Author Archives: CPAsteve

Figure Out Your Small Business Software

There are many different types of accounting software available for small businesses such as industry leader, QuickBooks, and online resources like Freshbooks, GoDaddy Bookkeeping, and Xero all enable small businesses to keep track of expenses, accounts receivable, bank reconciliation, checkbook registers and even create profit and loss statements.

 

Deciding which software is right for your growing enterprise can be complicated. Here’s a brief list of some of the best features and how these programs can fit into your business’ needs.

 

Quickbooks –  One of the most popular accounting programs in the small business world for a very good reason, Quickbooks has evolved over the past several years into a user-friendly software package that includes almost any feature a small business owner might need. On top of that, the technical customer support offered is top notch. It offers time tracking, payroll, customer and vendor portals, and inventory tracking. New versions even offer mobile access.

 

Freshbooks – newly redesigned from the ground up in 2017, Freshbooks provides an exceptional user experience with improved collaboration. This software is great for independent contractors and freelancers who need to track multiple clients and maintain strict control of their finances. Time tracking is available allowing the user to track hours or even partial hours worked so they can be billed at a later time. The recent updates did provide new insights and functionality, but did miss the mark with some of the reporting and customer records missing from the upgrade. Hopefully, future releases will bring back some of those loved features.

 

GoDaddy Bookkeeping – Another solid program for freelancers and independent contractors, GoDaddy Bookkeeping provides all major A/R and A/P transaction forms, time tracking, and live support.  With one of the lowest pricing structures, this software can fill an immediate need for accounting controls to get your freelance business up and operational. The software integrates with Amazon, eBay and Etsy making it easy to link sale directly to your bookkeeping. Bear in mind, that if you are looking for an expandable, scalable software, this one may need to be replaced with a more robust option down the line.

 

Xero – This double-entry accounting app excels at many of the small business basics such as records and transactions that support sales, purchases, and even payroll.  If you are a little more software savvy, you won’t miss the phone or tech support that other programs provide, but the lower cost may offset that pain.  Be advised that payroll tax management is not available for all states, so do your research before you buy.  

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Obvious ways to Save in Your Small Business

As a small business owner, you know how imperative it is for your business to save money. Entrepreneurs need to be nimble, resourceful,  and creative to keep the business robust enough to survive the ever-changing tides of a changing global economy. With gross receipts of less than $1 million annually, small businesses often live with very tight margins, cash flow fluctuations and more dramatic ebbs and flows in sales volumes. Having money to fall back on during the rainy seasons can really help a business remain steady while the storm passes, or bounce back after a challenging period. There are a number of strategies to help save money and increase cash flow to grow your business.

  • Turn out the lights.  Seriously. Electronic waste is one of the more obvious and costly ways a business can lose money without really noticing. Lights, computers, and machines kept running for long periods when they are not in use can quickly increase costs on your monthly electric bills.  Wherever possible, invest in motion lights and energy-saving bulbs and talk seriously with your employees about shutting down computers and other machinery at the end of a day. Local electric companies have business savings programs that include on-site evaluations and rebates for switching older fluorescent lighting to energy-saving dimmable LED lights that are not only more cost-efficient, but can help with harsh lighting and even reduce eye strain and migraines in employees.

 

  • Shop around and negotiate. Before you dish out money on supplies, equipment, or services, shop around. Check out other companies selling similar products or services and compare their quality, prices, and offers. Many people spend more on products or services that they could have purchased for less elsewhere. Ask about discounts and don’t be afraid to negotiate with your suppliers

 

  • Lease equipment. Depending on your business needs and how your write off your purchases, it may make sense to lease equipment versus buying it outright.  Leasing allows you to pay less than full market price for the item(s), the ability to turn it in for upgrades sooner with less costs, include maintenance costs into the lease,  and if you wish to purchase the item at the end of the lease, negotiate the value upon purchase. Conversely, leasing may add up to higher end costs for the item and if it is a long-term lease, you may end up owning the item for longer than your originally intended, so be sure you buy quality items that will outlast their lease agreement.

