Donating to Charity: Quick Tips for Safe Giving

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After setting up and successfully running your own small business, it’s an empowering and fulfilling thing to know you can give back to your community or really support a cause in which you believe. In addition to giving back to the community, you can also take advantage of tax deductions for your charitable contributions during tax season. However you choose to give as a small business, you should make wise choices in giving that will give you a real sense of satisfaction, reflect positively on your business, and also not cheat you on your generous dollars.

Before you write that check, set a plan in place for how much you would like to budget for charitable giving each year. That way you can spread out your charitable contributions and provide a framework for what types of charities and the total annual amount your business can afford to give. 

Here are some safety tips to guide you:

Choose a charity or cause wisely. If you are not very familiar with a charity’s work, investigate the group before you make your donation. Overall, it is best to contribute to an organization that you already know. You may also inquire about the exact service or activity your funds will end up supporting. Honest charities should be willing to communicate with their donors about their spending activities. Additionally, it does pay to do a little research on your chosen charities to be sure that they are legitimate nonprofit organizations. Try using online verification sites such as Charity Navigator to review ratings and check the status of your prospective nonprofit with objective feedback from other users.

For tax purposes, ensure that the charity is tax-deductible. Some nonprofit organizations participate in political activities that prevent them from accepting tax-deductible donations. If you donate to these organizations, you will not be able to deduct your donation on your federal tax return. If the organization is “tax exempt,” this simply means that they do not have to pay taxes, but it does not necessarily mean that your donations are tax-deductible. Ask the organization for its tax status to be clear and look for a nonprofit 501c3 federal status.

Be sure to obtain and keep a record of your donation. In addition to helping you properly manage your bookkeeping and cash flow, having a record for your donation will also be needed to deduct taxes at year end. If you contribute less than $250, you may present a bank record, a cancelled check or a receipt or letter from the charity. The receipt or letter must have the organization’s name, the date, and the amount that you donated. If you contribute more than $250, the IRS will not accept a cancelled check alone – you will have to furnish a receipt from the charity.

Be careful when donating online. Donating to a charity online offers many conveniences, but can also be disadvantageous. When donating to a charity online, make sure you are already familiar with the charity, then make sure there is a working contact for the charity. A physical address and phone number are fair indications that the charity is not a scam. Be sure that the organization is still current with the information you view on their website. Many nonprofits do not update their websites regularly. Be sure the site uses encryption technology to protect your personal payment information, and also make sure there is a privacy policy. Print out the confirmation of your donation and keep it for your records and for tax filing. Donations to foreign charities are not – of course – tax deductible.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations. To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Copyright Information 2018 Professional Association of Small Business Accountants

Estimating Small Business Start-up Costs

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No business ever starts with the problem of having too much money. Barring a lottery ticket win that spurs endless cash into a venture, most entrepreneurs take the leap into business ownership with a shoestring budget and gut determination. If you’ve ever sat down with a business advisor one of the first questions asked will be, “How much money do you have to start?” It’s a reasonable question that leaves many budding business owners scratching their heads and feeling defeated before they’ve even begun. Exactly how much is enough?

 

In 2009, The Kaufmann Foundation estimated that a new business start-up required on average $30,000.  While that may have been for a brick and mortar Main Street business, many micro-businesses can start with significantly less, somewhere in the $3,000 range.  Home-based franchises can start with even less financial commitment anywhere from $500 to $2,500.  But this all still feels like speculation and as anyone with a checkbook knows, it’s important to know where the money is going and how much to plan for the coming weeks and months.

 

Let’s start at the beginning.  You’re sitting at your kitchen table ready to take your business idea to business reality. What’s first?

1.      Begin tracking expenses as soon as possible. Associated costs with starting the business can be deducted up to $5,000 in the first year before your business even makes its first sale.  Costs above and beyond the first $5,000 will need to be amortized over a period of 180 months starting with the first month your business opens.

a.      Market research – Often involving more time than money, market research can include even your mileage costs to the library or the related costs for purchasing key industry reports. Costs for these can range from just your time to several thousand dollars depending on the depth and qualify of your research.

b.      Secure your business name by registering with your country clerk or state government. If you are using a Doing Business As, or DBA for your sole proprietorship, Partnership or Limited Liability Corporation (LLC), you’ll need to register this name.  Check with your individual state and county for specific rules, but costs can range from free to $1000 depending on your state and business type.

c.      Travel – Keep track of any travel to view potential business locations as these can be deducted.

d.      Consultants – Lawyers, accountants and business advisor fees can all be counted as start-up expenses. Plan on spending anywhere from $75 to $250 per hour for consulting fees.  You’ll want to budget more if the business is complicated or will require ongoing consulting support or patent work.

2.      Start-up Calculators can give you a good ballpark number. You can use a quick start-up planning calculator by going to Entrepenur.com or at the Wall Street Journal. If you determine that your expenses are too high, take another pass at the numbers and see what can be trimmed. Instead of purchasing expensive software licenses, try some of the cloud-based programs.  If buying hardware is too costly, investigate leasing agreements instead. Once you have a good starting point, you’ll want to take those estimates and formalize them into a full-blown business plan. While business plans may seem like drudgery, they are a necessity for a successful start-up.

