Corporate America ‘in limbo’ as IRS punts on foreign tax issue

U.S. companies anxiously awaiting guidance on how hard they’ll be hit by a new foreign levy in the tax overhaul will have to stay tuned for at least another two months.

The Internal Revenue Service proposed regulations on Thursday spanning 157 pages that provide some details on which assets are subject to the tax on GILTI, or global intangible low-tax income, and how to calculate it. But one of the most pressing questions — to what extent multinational companies can use foreign tax credits and business expenses to offset the levy — remained unanswered.

“It’s a very big deal that the FTC and expense allocation issues have been left out,” said Andrew Silverman, a Bloomberg Intelligence analyst who focuses on tax policy. The regulations are “not a great answer for companies who are essentially left in limbo.”

The rules provide a starting point for how to calculate what they owe, but without the additional information companies still won’t be able to get to a level of comfort to complete tax returns and file documents with the Securities and Exchange Commission, Silverman said.

Corporations don’t want to underestimate their GILTI liability because they could be hit with a penalty if they pay too little in their quarterly tax installments to the IRS. The deadline for two portions has already passed and the next payment is due Sept. 15. Treasury officials said during a call with reporters Thursday that the additional guidance will be coming in about 60 days.

The Republican tax overhaul slashed the corporate rate to 21 percent from 35 percent, and shifted the U.S. to a system of taxing its companies on their domestic profits only. Those changes required guardrails — like the tax on GILTI — to ensure multinationals pay at least something on their future overseas profits.

The piecemeal guidance process, and the lack of understanding about the ultimate amount of tax that will be paid until all the parts are finalized, underscore the complexity of the tax law’s international provisions.

Tax advisers have been modeling the effects of the new law for their multinational clients, but because many of the new provisions are interconnected, and implementation may be governed by old tax regulations still on the books, they’re only able to estimate the amount of tax due.

That’s been a frustration for many publicly traded companies and their investors, who are anxious to understand how the new tax law affects them.

Companies are hesitant to record a tax hit for GILTI that they don’t think they should pay, so they’re waiting for the clarification in the regulations, said Brent Felten, managing director of international tax at accounting firm Crowe.

‘Taxpayer Friendly’

Still, Thursday’s regulations signal some good news could be ahead for multinationals. The rules indicate that companies can “gross up” their foreign income by the amount of foreign tax paid, a move that would result in a lower GILTI bill, said Mitch Thompson, a tax partner at Squire Patton Boggs.

“It’s taxpayer friendly,” Thompson said.

The GILTI levy effectively sets a 10.5 percent rate to apply to a company’s “excess” profits earned overseas through some of its foreign subsidiaries.

GILTI was intended to prod American technology and pharmaceutical companies into holding their valuable intellectual properties in the U.S. Currently, many hold their patents in subsidiaries in Ireland or other low-tax countries. The tax is intended to apply only in cases where a company’s cumulative overseas tax bill is below 13.125 percent, or 16.4 percent after 2025.

However, tax lawyers and accountants say quirks in the way the tax is calculated mean it will likely hit other companies, such as big banks with offshore operations, even when they already pay effective foreign tax rates above the threshold.

Bank lobbyists have urged the Treasury to come up with a fix that would lessen the pain from GILTI, saying an adjustment is needed to make the tax consistent with the intent of Republican lawmakers who wrote the legislation.

Repatriation Refunds

Pass-through entities such as partnerships and limited liability companies could fare even worse than corporations under the GILTI tax, but they won’t want to restructure their business without knowing how the foreign tax credit guidance will work, said David Shapiro, a partner at the law firm Saul Ewing Arnstein & Lehr.

That could create a rush of companies looking to reform as corporations after the regulations come out and before the end of 2018, Shapiro said.

Even after all of the GILTI questions are answered, companies will still be trying to figure out how they fare under the new international tax regime.

Treasury officials have said they plan to issue proposed regulations later this year on the other two major international provisions in the tax overhaul — a tax break encouraging companies to export U.S.-made goods, known as the foreign derived intangible income deduction, and the base-erosion and anti-abuse tax on payments corporations make to foreign subsidiaries.

The need to pay estimated taxes before receiving guidance has already caused headaches for some corporations that overpaid their repatriation taxes on profits accrued offshore since 1986. Some companies had overpaid to avoid penalties and were hoping for a refund. Instead, the IRS said in August it wouldn’t send the excess funds back and would apply them to a future installment of the repatriation tax bill.

“The more guidance you get from IRS and Treasury, the better, and the sooner you get it the better,” said Joe Calianno, a tax partner and international technical tax practice leader in BDO’s Washington office.

— With assistance from Isabel Gottlieb

Source: Bloomberg News Via:Accountingtoday.com 

Small businesses need major tax help

Despite the widespread belief that small businesses are a target for IRS audits, nearly a third of small-business owners think they overpay their taxes, according to a survey by B2B research firm Clutch of over 300 small-business owners and managers.