 

  • Use recycled or used supplies or equipment whenever possible.

 

  • Know your tax deductions. Your business may qualify for several tax deductions each year. Make sure you understand your tax situation and plan for purchases, rebates and other tax incentives in advance of any new initiatives.

 

  • Watch your spending. It is easy to get carried away with your spending – you may not need an expensive piece of abstract art for your waiting area when there are many less expensive, just as lovely options available. On the other hand, that piece may translate to added value and customer appeal, depending on the kind of business you’re running. You know what you need and what you don’t – don’t spend money on items that are really unnecessary and that won’t redeem their worth.

 

  • Use electronic communication methods such as e-mail, GoTo Meetings, and Video conferences whenever possible.  Not only can to reduce travel expenses to clients, but you can save countless hours of lost travel time out of the office by working virtually. Sometimes you do need to make those face-to-face meetings with clients, so make those meeting opportunities really count. Send a set agenda, so clients can budget their time accordingly and you can add additional client visits on your journey.  For other times, a video conference will do the trick saving you and your client the additional time out of work. Take advantage of the technology available to you – it will save you the cost of manhours, travel, and lost productivity.

 

  • Use bulk shipping and mailing. By scheduling your shipments for certain times or days, you can take advantage of lower delivery expenses as well as special post office rates.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Strategizing Charity Under The New Tax Act

There are many winners and losers from the recent Tax Cuts and Jobs Act passed by Congress in December 2017, and nonprofits may be one of the biggest losers. While you may still plan on contributing to your local charity in 2018 and beyond, it will be harder for you to receive the tax benefit due to an increase in the standard deduction.  While not everyone gives to charity to take a tax deduction, there will be a substantial downshift in the quantity and frequency of contributions that nonprofits may start to see. The upside is that these impacts are ‘temporary’ as a part of the TCJA and will phase out by 2025 unless extended by Congress.

 

What’s changed?

 

A major part of the TCJA was a simplification in tax filing. This streamlining resulted in an increase in the standard deduction from $6,350 to $12,000 for single individuals and $12,700 to $24,000 for married couples.  It is estimated that the approximate 30 percent of tax payers who currently itemize their deductions will drop to about 6 percent in 2018. That translates to a drop of between $12 billion to $20 billion in charitable giving and charitable tax deductions according to the Tax Policy Center. Less itemized deductions means less opportunity for would-be donors to take a tax deduction for their charitable giving. Nonprofits are already bracing for the financial black hole that is to come.

 

Taxpayers are thinking strategically about their charitable giving, too. The New York Times wrote recently about the option of ‘bunching’ charitable contributions. Bunching is where instead of making annual contributions to charity, tax payers would accumulate donations over several years and make them in one year’s worth of gifts in order to take the larger itemized deduction and receive the tax break. But what happens to the nonprofit that counts on a steady stream of income and now faces substantial changes to donations?  Let’s take a quick look at donor advised funds. A somewhat daunting term for what translates to donating funds privately, donor advised funds allow the contributors to donate money and take the tax deduction in the same year, but pay the money to chosen charities over a predetermined time horizon.  The donor doesn’t control the money once it’s deposited to the fund, but can direct the fund’s administrator on how they would like the dollars allocated. Additionally, certain funds have an investment component that allows the fund to potentially yield even greater profits down the road.  While donor advised funds aren’t new to the financial industry, they are gaining traction as larger national funds have affiliated with big financial firms such as Fidelity and Charles Schwab.

 

In addition to the increase of the standard deduction, taxpayers are also facing substantially limited deductions for state and local taxes along with home mortgage interest. In states like California, New York, and Massachusetts, where both local and state taxes are high coupled with high real estate values may mean that the tax burden will be greater and charitable giving even less.

 

There is a small upside to these changes. The Act calls for an increase in the amount of deduction that an individual can make from 50 percent to 60 percent of his/her adjusted gross income. The nonprofit may see a slightly larger contribution than had been seen previously. Time will tell if this greater increase in donation maximums will bear fruit for nonprofits big and small across the country.

