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You will never believe what happened to me this week…..I had a free phone consultation with a new prospect on Tuesday. After 15 minutes on the phone, she was sold. I’m sure the fact that I was highly recommended by a current client helped a great deal. We ended the conversation with her stated that she wanted me to be her new accountant and she will being using my firm for both her business and personal returns. Two days later…..I got a call from another new client. Guess who referred him? You got it! The new client from Tuesday. Is that awesome or what?  That was certainly the highlight of my week. 

I am so grateful for the fact that 90% of my new clients have been acquired by referred by existing clients. I am so grateful for the fact that I have clients all over the country, many of whom I have never personally met. I am so grateful for the fact that after 15-30 minutes on the phone a potential client can see the value in the services we offer and are ready to move forward. I am grateful for the many clients like the one this week, that will refer someone to me before they even transact any business with me. 

So what’s my secret? Well…..I’m genuine. I truly love what I do and I believe people can immediately sense that. I sincerely strive to build a relationship with my clients. I like hearing about their kids, vacations, wedding plans and business goals. When the need arises, I patronize my clients businesses. I am always on the look out for potential referrals or gate openers for my clients. They know when they hire me….they get a new business partner. 

So I say again….who else needs a GREAT accountant?  A wise man once said….”it ain’t braggin if it’s true”

12 Common Bookkeeping Mistakes to Avoid

1. Commingling funds – So many business owners are guilty of either using the business account to pay for personal expenses or paying business expenses through the personal account. This is a big NO NO!

2. Misclassifying workers – Times are tough and staffs are getting smaller and smaller. Many business owners are classifying workers as independent contractors when they really are employees. This mistake can shut your business down.

3. Not reconciling books to bank statements each month – This is a practice that should be done each month. It ensures that all charges on your bank statement are legitimate and it also ensures that all charges on your bank statements are recorded in your books.

4. No backup – A paper trial of documentation should exist for all computer records. Technology is a wonderful thing when it works. Telling an IRS audit that your computer records were stolen or lost in a fire will not be sufficient.

5. Miscategorization or over categorization – This occurs when expenses are either recorded in the wrong category or there are too many categories created.

6. Improper use of petty cash – A system must be put in place where a set amount of money is placed in the petty cash fund and accurate records of expenses and replishments are recorded.

7. Missing deadlines – Filing returns late can create unwanted penalties and interest.

8. Excluding startup expenses – Failing to keep accurate records of the expense incurred prior to opening the business doors. These expenses are often time paid from the personal account and are often times overlooked.

9. Including equipment purchases with supplies – Equipment is a capital expenditure, and capital expenditures have to be depreciated, which means they get written off over several years.

10. Improper auto expenses – There are many options for calculating deductions when you use your car for business. (Actual expenses OR mileage)

11. Claiming too much for gifts – You may claim gifts given to your client but keep in mind that you can only deduct $25/per client/per year. So if you give a $50 gift you can only deduct $25/per client per year.

12. Writing checks out of sequence - Writing checks out of sequence opens your business up to theft from employees or vendors. 

Have you heard a tip that you didn’t know about?  Which one?  What are you going to do to clean up your books?  We’d love to hear from you.

SECRET TAX TIP #6

Avoid Extra Tax With A Wise Business Purchasing Plan!

Avoid the dreaded Alternative Minimum Tax by postponing purchases of depreciable assets or leasing rather than purchasing depreciable assets in years when you have high income and itemized deductions.  The alternative minimum tax is calculated by adding to your alternative minimum tax base any accelerated depreciation taken in a tax year.

Most busy business owners are not paying attention to the tax consequences and real money saving ramifications of their purchases.  In many cases, armed with up-to-date sales and revenue figures (especially 6 or 8 months into the year) you can properly plan when the best time would be to purchase that next “big thing” you need to run your business.  And again, in most cases, you can wait a couple of months and buy after the first of the year or in other cases, spend the money before December 31st.  Hey, on large purchases, it really does make a huge difference on your tax return!

SECRET TAX TIP #7

Defer Taxes Owed By Following The Installment Sales Rules

Use the Installment Sales rules to defer the tax you have to pay when you sell property by structuring your transactions so that you receive payments from the sale in more than one year.   For example, if your gain on the sale of property would be $40,000, you would owe tax on only half of that amount if you arranged to receive only half of the cash for the sale this year.

Too often, greed sets in and people want to get paid all up front.  But, if a deal is structured properly, getting paid some now and some over the next couple of years tends to dramatically help on the tax side of things.  Now of course, you don’t know what is going to happen with your financial picture in the future, but you might as well defer as many tax dollars as possible now and make other adjustments with future money in those coming years.  If given a choice, most of us would choose to give Uncle Sam his money later rather than earlier.

Now, those are 7 STRATEGIC ways you can benefit from the existing tax code and increase your profits this year.  But obviously there are thousands more tax savings strategies available.  Depending on your specific tax situation, you can use them all (if they apply) if you wanted to.

To be effective in any business, not only must you do a good job at selling your product or service, but it is imperative that you keep good records. Tax records are no exception to the rule. Did you know that when you don’t keep up with your expenses, you end up overpaying your taxes? Tax rates are high enough, and there’s no need to pay more than your share.

The tax codes allow for business owners to take deductions for legitimate business expenses. As a realtor, you are considered self-employed (that’s if you have not formed a partnership or corporation). As a self-employed individual, you are required to report your business income and expenses separately on a Schedule C.

So what’s deductible? Here are a few that might fit your situation:

Auto Expenses. As a realtor, one of the major expenses you can deduct is the business use of your vehicle. You may either deduct the standard mileage rate or the actual expenses for the amount of business use. It is very important that you keep a mileage log. Your mileage logs should document all your business use of your vehicle. The standard mileage rate for 2008 is a flat rate of 50.5 cents per mile from January 1 – June 30.  It was increases to 5.5 cents per mile effective July 1, 2008. If you don’t use the standard mileage rate, you may be able to deduct actual expenses including depreciation, insurance, lease payments, registration, repairs, tire purchases, gas, oil and license fees. Even if you opt to deduct the actual expenses, you are still required to keep a mileage log. The mileage log is what is used to determine the percentage of use. For example, if you drive 500 total miles in one week, 250 are business and the other 250 are personal, your percentage of use is 50%. You would be able to deduct 50% of your actual expenses.

Gifts. For new or returning clients, you may choose to offer new home or closing gifts. Please note that for each client, you may deduct up to $25 per client per year for these gifts.  Any thing above the $25 threshold is not deductible.

Meals & Entertainment. Business and entertainment expenses are deductible as well. Travel away from home for business, conventions, or conferences are considered deductible expenses. The costs involved with entertaining clients at restaurants or clubs are also deductible. Good recordkeeping is a vital part of establishing your claim for these expenses. It’s a good idea to include details about the involved parties and the business purpose of the expenses. These records are not necessary for preparing the return, but are needed for audit purposes.

Health Insurance. Self-employed individuals are entitled to a health insurance deduction. You can deduct 100% of the amount paid for medical and qualified long-term care insurance for you and your family in a plan established under your business.

There are many other legitimate deductions for Realtors, and we can work together to realize your tax savings. Avoid needless overpayment on your taxes and seek our professional advice.