3.      Talk with other business owners and gain the value of their experience.  Reach out to other business owners both in your industry and in a range of other business types. You’ll glean a realistic picture of costs, ways to reduce them, and learn some of the potential pitfalls of business ownership.

4.      Develop a plan to cover your operating costs for the first month and a large list of potential customers.  Knowing who your customers are and how to speak to them will help you immediately put sales vehicles into motion. Buying customers mean cash can flow into the business as soon as the doors open.

No list can be exhaustive on all of the line items you’ll want to cover before opening your business. The start-up calculators and a full business plan will be the best road map to gauge financial readiness.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.

To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Tax Credits Just for Small Business

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Tax credits are important for business. For each tax credit dollar, the tax payer will receive one dollar in tax reduction. There are certain tax credits earmarked specifically for small business use. Let’s review each one as well as the definition of small business as each credit may have different assumptions.

1. Research Credits – The IRS recently issued additional guidance (IR-2017-70, March 30, 2017) explaining how small businesses can take advantage of research credits. There is a new option available that allows small businesses to apply part or all of their research credit against their payroll tax liability, instead of their income tax liability. The new provision, found in the Protecting Americans from Tax Hikes (PATH) Act makes the tax credit available for income tax returns filed for 2016. To qualify, “a business must have gross receipts of less than $5 million and could not have had gross receipts prior to 2012.” A business can opt to use this credit for up to $250,000 of eligible research credits against its payroll tax liability by using Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. The form must be attached to its payroll tax return and accompany for 941, Employer’s Quarterly Federal Tax Return.

2. Small Employer Health Care Credit – If you have fewer than 25 full-time equivalent employees making an average of $50,000 a year or less, you may be eligible for the Small Employer Health Care Credit, which is worth up to 50% of the cost you pay for employee health coverage. Nonprofit employers can receive up to 35% of the cost paid. You must also offer your full-time employees coverage through the SHOP Marketplace. Note that you do not have to offer dependents of employees or employees working less than 30 hours per week health coverage in order qualify for the credit. The credit is highest for businesses with fewer than 10 employees who are paid an average of $25,000 or less.

 

3. Disabled Access Tax Credit – Available to small businesses that pay the cost of access for disabled employees and customers can receive a tax credit of 50% of expenses over $250 but not greater than $10,250 (not greater than $5,000 per year). For this tax credit’s purpose, a small business is considered one with gross receipts not exceeding $1 million in the preceding tax year and no more than 30 full time employees (FTEs). Eligible expenses can include:
a. Removing barriers to access
b. Providing interpreters
c. Methods to provide access to hearing impaired individuals
d. Readers or devices for visually impaired individuals
e. Any equipment or devices for individuals mentioned above.

4. Start a retirement plan – If you are a small business owner with under 100 employees and haven’t already started a retirement plan for you and your employees, there’s no time like the present to put one in place. The credit was designed to offset some of the initial costs for administering the plan and educating employees about its purpose and use. The plan must be a qualified retirement plan such as a simplified employee pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) or Keogh plan in order to claim 50% of the start-up costs up to $500 per year for three years. There are countless rules and regulations that encompass retirement plans, so work with an administrator or financial advisor to ensure that you meet your required obligations.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.

To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

What is PASBA?

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PASBA stands for the Professional Association of Small Business Accountants. It was formerly known by the name of the National Association of Small Business Accountants. This organization was founded in 1982 with the idea of strategically organizing small business accountants and bookkeepers to operate in a more efficient manner.

PASBA stands for the Professional Association of Small Business Accountants. It was formerly known by the name of the National Association of Small Business Accountants. This organization was founded in 1982 with the idea of strategically organizing small business accountants and bookkeepers to operate in a more efficient manner.

Over the years, these accounting professionals would meet at conferences and events to discuss the rigors of their work. They soon realized and agreed that many small business owners were neglected when it came to their accounting and tax preparation chores.

Sure, larger businesses have an entire department of professional accountants and bookkeepers but what about the small business owner who may only employ a few people? This is the group of people for which PASBA was formed.

PASBA believes that when a small business owner has a trained professional to do his or her bookkeeping and accounting, then he is much more likely to succeed. It stands to reason that if you are lying awake at night wondering if you’ve properly prepared IRS tax documents like Form 941, then you won’t be your best the next day at work.

As a small business owner, it’s important for you to concentrate your time and efforts upon the area of your expertise. If it’s sales, then you should be out selling; not in the office trying to figure out how to use your accounting software.

Small business owners agree that their work is much easier when they employ a professional service. PASBA is here to help you locate the one that’s right for your business. We take all the guess work out of finding an excellent accounting and bookkeeping service that fits into your budget.

Our service is open to you 24 hours a day, seven days per week, so if you’re up late, burning the midnight oil, you can visit the PASBA website and find a professional bookkeeping services or an accountant who will partner with you for ultimate success in your small business.