“If they think they’re paying too much, they’re questioning the accuracy of their tax return,” said Roger Harris, president of Padgett Business Services. “They’re somehow missing a deduction, or there are parts of the code they just don’t know about. If a business owner did their own accounting and bought a piece of equipment in October 2017, what’s the chance they knew the rules for the new 100 percent bonus depreciation?”

The small businesses in the survey listed unforeseen expenses (35 percent) as their top financial challenge, followed by the mixing of business and personal finances (23 percent) and the inability to receive payments on time (21 percent). Clerical errors in financial records, and outdated financial records, were both listed by 11 percent of respondents.

The majority of small businesses in the survey said they use the accrual method for tracking finances, although the smallest businesses, with fewer than 10 employees, were more likely to use the cash basis method.

“Actually, use of the cash method versus the accrual method has nothing to do with number of employees but with revenue,” said Harris. “In fact, the Tax Cuts and Jobs Act increased the ability to use the cash method for businesses with up to $25 million in annual revenue. Cash accounting is available to many businesses, and many small businesses prefer it because it’s simpler. They like taxable income to track as closely as possible to their checkbooks. In fact, most of our clients would be happy with a simple profit and loss financial statement: Money in minus money out equals money left, or what some of them call ‘my money.’”

“But the accrual method creates expenses that sometimes aren’t yet paid and sometimes defers costs that are already paid, and defers them into the future,” he continued. “In that case, taxable income can vary dramatically from using the cash method.”

“The cash method is easier for everyone to understand,” he said. “Money in is income, money out is expense, and what’s left is your money, which is what you pay taxes on.”

Most use a hybrid method — accrual for income because they have inventories, and cash for expenses, according to Harris.

“If I asked what method of accounting they use, most small-business owners would just stare at me,” Harris said. “But if I explained it to them and they made a pick, most would choose cash. I would be stunned if I asked a small-business owner without giving a choice, and anyone said ‘accrual.’ Most of them wouldn’t even know the term. If you go to the coffee shop in your building and ask the owner what method they use, they won’t know what you’re talking about.”

“In a classroom or to an accountant, the accrual method is favored,” said Harris. “But in the eyes of most owners, if they don’t have the money it’s not income, and if they haven’t paid money, it’s not an expense.”

Surprisingly, the survey found that more than a quarter — 27 percent — of small-business owners and managers said they do not have a separate bank account for their business. Naturally, established businesses are more likely to have separate bank accounts than start-ups. Nearly 80 percent of small-business owners of five years or more said they have separate accounts, compared to 68 percent of small-business owners of two years or less.

Source: accountingtoday.com Written by: R. Russell

What does the Supreme Court ruling on online sales tax mean for small business owners?

The Supreme Court ruled in June that states have the authority to require businesses to collect online sales tax on purchases even if the business does not have a physical presence in the state. Previously, businesses were only required to collect sales tax in states where they operate physically. Though some major online retailers like Amazon were already collecting sales tax nationwide, the decision has implications for small to midsized businesses that must adapt to remain compliant.

It’s not all bad news for business owners. While small businesses with an e-commerce presence may now be looking at a significant incremental compliance obligation, smaller brick-and-mortar operations who have always been required to collect sales tax are hailing the decision as providing long-overdue competitive equity. There are also some upsides for online retailers:

• You have some time. It takes time for states to react to such rulings and make the necessary changes to enable the collection of a new tax. While some states have been readying their processes in anticipation of the ruling, most will have work to do before enacting any major changes. In the meantime, it’s wise to get in front of this by locating the tools you need going forward.

• Some states already have enacted, or will likely enact, thresholds above which the tax will be triggered. Thus, if your activity in a particular locale is below an ordained dollar or transaction level, you may be exempt.

• The Streamlined Sales and Use Tax Agreement. Twenty-four states currently participate in this agreement, which in addition to standardizing some of the supporting tax calculation and submission protocols also provides for free sales tax compliance software for retailers under certain circumstances.Though the Supreme Court’s decision has been made, there are areas that small online retailers will still need to keep an eye on:

• Retroactivity: Some states may be tempted to look to collect these taxes not only going forward, but retroactively.

• Federal standardization: Policy makers grasp how challenging it will be to stay on top of the multitude of state and local sales tax rules. As such, the Supreme Court ruling may prompt Congress to finally enact a standardized federal policy — though this may be politically unlikely for now.

• Potential impact on general business taxes: Some states don’t levy income taxes on businesses without a brick-and-mortar location within their borders. This decision may spur these states to reconsider that stance given the opportunity for incremental revenue.

Though some effects of this ruling are unknown at this time, business owners can take steps to prepare. Assess the impact, evaluating where your main out-of-state sales come from. This will give you a sense of where you may want to focus your compliance attention.

