Among them are rules on donations, moving expenses and theft losses.
“Readers may be surprised by a few tax-law changes enacted late last year that have received relatively little attention. Tax advisers say the new law is packed with so many important and often complex changes that many people would be well-advised to take a fresh look at their withholdings, estimated taxes or both before 2019 arrives in less than four months.”
Today The Supreme Court will listen to a challenge to the Sarbanes-Oxley Act of 2002, the centerpiece of the government’s response to the watershed accounting scandals at Enron and Worldcom. There’s a chance that Sarbanes Oxley will be repealed, and if so it will confirmed what I thought-that Sarbanes Oxley (SOX) compliance is a waste of time and money. In February of 2004, I worked at Protiviti, a consulting firm that was created by former Arthur Andersen partners. I worked as risk management consultant and most of the work was Sarbanes Oxley compliance. Before working at Protiviti, I previously worked as an internal auditor for Deloitte & Touche and KPMG. SOX compliance testwork and narrative is similar to internal audit’s, but there was no one standard. Plus, the time the consulting team which included me “camped out” at a corporate headquarters for months documenting everything which seemed to mean nothing. It was frustrating work, and I am so glad I quit.
There’s an opinion piece in the Wall Street Journal that refers to a study:
In 2008, the SEC’s Office of Economic Analysis launched a survey of public companies to judge the results, and it recently posted the findings on the SEC Web site, after collecting data from thousands of corporations.
Section 404 is still consuming more than $2.3 million each year in direct compliance costs at the average company. The SEC’s survey shows the long-term burden on small companies is more than seven times that imposed on large firms relative to their assets. Are the internal controls audits helpful? Among companies of all sizes, only 19% say that the benefits of Section 404 outweigh the costs. More respondents say that it has reduced the efficiency of their operations than say it has improved them. More say that Section 404 has negatively affected the timeliness of their financial reporting than say it has enhanced it.
Wow, you can learn a lot by casually reading your friend’s tweets. Today I heard about Harvest, an online time tracking and invoicing application. Many self-employed/freelancers are looking for a simple solution to do invoicing and keep up with their accounts receivable. Harvest has some cool bells and whistles like recurring invoices, expense tracking and can export time sheet data into Quickbooks. The individual pricing for Harvest at $12 is comparable to Blinksale which is what I use, but there’s a limit of only 30 active clients and 20 active projects. If you have lots of small jobs/clients, then you may have move up to the next level which is $40/month. For Blinksale, there is unlimited clients and you can have payment linked to your PayPal account. There’s another simple invoicing web application Curdbee which is absolutely free. Curdbee allows you to accept payments via Paypal and Google Checkout. Plus it also accepts other currencies. I suggest you do a little research and select the best one for your invoicing needs. Any of these is better than a word document since the faster you invoice, means the faster you will get paid.
The lazy days of summer have arrived. Even if the economy has not affected your business, you should take a moment to the review and analyze how your business operated the first half of the year. I offer three tips and I recommend reading the full article from Joyce Rosenberg.
Review your overhead expenses and set how you decrease them.
Check with you client to make sure that they are happy.
Recharge your business development efforts and reach out to new potential clients.
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Today I found this article on CNNMoney about ways to finance a startup. Though the ways of financing is familiar, I would guess that many entrepreneurs don’t know how to record this accurately in the books. It could be classified as an aset, investment, owner’s equity or loan.
Here are the seven ways, and I will explain how to classify in your business’ Chart of Accounts.
1. Bootstrapping. That is simply using your own money to finance the business. You can account for this by classifying this as an equity account and calling it Owner’s Investment. However, if you “loan” the business funds periodically by paying for expenses that you want to be reimburse for, then you should also add a liability account called “What The Business Owes Me“.
2. Friends and Family. This could be a loan or investment depending on the agreement you set with your people. It is good policy to have this designated in writing with the terms for repayment or if the person have an equity stake in your business. If this indeed is a loan, the accounting for this to set up a liability account called Friend/Family Loan. If it an investment, then set up an equity account for this and called Friend/Family Investment. Then you also would want to set up a corresponding Friend/Family Draw account to note payment of profits back to them.
3. Banks. Classify as a loan. Depending on the terms it is either a current or long term liability. If it is actually a credit card as oppose to a line of credit, then set it up as such.
4. Grants. If you are diligent and lucky enough to receive a grant, then it is a boon to your business. Classify it as an asset and tell your friends. Grant awards are great publicity!
5. Angels and 6. Venture capital. The accounting is similar for both (an equity account for the investment.) However, the difference is whether Angel Investor or Venture Capitalist is a partner or member of your business and how is profit/capital gains paid to them.
7. Customers and suppliers. This can be a bit tricky. Are you customers/client merely referring new business to you or are they official partners in your business? If it just a referral, then an agreement should be drawn to specify the percentage of the referred sale your customer/supplier brings to the business. Classify the sale as referral/commission income and the payout as a commission expense. If you customer/supplier is more like a business partner, then you have to determine what their role is and what is their member or partner draw. That has to be clearly described in contract terms.
