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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”

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.

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.

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.

When determining whether your workers are employees or independent contractors, there are several factors you must consider.  The traditional test to determine a worker’s status involves the concept of control.  The IRS developed 20 factors to resolve a worker’s status as an independent contractor under the common law.  The burden of proof is also on the taxpayer.  It is understood that at least 11 of these factors should present evidence of an independent contractor’s status under the common law tests.

For the following questions, answering “yes” means the worker is an employee.

1. Instruction. Does the principal provide instruction to the worker about when, where, and how he or she is to perform the work?
2. Training. Does the principal provide training to the worker?
3. Business Operations. Are the services provided by the worker integrated into the principal’s business operations?
4. Exclusivity. Must the services be rendered personally by the worker?
5. Control of Assistants. Does the principal hire, supervise and pay the worker’s assistants?
6. Continuity. Is there a continuing relationship between the principal and the worker?
7. Schedule. Does the principal set the work hours and schedule?
8. Availability to Others. Does the worker devote substantially full time to the business of the principal?
9. Location. Is the work performed on the principal’s premises?
10. Directions. Is the worker required to perform the services in an order or sequence set by the principal?
11. Reporting. Is the worker required to submit oral or written reports to the principal?
12. Pay Frequency. Is the worker paid by the hour, week, or month?
13. Discharge at will. Does the principal have the right to discharge the worker at will?
14. Termination. Can the worker terminate his or her relationship with the principal any time he or she wishes without incurring liability to the principal?
15. Reimbursement of Expenses. Does the principal pay the business or traveling expenses of the worker?
For the following questions, answering “yes” means the worker is an independent contractor.

1. Tools. Does the worker furnish his/her own significant tools, materials and equipment?
2. Investment. Does the worker have a significant investment in facilities?
3. Profit or Loss. Can the worker realize a profit or loss as a result of his or her services?
4. Other Clients. Does the worker provide services for more than one firm at a time?
5. Availability. Does the worker make his or her services available to the general public?

Keep in mind that if you are found misclassifying an employee, you could face substantial penalties.  This article is intended to give the reader an overview.  It should not be taken as legal or accounting advice.  Seek our personalized, professional advice to guide you through the intricacies of tax matters.  Call us today for a business consultation  678-608-2775 .

1. “Free” Counsel – If I hear this one more time, I think I’ll scream. “My cousin’s plumber said I could deduct my haircut because…..blah blah blah”. Now, why do business owners have such a tendency to take advice from everyone but the professional? One of the fastest ways to kill your business is to keep listening to everyone but the professional, trying to save a buck. Think about it, do you call your electrician when you have a toothache? No, that’s ridiculous right? Well why do you get tax advice from your cousin’s friend’s plumber? So if you want to stay in business for years to come, pay for professional advice!

2. Your Buddies – Going into business with family and friends can be a nightmare. One of the biggest issues when going into business with family and friends is the lack of formalization. Here’s the scenario, sisters go into business together and they forget about creating a partnership agreement or an exit strategy. They just know that they love baking and they want to sell their delicious treats to the world. But problems arise when the bank account is empty and the creditors are calling. Or even worse when the phone stops ringing or the doors are not swinging open. If you must go into business with a family or friend, be sure to put everything in writing. I can’t stress the importance of knowing how you will handle the tough situations before they happen.

3. Plastic – As soon as you get a business license, incorporate in your state, or register for a Tax ID number using your business name, you get on the dreaded marketing list. Everyone will try to offer you something, i.e. merchant accounts, uniforms, marketing postcards, free checking accounts, phone service, and the biggest culprit of all….a Business Credit Card! Though a business credit card can be useful to the growth of your business, be careful of the trap. The interest rates on credit cards are outrageous and it’s a very dangerous way to finance your business. I recommend, if you do use a business credit card that you pay your balances off each month. That way the interest rate is not an issue.

4. Time Clock – Salaries and wages often times accounts for over 50% of all business expenses, mostly because the payroll taxes. As an employer you are responsible for not only matching your employee’s Social Security and Medicare Tax but you must remit them to the IRS. If you don’t, you will be in serious trouble. Failure to remit payroll taxes could result in the IRS coming by and shutting your doors for good. So it’s a good idea to subscribe to a payroll service or hire a professional to handle the payroll.

Owning a business includes more than just selling your product or service. Seek professional advice on areas that are not your area of expertise. Call us today for a free consultation 678-608-2775.