 

If you have questions or still aren’t clear on what type of contributions will be deductible or what your deduction threshold is, it may be time to talk with a Small Business Advisor.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Small Businesses Struggles To Make Ends Meet

According to WalletHub’s national Small Business Week survey on the state of their finances, small business owners are optimistic but still report needing better access to capital. With more than 543,000 new businesses started every month, the survival rate is still threateningly low – some two-thirds will only survive into the third year.

 

Traditional sources of small business capital include the basics like personal assets, bank loans and friends and family. Once these are exhausted, business owners can struggle to make ends meet. The next tier of banking options can include much-needed revenue but are a bit more creative in nature.

 

Supplier financing – Small businesses can offer products that can be sold on contingency, deferred with interest and even have straight funding options.  These can provide the business with an initial offering while the business sells the items making enough profit to repay the vendor(s) and restock or increase merchandise offerings in the future.

 

Seller financing – When a business owner wants to sell but also is willing to act as the ‘bank’ in the financing deal, this is called ‘seller financing’.  The financial arrangement allows the new owner to repay the purchase price on a monthly basis over a period of time directly to the seller versus obtaining financing through a traditional lender.

 

Factoring  – When your finances are tight, another option is to sell any money owed to you in the future in your accounts receivable to a company called a ‘factor’. The factor will pay you less for your accounts receivable than it is worth down the road, but selling it will provide some immediate capital. Be cautious that this doesn’t become a regular habit as much of your profitability is lost in factoring and it is not a solid business strategy long-term.

 

Peer to Peer (P2P) Lending – A relatively new method of debt financing, these services can leverage a technology platform to operate a credit market where users can borrow and lend money without the use of a financial institution as an intermediary. P2P loans tend to be less volatile than the stock market and can offer higher returns than more conventional sources of yield. Borrowers must apply for the loan as an individual using his/her personal credit score.

 

Crowdfunding – By selling shares in the business, small business owners can grow the business with the help of their own community. Bear in mind, that crowdfunding, by its nature, requires a strong internet presence where the business owner can keep in touch with funders and apprise them of the company’s progress with their investments.

 

Competitions and Grants – Not the fastest or most reliable way to raise money, start up competitions and grants can often provide innovative ways to increase cash flow. Competitions happen throughout the year and vary by business specialty and industry. Ever popular on television with shows such as Shark Tank and even cooking shows like Food Network Star, cash infusions by offering stakes in the business or prize money can kick-start a small business with both notoriety and cash. Grants, especially Federal grants through sources like the Small Business Association, are more competitive and difficult to obtain but also a worthy prize for the victor willing to put in the work.

 

Whatever path is chosen should be carefully considered and the consequences weighed.  Always talk with a financial advisor or small business consultant to be sure that the options are in your best favor.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Best Way To Pay Yourself As The Business Owner

Determining how to pull money from your business is a critical step in small business ownership. Whether you take a draw or a salary, makes little difference if you are a sole proprietor. A combination of salary and draw is typically how most small businesses start. When the business is doing well, the draw can be easy to utilize, but remember that the business will need cash flow when times are leaner, so overdrawing on the business can cause issues down the road.  That’s where a controlled salary can help keep cash in the business and make it less tempting to take more cash out of the business than you really need. The owner’s draw is also taxable on the owner’s personal tax return and  owners must make estimated tax payments and self-employment taxes on any draws.

 

Your business type is critical.

 

If you are a sole proprietorship, you can take whatever amount you’d like for compensation, if the business has any money. If however, you use any other business type, the issue of compensation becomes much more complicated. If you have an S-corporation or a C-corporation, there are IRS rules regarding compensation and stock options that you need to be aware of and know the ins and outs of using. This is a great time to talk with a tax accountant about the differences and how to stay in compliance with all of the rules surrounding executive compensation limits.

