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CPAsteve discusses the value of asking about tax risk in the Business Financial Confidence process, and how business owners and advisors can benefit from simply knowing the answers. Use our Business Financial Confidence Map to help you find your way.
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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.
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.
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.