Sep 09

Has your business growth plateaued?

Do you feel that you have plateaued in your business? Can’t seem to reach that next level of growth? I know that feeling all too well, guys! I learned that solid growth in business does not happen by accident.  It takes honest analysis, planning, and execution.  We are indeed big dreamers; otherwise we would never have ventured into small business ownership, but solid growth takes planning, too. Realistic goal-setting allows an owner to judge performance over time and make changes when necessary to achieve intended goals.

Although a small business might have experienced a phenomenal growth curve in the past with excellent execution, it cannot automatically be assumed that the business can continue on the same trajectory. While resources may have been adequate or, even underutilized, at the onset of the business, those same resources might one day reach their full operating effectiveness. Suddenly, a small business might find that its growth cannot continue without an influx of additional resources…highly trained employees, physical location capabilities, enhanced technology, and financial capital…all needing a certain amount of planning.

Consideration must be given to all facets of the business when planning:

Budgets and cash requirements: Prepare short and medium-term master budgets including cash flow budgets

Human resources: Plan for the number of additional employees needed, salary and benefit projections, succession plans if key employees leave, skill-needs projections, and training plans

Fixed Assets: Consider additional, necessary fixtures and equipment including replacement of current fixed assets

Building: Decide if current location, whether owned or leased, has potential for expansion

Technology: Assess hardware and software needs to handle increased business, improve efficiency, and increase output

Marketing: Understand full market potential, target segmented markets, and explore all marketing opportunities

Capital structure: Plan for debt and/or equity financing as needed for growth

As a small business grows, it can quickly outpace its internal resources. It is critical to constantly assess strengths needed for expansion and how to improve upon inherent weaknesses that can limit growth.

Call us at 770-575-9737 to find out how we can help you boost revenue and profits, or just have more leisure time.

 

Sep 09

The Dreaded IRS Letter

Have you ever received a letter regarding your tax return from the Internal Revenue Service (IRS)? doesn’t exactly create a warm, fuzzy feeling. In fact, IRS correspondence often conjures up a feeling of dread, some of which is not warranted. The first actions to take when receiving such a letter are to remain calm and read the correspondence. Ignoring it is the most common way to create an even greater issue.

Letters from the IRS generally fall into the following categories:
– Request additional information
– Refund due
– Notification of an adjustment on your return
– Address change confirmation
– Appointment scheduled for an audit.
– Certified letter (Most common are notice of demand for payment, tax lien, or levy)

In my experience, approximately 90% of correspondence received by my clients can be handled with no money ever being paid to the IRS.

Keep in mind that the IRS never initiates correspondence with taxpayers via e-mail. There have been fraudulent attempts to extract personal information under the disguise of collecting information “from the IRS.” This year has been an especially bad year, with fraudulent e-mails soliciting information by promising tax refunds.

If you have worked with a tax professional, promptly contact him/her upon receipt of correspondence and before you directly respond. A tax professional is familiar with the IRS and can help you more effectively.

I advise my clients to never ignore an IRS notice, but also to not immediately assume that the IRS notice is correct. Certified letters are serious and normally is an indication the IRS is about to take some action against you. I have my clients send me any correspondence they receive from the IRS immediately.

For more information on IRS Resolution, call 770-575-9737.
Source: NATP

Mar 06

7 Mistakes Business Owners Make

Over the years I have identified common mistakes that business owners make. Since the March 15th deadline for Partnerships and Corporations is looming; I feel this is the most appropriate time to examine common mistakes, and provide helpful tips to avoid these mistakes. But most importantly you can use these tips moving forward in 2017. Let’s examine:
Misclassification of Loans Made to Business- Owners borrow and make personals loans to their business. But often, these transactions aren’t properly recorded as loans and could be classified as revenue that will be taxed. Tip: Identify these transactions and advise your accountant or tax professional of non-revenue deposits made to your business.

Maintaining Mileage Log- Imagine you are in an audit with no mileage log- the IRS will disallow mileage deduction which can be substantial. Technology has made it easy to keep track of business miles. Make it a habit. Tip- Use your appointment calendar to reconstruct your mileage.

Using Personal Credit Cards- Many of my clients forget they used personal credit cards for business purposes.It is certainly acceptable to use your personal credit card; but, create a system of tracking these expenses to include in your business tax return. Tip: If you pay your personal credit card from personal funds then have your company reimburse you for expenses.

Failure to Pay Estimated tax payments- Don’t be shocked when you file your taxes- be proactive and pay estimated taxes. Also, you will pay a penalty for failure to pay the correct amount of estimated taxes. Tip-Pay your estimated taxes quarterly based on previous year’s tax liability.