Source, www.accountingtoday.com Written by: M. Trabold

The opportunities and challenges facing your entrepreneur clients

American entrepreneurship is on the rise. Based on a historical analysis of a subset of Paychex clients, in the first quarter of 2018, small business entrepreneurship was near its best pace since the recession. Odds are you’re seeing more entrepreneurs walk through your doors looking for financial guidance as they start and run their business, but are you aware of the current state of entrepreneurship, as well as the opportunities and barriers your clients face?

A new report by Paychex analyzes American entrepreneurship during the past decade and the state of small business today, including today’s business owners’ attitudes and perceptions of the current business environment.

Overall, the majority of business owners feel positively about the state of business as a whole. More than three quarters of small business owners (79 percent) would recommend starting a business today, and 71 percent of business owners describe today’s business environment as either better or the same compared to when they started their business. Most business owners (74 percent) cited the satisfaction of working for themselves as a reason they’d recommend starting a business today. However, the age and size of the business impacts business owners’ outlook:

• Business owners who started their company during or closely following the recession (four to nine years ago) were more likely (57 percent) to say the business environment is better today than when they started, compared to only 32 percent of those who started their companies 20 or more years ago.

• Eighty-one percent of business owners with 100 to 500 employees say the business environment is better today than when they started, compared to 46 percent of owners with one to 19 employees.

• Owners of larger businesses were also more likely to recommend starting a business today. Ninety-four percent of owners with 100 to 500 employees and 91 percent with 20 to 99 employees would recommend starting a business today compared to 78 percent of owners with one to 19 employees.

From an individual standpoint, business owners today also have a positive outlook on their future. Nearly two-thirds (64 percent) are optimistic or very optimistic about their ability to make a profit, and 58 percent are optimistic or very optimistic about their prospects for growth. Half of business owners are optimistic or very optimistic about the U.S. economy, but they face some barriers to starting and running a business too:

• Ninety percent of business owners are at least slightly concerned about rising costs and 84 percent of business owners are at least slightly concerned about taxes.

• In today’s tightening labor market, 67 percent of business owners are at least slightly concerned with finding quality employees (30 percent are very concerned).

• Additionally, approximately 25 percent of business owners are at least somewhat pessimistic about their ability to hire and raise wages.

Each business owner seeks different outcomes from their entrepreneurial endeavors. Only 11 percent of business owners say rapid growth is their top priority at this time. The majority are happy to remain comfortably profitable or grow at a moderate rate.

• Remaining “comfortably profitable” was the top choice for male owners, owners in business 10 or more years, and owners age 50 or older.

• Growing at a “manageable rate” was the top response from female business owners, owners in business nine or fewer years, and owners 18 to 34 years old.

Knowing how today’s business owners are feeling and what they’re facing can help you as you advise them in starting and growing their business. Though business owners know that rising costs and taxes are impacting their business success, your expertise can guide them to best manage and plan for the expected and unexpected barriers they face. 

Source: Accountingtoday.com, Written by: F. Fiorille

5 tax reform twists businesses need to know more about

The Treasury Department has been directed to remove two existing regulations for every new one it issues going forward. While these moves are intended to reduce the volume of regulations and to clarify the new law, tax and regulatory executives at businesses of varied sizes are still looking for clarification across many key areas, particularly when it comes to the ramifications of the Tax Cuts and Jobs Act.

While the size, entity type and geographic footprint of a business yields many company-specific questions and tax scenarios, what is known about the implementation of the new tax law today does permit the identification of some broad areas of observation and discussion. Here are several specific examples:

1. GILTI

When the Tax Cuts and Jobs Act became law, most of the discussion centered on individual and domestic business tax reform changes. However, several of the international tax provisions in this law may have a significant impact on taxpayers. A new category of income, “global intangible low-taxed income,” or GILTI, will require businesses to recognize a percentage of previously deferred foreign earnings via a minimum tax on a controlled foreign corporation’s income, offset by a 10 percent reduction roughly equal to the adjusted tax basis of the CFC’s depreciable tangible personal property. While conformity laws are expected in some states, not all states may conform to the federal GILTI provisions.

To prepare, taxpayers should analyze their existing foreign structures to ensure they have appropriate expense allocations and add GILTI implications into their tax rate forecasts and provisions. Similarly, as some of the offsets of this provision are only available to C corporations, taxpayers should examine their overall tax position to determine which alternative tax strategies could be required to mitigate the GILTI impact.

2. Section 162(m)

This section of the Tax Code prohibits publicly held corporations from deducting more than $1 million per year in compensation paid to each of certain covered employees. With an eye toward reining in performance-based compensation exceptions, the proposed revisions to this section stem from public outcry in the late 2000s over exorbitant executive bonus structures. Questions remain as to what might be grandfathered in from previous law and what might not. “There was always an exception for performance-based compensation,” said Ronnie Brown, vice president of tax at National Vision Inc., who teaches at Georgia State University’s J. Mack Robinson College of Business. “Those rules have been tightened a bit. Companies may look at their compensation structures more and make sure they look at the 162(m) regime.”

