Simplybookkeep-blog

Jumpstart Funding Sources For New Business

2012-05-07T15:05:48Z

In April this year, President Obama signed into law the Jumpstart Our Business Startups Act (aka the “JOBS Act”), which includes a number of provisions aimed at easing access to capital for entrepreneurs with the goal of ultimately creating new jobs.

Crowdfunding from Non-Accredited Investors

The JOBS Act eases restrictions on equity-based crowdfunding to allow investments by all investors, not just accredited investors. Any non-credited investor can invest up to the lesser of 10 percent of annual income or $10,000. Crowdfunding investments will still need to file with the Securities and Exchange Commission (SEC), and are restricted to raising $1 million annually, or $2 million if they have filed audited financial statements.

Crowdfunded companies will need to provide the SEC with names of directors, officers and any shareholder with more than 20 percent of the company’s stock, as well as a business description and the following financial information:

If raising less than $100,000, then financial statements must be certified by a company principle

If raising between $100,000 and $500,000, then financial statements must be certified by a CPA

If raising $500,000 or more, then financial statements must be audited by a CPA

More Growth Allowed Prior to SEC Registration

The JOBS Act raises the Regulation A threshold from $5 million to $50 million in a 12-month period before having to register with the SEC. This will likely be of great use to angel-funded ventures.

The JOBS Act also expands the limits currently set for registration with the SEC. Currently; a company must register once it reaches 500 investors and total assets of $10 million. The new law increases those limits to 2,000 investors or 500 non-accredited investors and $10 million in total assets. Companies will have 120 days of the first fiscal year in which they exceed these caps to register. There is no specific deadline for implementation of this provision.

Easier Path to Going Public

Effective immediately, the JOBS Act adds an SEC stock issuer category called “emerging growth company.” An emerging growth company is defined as having less than $1 billion in gross revenues in its previous fiscal year and less than $700 million in publicly traded shares after an IPO. These companies will receive a five-year exemption from some SOX 404(b) requirements, such as hiring outside auditors. If you have filed for an IPO since December 8, 2011, you may retroactively apply for “emerging growth company” status.

Greater Ability to Attract Accredited Investors

The Act removes the SEC ban on advertising Regulation D 506 stock offerings to attract accredited investors to a non-public offering.

These new provisions are likely to drastically shift reporting compliance requirements while opening more sources of funding for entrepreneurs. If you have any questions as to what opportunities may exist for you and your business under the JOBS Act, contact your Simply-Bookkeeping consultant.

New Tax Year Tips For Small Business's

2012-04-29T22:04:58Z

Congratulations, you made it through the tax season content with the results of your business income tax return. However, just because April 17 is in the rear-view mirror, that does not mean you should stop thinking about taxes.

It is time to consider the current year and your financial situation with an eye to your 2012 income tax liability.

Here are just a few tips to help you get and stay organized:

Update your books. Business owners need to keep a accurate set of books. If you use accounting software, make sure to post transactions daily so you can closely monitor your progress.

It’s easy to maintain an accurate checking account balance by paying bills through your accounting software, entering all deposit information on a regular basis and reconciling your bank accounts. It also makes it easier to check your profit or loss for the year, compare figures to previous years, and keep an eye on cash flow. In addition, if you need to provide a current profit and loss to a lender or someone else, it will be immediately available.

Midyear review of books and tax planning. By June or July, you should be considering a tax planning session with your tax adviser. At the meeting, you should provide a profit and loss and balance sheet, discuss your business plans for the year and comment on any business trends you are noticing that will affect your tax liability for 2012. Your tax advisor should be able to work with you to find some creative ways to minimize your tax bill.

Fund a retirement plan. If you do not have one in place already, consider opening a retirement plan not only to defer income taxes, but to provide for your future. Receiving only Social Security benefits is not a viable retirement savings plan. Unless the government acts, the Social Security program is on a course to bankruptcy.

Equipment and other capital purchases. These transactions are normally depreciated over the useful life of the asset purchased. However, Section 179 deduction in which the taxpayer is allowed to write off the entire purchase price and bonus depreciation are available to help a business owner minimize his tax liability.

Adjust estimated tax payments. Perhaps when you filed your 2011 tax return you were left with a large tax liability or a large refund. Either way, you need to take a close look at how you are calculating your estimated tax payments. Remember that estimates are just that: estimates. Therefore, as the year progresses, you need to keep an eye on your bottom line and adjust your estimates accordingly. There is nothing worse than overpaying when you could better use the funds for cash flow to keep your business alive. Well, maybe there is something worse: underpaying and ending up with a huge liability that you had not planned for.