Review Financial data at Year-End Only-Waiting till tax time to prepare a Profit and Loss does not allow you the opportunity to monitor your expenses and revenue. How will you know if you are meeting your strategic goals successfully? You may think your business is doing well, but the data may show otherwise. Prepare monthly or quarterly financial statements. Also, on-line banking allows you to download your transactions into an accounting software. You should know your financial position at all times. Tip-Set aside time weekly to review your Profit and Loss, and Cash Flow.

Commingling funds-I admit I am guilty of this too, but it is important not to pierce your corporation by commingling funds. Pay your personal expenses out of your individual bank account. Tip-This is where planning comes in- have adequate funds in your personal account to pay your bills.

Setting up S Corporations to Avoid Self Employment Taxes- The IRS requires shareholders to pay themselves reasonable wages. Should your business be audited the IRS could reclassify distributions to wages. Tip- Determine reasonable compensation and set yourself up on a regular payroll schedule through a payroll company.

Depending on your entity classification-Corporation, Partnership, or Sole Proprietorship will determine the best use of these strategies. Owning a business is challenging- so much to consider, but remember there are resources and help available for you.

Want more information on Business Compliance? Contact us today for a free 30 minute consultation at 770-575-9737

Sep 23

Innocent Spouse Tax Relief-Do You Qualify?

divorce_pic1Often in divorce we rarely consider the possible consequences of filing joint returns. Maybe when you signed tax returns, you may have not been privy to certain information. Perhaps the former spouse underreported income, or claimed false deductions unbeknownst to you. After your divorce you started receiving notices from the IRS for joint tax returns.  Although you had no knowledge, the IRS can enforce collections from both parties involved.  In such a case, you may want to apply for innocent spouse relief if your former spouse understated taxes while you were both married. Understatement of taxes is derived from underreporting income, or false deductions or credits.

To qualify you must meet all the following conditions:

  • A joint return must have been filed with understated tax attributed to the spouse.
  • You must be able to prove at the time you filed the return- you had no knowledge of the understatement of tax.
  • Based on the facts, to hold you accountable would be unjust.
  • You must be divorced from spouse.

 

The good news is the IRS has recently eliminated its two year time limit to apply for Innocent Spouse Relief.

 

Sep 02

Victims of IRS Identity Theft-The Dilemma of Obtaining a Loan

Image ID TheftA fraudulent tax return was filed for a refund which created a conundrum for my client when he applied for a business loan. He owes what is considered a ‘’large dollar” amount to the IRS.  A fraudulent return was filed – IRS applied the amount to a prior year tax balance for which my client had an installment agreement.  The fraudulent refund was enough to pay off that year.  Subsequently, once the IRS realized the refund was fraudulent; the amount was reversed, and the original tax balance was restored.  Now, I understand this was the correct IRS procedure, but the IRS computer defaulted his installment agreement; although, he is paying back taxes through direct debit-an error admitted by the IRS.

 Why is this problematic? The lender was aware of his tax obligations but required assurance and proof that he was compliant and current with his IRS installment agreement. However, the IRS account transcript indicated that he was no longer in an installment agreement for that particular tax year. As a result, the lender would not make the loan unless the IRS corrected my client’s account. This only further delayed my client from receiving the loan he so desperately needed for his business. We can all understand how that feels when we have applied for a mortgage or another type of loan and encountered a setback.

 In order to resolve his dilemma and the lender’s request; I spent hours talking with the IRS Service Center only to learn we needed to contact the IRS Revenue Agent whom originally set up the installment agreement, and closed the case over a year ago to correct my client’s account.

 We ultimately satisfied the lender’s requirement and my client received his loan a week later.  But, I must add it was an extremely arduous undertaking and tough for my client to endure all because someone filed a fraudulent tax return. 

Aug 25

The Dreaded IRS Letter or Notice-What should you do?

Have you received a letter from the Internal Revenue Service (IRS)? It doesn’t exactly create a warm, fuzzy feeling. In fact, IRS letters often conjures up feelings of dread and fear. The first action to take when receiving such a letter is to remain calm and read the correspondence carefully. Take note of the date provided for you to respond. Ignoring an IRS letter can exacerbate the situation. Furthermore, always pick up IRS certified letters from the post office. Keep in mind that the IRS will never initiate correspondence with you via e-mail. Beware of phishing to extract personal information under the disguise of collecting information “from the IRS.”