3. Transition taxes

To offset potential revenue from transitioning to a quasi-territorial tax regime, a one-time deferred income inclusion on previously deferred and untaxed income will be subject to a mandatory transition tax in the United States at either an 8 percent tax rate for illiquid assets or a 15.5 percent tax rate for earnings attributable to liquid assets measured at Nov. 2, 2017, or Dec. 31, 2017, whichever is higher. New sourcing rules also change where activities are considered taxed. The law changes the current worldwide taxation system (with some deferrals) to a participation exemption (via a dividend received deduction) with current taxation of some types of income. This tax will affect U.S. persons who own 10 percent of the vote or value of a specified foreign corporation. Therefore, this provision could impact not just U.S. corporations owning foreign subsidiaries, but also foreign private equity funds and their U.S. owners.

The relatively low rates of the transition tax are designed to facilitate the return of the estimated $2.5 trillion in accumulated foreign earnings – earnings that, under the higher tax rates of the prior tax law, were largely left tax-deferred in foreign subsidiaries. Early trends indicate that the law is achieving its desired impact. However, some companies may still not be able to bring this money back to the United States due to the working capital needs in their foreign operations, as well as withholding tax at the local level.

4. Section 163(j)

The deductibility of net business interest expense generally will be limited to 30 percent of adjusted taxable income. Moreover, there is no grandfather provision for loans made prior to the enactment of the law, so interest on these prior loans will also be subject to this new limitation. This may result in less borrowing by businesses with a corresponding turn to equity transactions, as not only will the interest deduction be limited but the deduction itself is not as valuable now that the corporate tax rate has been reduced to 21 percent. Additionally, the law does not address whether a consolidated group is treated as a single taxpayer in the calculation of this deduction, which requires further clarification.

5. Conformity laws

For companies operating across numerous states, new federal regulations present challenges if states do not conform with the federal provisions. The state income tax implications of the new legislation vary widely depending on states’ automatic or fixed conformity to the Internal Revenue Code and based on states’ appetite for amending their tax laws after the law’s enactment. Generally, however, the tax reform will have the effect of increasing most businesses’ effective state income tax rate due to the broadened federal income tax base without a corresponding reduction in the state tax rate. For example, Georgia recently enacted HB 918, which resulted in GILTI income being subject to tax despite Georgia’s historical stance of not subjecting foreign dividend income to taxation.

Shortly after taking office last January, the Trump administration set in motion a process requiring the Treasury to identify and reduce tax regulatory burdens. The Treasury has responded by proposing the removal of hundreds of burdensome or obsolete regulations. Under the requirement to remove two old regulations for every new one, the Treasury now can issue regulations to answer the many questions and provide the clarity that corporations will need as they plan for and comply with the provisions of the most significant tax legislation in the last 30 years.

Source: accountingtoday.com Author: J. Pickett

Small Business Tax Tips

Tax Tip #1: Home Office
Make sure that your office is distinct from your living area. Whether it is a room of its own or a part of a larger space, there should be a clear line between your workspace and the rest of the home
If you only have one computer, claiming it as the office computer will be difficult. No auditor will believe that it is not utilized for personal use as well. The burden of proof will be up to you, so either dedicate a computer solely to work, or omit the computer area from your office space.

Tax Tip #2: Technology Purchases
Up-and-coming businesses need to be up-to-date on their technology, and Uncle Sam does not hinder this. Under Section 179 of the tax code, equipment expenses such as computers, printers, and even company vehicles are tax-deductible, up to a certain amount. Depending on the item, you can deduct the full cost on the year of purchase, or split it between several years.
Business-related software also qualifies under section 179. So don’t be afraid to get the technology you need to perform necessary business tasks. Just be aware of the amount you can deduct under section 179 because it changes yearly.

Tax Tip #3: Travel Costs
Since travel can be necessary for business success and expansion, many of the expenses are completely tax deductible.
Feel free to take your family with you, but only the costs for you, and only those that are business-related, can be deducted.

If you’re taking clients out for a meal, those costs are 50% deductible, just make sure to write on the bill/receipt the reason for the meal.
Conference fees are deductible as long as the conference is directly useful for your business. If it’s a conference related to your industry or will help you run your business more smoothly, then it probably qualifies.

As always with finances, especially taxes, it’s important to keep your receipts and details about the reason for purchases. While doing this for every purchase may seem over-the-top, it’s easy once you get into the habit of it. It will also save you a lot of grief if you get audited, and it will help you keep peace of mind that your finances aren’t going to get your business in trouble.

Courtesy of LessAccounting

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Bookkeeping tips

Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

But when you don't have a system and some processes in place, unpleasant surprises can pop up, goals can be easily missed and important paperwork forgotten. Getting a better handle on your money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with the Internal Revenue Service.

1. Plan for major expenses.
You're less likely to miss business opportunities or have to scramble for a loan when the expenses become unavoidable.

2. Track expenses.
You otherwise might some miss tax write-offs and may lose out on others.

3. Record deposits correctly.
You may be less likely to pay taxes on money that isn't income.

4. Set aside money for paying taxes.
The IRS can levy penalties and interest for not filing quarterly tax returns on time.