Employee benefits. Employees are the backbone of a well-run business, and when a business owner adequately rewards their employees, they get loyalty and hard work in return. Not only that, the employer can enjoy a nice tax savings as well. When you add benefits like health insurance, group term life insurance, childcare subsidies, and other pre-tax benefits to an employee’s pay, you save money because you are not required to pay the employer’s share of payroll taxes on this form of pay. So rather than just giving a raise to an employee, provide her with a fringe benefit that she will find useful.

Follow these simple tips and work with your Bookkeeping and Finance team and you'll have a much smoother time during the next tax season.

Owe Lots of Taxes? Prepare to Give Up Your Passport

2012-04-09T17:04:27Z

A new bill making its way through Congress could allow the federal government to prevent Americans who owe back taxes from leaving the country. The provision is part of Senate Bill 1813, which was introduced by Senator Barbara Boxer (D-CA) in November and passed by the Senate on March 14 “to reauthorize Federal-aid highway and highway safety construction programs, and for other purposes.”

Those “other purposes” have come to include a little-known amendment recently introduced by Senate Majority Leader Harry Reid that would allow the State Department to revoke, deny or limit passports for anyone the IRS certifies as having “a seriously delinquent tax debt in an amount in excess of $50,000.”

$1 Billion Awaits People Who Haven’t Filed 2008 Taxes

2012-02-27T14:55:27Z

Tax refunds amounting to over $1 billion are awaiting an estimated 1 million people who still have not filed a federal income tax return for 2008.

To collect, taxpayers and preparers must file a return with the Internal Revenue Service no later than Tuesday, April 17. The IRS estimated that half of the potential tax refunds are for more than $600.

The law requires that 2007 return be properly addressed, mailed and postmarked by April 17. There is no penalty for filing a late return qualifying for a refund.

The IRS also noted that taxpayers seeking a previously unclaimed 2008 refund may still have their refunds held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, or they may be used to offset unpaid child support or past-due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008, the IRS noted. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit.

In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children, $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and $12,880 ($15,880 if married filing jointly) for those with no qualifying children. For more information, contact the IRS or your tax management firm/bookkeeper.

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2008, 2009 or 2010 should request copies from their employer, bank or other payer.

Do I need to file Form 8938 with my Taxes, “Statement of Specified Foreign Financial Assets”?

2012-01-31T21:44:55Z

The IRS has just updated their directive regarding the declairing of foreign financial assets for individual taxpayers both here in the US and US Expats abroard. Here is a summary of what they are saying.

Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will now need to report information about those assets on the new Form 8938, which must be attached to their annual income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad.

The Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010. For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this during this tax filing season and remember it is important to realize there is up to $10,000 civil penalty for not filing the form 9838 as well as possible criminal penalties.

So does it mean you? Here is the guide:

You must file Form 8938 if:

1. You are a specified individual.

A specified individual is:

A U.S. citizen
A resident alien of the United States for any part of the tax year
A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return
A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico

AND

2. You have an interest in specified foreign financial assets required to be reported.

A specified foreign financial asset is:

Any financial account maintained by a foreign financial institution, except as indicated above
Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
- Stock or securities issued by someone other than a U.S. person
- Any interest in a foreign entity, and any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.

AND

3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:

Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Taxpayers living abroad. You are a taxpayer living abroad if:
- You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or

You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.

Reporting specified foreign financial assets on other forms filed with the IRS.

If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938.

If you are a taxpayer living abroad you must file if:

You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or

You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets.

Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you.

Well if that all sounds rather confusing then do not worry, contact your retained tax advisor or call us here at Simply-Bookkeeping +1832.426.3845 and we will review your situation and make recommendation as to the best course of action.

If you have filed your taxes already but failed to submit the Form 8938 if required, then please seek Council

The Top 12 Tax Return Preparation Errors

2012-01-31T00:00:39Z

We found these sage pointers by Ed Mendlowitz, CPA from Withum CPAs in New Brunswick, N.J.

Take heed if you intend to use popup tax return stores that appear just for the season in all manner of places and ensure they dont make these simple mistakes that can cost you lots.

Over the years Ed Mendlowitz, has compiled this handy list of the most frequently found errors in tax return preparation:

1. Number transposition and spelling errors. This includes income and deduction amounts and client Social Security numbers, addresses and zip codes. Spelling errors should also be avoided – they indicate a lack of attention to what you are doing.