Once in a while, I read a business article that I nod my head in agreement to every sentence. Joyce Rosenberg is spot on in her piece, For Small Biz, Income Tax Season is Right Now.
clipped from www.businessweek.com
For the many owners who file their business tax returns using a Schedule C attached to their 1040 forms, not knowing where they stand in terms of company finances also means they don’t have a complete handle on their personal finances as well, Chazen said. And that can have long-term ramifications, for example, on savings for retirement or children’s college tuition — if a business isn’t turning a profit now, then an owner can be hard pressed to put money aside for the future.
But let’s say you don’t heed the advice, and there you are in early April, ledgers or shoebox in hand. Be prepared to hear your accountant say that he or she won’t be compiling your return, but will instead be filing for an extension of the filing deadline.
“You can’t do it that quickly without making any mistakes,” Chazen said, warning also that presenting a tax preparer with a chaotic set of records is going to be more expensive: “When someone else is cleaning up your mess, it costs more.”
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Via Lifehacker, I found this excellent blog post on Freelance Switch with accounting tips for freelancers. Many of my small business clients also do consulting or writing which is an additional stream of income so they are freelancers as well.
1. Set up a billing system. I personally use Blinksale to bill some of my clients. If you only send three invoices/month then it is free. Also, the invoice can have a link to your Paypal account.
2. Know who owes you money. I bill people usually every time I work or work on a monthly retainer. I also maintain a Google Document (FREE) with clients and the date of the last service, so that I can check if they are ready for a monthly bookkeeping check-up. Consider me to be like a mechanic for bookkeeping. 🙂 Besides, clients are also maintained on Blinksale.
3. Track Expenses Carefully. A fine tooth comb is not necessary if you set up an easy system. First, be proactive and minimize receipts by using debit card for your business expenses, then they will already be captured on your bank statement. Otherwise. I suggest collecting cash receipts monthly in an envelope or even put in the back pocket of a moleskin notebook. Then when a free moment, scan the receipts and enter them into the bookkeeping system you are using. You can use Spending Diary to track your spending. This can be great if you are doing cash purchases and also if you are getting reimbursed.
4. Keep ’em separated. How many times must I SHOUT from the rooftops that you should maintain a business and personal account separately. It’s necessary to keep from commingling funds, figure out deductible expenses and it’s a good way to budget yourself.
5. Find a good accountant. Someone who gets you. I am an accountant, but I am not a CPA. Some people are looking for a CPA to do their taxes. I am more of a coach who preps you for the CPA. Ask friends who freelance like you to refer a CPA. If you get organized and follow the advice of tips 1-4, then you may be OK with getting Turbo Tax and doing it yourself. If all this money stuff scares you the living daylights out of you, then contact me.
An excellent post about getting the right accountant and preparing for next year’s tax bill. I hightly recommend checking in with an accountant in December to see what you expected tax bill will be. Also, get organized on Quickbooks or some accounting system where can actually review your P/L and Balance Sheet.
clipped from fortuito.us
If you’ve ever run your own business or been a freelancer, you know the pain of scrambling to pay an unexpectedly large tax bill. Be aggressive with the amounts you pay on your quarterly payment schedule and you’ll spare yourself a lot of pain down the line.
- Even if you handle taxes yourself, you should see a trusted accountant every December with your estimated year-end totals on revenue and spending to figure out where you’ll stand come April
Every tax day for the last four or five years I’ve owed the IRS thousands of dollars. For the last two years, I’ve met with an accountant in December to handicap where I’d stand come April. It’s been a godsend because I’ve been prepared both times for the worst, and had plenty of savings ready to pay the bill. A December accountant visit is also good for determining if your estimated taxes are inline with your earnings — whether you should be putting away more or less the same amount the next year.
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I actually stumbled upon this link, and there are so many calculators (100) that I suggest reviewing the ones that are most applicable and critical to your business. Cash Flow is a good one!
clipped from www.businesscreditcards.com
Business Operations
Don’t get caught off guard by the unexpected financial pitfalls of owning a business. Keep one step ahead with these useful business calculators.
- Break Even Analysis: Figure out how much you’re going to need to sell with your business just to break even. This can be helpful in creating a starting point for your sales goals.
- Business Valuation: Whether you are just curious, or want to sell your business, this calculator can help you determine the value. Just enter your cash flow and your expenses to get an estimate.
- Working Capital Needs: Find out what your business will need to keep going with this helpful calculator. It will take into account your short-term monetary obligations and figure out how much capital you’ll need so you won’t fall short.
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My favorite clients are actually the ones who ask a lot of questions, but also respect my knowledge and experience. Many have asked me to refer a CPA to them, but it is hard to do that since each clients has different needs. Some people really want a tax preparer. Some want a financial advisor and some want a budget manager or all of the above. I advise to figure what they need and seek out a CPA who offers a free initial consultation.
The excerpt from the blog below shows how you can do some research before interviewing CPA. NOTE: Do you homework before hiring any service provider.
clipped from www.productivity501.com
So here is how I suggest you select a CPA. Find a few areas of the tax related to your business and read everything you can on it. Look up the topic on the IRS website, read anything you can find about it in the library, browse the local books store tax section and read the pages dedicated to your selected topic. It doesn’t matter if you come to a full understanding of your particular topic, but you need to be familiar with many of the issues and exceptions.
When you sit down with a prospective CPA, give them enough background about your situation and setup and then ask them questions about the topics you’ve researched. Don’t tell them you’ve done extensive research on the topics. You should be able to tell enough from their answers if they will be a good match for you.
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FinTech And Personal Finance 