5. Keep a close eye on your invoices.
Late and unpaid bills hurt your cash flow.

Some entrepreneurs believe that once they've sent out an invoice, they've taken care of billing. Not so, Every late payment is an interest-free loan and hurts your cash flow.

Courtesy of Entrepreneurs

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting Tips for Small Business

Accounting can be tedious for any business, but if your small business doesn’t keep tight books it can make your taxes a nightmare. Without a system for your business’s finances a lot of things can slip through the cracks and end up costing you money in the long run. With a clear-cut process and some simple bookkeeping tips you can get a better grip on your financial situation, and even increase your earnings. The goal is to get a simplified process created detailing your businesses finances. Having a method that combines your expenses, invoices, deposit records and tax information can make your life as a small business owner ten times easier, especially as tax season rolls around.

1. Go Paperless by using Cloud-Based Accounting
Look for packages made for small business owners because they streamline the process by providing basic templates for your business like invoices, deposit slips, and business account check printing. With the addition of cloud-based accounting systems you can access your business information from anywhere.

2. Find A Good Advisor
Having a good advisor on payroll to help you out at least once a month can become invaluable. They can teach you how to handle your books properly, answer any questions and fix any mistakes that might have been made.

3. Keep Personal and Business finances separate
Never mix the two up, it will make your accounting much more difficult to handle. It’s a lot easier to keep accurate records if your only dealing with one type of account, so stay organized.

4. Plan for Major Expenses
Set aside money for major expenses like inventory, office supplies, repairs and maintenance.

5. Set Aside Money for Taxes
If you keep track of your financial records properly you can be prepared for year-end taxes. Setting aside a little bit of money each month towards paying your small businesses taxes you wont have to cutback at the end of the year or get a loan to pay your taxes, you will already be prepared.

6. Keep and Eye on Your Invoices
Late and unpaid bills can affect your businesses credit and effect your tax payments as well. Keep your bills organized and always pay on time.

7. Keep Daily Records and Reconcile bank accounts monthly
Double check your bank accounts and daily records at least once a month. Reconcile your withdrawals and deposits in your account so that discrepancies can be spotted more easily.

8. Avoid Cash
Using cash it is hard to keep track of spending. You also lose track easily of write-offs because there is no record of purchases. By using a debit or credit card you can keep track of amount spent, where it was spent and when it was spent.

9. Set up a specific time each week to go over your books
Giving yourself at least a half an hour ever week to go over your finances and make sure everything is in order.

10. Check Up Monthly On Your Accounts Receivable.
Having a client owe you money for services, especially at the end of the year, isn’t the same as having that money in your business account. Make sure you stay on top of your accounts receivable so that you are getting all the monthly payments you are owed. Without receivables, income dwindles.
Courtesy of Kabbage
For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting 101

This assumption requires us as small business owners...

to keep all of our business transactions separate from our personal transactions.

The easiest and best way to so this is to open a business bank account.

Some people think that just keeping separate records is enough in separating business from personal. It is not. You should physically keep your money separate. Some business owners will go as far as keeping their personal and business accounts in different banks.

They said it is better for them as they have to write out a check to deposit instead of transferring between accounts in the same bank.

The main thing is not to pay for personal expenses out of that business account. If you need money from your business for personal expenses write yourself a check or transfer the money into your personal bank account.

One of the biggest justifications for keeping a separate bank account for your business is for clean and accurate bookkeeping.

If you have a separate bank account for all of your business transactions then it will be easier to match and record all of those transactions.

I have even missed recording a few expenses and caught them when I did my bank reconciliation...which by the way is 100 times easier when you have a separate account.

Come tax time, you or your accountant will be happy you maintained separate accounts too.

Also if you were ever audited...you do not want to bring in a bank record that has your personal expenses mixed in. Auditors tend to frown upon that.

Courtesy of BasicAccountingHelp

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

When should I hire an Accountant?

There are good reasons for hiring an accountant at different stages of your company's growth. From a business plan to company formation, loan application to government audit, an accountant can make life easier for you at each step.

That doesn't mean you always need to employ an accountant full-time or hire one on a retainer basis. Sometimes just a couple of hours of their time will be enough.

Like all small business owners who are looking to save money, you may think you can’t afford an accountant. But look at how long it would take you to do certain tasks (such as taxes), and ask yourself, is that a good use of your time?

If you involve an accountant while you're writing your business plan, they will be able to use accounting software to add financial projections and other reports to it. This will help you create a business plan that's realistic, professional and more likely to succeed.

Not all businesses have the same legal structure – there are different types that are determined by a number of factors. Some might be called limited companies, limited liability partnerships or corporations, others could be sole traders or proprietors. These vary from one country to another.
You should carefully consider each type before deciding which one best suits you.

Small business accounting can quickly become complex if you do it on your own. If you feel you're losing control of who owes you money and how much, an accountant can help you get back on track.

