Tag Archives: appletree

NH rules on Independent Contractors vs Employees

First, why do you care about whether your help is a sub or an employee? Because you can push the tax burden onto the contractor rather than deal with payroll and you can avoid having to pay workers compensation insurance on those contractors,  Or can you?

 

In a nutshell, here is what the state says:

In New Hampshire, the party you are HIRING is a subcontractor and NOT an employee if ALL of the following are TRUE:

1- The hired party possesses or has applied for a federal employer identification number or social security number

 

2- The hired party has control and discretion over the means and manner of performance of the work

 

3- The hired party has control over the time when the work is performed and the time of performance is not dictated by the employer. However, this shall not prohibit the employer from reaching an agreement with the person as to completion schedule, range of work hours, and maximum number of work hours to be provided, and in the case of entertainment, the time such entertainment is to be presented.

 

4- The hired party hires and pays the person’s assistants, if any, and to the extent such assistants are employees, supervises the details of the assistants’ work.

 

5- The hired party holds himself or herself out to be in business for themself or is registered with the state as a business and the person has continuing or recurring business liabilities or obligations.

 

6- The hired party is responsible for satisfactory completion of work and may be held contractually responsible for failure to complete the work, AND

 

7- The hired party is not required to work exclusively for the employer.

 

 

Are you confident the people you are hiring qualify as Independent Contractors? We deal with issues like this all the time and can give you some really good advice on how to survive a challenge. Let us help you get confidence today.

 

If you found this article useful, please share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Using a Payroll Service? Read this..

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers (such as Appletree).

 

Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

 

Here are some things you should know:

 

1) Are payroll taxes impounded by your payroll service, meaning are the tax monies pulled from your bank account and put into the payroll service’s bank account until due?

 

2) If you get a letter from the IRS about payroll taxes you believe you paid, you should contact the IRS YOURSELF; since this could indicate a much bigger problem.

 

3) Become familiar with the tax due dates that apply to employers of your size, try to keep track of these dates.

 

The key issue here is that you, the employer, are ultimately responsible for the payments even if the third party agent misappropriates the funds.

 

Are you certain about how your payroll taxes are being handled?

 

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

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Is your business pretax health plan now history?

Effective January 1, 2014, Businesses who DO NOT have a group insurance health plan set up for their business can no longer use a SECTION 125 employee plan for deducting qualified medical insurance premiums and expenses on a pre-tax basis. This doesn’t affect dental , vision, or dependent care expenses allowed in a 125 plan.

 

Are you confident on how to proceed from here? Confusion reigns!

 

If you want more information, look at Appletree Business Services’ Business Financial Confidence Map. 

 

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

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

When your tax returns need to tell a story

When I first meet with a prospective client I love to see what ‘story’ the tax returns are trying to tell.

 

Typically, I’ll ask you what you understand your tax return to be, like whether you’re a corporation, a partnership, an LLC, or whatever…

 

I’ll even start asking you some of the hard questions like WHY you are what you are.

 

From here, I need to see the tax returns, all of them, Business and Personal, State and Federal  so I can see if your story plays out.

 

For instance, if you tell me that you’re an employee of your corporation, I’m going to ask questions when your corporate tax return shows zero compensation to the owner and your balance sheet says that you owe your corporation $500,000!

 

Or, I see , in addition to your corporation tax return, that you also have your own business  on your personal return, and you’re taking deductions there.

 

Or, you’re complaining about all the taxes that you pay for your S Corporation restaurant, and I see all the profit that you have, and it’s because your tax return very clearly says that you have $1,000,000 as CASH in your bank account, and you tell me that there can’t be any more than $10,000 in your bank account!

 

The ‘story’ has to play. Maybe that’s where my strength is, since I’m going to look at the big picture. Are we telling the State of New Hampshire (or neighboring states) a story consistent with what we’re telling the IRS, taking a reasonable compensation at the same time. In the end , it’s all got to be consistent.

 

When I’m sitting across from the auditor, I need to be able to tell them this ‘story’, so it’s important that whatever the ‘story’ is, it needs to be credible. For instance, if your tax return says that you owe your company $200,000, you’ve got a loan document to support this. If I walk in the door, and you’re the owner, and introduce me to the ‘president’, well that president better be an employee, and not a ‘sub-contractor’…

 

Do you know your story? Do you understand your tax returns well enough to know whether they tell the same story? Is your story credible?

 

If you want to learn more about this, check out Appletree Business Services’ Business Financial Confidence Map.

 

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

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

No barbequeing with accountant

“I don’t want to barbeque with my accountant”“

 

The other day I picked up a new new tax client. He’s an insurance agent with plenty of accountants that he already knew.

