Whether you’re an independent personal trainer, manage a team, own a studio or a franchise, cash is king! Let’s face it, if clients or members aren’t coming in the door, your doors wouldn’t be open. We love the fitness industry because we’re fitness nuts ourselves. On our days off you can find us in the gym or outside hiking or cycling. So naturally thought we would pair one of our passions with another here at iAccounting Solutions; help businesses plan and better manage their taxes and finances.

Income & Expenses

This may be a no brainer but we’ve met so many business owners that don’t do track their income and expenses. Here’s a little test: Can you tell me, within a few mouse clicks, what your net income was last month? If not, then you may want to consider upping your “tracking game” and here’s why.

Tracking your income and expenses is a major part of your cash in’s and out’s. Knowing what expenses are higher than normal, or if your revenue is on track, or not, can mean you’re working for nothing! You also get what I call “the magic number”, or Net Income. Net Income tells you how much profit your business is making and is a gauge for knowing how much tax you’re going to pay. For example, you “think” you’re making money because you have cash in the bank, but your Net Income is less than you think. Conversely, you may think you’re not going to pay tax on much at all but your Net Income could give you a higher bill.

Additionally, using software connected to your bank can make this process of tracking much easier. And if it’s easy, you’re more likely to do it! Revenue is not the only thing to be aware of. Expenses play a large role in whether or not your business is profitable. Having a report where you can look at all the revenue and expenses with a critical eye can be invaluable when you’re figuring out if you’re meeting your goals. This should be your first step in managing your cash flow.

Lastly, keep in mind that any loan payments do NOT affect Net Income. Instead, those payments are tracked on a different report called the Balance Sheet. More on loans later.

Profit Margins

If you’re tracking income and expenses then you can figure a very important thing: how hard you’re working for your money! Looking at your net income and cost of sales as a percentage are referred to as your “profit margins”. This is good measurement of how efficient your business is using its resources or charging for products and services. For example, a Cafe may have a 9% profit margin, which is really good for the industry. However, if you run a personal training business that number should be closer to 15%-20%. If you’re lower than what you should be then that means something isn’t right. It may mean you’re not charging enough, or it may mean you’re expenses in proportion to your income is too high. But if you know the number then you can start analyzing and drilling into the problem areas.

If you don’t have one, you should map out a “Profitability Formula” for your business.

If you don’t have one, you should map out a “Profitability Formula” for your business. That sounds complex but it’s really not. All it is is planning how much you’re going to charge vs. your costs to make sure your business is going to turn a profit.

Liabilities

Keeping your debts under control and knowing how much you owe is paramount to keep your business thriving. Not only cash flow wise but mentally. If you feel like you’re on a sinking ship and there’s no way out then you’re not going to be able to manage your cash effectively to “dig your self out”. One of the best ways that I’ve advised clients to get themselves out of debt it to do what I call “Skim the gross”. Skim the Gross means that you’re choosing one debt to focus on and you’re taking a certain percentage from your Gross Revenue and paying it towards your debt. You do this as soon as it enters your bank account. The idea is that if you take it off the top that you won’t miss it. It’s kind of like taxes being taken out of your paycheck, you don’t see them so you never miss them!

One of the best ways that I’ve advised clients to use to get themselves out of debt it to do what I call “Skim the gross”

Staff/Labor Costs

Perhaps one of the largest expenses we have as businesses is your Labor costs. It’s a no brainer that labor should always produce more than they require in cash but how do you measure and know if you’re getting enough out of your staff? One way is to figure out how much your staff costs are in relation to your revenue. This is often called Labor vs. Revenue ratio and is simply calculated by dividing your staff costs by your revenue and getting a percentage. That percentage should be in the 30% to 40% range for a healthy gym or personal training studio.

For example, let’s say your business’s Gross Revenue is $30,000 in one month. Your staff costs are $10,000, which works out to be 33%(10k/30k)–you’re within range. Let’s say the same example but your staff costs are $15,000. That’s 50%–that’s too high.