 

To fully understand the salary versus draw decision, you must understand owner’s equity. When starting a business, the business owner contributes cash, equipment and other assets into the business.  Asset contributions elicit owner’s equity in the business. Accountants define equity in a simple formula:

 

Assets – liabilities = equity

 

Assets used in business include cash, equipment and inventory. Liabilities are the monies the business owes and includes bills that must be paid each month. If a business was to convert all of the company’s assets into cash and then used that cash to pay off any liabilities, any remaining dollars are considered the business’ equity. Calculating the business’ equity is a good way to determine the actual value of the business and then make a decision regarding taking a draw.

 

One-Third Rule

 

In order for your business to thrive, it’s important to remember that taking all of the profits out of the business in the form of a salary or a draw, will leave nothing for future growth or leaner times.  With that in mind, consider the one-third rule.  Take one-third of the business’ gross income and place it in a money market or business account. Take the second third of the income and use it to pay business expenses. The final third can be used to take personally or put back into the business for additional capital expenditures or growth.  This model won’t work for every business type, as businesses with greater capital outlay such as retail businesses have a much tighter margin than service related companies with smaller expenses.

 

Set your budgets – even in the beginning.

 

Get what you need to keep yourself and your family afloat. One of the leading causes of divorce is financial hardship. Bear that in mind when you go to your spouse and ask to strap the family for not just a short while, but for what could realistically turn into years. Also consider that if you carry the health insurance benefits through your salaried position now that either your spouse will need to pick up coverage, or you will have to seek other options. Sole proprietors, members of LLCs, and partners must each pay self-employment taxes on draws and any other distributions taken from the business.  S Corp shareholders do no pay self-employment taxes on distributions, but each owner who works as an employee of the company must be paid a ‘reasonable compensation’ before profits are paid.  Those employees will then pay taxes on the monies paid

 

Taxes, Man, Taxes.

 

Remember that no matter what kind of business entity you decide to create, Uncle Sam will always want his cut including Social Security and Medicare taxes (FICA).

 

Ultimately, the choice is yours, but before taking a draw or salary consider the following:

  • Business funding – Does the business have enough capital to operate sufficiently before you take the draw?
  • Taxes – Understanding tax liabilities, both for the business and personally is crucial to deciding whether to take a draw or a salary and through which type of business entity. There is no method that escapes the tax bill, so plan now for future draws and income.
  • Plan – Talk with a business tax specialist about the best ways to handle tax payments and individual liability based on your business type.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Navigating the Treacherous Waters of Small Business Loans

If you own a small business, you’ve no doubt seen those ads promising quick and easy small business loans, usually for large dollar amounts. Should you really take out such a loan? Before you sign the loan agreement, there are a few key steps to protect yourself and your business.

 

Do your homework. The old adage,’ if it’s too good to be true, it probably is’ should be carefully adhered to. Take the time to read the fine print – ALL of it. It’s in these tiny details where you will find all of the responsibilities, commitments, interest rates and repayment rules. Meticulously review the details for additional fees, service charges and balloon payments that can easily double or triple in short time.  Depending on how quickly the loan is repaid, there may also be additional charges for early repayment. Surprise fees can quickly add up and take your business from thriving to life support.

 

It’s not uncommon to find different rates from lender to lender. Shopping around for rates and repayment options makes good financial sense.

 

When do you need the money?

 

If you think you might need cash at some point in the near future, start researching and applying for a loan now while your business’ cash flow looks good. The loan process takes time, generally four to eight weeks, requiring lots of documentation regarding your business’ finances, accounts, and often, personal finances as well. Be prepared and gather all of your documents before you start the application process. Going to a lender for money when your business is financially stretched puts the odds against you for an approval. If you present your business concept with a solid business plan when things are new or going well, you have a much better chance at success.  Borrowing when you don’t need the money, means that your business will have the available operating capital to plan through the leaner times, fueling even greater growth opportunities.

 

Find a financial Sherpa.