 

He barely knew me, but I had one big advantage that none of the other people he knew had…He didn’t know me!

 

He wants an accountant that can talk to him totally objectively, and not have to worry about not being invited to next week’s barbeque!

 

I was happy to oblige!!

 

If you want to connect with us at Appletree Business Services, take a look at our Business Financial Confidence Map.

 

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

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

What? New Hampshire has business taxes?

Most small businesses are required to file the New Hampshire Business Profits tax and Business Enterprise tax. Are you confident you know what these taxes are and how much you should plan to owe on them as a small business owner?

 

NEW HAMPSHIRE BUSINESS PROFITS TAX

 

If your business has gross receipts over $50,000, then you are required to file a Business Profits Tax Return, a tax of 8.5% of the ‘net income’ apportioned to New Hampshire. . From this , you can then take a deduction for reasonable compensation for personal services. A typical small business owner who’s typically doing the work in his small business will have no problem often justifying that 100% of his or her Schedule C income is reasonable compensation. But there are all sorts of traps here, so be certain you’re doing this right, particularly once we introduce the BET tax!

 

NEW HAMPSHIRE BUSINESS ENTERPRISE TAX

 

This is a tax of .75% on your Enterprise Tax base of all wages (including Reasonable Compensation above), interest (including any Mortgage interest from a Home Office), and any dividends paid. This tax will also reduce dollar for dollar any Business Profits Tax you would owe. So, essentially the Business Enterprise Tax is a minimum tax to make sure that all small business owners pay something, particularly since so many avoid the clutches of the Business Profits Tax.

 

What I just presented is a simplified explanation of these taxes. Quarterly estimates are required to be made as well.

 

Do you know if  your small business is affected by the New Hampshire Business taxes? Because we have no income tax IN New Hampshire, many small business owners  often don’t file these tax returns, until several years later when the state comes knocking, and they will.

 

Also, planning can be extremely difficult with these two taxes, particularly where certain techniques often used in other states will backfire in New Hampshire, partly because New Hampshire does not recognize flow through entities such as S Corporations.

 

We run into clients all the time that haven’t prepared these taxes or simply prepared them incorrectly, often we end up saving them a substantial amount in overpaid taxes once they come to us. This is what Business Financial Confidence is all about. Let our accountants help you get that confidence with our Business Financial Confidence Map.

A KPI? What’s that?

Everybody’s got ‘books’, but how is your business performing?

 

I don’t care what the size is. Every small business owner needs to have a measurement tool and be consistently measured against that tool.

 

 

And that is where Key Performance Indicators or KPI’s come into play.

 

It’s one thing to know what your sales are. That’s the easiest measure, but don’t you want to at least go one step up from your competition? How about knowing what your gross profit margin is ( Take your sales minus your direct costs of doing sales and that gives you gross profit. Gross Profit divided by Sales is your gross profit margin)

 

Every business owner, at a minimum, should know their gross profit margin. Without knowing this, how can you predict, with certainty, how much money you could make if your sales increased by X dollars?

 

Now let’s get a little more complicated…Do you know what your breakeven sales are? That’s great if you can figure that out for today, but what was it last year at this time? Do you know that?  Great, your breakeven sales went down from last year. Why did that happen? What’s changed in your business? Is this something we can capitalize on going on forward.

 

If you’re a service business, how many employees do you have? Do you know what your average sales are per employee. or perhaps per  foreman.

 

Can you see where I’m going with this? Everyone else is  just talking about keeping track of your dollars, not about being able to manipulate those dollars so that a small business owner can be that much more confident about where they are today, and have the certainty about where their business is going tomorrow.

 

Start measuring your performance today! Do you know what a KPI is for your business? I’d love the opportunity to talk with you further about helping you figure out your own business financial confidence. If you want to learn more, look at Appletree Business Services’ Business Financial Confidence Map.

The value of an accountant to your New Hampshire small business

What is the value of a small business owner having a relationship with an accountant?

 

As business owners, we often build our own mental barriers to change, until something changes…

 

When I first met this one client, every time we talked, he would bring up his desire to offer health insurance to his employees. I would ask him about talking to his insurance agent, and he would present me the options that were presented by the agent. He had  ‘trust’ in his agent, and was somehow looking for me to resolve ‘the problem’.

 

I would suggest talking to another insurance agent, but would get resistance. After about 6 months of this, I finally told the client that EVERY time we had talked , this subject had come up, and it was time to put or shut up. I told him that if his insurance agent was so good, then we wouldn’t be having this conversation every single month, that at least, it was worth talking to another agent.

 

He met with a different insurance agent, and a whole different solution was presented with my client now offering health insurance to all his employees with a minimal match by him as the employer.

