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2015

Taxes_Infographic_Thumb.gifEven though the majority of small business owners across the country have their taxes prepared by an accountant or other tax professional, it’s still a time-consuming task. Business owners spend nearly two billion hours a year in their efforts to stay current and compliant with ever changing tax regulations.

 

These are just a few of the highlights from our small business tax filing outlook. When it comes to the cost of getting their taxes prepared each year, a little more than a quarter of small business owners spend $10,000 or more, while nearly half spend $5,000 and above. Read on for tips on overlooked deductions, and the impact that the Affordable Care Act is having on tax filing.

 

Click here to view the infographic.   You can also download a version for printing by clicking here.

 

 


Jerry (opening a mail package): “Hey, what happened to my stereo – it’s all smashed up!”

Kramer: “It looks like it was broken during shipping. But I insured it for $400.”

Jerry: “So we’re going to get the post office to pay for my new stereo now?”

Kramer: “It’s a write off for them.”

Jerry: “How’s it a write-off?”

Kramer: “They just write it off.”

Jerry: “Write it off what? You don’t even know what a write off is, do you?”

Kramer: “No. I don’t. But they do.”


Many people don’t understand the ins and outs of the tax code and it’s not surprising. Federal, state, and local taxes can be very complicated (write-offs included.) Nevertheless, it’s true that when it comes to taxes, you as a small business owner have two duties:

  1. To pay whatever it is you owe, and
  2. To figure out how to legitimately reduce your tax bill to the extent you legally can.

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Here are our top tips that help you do both of those things:


1. Deduct all expenses that are “ordinary and necessary”: The higher your expenses are, the less you will show as income, and the less you show in income, the less you will pay in taxes. Some tax expense deductions are obvious – advertising, labor, rent, and so on. But others are less so and thus are even more important because they can be overlooked:

  • Home office deduction: By some estimates, less than half of the eligible small businesses run from home take the home office deduction.
  • Business debts
  • Startup costs: Expenses incurred before you open the doors can be deductible.
  • Trips that combine business and pleasure.

 

2. Make sure you pay all taxes for all employees. More than almost any other tax, the IRS comes down hard on missed employee-related taxes. These include:

  • Withholding.
  • Matching.
  • Unemployment tax. You need to also pay federal and state unemployment taxes.


Click here to read more articles from small business expert Steve Strauss


3. Make sure to pay all sales taxes to all entities. Where I live, a giant mattress chain store just went out of business. Why? They didn’t pay sales tax to the next-door state where many of their customers came from. Having what the IRS calls a “presence” in a state is the rule. 


4. Get your quarterlies in on time. The self-employed have estimated taxes due four times a year: April 15, June 15, September 15, and January 15.


5. Charitable Contributions. Charitable contributions typically “flow through” to the individual tax returns of shareholders (unless yours is a C corporation.)  These are the basic charitable giving rules:


6. Avoid the dreaded audit: No one wants an audit. Here are a few tips that can help you avoid one:

  • The charitable organization must typically be a non-profit. See “exempt organizations.”
  • In general, donations of property can be deducted only for their fair market value.
  • Pledges to give cannot be deducted until the contribution is actually paid.
  • Avoid payroll tax problems at all costs. Payroll tax debts are taken seriously by the IRS and must be avoided if you want to avoid an audit.
  • File on time
  • Don’t over-deduct: This is a red flag. If it’s not “ordinary and necessary” don’t deduct it.
  • Don’t do your own taxes: At some point, most small businesses outgrow do-it-yourself tax planning and software. A good accountant and/or bookkeeper is a necessity.

 

About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steven A. Strauss to provide informational materials for your discussion or review purposes only. Steven A. Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steven A. Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


David-Solis3.pngBy David Solis, National Executive, Bank of America Small Business Centralized Sales

 

With so much demanded of them every day, small business owners are often experts in multitasking. Though they’ve learned how to juggle the numerous demands of running their business, tax season can still be a struggle for small business owners, as it requires additional attention and expertise. With recent changes to tax laws, filing 2014 taxes promises to be difficult. There are several things to keep in mind as you’re preparing your taxes this year – including credits and deductions, new tax rules around the Affordable Care Act and the importance of staying organized. Below are some items to keep in mind to ease your burden this spring.

