholder levels. There cannot be more than 100 shareholders for a single stock.
Startup Expense Deductions
Once your business is up and running, you may be able to deduct some of your startup costs. Small businesses do have expenses which can be deducted before the first day of business. Costs accumulated prior to opening can be deducted.
Estimated Payments Are Required
If you do not file all of the taxes that you owe, penalties can be placed on you. Use the previous tax year’s income, including credits and deductions, to calculate estimated tax burdens. Startups are typically tax exempt in their first year.
Self-Employment Tax Payments Are Required
When you earn money but no one takes out withholdings for Medicare and social security, you are self-employed and are responsible for paying those taxes out-of-pocket. The downside to self-employment taxes is that you pay 1.5 times what a traditionally employed person does.
In Conclusion
With a better understanding of taxes for new business owners, you should be able to start planning ahead. Using some of your personal profits to save for self-employment taxes can help take some of the stress off of you.
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Will The Family Business Estate Tax Loophole Be Closed?
Family business estates often require a team of accountants and financial advisors to sort through. During tax time, the wealthier portion of family estate business owners do whatever they can, within established legal boundaries, to reduce their tax liabilities. Some maneuvers are seen as dishonest and the Treasury plans to close in on these loopholes in the future.
Restricting Assets Loophole
Donors, or family estate executors, can transfer assets and gifts to other family members without tax liability. Estates with a value of $5.45 million for a single person or $10.9 million for married couples are taxed. Some wealthier estates are artificially reducing values of assets to reduce tax liabilities.
Placing restrictions on assets is done to justify discounting values when gifts/shares/donations are transferred. This reduces the tax liability but does not reduce the value of the entire estate.
Minority Shareholder Discount
Financial advisors for large estates can help their clients by assisting that they divide shares or sell shares of the company to ensure that they own a minority number of shares. This would reduce a stakeholder’s power in voting and lower their level of control in the business. This discount can no longer be taken. This is one loophole that has completely closed for wealthy family estates.
Closing Thoughts
It is important that your family business estate account for every dollar appropriately. It is also vital to claim the proper values of assets and belongings. An annual appraisal of assets and possessions should be completed and available for the IRS to view when questions do arise.
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Three Business Tax Tips for Home Business Owners
Running a business out of your home allows you to have access to a variety of tax advantages. It’s important to discover just what opportunities fit best with your lifestyle. Using tax write offs and deductions will help you save money on your return.
Stay Organized!
The biggest thing you can do to prepare for the next tax season is to stay organized and keep good records. This will help immensely when it comes to writing off deductibles or reporting income. After you report profit to the IRS, they may request for additional information.
Deducting Home Office Space
In order to deduct a percentage of your home space, there must be a dedicated area used exclusively for business activities; you cannot have another fixed location outside of the home where you regularly conduct business activities. Any rent, utilities, repairs, or home improvements may have a percentage written off on them depending on the space’s contribution.
Track Car Mileage
If you are using your vehicle to complete local deliveries, collect supplies, or attend conferences and meetings you may be eligible to write off your car mileage as a deductible. Keep track of the yearly miles you put on the vehicle for business adventures instead of taking the standard mileage allowance to get the full benefit of the write-off.
Conclusion
Having a business out of your home can be very advantageous to your career. Be sure to use these tax tips to your benefit during the next season. Missing out on the opportunities is comparable to throwing away money.
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Shedding Light on the New Small Business Tax Rates
Tax laws are always changing. You need to be aware of the new tax laws so you can be sure to take advantage of new tax breaks and deductions for your business. The information included in this article will elucidate some of the new tax rules coming up.
Tax Breaks Extended
Two important tax breaks for businesses have been extended. The breaks that got extended are Section 179 and bonus depreciation. Businesses will be allowed to deduct the full price of software or equipment which was purchased or leased during the year as long as it meets qualifications. The maximum deduction allowed is $500,000.
The bonus depreciation was extended through the year 2017. It allows business owners to depreciate 50 percent of the cost of new equipment that was bought in the year 2015. Businesses will be permitted to use both of these deductions simultaneously.
These are not the only things which were extended. The work opportunity tax credit, the research and development credit, the credit for local and state sales tax, and the energy production tax credit were all extended. These extensions mean that small business owners can invest more in their business with new equipment.
The Affordable Care Act
The Affordable Care Act will affect some small business owners. It will depend mainly on the number of employees you have. If you have 51 to 99 employees, you will be responsible for providing at least 70 percent of your full time employees with health insurance. You could face a hefty fine if you don’t comply. Your tax penalty would be $2000 per employee if you don’t follow this policy.
These new rules can both help and hurt your business. The extension on the tax credits could put more money in your pocket while the health care rules could result in more paperwork. Be sure to talk to your accountant to see how these new rules will affect your business.
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