2. Unreported 1099 income. Clients frequently leave out 1099s, but the preparer should make sure all 1099 items from last year are accounted for. Missing 1099s that were not final
for last year should be accounted for.

3. Tax payments. Entering incorrect and unpaid amounts can be avoided by requiring the client to provide “proof” of the payments. Entering “incorrect” amounts provided by the client
is a major cause of tax notices.

4. Keeping review notes after the return is completed. This can create liability issues if there is ever a controversy over the return. Review notes usually deal with errors and
omissions and the type and quantity of them can indicate a lack of training, proper
procedures, adherence to processes or care. Retaining these notes cannot ever help you.

5. Not correcting reason for tax notices for prior year on this year’s return. This is a no
brainer, but for many preparers there is a disconnect between a notice for last year’s return
and the preparing of this year’s return.

6. Not questioning numbers that stretch the imagination. My imagination is likely to be
different from yours, but a client with high debt indicated by mortgage and home equity loan
interest usually won’t be making cash charitable contributions equal to 8 percent of their
gross income. Likewise for maximum allowable IRA contributions. Explain the requirements
for substantiating these deductions and ask client if they have it.

7. Not following up enough with clients to get missing information. This could create last minute rushes and unhappy clients, even though it was because of client’s lack of response.

8. Not specifically asking clients if they have, can sign or control a foreign bank account.

9. Not telling client about items that aren’t on return. Items such as traditional and Roth
IRAs, SEPs, making charitable contributions with appreciated stock, claiming a grown child
with minimal income who lives with client as a dependent, or signing up for an employer’s
401k plan and/or flexible spending account, or partial exercising of ISOs to avoid AMT.

10. High mortgage interest deductions. Excessive amounts (usually over $50,000) are a red flag for the IRS. Make sure the interest is not from excessive mortgages, that the funds were used for proper purposes or that the interest tracking rules have been complied with and if mortgage proceeds were used for investment purposes, it is properly reflected on the return.

11. Alternative minimum tax. Watch for unapplied AMT credits and AMT NOLs, and state tax refunds reported as income even though not deducted in prior year because of AMT.

12. Not calling a client to relay unexpected (and especially bad) final results.

We know it is easy to walk into the local high street preparer or get it all done with your groceries shopping and perhaps if your just filing a 1040EZ then this is a good deal as its generally free. However, once it comes too married with children or taxpayers with small business interests or complex investments then its best to seek the knowledge and advice of firms that really understand tax and how to make sure you are in the best position for the maximum deductions and refunds you are entitled too.

For professional tax advice seek out your local CPA firm or the tax team at Simply-Bookkeeping can help.

Reducing Business Financial Management Fee's By a Tidy Chart of Accounts

2012-01-25T19:21:49Z

So many companies fail to set up their charts of accounts correctly in QuickBooks. All too often as a professional bookkeeping and business financial management firm we observe charts of accounts resembling a collage of accounts in unfathomable format without any logical order, containing duplicate if not triplicate accounts, inconsistent protocols, and even inappropriate, if not undecipherable, names. When the outside finance professional receives this mess at tax time, the trial balance necessitates countless hours of reclassifications and groupings to connect and coordinate the amounts with the classifications required on tax returns and financial statements. At an average public accounting fee of $150 per hour, clients bear the costs of needless expensive clean ups, often tacking on an additional $500 to $600 per year to their annual financial management bills

There is no excuse for not having a chart of accounts set up in a format compatible with and reported on one’s tax return as well as one’s financial statement. Once set up, a simple click in QuickBooks prints a readable and well-organized financial report for internal management, bankers, other creditors, bonding companies, shareholders, et al. In addition, with some mapping to a compatible tax software program, the client’s trial balance amounts can be exported to the company’s tax return by the tax preparer with another click of the mouse.

And so, in order to minimize costs associated with the preparation of tax returns and those interim and year-end financial reports by an outside accountant, businesses would be well advised to adopt account names, account groupings, and an overall format predicated upon their requisite tax returns. This format need not be inconsistent with that used for internal and external financial reporting, since subaccounts would provide any necessary detail required by management and interested outside parties; while a simple click under report modification in QuickBooks re-arranges the expense accounts in alphabetical order, often the desired presentation for banks.