 

Trying to navigate the treacherous waters of small business financing can be a ‘swim at your own risk’ endeavor. The good news is that you don’t have to go it alone. There are countless resources available to entrepreneurs to help you on your journey.  The Small Business Association (www.SBA.gov) website is a tremendous resource for loan types, grants and other information. Additionally, small business owners can talk to consultants for free advice and even request a business mentor in their community or even in their business type, who can meet with them regularly and help provide a roadmap and framework for the growing enterprise. If the entrepreneur discovers that more ongoing guidance is needed, there are lists of resources and professional services also available.

 

Whatever route you decide to take to finance your business, remember that you never have to make the decisions alone.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Magic Of Getting Cash From Your Customers Quicker

Freelancers have become an even larger part of the small business population since the great recession of 2009. According to a 2014 study commissioned by the Freelancers Union, some 34 percent of the total workforce is independent workers, or freelancers. That number is expected to rise to nearly 50 percent by 2020.  Many large companies who traditionally hired workers, now subcontract to freelancers, saving the company overhead for items like space, technology (computers, cell phones, printers, etc.) and benefits packages including health insurance, vacation and holiday pay. There are upsides to freelancing as well. Freelancers can set their own schedules, pick and choose projects and often experience greater creative freedom – but at a price. As more companies struggle to meet their own financial obligations, freelancers often end up on the bottom of the accounts receivable pile waiting 60 or 90 days or more to be paid.

 

Steps for improving your bottom line.

 

Freelancers often send an invoice and wait. While it may feel like much of the accounts payable is out of your control, there are steps you can take to improve payment frequency and the amount of dollars clients are paying you.

 

Contracts and deposits are your friends.

 

Rather than performing the work first and billing after completion, send a contract and initial deposit invoice prior to any work commencing. This works on many fronts. First the client will have a much clearer understanding of your relationship, when to expect work and when they will need to pay you. Secondly, there will be no doubt about the payment terms including any late payment fees, because you outlined them in the contract. Having a specific contract that covers each step of the project will also help to keep the project on time and on budget. Freelancers also face changes of scope on an almost daily basis. Instituting change orders is a great way to ensure that the scope of work and costs don’t exceed the initial project’s goals. How many times has a client stopped a project part way through making it nearly impossible to invoice for the work completed? Requesting an initial deposit, or regularly scheduled payments throughout the life of the project will help improve your cash flow while also keeping the client committed to the project. If the scope or goals do change, at least the client will understand that there is a process for that and know what to expect from you.

 

Take credit cards.

 

Clients may have the same cash flow issues you’re facing, but if you provide several different options for payment, odds are that you will see an increase in timely payments. Only a few years ago, credit card processing was only for larger companies, but with the advent of handheld card reading devices like Square, taking credit card payments is easy and cost-effective for any size business. Initial deposits, scheduled payments and final payments can all be set up in advance and automatically charged to your client by your accounting software, too. That way, you can spend more time working and less time processing invoices and payments.

 

Do your homework.

 

Consider if you were a financial lender and a client came to you to borrow money. You certainly wouldn’t give him thousands of your hard earned dollars without a contract outlining when he would pay you back. Nor would you just hand over the money without some type of credit check or personal history to ensure that he was credit worthy.  Just because you are an independent contractor shouldn’t mean that you hand over your time and talents without the same scrutiny. Taking the time to do a little homework on your clients’ credit history will prevent you from unwanted financial surprises down the road.  That doesn’t mean that surprises won’t still happen – they will.

Clients are business owners, too. Sometimes they need a helping hand just like you. It’s important to consider each client individually, Personal relationships are so important for small business owners. You may want to sit with your client and discuss a new payment strategy to help them over a hardship. In the end, you may achieve your goal of keeping that client and saving the relationship, too.

 

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Copyright 2018 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

The New Tax Act – What It Means To Small Business

For the first time since 1986, the U.S. Congress passed major tax changes affecting both individuals and businesses across the country. The Tax Cuts and Job Act of 2017 (TCJA) has far-reaching impact for many business types and individuals.