If you’re too high you need to focus on getting that number down to a reasonable range of 30%-40%. A few things to look at are your pricing for services, your staff pay rates, and also the market or neighborhood you’re in. All those come into play when determining if this is a healthy cost for your business.

Owner Pay

Unless you like working for free (I don’t know how does!) then you have to figure out how to pay your self for your blood, sweat, and tears that you’re putting into your business. Now the “how-to” of paying your self has a lot to do with what type of entity your business is–that’s a whole nother topic for a future blog post. However, when all is said and done you need to plan and budget your compensation into your profitability formula for your business. Whether it’s a salary, commission on sales, or hourly rate, plan and do it! If not, then it’s like you’re working for free and will most likely burn out and lose interest. If that happens, “adios” to your business!

Estimated Taxes

We all love taxes right?! I don’t know anyone that loves having the conversation at the end of the year where they learn they owe tax! A good way to manage this, and also sometimes required by the IRS, is to pay Estimated Taxes. In short, this is basically prepaying your tax liability for the upcoming year. This is a great way to manage your tax liability and not have a huge bill at the end of the year. Plus, when you attack your taxes proactively your whole mindset changes and something you used to fear goes away and you can devote more mental energy to positive things in your life.

There are different ways to do this but the simplest approach I’ve found is to again use the “Skim the Gross” method that I explained earlier. Skim some off the top of your Gross revenue and transfer into a savings account that is hard to access. That way you won’t be tempted to dip into it and you’ll have funds ready to make your quarterly payments.

when you attack your taxes proactively your whole mindset changes and something you used to fear goes away and you can devote more of your mental energy to positive things in your life.

 

Be Open to Change

While these all may sound great, it takes some planning and structure to succeed at mastering your cash flow. If you need a system, give us a shout. We’ve help clients with this all the time and have it down to an art and can help you make it easy.

Lastly, Be open to change so you can “roll with the punches”. Because the punches will come and you’re going to feel like giving up before you become successful–100% guaranteed! But don’t give up, make changes in your business to make it profitable, try new services, re-write your business plan after a year or two, you get the idea. Do-what-it-takes to get your business where you want it and throw some elbow grease into the mix. Everyone I’ve seen do this have met their goals and is getting what they want out of their business, which is Financial Freedom!

 

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Every business owner goes through the process of deciding how to hire someone when they get to the point where they’ve outgrown their current situation or just need a bit of extra help.  You’ve found the right candidate and now you need to decide whether or not to hire a contractor or employee…this is where you need to be very careful!

Watch out for the pitfalls

While your first inclination is to hire contractors to save paying FICA and Workers Comp, you should be aware of the rules that the IRS and state can nail you on.  Yes, there may be two sets of rules that you have to abide by!  We’ll explain each one, and since we live in California, the rules here as well.

What the IRS Looks For

The IRS is mainly looking at two factors; Control & Relationship.  Control is what it sounds like, do you have control over how your worker does their work and when they do it?  Do you determine how much you pay the worker?  If the answer is yes, then you most likely have an employee, not a contractor.

Under the Relationship test, does your relationship with your worker resemble an employee or contractor?  Are there written agreements, do you pay for benefits, do you reimburse your worker for expenses?  If it walks like a duck, quacks like a duck, then you most likely have an employee.

Under the Control test, you give up when and how the worker perfoms the work. For example, you take your car to the mechanic for some work.  You walk in and the mechanic tells you how much it’s going to cost and how long it’s going to take to do it.  Now you’re hoping it’s fast because you need to pick up the kids, but you can see what I’m getting at here.  You really don’t have any control over the mechanic in how and when they do their work.  In this case, we’re describing a contractor relationship.  