 

Tax Credits from the Affordable Care Act

Many small business owners are concerned about the different impacts of the Affordable Care Act on their taxes. For example, if you’re paying health insurance premiums on behalf of your employees, you are eligible for a tax credit for those premiums. Also, if you have a business with 100 or more employees, you must provide health insurance to 70 percent or more of your full-time equivalent employees, or you’ll face a tax penalty. Be sure to pay close attention to such changes when filing this year.

 

Notable 2014 Tax Breaks

Two important tax breaks have been extended this year for small businesses. One is a $500,000 maximum deduction for the price of any qualifying equipment or software that you purchased or leased in 2014. “Qualifying equipment” can include software (such as your accounting or marketing software), computers, office furniture and/or business-use vehicles (such as a delivery van). In addition, you can depreciate 50 percent of the cost of qualifying equipment. That means you can deduct the cost and then receive an additional deduction from depreciation. Combined, these two tax breaks can result in significant savings for a small business.

 

Utilize the Appropriate Resources

Trying to do taxes on your own might not save you as much money as you think. Bookkeeping and filing taxes takes time—time that you could be spending growing your business, developing new products or services or helping clients. Should you choose to work with an accountant, finding the right one and developing a good relationship with him/her is crucial. Finding the right accountant is something you should consider talking to your small business banker about, as they often work closely with accountants in local communities and could connect you with one that specializes in your industry or size of business.  Theycan help you stay on track with your taxes, including quarterly estimated tax payments, all year long—kind of like a personal trainer for your finances.

 

If you think you’re up to the task and choose not to work with a CPA, there are plenty of do-it-yourself options during tax season. The more straightforward your business is, the more it may make sense for you to use tax preparation software.

 

Stay Organized

Staying organized throughout the year can save small business owners a lot of headache during tax season. This means keeping a detailed log of all travel and other expenses as they are incurred. Use whatever method works for you, whether it’s hiring a secretary, using an excel spreadsheet or handwriting the information in a notebook. Proper documentation will make tax preparation simpler, increase your money-saving options and avoid any upsetting surprises.

 

Want to learn more about tax-saving strategies? In March’s Bank of America Small Business Social Series, a panel discussed tax season and tips for small business owners. The Google+ Hangout was moderated by CNBC’s Carol Roth and included David Solis from Bank of America, USA Today’s Steve Strauss and Ebong Eka, CPA and small business tax expert. They discussed strategies for surviving tax season.  Click here to watch the video replay.

New entrepreneurs are a hearty, impressive group of people. Typically full of enthusiasm, optimism, and a willingness to do whatever it takes, they will jump into their new adventure sure of many things, unsure of a few others, and sometimes with an unwillingness to admit the difference.

 

And while that can-do attitude is great to have when you leave a job and start a new business, some things simply cannot be overcome by sheer force of will, and one of those things is the nitty-gritty analysis needed to figure out just how much it is going to cost to get your new venture up and running.

 

This info is critical to know because:

  • It will establish how much money you need to raise before you get started
  • It will help you figure out a budget and timeline for getting to profitability

 

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So, just what are those startup costs actually going to entail? They can roughly be broken down into two broad categories: Assets and Expenses. Let’s look at each:

 

1. Assets: You need to make a list of what you will need to buy to launch this business, and then estimate (to the best of your ability) what each one of these assets will cost. For example, if you are going to start a nail salon, you will need to account for the cost to build the stations, purchase the nail polish and other inventory, the cost for signage, and so on.