You may also want to measure key business metrics, such as the ratio of salaries and other employee payments to total revenue. An accountant can help here by managing your payroll and producing graphs so you can see how the ratio changes over time.

As a small business owner, no doubt one of the things you like best is that you have control. You can set your own working hours, craft your business strategy, regulate your workload (at least to some extent) and determine your own finances. And being the master of all of these things is a wonderful and liberating feeling.

But sometimes it can stop you from delegating. Business owners can feel overworked, partly due to a reluctance to allow other people to help out. You might feel that no one can possibly know your business as well as you do, therefore nobody can handle any part of your business as well as you can.

Inability to delegate can mean you’re left feeling overworked and stressed. At some point you will have to let go, and learn to trust other people to handle some parts of your business so that you can look after the rest.

Courtesy of Xero

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting Tips for Small Business

There’s no shortage of details to consider when you’re a small business owner. Getting the back-office basics of accounting in order early on – tracking revenues, expenses and costs – will keep you out of the weeds of paperwork and cash flow snafus, and onto the important work of growing your business.

To keep moving toward your long-term goals and improve profits, get your small business accounting in order with these essential tips:
Separate Business and Personal Expenses
Track Every Expense
Accurately Record Deposits
Understand When It Pays to Pay
Dedicate Time to Update Your Books
Keep Tabs on Labor Costs
Expect Major Expenses
Maintain Inventory Records
Follow Up on Invoices and Receivables

Bookkeeping is a necessary chore of all businesses, helping you manage your operations and prevent an audit by giving the IRS what they need.

Courtesy of FundEra

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Do I need an Accountant?

As a small-business owner, up until this point, you may have managed your money successfully. Software programs like QuickBooks make it possible, even if you don’t have much financial knowledge or experience.

However, as your business — and revenue — grow, managing your financials may become a task you don’t have the time or knowledge to manage. Specifically, when it comes avoiding legal and compliance issues.

An accountant can talk to you in straight terms, weed through terminology, and teach you how to manage your own finances. In addition, you don’t want to miss key information or make mistakes early that could cost you down the road. An accountant can start you and your business off on the right track.

An accountant can advise you early on so that you can comply with all tax regulations. More importantly, an accountant can inform you of tax credits and deductions you can take, and predict the taxes you’ll owe.

Managing your books is preventing you from accomplishing tasks that could directly grow your business (for example, acquiring new clients or moving into new markets) or managing your business effectively (such as dealing with performance issues or troubleshooting service problems). Hire an accountant so you can focus on winning more business, innovating, building your team, and other development activities.

Accountants can create detailed, accurate reports that keep your investors happy and allow you to focus on tasks like growing the business. Additionally, if you are looking for a loan or funding from an investor, you will need to present a polished business plan. An accountant can help you flesh out the financial portion of your plan

If you want to grow through an acquisition, sell off parts of the business, or sell the entire business, an accountant can walk you through the process and determine how to structure the transaction so that you aren’t hit with overwhelming taxes.

Courtesy of QuickBooks

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Basic Bookkeeping tips

For many small businesses, the most common bookkeeping errors are also the easiest to fix. Use these six tips to help keep your business on sound financial footing.

1. Use the right accounting system. Most businesses use either cash-based or accrual-based accounting. If you use the cash method, you count income when you receive it and expenses when you pay them. Under the accrual method, you count income and expenses when they happen, not when you actually receive or pay them.

2. Maintain daily records. This is one of the most basic rules: If you don't keep accurate daily records, you don't have an accurate way to track the financial condition of your business. Different people use different record-keeping systems; what matters is that you have one and use it every day. Once you have a good system set up, accurate record keeping will take just a few minutes a day.

3. Handle and review checks carefully. It's easy to be on autopilot when you're writing checks and tossing canceled ones into a filing cabinet without reviewing them. Remember: Those checks are as good as cash. And if something goes wrong, you — not the bank — will be on the hook. Take the same care with checks as you would with cash. Sign checks using a clear, distinctive signature that won't invite forgery.

4. Get a bank statement with a month-end cutoff. This is another basic tip that can reap big rewards. Synchronizing your bank statement with other monthly records will make it much easier to reconcile your statement and track expenses.

5. Leave an audit trail. Your record keeping will be much more effective if you have a system that allows you to quickly and easily retrace your company's financial activities. This means keeping your invoices and checks in numeric order, not skipping check or invoice numbers, and keeping separate bank accounts for your business and personal funds.

6. Use a computer. Computer bookkeeping software is absolutely essential for all but the smallest businesses. These applications make it easy to track income and expenses, prepare tax documents, summarize your company's financial activities and back up records for safekeeping.

Courtesy of Score

12 Tax tips for Small Business

Small-business tax rule No. 1: Don't mess with the IRS.