California

In California, we take it to another level! Oh, how we love the Golden State! New legislation for 2019 enacted more rules for determining contractor status.  (Even if you’re not in California you might as well take heed as I’m sure states will soon follow California’s lead)

California gives you the “ABC” test to help you determine whether or not you have a contractor or employee relationship:

A – Control

This refers to whether or not the worker is free from the control of your business in connection with their performance of the work. Thus, if you are telling the worker when and how to do their job then you are probably going to fail this test.

B – Business

Additionally, the worker should be performing work that is outside the normal course of your business.

C – Customarily Engaged

In connection with A & B, the workers must be engaged in an established trade or business of the same nature as the work performed.

Summing up California

Photo by Vital Sinkevich on Unsplash

As you’re now most likely thinking about what this means for your business, these new rules rule out a lot of what has gone unchecked for many years–hiring just anyone to get around payroll taxes and workers comp insurance. To illustrate, here are a few examples:

Example 1: You run a personal training studio and hire other personal trainers to come in and run training sessions. That’s an employee.

Example 2: You’re a physician in private practice and you hire office staff. This is an employee because they will most likely fall under the “Control” test.

Example 3: You’re a church and you hire a consultant to help you with leadership and other efficiencies. That’s a contractor.

Example 4: You’re a real estate agent and hire a transaction coordinator to help you move all your listing and sales through the administrative pipeline. But they work from home and you don’t dictate their schedule. You can most likely get away with hiring them as a contractor.

These rules can be tricky…no matter what state you live in

The worst thing for you to do is to guess at these rules. Feel free to reach out or comment if you find yourself stuck and caught in the web of employee vs. contractor rules!

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We love the holidays and the season of gifts, getting together with family and friends and frankly just kicking back.  But as you un-plug for a few weeks this is a great time to think about the new year and making positive changes for your business.  Here’s our top tips for changes you can make to start the new year off on the right foot.

Utilize Technology To Automate

Find your self doing the same tasks over and over again?  Look into automating those with tools like Zapier and others.  I’m not saying to take the human out of where it counts, but updating email lists etc. doens’t require a human touch.  When you’re able to reassign tedious tasks you can spend more time on meaninful activities.  For example, if you send out a MailChimp email to your client based on an action by them, why not use Zapier to automate that, plus update your MailChimp list at the same time.  Really, the possibilities are endless.

Setup A Budget

Creating a budget is the first step in planning to make sure you meet goals.  Setting up thresholds and goals will help you measure your progress throughout the year.  It can even be easily done in your accounting softwar like Xero or QuickBooks Online.

Beyond tracking the income and expenses, it forces you to think about what you plan to do and set goals.  That act is alone is a lot more than what a lot of business owners do!  easily take, forgranted–it has a throughout positive effect on how you treat your business.

Implement Some Tax Planning

Now, you have probably heard lots about taxes this past year and rightfully so, 2018 has seen some of the most extensive tax reform laws in decades!  Knowing why they mean and translate for you in your business is no small feat but that doesn’t mean you should keep your head in the sand.  Planning now can save you tons of tax if you play your cards right.   For example, IRS section 199 outlines hefty tax savings for small business owners under a certain income threshold.  This translates into huge tax savings for a lot of businesses.  

Fortunately for you, if you’re reading this blog you’re in the right place to get help if you don’t understand or know how to apply it to you.  There are also tons more opportunities to save tax so it may be worth your while to schedule some time with your tax planning expert.  Or, give us a call if you don’t have one.

Get Your Books In Order

I call ‘net income’ the magic tax number because it’s what drives most of the tax liability when you operate a business.  But you’re never going to know what that is unless you keep good records of your income and expenses.  Let’s face the hard truth, the days of paper and spreadsheets for tracking this should be over.  Online accounting software like Xero is so easy to use and so cheap that it’s a no-brainer.  Plus, using something like Xero is a great way to get ALL of your business on one place for invoicing, bills, document storage, etc.