Letters from the IRS generally fall into the following categories

Request for additional information
Refund or balance due
 Notification of an adjustments on your return (underreported income, incorrect calculations)
 Proposed Assessment
 Address Change Confirmation
 Correspondence Audit
 Certified Letter (Most common are notice of demand for payment, tax lien, or intent to levy)

In my experience, approximately 90% of correspondence received can be handled with a simple reply. IRS certified letters are serious and typically is an indication the IRS is about to take some legal action against you. You will likely have 30 days to respond to this notice before the IRS initiates enforcement; an even more important reason to open IRS letters promptly. If you have a tax professional, notify them promptly before responding. Tax professionals are familiar with IRS notices and the most efficient action needed. Most importantly, do not always assume the IRS notice is correct.

Also, notify the IRS promptly of address changes-you want to be apprised of IRS actions against you. The IRS will send notices to the last address on record.

So take a deep breath, open your IRS letter, read it carefully, determine what action the IRS needs you to take, and the deadline to respond. You will feel so empowered when you take action!

Aug 18

Are You a Victim of IRS Identity Theft? Here is What to Expect.

20130814-120302.jpgTreasury Inspector General for Tax Administration suggests the IRS could lose $21 billion to tax fraud over the next five years. While these numbers continue to increase, you could potentially become a victim of tax fraud. All the crooks need is your name and social security number. Aside from a delay in receiving your refund; there are a few other implications. Here is what you can expect while you have an open ID theft case with the IRS:

IRS Collection Notices– You may receive notices demanding you repay the refund you never received (this notice is the most troubling). Contact the IRS immediately and inform them you are a victim of identity theft-this will allow them to put a collection hold on your account while the ID theft case is pending. Although you may have submitted the Identity Theft Affidavit, it is best to respond to such notices.

Estimated Tax Payments– Your payments may have been refunded to the crooks; once your case is resolved the IRS will reapply these payments to your account.

  • Mortgage Loans– The income showing on your account transcripts will not match your actual return. In most cases the crooks will file with substantially lower income to receive the earned income credit on fraudulent tax returns. This could prove challenging because the fraudulent return is posted to your IRS account. You will need to provide proof to the lender that you are a victim of ID theft.
  • FAFSA (Student Loan) applications– You will need to provide proof to school that you are a victim of ID theft. The income will not match IRS records as explained above.
  •  Refund Delay-It may take 6 months or longer to receive your refund.
  • State Refunds– Most likely the criminals received a state refund, too. Notify your State Department of Revenue that you are a victim of IRS identity theft, which will likely cause a delay in receiving your refund. Your state may require you to complete a separate ID theft affidavit.
  • IRS Pin Number– Assuming you have submitted your ID theft affidavit, in December you should receive a pin number to file future tax returns. The pin number should protect you from becoming a victim of IRS identity theft again.

Keep in mind, these are only IRS and State implications; it will be prudent for you to immediately place a free initial 90 day fraud alert with Equifax, Experian, and TransUnion. After 90 days you will be allowed to place an additional free seven year fraud alert on your account. Additionally, file a report with the Federal Trade Commission and your local police. The IRS website www.irs.gov provides more in-depth information on identity theft.

Finally, you are entitled to representation by an Enrolled Agent, Attorney, or CPA to handle your case. Although, it may be troublesome to discover you are a victim-the issue will get resolved in time. However, if the delay in refund is causing you economic hardship; contact the Taxpayer Advocate Office to expedite your case. Do not worry the IRS will eventually correct your account. In the meantime, you will need to exercise patience and diligence in resolving your case. Hopefully, the IRS will find a way to stop ID theft.

Aug 14

Has It Been Years Since You Filed a Tax Return?

20130814-120302.jpgYou have not filed your taxes in years and the situation worsens as time goes by-feelings of dread and fear consume you. There is a good chance that you may be due a refund; however, you must request a refund within three years of the due date of the return. Another key point for filing those tax returns; the IRS ten year statute of limitations for collections. In other words, the tax balance will disappear after ten years if there are no other legal actions to toll the statute such as bankruptcy. However, the statute does not commence until tax returns are filed. The first step is to contact an Enrolled Agent to help you file your delinquent returns, and set up an installment agreement if needed. Enrolled Agents are federally licensed by the IRS to represent taxpayers in all collection matters. Only an Enrolled Agent, CPA, or Attorney can represent your case before the IRS. By law you have a right to professional representation.

Q. What if you file your tax returns and owe money? Are there options available to you?
A. Yes, there are options available. It is possible that your account can be placed in a non-collectible status if paying would create a financial hardship for you. You can request a penalty reduction if you have reasonable cause for not filing and paying timely. You can request an installment agreement. If you owe less than $50,000 and can pay the full amount within 72 months, you may be able to set up a streamline payment plan. If your balance exceeds $50,000, you will be required to complete a financial statement to assess your repayment ability. Additionally, you may qualify for an Offer in Compromise. You must be compliant with tax return filings and estimated tax payments (if applicable) before the IRS will consider any of the above options.