1. Home office
The deduction, however, isn't limited to a full room. Your home office can be part of a room. Just how much of the space is deductible? Measure your work area and divide by the square footage of your home. That percentage is the fraction of your home-related business expenses -- rent, mortgage, insurance, electricity, etc. -- that you can claim.

2. Office supplies
Even if you don't take the home office deduction, you can deduct the business supplies you buy.

3. Furniture
When your office supplies are more than just pens and paper, you have another tax-cutting opportunity.

Office-furniture acquisitions provide a couple of choices. Deduct 100% of the cost in the year of the purchase or deduct a portion of the expense over 7 years, also known as depreciation.

4. Other equipment
Items such as computers, copiers, fax machines and scanners also are tax-deductible.

5. Software and subscriptions
The increased Section 179 provides another tax break in this area of business expenses. Previously, a company had to depreciate the cost of computer software over 3 years. Now, off-the-shelf software a business buys can be fully expensed in the year purchased.

6. Mileage
If you drive for business, the IRS wants to give you some of your money back. But Uncle Sam loves documentation, so keep a notebook in your vehicle to record the date, mileage, tolls, parking costs and the purpose of your trip.

7. Travel, meals, entertainment and gifts
Good news, small-business travelers. You might as well stay in a nice hotel, because the entire cost is tax-deductible. Likewise, the cost of travel -- air, rail or auto -- is 100% deductible, as are costs associated with life on the road (dry cleaning, rental cars and tipping the bellboy).

The only exception is dining out. You can deduct only 50% of your meals while traveling.

8. Insurance premiums
Self-employed and paying your own health insurance premiums? These costs are 100% deductible.

This break primarily benefits proprietorships, but there are limits. The deduction can't be more than your business' net profit. And it's not allowed if you were eligible for other health care coverage, including that offered by your employed spouse's medical plan.

9. Retirement contributions
Are you self-employed and saving for your own retirement with a SEP IRA or Keogh? Don't forget to deduct your contribution on your personal income tax return.

10. Social Security
The bad news: If you're self-employed or starting a small business, you have to pay double the Social Security contributions you would as an employee. That's because federal law requires the employer pay half and the employee pay half. Self-employed workers are both, meaning the total will equal 15.3% of your net profits.

11. Telephone charges
You can deduct the cost of the business calls that you make for business from home. When your bill comes in, circle the business-related calls, total them up and keep a copy. At the end of the year, tally your 12 bills and deduct 100%.

12. Child labor
Depending upon how much you paid them, they might be able to avoid income taxes. Plus, there is no Social Security tax when you hire your child who is 17 or younger and you can deduct the salary as a business expense. This break is available, however, only if you operate as a sole proprietor or as a partnership in which you and your spouse are the only partners. If your business runs as a corporation, then it, not you, is considered the employer and the corporation is not relieved of the tax liabilities.
Courtesy of BankRite

6 Smart Budgeting Tips for Small Business

If you run a small business, it's likely that you're operating on a relatively limited budget. Whether you bootstrapped your business or are trying to pay back loans you took out to cover your startup costs, it's in your best interest to conserve money wherever you can.

Without a thorough budget plan, however, it can be difficult to track and manage your finances. This is especially true for any unexpected business expenses that may come up, as they often do.

If you want to keep your business operating in the black, you'll need to account for both fixed and unplanned costs, and then create — and stick to — a solid budget.

Define and understand your risks
Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Paul Cho, managing director of Headway Capital, said that small business owners need to consider their long- and short-term risks to accurately plan for their financial future.

Overestimate your expenses
If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can't predict when something is going to go over budget.
For this reason, budgeting slightly above your anticipated line-item costs, no matter what, so that if you do go over, you won't be fully unprepared.

Pay attention to your sales cycle
Many businesses go through busy and slow periods over the course of the year. If your company has an "off-season," you'll need to account for your expenses during that time. Use your slower periods to think of ways to plan ahead for your next sales boom.

Plan for large purchases carefully and early
Some large business expenses occur when you least expect them — a piece of equipment breaks and needs to be replaced or your delivery van needs a costly repair, for instance. However, planned expenses like store renovations or a new software system should be carefully timed and budgeted to avoid a huge financial burden on your business.

Remember that time is money, too
One of the biggest mistakes small businesses make is forgetting to incorporate their time into a budget plan. Business owners should keep in mind that time is money, especially when working with people who are paid for their time.

Constantly revisit your budget
Your budget will never be static or consistent — it will change and evolve along with your business, and you'll need to keep adjusting it based on your growth and profit patterns

Courtesy of BusinessNewsDaily

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

5 Easy Tax Tips

Don’t Forget the Basics
When preparing your taxes, nothing is more important than keeping good records. Without accurate records of profit and loss, business expenses and eligible tax deductions, you can’t estimate your tax liability, your accountant can’t give precise and professional advice and in the event of an audit, you can’t prove your expenses.

Don’t Mix Business With Pleasure; At Least Not On Your Tax Return
One aspect of keeping good records for your business is to be sure to keep business expenses separate from your personal expenses.