Level Your Business Up

During this time when you’re taking some time off or away from the desk think about waysin you can make small changes to improve the quality of life.  Think in terms of plenty  and ditch the scarcity mindset.  When you do you’ll see big changes at how you handle stress and how you visualize success.  For example take implementing a CRM like Active Campaign or Hubspot costs a monthly fee, but did you think about how much time you can save with automation and how you can better serve your customers by having a system in place to put them in?

When you’re able to spend a little you make big gains in your mentality for growth.  Remember, unless you invest and work on your business there is huge rewards.

In closing I hope you’re able to use some or all of these points to have successful new year going into 2019!  Don’t forget, growing your business is like steering a large ship, you do it with small course corrections and in time you will get where you want to go!

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It’s that time again and the holidays are fast approaching.  It’s a time of excitement, family, get togethers, and…finances!  For most, year-end is the time when we start thinking about taxes and our financial situation for the year.  December 31st is too late, but if you’re reading this now, you have a good chance to get things in order to make tax time and other year-end tasks less stressful.  Keep reading to see how to get ready!

Catch Up Your Bookkeeping

If you have some a back log of bookkeeping to do, now is the time to get caught up and ready for January.  Bookkeeping can be as simple as a spreadsheet if you’re a sole proprietor, or if you have LLC or Corporation, then you really should use software like Xero.  Don’t spend hours and hours on this.  Technology is come along away in the past 5 years so chances are “there’s an app for that”!

Having your books caught up will tell you how much income and expenses you have for the year.  Once you know that, then you’ll have a good idea of what your tax bill is going to look like.

Taxes

If you’re self-employed chanced are that you should be paying estimated tax payments–which are basically tax prepayments.  Reviewing how much you’ve paid in, and making any necessary catch up payments will help ensure you don’t have a large tax bill and will help you avoid any pre-payment penalties.

Additionally, you should review your net income to ensure you aren’t getting caught with a large unexpected tax bill.  Reviewing this will help you know what to expect when it’s time to file taxes.  And if you have extra cash, you can even pay some or all of your tax liability before you file your return.

 

Retirement Accounts

Saving for retirement has almost become a cliché term.  But did you know most business owners aren’t taking advantage of having their company pay themselves for retirement?  It’s one of the great tax planning tools that a business owner can use!  The company (which you own) pays into a retirement account for you.  So it’s like getting a double benefit!  Every business owner should be doing this.

There are many different options for retirement accounts.  Whether it’s a 401K, SEP, or SIMPLE IRA, find the one that works for you and get it started.

Re-evaluate Your Pricing & Costs

End of year is a great time to look at your pricing and costs.  It’s also a great time to review your Gross Profit % and make sure you’re charging enough for your products/services, or adjust your Cost of Goods Sold (COGS).  Keep in mind that generally speaking, your COGS should be no more than 30% of your revenue.  If it is, you could be bleeding cash and you may soon run out.  If you run out of cash, guess what?  The jig is up and you may be out of business.  In order to do this you’ll need to of course have your bookkeeping caught up so do that first, and then review these numbers.

 

…your COGS should be no more than 30% of your revenue

Review Your Systems and Processes

Finally, review your internal systems and processes.  Or, maybe this is the time where you commit to write them down.  Mapping out your systems and processes does a few things for you:

  1. You can discover inefficiencies that you may have never seen.  Writing something down  has the amazing effect of providing objectivity!  You can use paper or online tools like Google Docs or Evernote to do this.  That way, if you ever have staff taking over certain jobs, they’ll know what to do.
  2. It also prepares you to be able to hire staff and delegate tasks or jobs.  Doing this allows you to take on more of a managerial/strategy role and be less of a technician.  As business owners, we should all be moving away from the technical side of the business so we can work on the vision and growing the company.

 

As business owners we should all be moving away from the technical side of the business so we can work on the vision and growing the company

 

This isn’t meant to be an exhaustive list by any means, but it should get you started.  If you need help, just ask!  We’ve helped countless businesses do these things and we can offer down-to-earth advice that will make doing this, easy!