 

My point is that, to my client, that problem that could have festered for a lot longer. But it was because he had a ‘relationship’ with an accountant or business adviser, he was able to get out of his mental box and move on.

 

As a business owner, don’t settle for just looking for a bookkeeper or an accountant. Look for a someone that you feel comfortable with, someone that’s approachable. Look for someone that you feel comfortable opening up to.

 

If you can’t open up, then your advisory can’t help you get out of your box and help you achieve your long term objectives. With that all said, you also have to give the relationship time, and not expect results within days of starting this relationship.

 

What are you waiting for? Check out our Business Financial Confidence Map for a head start.

Help, the IRS Padlocked my Doors!

Oftentimes, I’ll meet a new business owner who simply doesn’t respect the power of the IRS.

 

Typically, the small business owners is just starting out. He or she figures that they don’t really have the money or even the wherewithal to deal with paying their payroll taxes, and so they ‘start’ to get behind.

 

This can be a routine that starts innocently enough, but then just gets bigger and bigger and bigger. Amazingly, you might not even hear from the IRS for many months. You have quarterly obligations, but you may have ignored that as well, so the IRS won’t even know you exist.

 

Eventually, an employee is going to want a W-2, or somebody files for unemployment, or maybe you got visited by the labor department.

 

But that’s OK. The IRS is patient. They barely even know who you are, and you figure that’s a problem for another day.

 

You can do this with about 10 employees and find out that in a year’s time, you owe $50,000.

 

So now the IRS knows who you are, and they are not very lenient about people who don’t pay payroll taxes. That’s because payroll taxes are  mostly a ‘Trust Tax’, whereby your employees entrusted you to turn their witholdings over to the government.

 

While you’re in business, the IRS can easily seize money from your bank account, they can even padlock your doors.

 

Make sure you’re staying on top of your obligations or get out of business.

 

My clients are confident knowing that as long they do what we tell them, they’ll be fine with the government. We’ll even pay any penalty if the client did what we told them to do.

 

Are you confident the IRS can’t come after you?

 

If you want business and financial confidence, take a look at Appletree Business Services’ Business Financial Confidence Map.

What the IRS does when your small business gets audited

Have you ever wondered how the IRS audits a business for unreported income, particularly when we’re talking about a small business with little internal controls, and a business model where customers can pay with cash?

 

Well, the IRS has published an audit guide explaining what they look for.

 

In the guide, they explain the 3 principal ways income goes unreported:

 

  • It can be skimmed from receipts, for example, pocketed before it is recorded. If this happens it will not be discovered by auditing the books.
  • It can be stolen after it has been recorded, for example, cash removed from the cash register or goods stolen from the shelf for future resale.
  • A fraudulent disbursement can be created, for example, a payment to a vendor that is actually cashed by the owner’s son.

 

What may be more useful is understanding the audit techniques the IRS might use when your small business gets audited:

 

The most significant indicator that income has been under reported is a consistent pattern of losses or low profit percentages that seem insufficient to sustain the business or its owners. As an accountant/tax preparer, I like to call this the ‘smell test’, a technique I often use on all the tax returns I prepare.  For instance, if someone is consistently showing income of only $5-10,000 per year, but at the same time consistently shows substantial (if any) home mortgage interest, real estate taxes, and charity, then this return would fail the smell test. Typically, I would ask the taxpayer a lot more questions, at least so I can be reasonably comfortable that the return is correct, since if I think the return is suspect, so will the IRS.

 

Other indicators of unreported income can include:

 

  • A life style or cost of living that can’t be supported by the income reported. Can the business support the houses and vehicles that are recorded in the owner’s name?
  • A business that continues to operate despite losses year after year, with no apparent solution to correct the situation. Oftentimes, people will worry about the ‘hobby’ rules, but the real threat is if the government can’t understand where the losses are even coming from.
  • Bank balances and liquid investments increase annually despite reporting of low net profits or losses.
  • Accumulated assets increase even though the reported net profits are low or a loss.
  • A significant difference between the taxpayer’s gross profit margin and that of their industry.
  • Unusually low annual sales for the type of business.

 

Having good books and records, including cash register receipts, is crucial in an audit. Having daily balancing of the cash register, and monthly balancing of the bank account to the books can be extremely useful in helping an auditor be comfortable that income has been reported.

 

One technique that you can expect on virtually any audit of a small business is a gross receipts test of all the bank accounts, both business and personal, where the government will try to agree your reported income or gross sales to the amounts actually deposited into your bank account(s).

 

If you’re not sure if your business would survive an audit (and we continue to see a noticeable increase in clients being audited),  I would be happy to sit down with you and discuss in more detail how your books and records could be improved upon.