 

Business Taxes

  • The corporate income tax rate is permanently lowered from 35 to 21 percent starting in January 1, 2018.
  • Pass through businesses – A new 20 percent deduction of qualifying business income from some pass-through businesses in industries such as sole proprietorships, partnerships and S Corporations will now be available. According to the Brookings Institute, pass-through businesses, those businesses who have their income ‘pass through’ to their owners, account for approximately 95 percent of U.S. businesses, while only 5 percent are C-corporations. Previously, income for pass-through businesses was charged at the highest personal tax income rate of 39.6 percent. The new law allows for 20 percent of the pass-through to be deductible while the remainder is subject to tax at the individual marginal income tax rates to a new lower maximum of 37 percent. There are exclusions including health, law, and professional services organizations except for households with taxable income below $157,500 for single filers and $315,000 for married filers. For these filers, there is a restriction to pass one of two tests:
    • 50 percent of the wages paid by the pass-through entity; or
    • 25 percent of the wages paid plus 2.5 percent of the “tangible, depreciable property used by the pass-through entity to make income. These pass-through provisions will expire at the end of 2025.
  • AMT – The TCJA eliminates the corporate alternative minimum tax (AMT) allowing for full expensing of capital investments for the next five years.
  • Craft Beverage Modernization and Tax Reform Act – Part of the larger TCJA law, this change provides excise relief in the next two calendar years of 2018 and 2019. Brewers that produce less than 2 million barrels annually will be taxed at a rate of $3.50 per barrel on the first 60,000 barrels of beer produced, and $16 per barrel on any further barrels produced up to 6 million. This change will help to provide additional capital that previously would have been sent to the government enabling additional growth and profitability. This reduction also impacts wineries and distillers.
  • Section 179 deductions- Used for expensing capital assets for small business, the deduction thresholds have been raised from $500,000 to $1 million. Odds are most small businesses won’t be able to reinvest such a large amount of $500,000 to $1 million in capital expenditures in a single year, but the offer is nice.

 

Personal

  • Individual tax brackets – The Tax Cuts and Jobs Act retains the current seven individual income tax brackets, but modifies both the width and tax rates. The new brackets are reduced to 10%, 12%,22%, 24%, 32%, 35% and 37% respectively. The downside is that while these tax changes are permanent for corporate tax payers, the individual tax changes are temporary, running out in 2025. Additionally, the Tax Policy Center found that “while the average household would get a big initial cut, by 2027 households in the $50,000 to $75,000 income range would see an average increase of $30 compared with today.  Secondly, the bill is expected to add $1.4 trillion to the deficit. How will this be paid?  As mentioned by Speaker of House Paul Ryan, healthcare entitlements such as Medicare, Medicaid, and Social Security are the best way to handle the growing deficit.
  • Child Tax Credit – There is an increase in the child tax credit amount to $2,000 from the current$1,000. Families making up to approximately $400,000 will get to take the credit and more of the tax credit is refundable, meaning that families that work but don’t earn enough to actually owe federal income taxes will get a check back from the government.
  • ACA Penalty – Repeal of the individual healthcare mandate penalty for not having health insurance starting in 2019. How this will play out in uninsured Americans and increased health insurance costs down the road is yet to be seen.

 

The new tax changes did not simplify the tax code, rather it is now more complicated.  

 

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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

An Unwanted Surprise In Your Paycheck

The Treasury Department recently announced revisions to the 2018 withholding tables to reflect the changes spurred by the Tax Cuts and Jobs Act (TCJA).  Included in the law, employers can use worker’s existing W-4 Forms already on file to make the adjustments to their withholding.

 

What that means for employers:

Since it isn’t mandatory for employees to review their W-4 form after their initial employment, employers may want to reach out to workers to encourage them to thoroughly review their pay stubs after the first payroll with the new withholding rates. Additionally, new forms will be forthcoming from the IRS, so employers will need to again communicate with workers about completing the new form to update their individual withholdings.

 

What the changes mean for workers:

Some 90 percent of workers will see an increase in their weekly pay as a result of the TCJA according to Government estimates. The Tax Policy Center estimates that about 80 percent of all filers will see a tax cut, while approximately 5 percent will see an increase, and no change for the remaining 15 percent.