 

 

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audit-proof-your-business-with-evernote

 

Going through an IRS Audit can be a big deal if you’re not prepared.  But with today’s technology, we’re going to show you an easy way to make sure you have all the documentation you need to prove your business expenses.  I’m not saying that all audits are the same, but most of the ones we’ve helped clients through ask for substantiation, or proof, of certain expenses that you’re claiming on your tax return.  If you can’t provide adequate records and prove the business purpose, then the IRS could disallow those expenses—and you don’t want that!

 

Use Technology

We spend lots of time vetting out new technologies to find the ones that work well, and the ones that don’t.  Part of this process is actually using the apps, and analyzing a few things: 1. How easy is it to use and 2. Does it work well with a general small business work process?  Our favorite app for retaining information is Evernote.  If you’ve never heard of Evernote (that would be surprising), we recommend checking them out on the web.  We’re going to show how to use Evernote to audit-proof your business.

 

Introduction to Evernote

Evernote is a like a central hub for all data you want to put into it.  For me, I use it like an external hard drive for my brain!  The power of Evernote lies within it being accessible on every device you own, easy to get information into it, and easy to find the information later when you need it.  For the purpose of this post, we’re going to cover:

  • Using your mobile device to scan receipts
  • Organizing into Notebooks
  • Using tags
  • Using other services to connect to Evernote

 

Overview

To audit proof your business you need to track key elements about your expenses.

  • Date you purchased
  • Amount
  • Who you purchased from
  • Business purpose

Most of the time a receipt covers all that quite nicely.  The only thing you should add is Business Purpose (which we’re going to show you).  You should also keep bank/credit statements, and even cleared checks.

 

Using Evernote to Achieve Audit Protection Bliss

At the very basic level, Evernote is structured as Notebooks and Notes that live within those Notebooks.  You can also use Tags to help you organize and search easier.

Keep Receipts

Step 1: Create a Notebook called Receipts

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Step 2: Use the mobile app to snap scans of your receipts as you make purchases

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Notice that the Notebooks is “Receipts” and we’re using a tag called “office supplies” so that we can easily search for office supplies.  Also, you’ll notice we put the business purpose as the name of the note.  You can do this on your computer, or on your mobile device.

Step 3: Do the same process for every receipt you get.  Evernote will become your repository for all your receipts.  You can easily search for your receipts by tag if you want to see all of your Office Supply receipts.

Keep Bank Statements

After using Evernote you’re going to find more useful ways to use it in your everyday life.  One key feature is being able to keep and store attachments in notes.  Now, downloading your bank statements and putting them in Evernote is not that hard, but it’s also not that convenient.  Remember we said that one of the key features to apps we use is convenience?

The solution to this is to use an Evernote Marketplace app called File This.  File This is simply an app that will automatically retrieve your bank, credit card, utility statements, and put them where you tell it.  While it will export directly to popular cloud-based file sharing apps like Google Drive & Dropbox, you can also connect it to Evernote.

Once you have it File This connected to Evernote, your bank statements will automatically appear in the designated Notebook within Evernote.  File This is pretty robust and even has a free version for you to get started on.

 

Start Scanning!

Scanning your receipts and storing bank statements within Evernote will start you down the path of preparedness if the IRS decides to “knock on your door”.  Of course, in order for this system to work you have to be committed and adopt it as a workflow/system you use in your day to day life.  We use this system, we have clients using this system, and we can tell you that with a bit of discipline, it works!

Want to learn more about Evernote?  I’m an Evernote Certified Consultant so drop us a line and we’ll help you figure which version is best for you, and discuss how you can use it in your business.

Here are some useful links where you can sign up for free trials:

Evernote Basic

Evernote Plus

Evernote Premium

Evernote Business

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receipts
If you’ve been in business for any amount of time, you’ve probably heard something about keeping your receipts.  And we’ve heard some good myths about when and when you don’t have to keep them.  We’re here to set the record straight and tell you exactly when you need to keep receipts.