Ask for Help
Between the tax code, tax regulations and IRS rulings, the federal tax rules span 73,954 pages. America’s tax system is way too complicated for most people to understand, especially if they are small business owners who have to deal with all of the extra complexities and regulatory obligations. So get an accountant to help do your taxes.

 Take Advantage of Recent Legislation
Every year there are a variety of changes to federal legislation that might affect your business and your tax return.

Avoid Common Audit Traps
Going through an IRS audit is never fun for anyone, so it’s best to avoid putting yourself in that position in the first place. With careful planning and attention to detail, you can avoid some of the most common IRS audit traps.

So, in sum: keep your files in order, stay up-to-date, and consult a professional tax adviser to avoid playing fast and loose with the federal government’s rules and regulations.

Courtesy of Kabbage

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Bookkeepers and accountants are not the same

Accountants and bookkeepers have different jobs and responsibilities.

An accountant’s main focus is:

• the preparation and lodgment of statutory returns
• advising on legal entity structures
• giving general business and financial advice.

Accountants are usually members of a statutory association. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants), CAs (Chartered Accountants) or other titles, depending on the country they're working in.

Bookkeepers can manage lots of different responsibilities within a small business. But the main focus is the organization, recording and reporting of financial transactions as part of the operational life of a small business. In more recent times, some bookkeepers have extended their range of duties to include:

• training clients to use accounting software
• implementation of document management and inventory control processes to create efficiencies within the business
• implementation of POS (point of sale) systems that capture the daily transactions in a retail environment.
• Develop, implement maintain and review internal business processes.
• 
  
• Keeping track of daily transactions
• Sending out invoices and managing the accounts receivable ledger
• Handling the accounts payable ledger
• Keeping an eye on cashflow
• Preparing the books for the accountant

It's the bookkeeper who does the day-to-day work so that the accountant can concentrate on strategic financial operations.

Courtesy of Xero

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Before you hire an accountant...

Every dollar counts for business owners, so if you don't know where you stand on a monthly basis, you may not be around at the end of the year. And while using do-it-yourself accounting software can help monitor costs, the benefits of hiring good accountants extend far beyond crunching numbers.

Before you hire one though, make sure you understand the four basic areas of expertise in a general accounting practice:

Business advisory services. Since an accountant should be knowledgeable about your business environment, your tax situation and your financial statements, it makes sense to ask them to pull all the pieces together and help you come up with a business plan and personal financial plan.

Accounting and record-keeping. These are perhaps the most basic of accounting disciplines. While it makes sense for many business owners to manage their day-to-day records, an accountant can help set up bookkeeping and accounting systems and show you how to use them. A good system allows you to evaluate profitability and modify prices.

Tax advice. Accountants that provide assistance with tax-related issues usually can do so in two areas: tax compliance and tax planning.

Auditing. These services are most commonly required by banks as a condition of a loan. There are many levels of auditing, ranging from simply preparing financial statements to an actual audit.

The best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague. You can also check in with the Society of Certified Public Accountants in your state, which can make a referral.

Courtesy of Entrepreneur

For more information contact Neikrik, Mahoney and Smith at 502-896-2999

Accounting tips for Small Business

Keep it separate.
By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place.
Call in a pro.
An accountant will almost always find more deductions and keep you penalty-free.
Pencil it in.
Set aside about 15 minutes every week to organize your finances, and don’t let other things take priority during this time.  You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches.
Consider your people.
Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime and any other costs associated with labor. By tracking your spending on labor, perks and benefits, you may find you have more money to incentivize your employees — or that you’re outspending your budget.
Don’t forget to get paid.
If you’re not keeping proper records that you can make sense of at a glance, it could be months before you realize you have outstanding invoices. You could be collecting payments late, or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.

Courtesy of Forbes

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting tips for New Small Business

Keep it simple starting out. The simplest form of entity for running your first business is called a sole proprietorship. This form of ownership requires NO special communication or filings to the Internal Revenue Service until you start paying employees.

As a sole proprietor you are the owner/entity which might require only to acquire an occupational license if your county or municipality mandates one. As the owner, you are also liable to remit all state or city tax collections on retail or wholesale sales your business collects. Service businesses and most cross state sales are exempt from state tax collections.

If you are concerned about personal liability as a sole proprietorship then do the cheapest and simplest thing which is to buy a personal liability umbrella policy. The best way to avoid liability is to learn your trade well and keep accurate records.

Over 90% of small businesses fail or change ownership within the first five years. Plan your business to thrive but if it fails under a sole proprietor you simply stop doing business. No communication or special forms with the IRS, no additional taxes to get your investment returned and no high accounting fees to close out your entity.

Concentrate on building your business not communicating with the IRS. As a sole proprietor, the IRS will not even know you exist until after you file your first personal income tax return. This return will include a Schedule C which communicates all of the sales and expenses you recorded.

Courtesy of LessAccounting

For more information contact Neikirk, Mahoney and Smith at 502-896-2999