 

What’s the issue?

Many Americans haven’t reviewed or even seen their W-4 Form since they were hired, so changes to the withholding could have more serious impact on a family that has grown or shrank over the years. Tax payers who are either under or over-withholding aren’t going to see the full impact of the change until it comes time to pay their 2018 income taxes – too late to make what could be costly changes.  “The results could vary dramatically from one individual to the next,” says Steven Feinberg, CPA and owner of Appletree Business Services in Londonderry, NH. “We are encouraging both employers and employees to review their withholdings,  compare it to their current situation and make any necessary changes now rather than waiting a full year to see what the impact might be.”

 

New Tax Brackets for 2018

Single Rate Married
Above $500,000 37% Above $600,000
$200,001-$500,000 35% $400,001-$600,000
$157,501-$200,000 32% $315,001-$400,000
$82,501-$157,500 24% $165,001-$315,000
$38,701 -$82,500 22% $77,401-$165,000
$9,526-$38,700 12% $19,051-$77,400
Up to $9,525 10% Up to $19,050

Source: Joint Explanatory Statement of the Committee of Conference, H.R.1

 

The new withholding tables have been adjusted to include new larger standard deductions, lower tax rates and the repeal of the personal exemption. What the tables couldn’t include is how the changes would affect individuals differently. For example, the reducing alternative minimum tax, expanded child credits and repeal of deductions on the state and local levels. All of these items can come into play and impact what an individual might normally ‘expect’ for an annual tax refund.

 

Tax officials at the US Treasury and the IRS are working on a revised W-4 form, which they hope to release sometime in February 2018.

 

Those at risk for under-withholding could include employees who receive bonuses, stock options or commissions because the withholding rate for that population has dropped from 25 percent to 22 percent. Additionally, parents with dependents over the age of 17 are also losing a key tax credit of $2,000, replacing it with just $500. Couple that with the loss of the personal exemption, and those tax cuts aren’t looking nearly as attractive as they were on the surface.

 

Another item to remember is that the tax penalty for underpayment, meaning the requirement of taxpayers to pay in at least 90 percent of what they owe by April 15th still carries a 4 percent interest rate quarterly. “Waiting and finding out that you substantially owe more income taxes could be coupled with a pretty hefty penalty,” continues Feinberg.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Should I be concerned about Net Neutrality?

Net neutrality is the concept that the internet service providers should provide equal access to web sites regardless of content or the source. The idea is that by allowing equal access everyone, big business or small, average Joe or superstar has the same access to information on the Net.   The current net neutrality laws were carried over in the Obama administration in February of 2015 with a vote of 3-2. Under the direction of Thomas Wheeler as chairman of the Federal Communications Commission, many were concerned that his lobbyist past and membership in the National Cable and Telecommunications Association would shift net neutrality in the direction of big corporate internet providers. What happened was a strong support for the American consumer. Zoom forward two years and net neutrality is once again up for debate as a new administration makes moves to threaten access. How can changes in net neutrality impact small business?

  • Internet Service Providers (ISPs) may have the ability to limit the speeds of the internet based on websites or apps frequented.
  • IPSs may be able to charge each website for data prioritization, which would give increased speeds while browsing that site.

Still puzzled about how shifts in net neutrality could impact you? Think of it this way, on the school playground there’s always a big, threatening kid who bullies the other smaller kids into giving over their lunches, paying for his snacks or some other egregious ‘fee’ for simply breathing in his space. ISPs, if left to their own devices, may become like those playground bullies, charging small businesses exorbitant fees just to play in the same playground as everyone else.

 

 

Worse yet, because your mom only gives you enough money to buy lunch but some kids have lunch money and an allowance, the playing field shifts further because they can afford to pay more for better access to the playground.

 

 

Net neutrality means that your small business gets the same internet speeds and access as Target, Walmart and your local diner. It’s fair and equal for all. Loss of net neutrality will cost your business in lost marketing opportunities, a tightened sales pipeline and less access and online sales.

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

 

Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.