First, let me explain that there are different suggested records for different types of transactions.  For example, what you keep to prove the purchase of inventory is different than gas for your car.  We’re going to explore two categories today: General, and Travel/Entertainment expenses. But there are many more that we’re not discussing today.

General Expenses

What are they?

General expenses are things like paper, utilities, cell phone, etc.  Those types of expenses must be be proved with a bank/credit card statement, receipt, or invoice that shows the date, amount, and busienss purpose.

How long should I keep records for?

Generally speaking, you’ll want to keep records for at least 3 years from when you claimed them on your tax return.  The good news is that you can keep them in paper form, or electronically.  We’re a big fan of using the mobile app for Xero to take a snapshot of the receipt, and recording the transaction right on the spot when it happens.  You can also use other systems like Evernote, Google Drive, Dropbox and Box to store your records.  If you choose to keep paper, then have a good file system organized by year and type of expense, at the very least.

 

Travel & Entertainment Expenses

What are they?

41131785-business-team-on-the-way-to-meetingsJust as it sounds, expenses you incur to travel, take clients out to lunch.  It also covers lodging, rental cars, transportation, and a host of other things.  See IRS Publication 463 that is referenced below for more things that qualify as travel and entertainment expenses.

 

 

How should I keep records and for how long?

The trick here is to have “adequate” records.  There are 4 main points that you must prove in order to have a deemed adequate expense in this category:

  1. Amount
  2. Time (for travel)
  3. Place or Description
  4. Business Purpose

What that basically means is that you must have a receipt, log book, or some kind of record that proves those 4 main points for each expenses you deduct.  Estimates don’t count.  The long and short of this is: that you keep all receipts/invoices for each expense in this category.  There are only a few exceptions, one of them being that if your expense in under $75 (except lodging), you can simply provide bank statements to prove you expense.  Of course there are more exceptions, but we don’t have time to go into them in this post.

And like above, you should keep these records for 3 years after you file the tax return for the year you’re taking the deduction in.

 

The IRS has some pretty elaborate articles and publications on this topic.  We referenced IRS Publication 463.  Feel free to check it out if you need to dive in a bit deeper.  Or, leave a comment and reach out to us and we can help you navigate the murky waters of business deductions.

 

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14734986-a-businessman-burdened-by-heavy-taxes

Ok, you’re a personal trainer, and it’s tax time.  Does your tax bill hit you like a ton of bricks?  Chances are you’ve experienced this pain.  But, there are ways you can plan so that your not working for “Uncle Sam” and paying too much of your heard earned money!

The first thing to consider is how you’re getting taxed–as an employee or contractor?  If you just filed taxes, then this is easy to find out.  If you received a 1099, then you are a contractor.  if you received a W-2, then you are an employee.

What’s The Difference?

If you are a contractor getting a 1099, you are technically self employed.  Meaning, that you will owe self employment tax on whatever your net income is.  This also changes how you file your tax return by requiring you to report your income, and any expenses associated with that income, on a business form called Schedule C.

Getting a W-2 is inherently easier.  You report the W-2 as wages, and there is no self employment tax.

 Which One Is Better?

There is a good, and a bad list to each one.  If you’re detailed, you can save a lot of tax by being self employed.  However, it’s much less complicated to receive a W-2 and report the wages.  Whatever you’re preference is, there are ways to make sure you’re minimizing your tax.

If you need help or have questions, feel free to reach out or leave a comment!  If you have friends that would find this useful, tweet, share, plus this over to them!

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April 15 is the tax day deadline for most people. If you’re due a refund there’s no penalty if you file a late tax return. But if you owe taxes and you fail to file and pay on time, you’ll usually owe interest and penalties on the taxes you pay late. Here are eight facts that you should know about these penalties.