Stop lying awake at night worrying about your payroll, accounts receivables and payables. Let a PASBA Pro take over the accounting chores at your small business. We are committed to your success.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants,  Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations. To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice.  Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Copyright Information 2011 Professional Association of Small Business Accountants

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Selecting the Right Accounting Firm

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Owners of small businesses place much emphasis on fees when choosing their accounting firm. Fees are an important factor and need to be affordable. Often, however, business owners compare fees yet fail to scrutinize big picture issues such as: Qualifications, Expertise, Reputation, Reliability, Consulting and Communication Skills and Overall Performance.

Like all businesses, professional firms develop a fee structure by comparing their pricing to other firms providing comparable services. Firms that provide a higher quality service charge higher fees and visa versa.

Owners of small businesses place much emphasis on fees when choosing their accounting firm. Fees are an important factor and need to be affordable. Often, however, business owners compare fees yet fail to scrutinize big picture issues such as: Qualifications, Expertise, Reputation, Reliability, Consulting and Communication Skills and Overall Performance.

Like all businesses, professional firms develop a fee structure by comparing their pricing to other firms providing comparable services. Firms that provide a higher quality service charge higher fees and visa versa.

Experienced decision makers know how to evaluate both factors before making a decision: Price and Performance. While price is a consideration, the overall results a firm can deliver is the primary factor in determining which accounting firm to select.

To help your business increase profits, cash and business growth, select the accounting firm from the classification that is best suited to meet your needs.

Recordkeeping 101

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Small business recordkeepingEven with the information and technological age upon us, it is still critical for small businesses to keep a well-organized set of physical records. Often one of the first questions business owners ask when meeting with an accountant is about recordkeeping and the length of time all of those little receipts and trails of register tapes should be kept.

Small business recordkeepingEven with the information and technological age upon us, it is still critical for small businesses to keep a well-organized set of physical records. Often one of the first questions business owners ask when meeting with an accountant is about recordkeeping and the length of time all of those little receipts and trails of register tapes should be kept.

There’s a very good reason to invest in some good filing cabinets, electronic data back-up, and off-site data storage – the IRS has every right to request these documents for up to seven years after you file the business’ taxes. Failure to produce this documentation, even in the event of a disaster, won’t excuse your liability in the eyes of Uncle Sam. To protect yourself and your documentation, it may be wise to invest in an off-site data storage. Companies specializing in data storage can make electronic copies of your physical records and digitally store them. Your physical records along with your electronic bookkeeping should be backed-up both at your physical business location and remotely for security and restoration purposes in the event of a catastrophe at your business’ location.

Why keep financial records?

Every business needs a good understanding of where it stands with regard to tax purposes. Without a proper set of books business owners are left without any understanding of their tax liability for quarterly tax purposes. Failure to make the payments or keep accurate records could expose the business to state and federal tax audits, fines and even risk closure of the business. That being said, the key information to keep should include:

  • payroll
  • income statements, and
  • a summary of all business transactions.

Many young businesses in their second and third years will use previous year’s reporting as a baseline for what they should expect to pay in quarterly tax payments. The cautionary tale is that if your business is in a strong growth period, you may end up facing serious shortfalls in estimated tax payments. The result will be a figure that’s considerably higher than what you budgeted. It’s impossible to manage what isn’t being measured. Accurate accounting up front can alleviate many headaches later.

Solid recordkeeping also helps you to monitor inventory, control expenses, fulfills payroll requirements, improves cash flow and allows you to see trouble spots before they become potentially ruinous.

Gross Receipts

In businesses with multiple registers, it is advisable to keep ALL receipts from each register. For example, state revenue departments require substantiation for how a restaurant calculates and pays its meals taxes. The restaurant owner must demonstrate the gross sales, taxes collected and then in turn pay taxes based on daily register receipts. File receipts together by month, and then by year for a minimum three years. Even if the restaurant is using an electronic accounting system like Retail Pro®, they will still need to provide the auditors with detailed physical receipts and register tapes in order to substantiate what the electronic recordkeeping is showing. The auditors will take a sampling of one or two months of receipts and then narrow their focus to one to two weeks. If things don’t add up, that’s when the state or federal revenue department can then request multiple years of financial documentation for the audit.

Employment Taxes

If you have employees (including yourself if you’re a corporation) then you had better be sure you’re collecting and paying the right amount of employment taxes or face serious consequences in penalties. The IRS advises that business owners keep all records of employment taxes for a minimum of four years.

Assets

Physical assets include equipment, vehicles and even furniture owned by the business. Maintain receipts for date of purchase, maintenance costs and even taxes paid (especially for vehicles) for the life of the purchase. Each year, you’ll need to reference these documents in order to calculate depreciation. The typical open audit period is the current year plus three, however if the business is purchasing assets, the receipts need to be kept permanently in order to determine depreciation and if the book value of the item if it is sold.

A tidy set of records will greatly reduce your stress because any information you need about your business’ financials will be at your fingertips. If you need assistance to set up an accounting system, you can easily locate a PASBA accountant by visiting the web site at www.SmallBizAccountants.com and click on the Find an Accountant link.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants,  Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations. To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice.  Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Copyright Information 2011 Professional Association of Small Business Accountants