Setting up a robust and ordered chart of accounts is not an overwhelming task in QuickBooks. Through the availability of wizards and industry specific templates Accounts easily can be created, edited, and merged with a matter of clicks. If you need a starting point, grab your tax return or financial statement compiled by your outside finance professional, and enter the accounts found therein, decomposing summary accounts into subaccounts in QuickBooks. In addition, always remember to backup your company’s QuickBooks’ file before merging two accounts in the event you wish to reverse the process. By creating a more organized and efficient chart of accounts, you will not only save on financial management fees but you will improve your financial reporting in-house as well.

If your still not sure or have a Tax or Bookkeeping question? Please feel free to submit it via the contact us form on our website www.Simply-Bookkeeping.com or call us at +1 832.426.3845.

e-File is open for business

2012-01-18T16:16:48Z

The Internal Revenue Service opened the 2012 electronic tax return filing season today (17 Jan 2012) with a reminder to taxpayers that e-file remains the best way to get fast refunds and ensure accurate tax returns.

With most people receiving a refund, the fastest way to get a refund is by e-filing and using direct deposit to their bank account. Taxpayers can get their money automatically in as few as 10 days in most cases. In 2011, more than 79 million refunds were electronically deposited into taxpayers’ accounts, saving them a trip to the bank

Also good point to note is that taxpayers should also only use paid preparers who must sign the returns they prepare and enter their Preparer Tax Identification Numbers (PTINs). Preparers are required to sign the returns they prepare and include their PTINs. Although paid preparers sign returns, taxpayers are legally responsible for the accuracy of every item on their return. Preparers are also required to give taxpayers a copy of their returns.

Cashflow is King For The Small Business

2012-01-17T14:29:16Z

A company needs cash to stay in business. A company needs cash to grow. A company needs cash to compete. A company can look good on paper, and yet not have enough cash to make it through the next month. Hence, the importance of balancing cash flow.

Remember, cash flow is the money your company has available so it can pay salaries, rent, expenses, payables and equipment. When you create a new invoice for a product or a service, it shows up in the books as an asset. However, the money isn't available yet. You can't pay for anything until the customer pays the accounts receivable.

These activities affect cash flow:

Customers slow to pay invoice.
Not enough or slow sales.
Standard expenses, such as payroll, rent and phone service.
Unexpected expenses, such as building repairs and replacing broken expensive equipment.
Charging too much or too little for products and services.
Failure to consider financing.

Simple example on how timing affects cash flow: a customer that pays you in 45 days affects your ability to pay your credit card bill that's due every 30 days. Since the customer is over two weeks late, you may be stuck paying a fee for missing the payment due date.

You can do many things to manage your cash flow, such as changing your the bill cycle for your credit card payment so you can pay at a different time of the month and consult with your bookeeping team.

The following five basic laws set the tone for better cash flow management.

cashflow

Tax Reporting for Merchant Card & Third-Party Payments

2012-01-16T16:23:52Z

Just as you thought it was safe to come out of the coffee shop and get your business taxes done, there is a new form from the IRS out this year and one might be landing in your mailbox soon. The federal form 1099-K, Merchant Card and Third Party Network Payments, will debuts this year: forms 1099-K are due to merchants by January 31, 2012. Electronically filed 1099-Ks are due to the IRS April 2, 2012 (normally March 31), while paper 1099-Ks are due February 28, 2012.

So what is the new form 1099-K? It looks like this.

Here’s how it will work: for certain types of payments for goods and services paid by credit card or third party merchants will be reported to the IRS via the new form 1099-K. A reportable payment transaction is a transaction in which a payment card (such as a credit card or gift card) is accepted as payment or any transaction that is completed through a third party payment network like PayPal. It does not include ATM withdrawals, cash advances against a credit card, a check issued in connection with a payment card, or any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the card.

In everyday talk, this means that taxpayers who have a credit card merchant account, PayPal account or similar account and otherwise meet the criteria will receive form 1099-K from their service provider. That includes professionals like lawyers and architects who accept online or credit card payments for services, freelancer workers compensated via PayPal and etsy sellers, affiliates, eBay merchants and other small businesses who accept credit cards, debit card or PayPal as payment for their goods.

But not every dollar will count. Reporting is only required when gross payments to an individual payee exceed $20,000 for the year and when there are more than 200 transactions with the participating payee. So the occasional sale of a decorative cushion cover over the internet is not likely to merit the issuance of a 1099-K. However, a successful online store should expect to get one.