1. If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

2. The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can. You should try other options to pay, such as getting a loan or paying by credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.

3. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

5. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

6. If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.

7. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

 

Reach out to us if you have questions, or think you’re going to owe penalties and interest!  No one wants to pay more than they’re fair share to the IRS!

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In our effort to educate the small business owner in how to keep more of their hard earned money, often we get asked: So what is better ROTH or Traditional IRA’s?  So we asked a local Financial Expert to explain the differences.

 

What type of IRA (Traditional or Roth) best meets your financial goals?

Tax Benefits:

Roth:  Tax-free growth.  Tax-free qualified withdrawals.

Traditional:  Tax-deferred growth Contributions may be tax-deductible..

 

Eligibility Age:

Roth:  Any age with employment compensation.

Traditional:  Under age 70½ with employment compensation.

 

Taxation at Withdrawal:  

Roth:  Contributions are always withdrawn tax-free.  Earnings are federally tax-free after the five-year aging requirement has been satisfied and certain conditions are met.

Traditional:  Withdrawals of pre-tax contributions and any earnings are taxable when distributed.

 

Penalties at Withdrawal: 

Roth:  A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies.  (A distribution from a Roth IRA is federally tax-free and penalty-free provided that the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, qualified first time home purchase, or death.)

Traditional: Withdrawals before 59½ may be subject to a 10% early withdrawal penalty unless an exception applies.  (For Traditional IRAs, penalty-free withdrawals include but are not limited to: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments.)

 

Required Minimum Distributions (RMD’s)

Roth:  Not subject to minimum required distributions during the lifetime of the original owner

Traditional:  RMD’s starting at 70½

 

Maximum Contribution: 

For both 2013 and 2014: $5,500 ($6,500 if you are 50 or older) or 100% of employment compensation, whichever is less

* Catch up contributions:  Individuals age 50 or older (in the calendar year of their contribution) can contribute an additional $1,000 each year

** Contribution deadline:  Tuesday, April 15, 2014, for the 2013 tax year

Note: A Rollover IRA is a Traditional IRA often used for rollovers from an old workplace plan, such as a 401(k).

Feel free to reach out to either us if you have further questions.
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If you run a small business, then chances are you maybe required to file 1099’s.  These are probably one of the most misunderstood forms business owners file.

Here’s the scoop:

What are they for?

Form 1099 is used to report money paid to individuals who are not your employees.  The IRS uses your 1099 to make sure the people you pay are reporting the income on their tax returns.

Who should I file a 1099 for?

File a 1099 for everyone that is not an employee (individuals you’re not withholding taxes for) that you pay more than $600 to in a calendar year.  You are not required to file 1099’s for money paid to company’s (LLC, Corps).

 How do I file a 1099?

There are many service providers that will do this for you.  Whether it’s your accountant, or a web service, we recommend using one to assure that they are accurate, and filed timely.  All 1099’s should be filed and in the mail by Jan 31st.  But if you’re a DIY (do it yourself) type of person, there are plenty of services on the web that do this for you at a very reasonable cost.  Our favorite is Track1099

How do I keep track of how much and who to file 1099’s for?

This is easily done in accounting software like Xero and QuickBooks.  You can designate contacts/vendors as 1099 recipients, and as long as you record all your transactions, you can run a report at the end of the year that will tell you how much to file them for.  We recommend using Xero for this.  It’s easy, and will be a breeze to setup and do.

What happens if I don’t file 1099’s?

You may get away with it…for awhile.  But if the IRS decides to audit you, and you didn’t file, then watch for penalties coming your way!

What do I do if I have no clue what to do?

Easy, reach out to us and we can take care of from start to finish!  We can help no matter what state you live in.

 

Have questions, feel free to leave comments and we’ll answer them ASAP.  Want to reach out directly, fill out our “Contact” page and we’ll get back to you within 1 business day.

Thanks for reading!

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