Q. What happens if I continue to ignore the IRS notices?

A. Your bank account or wages could be levied. Also a tax lien may be filed at the court house, and your credit will be adversely impacted. The IRS may come to visit you at your office (self- employed) or home.

Q. What happens if I receive a wage or bank levy?

A. You will be required to set up an installment agreement and or submit a financial statement. It could take weeks before the IRS will release levy. If you are experiencing a hardship based on your financial statement information – the IRS may release levy immediately.

Keep in mind there are remedies available. The IRS does not want to take enforcement action; they are only trying to get your attention to act. The system is more favorable to voluntary compliance. Do not be afraid or embarrassed to ask for help. Believe it or not most of my clients feel a sense of relief when they face the issues. Additionally, they feel as though they can finally move forward in their life. Most of the time, it is not as bad as you think.

Jul 14

The rise of IRS identity theft will likely delay tax refunds-Change your withholdings.

With the rise of identity theft, the IRS will likely delay tax refunds and increase audits in the future. According to the Taxpayer Advocate, identity theft cases jumped 157% from fiscal year 2011 to fiscal year 2013; this clearly shows no slowing down of IRS identity theft in the near future.

Do you use the IRS as a savings institution? Does it make you feel good to receive a large tax refund to do those much needed home repairs? Well, now is the time to change your thinking, because you may not be able to get your refund when expected from the IRS. Due to the identity theft epidemic the IRS will likely increase their efforts to reduce fraudulent refunds to crooks by creating more flags and delay refunds.

Why let the IRS hold your hard earned money? The average refund is approximately $3000, which equals $250 per month that you could use to pay down debt or deposit into an interest bearing savings account. Do not get caught up in promises of large refunds by some tax preparers; have use of your money each pay period.

Now is the time to adjust your W4 withholdings to at least break even. With the proper tax planning throughout the year you can minimize your tax refund. The more exemptions the less taxes withheld so you must be careful not to claim too many exemptions and end up with a tax balance.

Planning is relatively easy. Notify your tax professional when you make life changes, such as purchasing or selling a home, divorce, etc- these changes will impact your taxes. Ask them to provide you with a new W4. If, you prepare your own taxes, use the withholding calculator at www.irs.gov to figure your withholdings, and complete a new W4 to give to your employer. I recommend you review your withholdings twice per year to ensure accuracy.

Taking these steps will guarantee that even if you are a victim of identity theft, or your return is randomly flagged by the IRS- you will not have to wait for a refund.

Jun 23

AIRBNB- How does being a “host” impact your income taxes?

How does renting a room in your house or an entire apartment impact your income taxes?  It is important to keep good accounting records in order to minimize your taxes at the end of the year,

While on vacation this year I decided to try Airbnb. Airbnb is a company that provides the platform for individuals (hosts) to rent rooms in their home or entire apartments mainly to travelers. Airbnb rates are typically lower than most hotels. The most intriguing aspect to me was the opportunity to interact with the locals which in my opinion adds to a traveler’s most authentic traveling experience.

Of course, the accountant in me surfaced while staying with my host, and I wanted to learn more about this rapidly growing industry. I learned Airbnb continues to have exceptional growth worldwide; as of November 2012, the company had over 250,000 listings in 30,000 cities and 192 countries.

First, understand you have embarked on a business. So let me try to simplify the tax code regarding rental income and expenses. For the purposes of this blog, we will assume you rent a room in your primary residence and this room is always available for short term rental, and you do not use this room. You must divide the expenses between the parts you rent and the parts you live in; just imagine you have two properties. You would figure out the square footage of your entire house and divide by the square footage of the room rented.

Example- You rent a room in your house. The room is 12 x 12, or 144 square feet. Your entire house is 2000 square feet. You can deduct as rental expense 7.2% of any expense that must be divided between rental use and personal use.

You can deduct:

Mortgage Interest

Real Estate Taxes

Advertising

Lawn Care

Repairs and Maintenance

Housecleaning Services

Security System

Utilities

HOA fees

Meals and beverages provided to guests

Mileage if applicable

Supplies ex. towels, bedding, etc.

Depreciation

Repairs made specifically to rental room such as replacing carpet can be a 100% deduction. Since Airbnb will issue you a 1099 at the end of the year, tracking income is easy. Even a more important reason you should keep good records tracking expenses in order to minimize your tax liability.

Following these guidelines can make your new venture an enjoyable and profitable experience instead of a tax nightmare at the end of the year!

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