 

Assets businesses might find on this list include:

 

  • Computers and printers
  • Displays
  • Office supplies
  • Desks, chairs, filing cabinets, office furniture
  • Product packaging

 

Click here to read more articles from small business expert Steve Strauss

 

2. Expenses: There are two types of expenses to account for when you start a business – one-time startup expenses and ongoing expenses. For this analysis of startup costs, they need to be treated differently:

 

One-time expenses:

 

  • Legal and accounting expenses
  • Licenses and permits
  • Website creation
  • Remodeling / decorating
  • Deposits

 

Ongoing expenses:

 

  • Marketing, advertising, and related materials
  • Rent
  • Taxes
  • Insurance
  • Debt repayment
  • Utilities, Internet, phone
  • Wages
  • Salary of owner
  • Supplies

 

Once you have all of these numbers, the real trick is figuring out how to put them together in such a way that you really know what it is going to cost to get started.

 

The first few categories are pretty straightforward. Simply come up with a grand total for the assets you need to buy, as well as for your one time-expenses. For the sake of argument, let’s say that assets will run you $10,000, and that your one-time expenses are $10,000 too -- $20,000 total.

 

The real trick is that last category – ongoing expenses. A good rule of thumb is that it will take you at least six months after you begin your venture to start turning a profit. Of course, it could be more or less, but that’s a good figure to play with as that is how long it may take to market and advertise your business, get some customers, generate income, and get paid.

 

As such, you need to estimate what your ongoing expenses will run you for the first six months. Let’s say that it will cost $5,000 a month to run your business. That means that your startup expenses will break down like this:

 

Purchase of assets:                     $10,000

One-time expenses:                    $10,000

Six months ongoing expenses:  $30,000

 

Total:                                              $50,000

 

$50,000 is how much money you will need to open the business, outfit it, and have enough money in reserve to pay yourself and keep the doors open until you turn a profit roughly six months later.

 

Word of warning: Don’t underestimate these numbers. One of the worst things you can do is start a business and run into a cash crunch a couple of months down the road because your forecast was too rosy. Be conservative.



About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

http://www.smallbusinessonlinecommunity.bankofamerica.com/people/Steve%20Strauss/content

You can read more articles from Steve Strauss by clicking here





Biz_Debt_body.jpgby Iris Dorbian.

According to statistics compiled by the Small Business Administration, about half of small businesses close within five years. Of the reasons cited, insufficient cash flow and debt are among those commonly listed. Clearly, for small business owners struggling to survive and stay financially afloat, getting rid of debt should be a top priority.

But the question is how? Although the economy has been gaining considerable momentum since the dark days of the recession, there are still many business owners who are suffering the aftereffects of having taken out loans during that period to pay their bills or increase their cash flow.

The following are five suggestions courtesy of Debt.org., an Orlando, Florida-based site that offers people information on relieving debt. These takeaways should help small business owners eliminate or significantly reduce their financial burdens. 

1. Do a monthly budget

This will help you calculate just how much money you need for your business and how much can be earmarked for paying off your debts.

2. Cut costs

Sometimes just trimming excess expenses from an operating budget is enough to get a business through troubled times. Are there membership fees to groups and organizations that you no longer need? Cancel them so the money isn’t coming out of your account every month or quarter. If there is equipment that your business no longer uses consider selling it. If you do need it down the line, it might be more cost efficient to lease or rent it.

Biz_Debt_PQ.jpg3. Speak to creditors and/or vendors

If you owe them considerable money for past services rendered, try to speak to them about arranging to increase your credit line, reduce monthly interest rates, or restructure your repayment options.

4. Consolidate loans

Dealing with one creditor rather than several can lighten your financial burden and save time. Research loan consolidation companies that can help you navigate the process without tacking on additional fees.

5. Offer marked down items to customers

Not only can this elevate your profile within your community and attract customers, both new and regular, to your business (you can promote a big sale or discount at your store through print/digital media as well as word of mouth), but it might be a good way of generating extra income that can allow you to stay on top of bills.

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