Tag Archives: Steven Feinberg

Let us take on the complicated challenges of small business bookkeeping, payroll, and taxes for one fixed fee. Don’t be a small fish in a big pond. (VIDEO)

Is your corporation really a hobby?

Wouldn’t it be great if you could deduct all the expenses for your hobby?

 

Well, unfortunately, you can only deduct losses on a hobby to the extent of your hobby income. But what happens if you decide to create a corporation for your hobby?

 

I have bad news. Operating the hobby activity within a corporation does NOT change the tax result.

 

Recently, a federal appellate court said that the net losses are not deductible. But, what’s even worse is that the owner of the corporation had dividend income based on the costs that the corporation incurred for the activity.

 

Make sure you understand the rules before you decide to deduct the expenses of your hobby.

 

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.

Can you get Health Care tax Credits?

Businesses with fewer than 25 employees that pay at least 50% of the health care insurance premiums for their employees may be eligible for a tax credit for as much as 35% of the cost of the premiums. To qualify, the business must employ fewer than 25 full-time people with average wages of less than $50,000. For 2014, the maximum credit increases to 50% of the premiums the company pays, though to qualify for the credit, the insurance must be purchased through SHOP (or a broker authorized to offer SHOP insurance that is in compliance with the Affordable Care act).

 

As a practical matter, we’ve found very few of our clients actually qualify for this, but when we find one client that qualifies, they’ll usually end up with  thousands of dollars in tax credits.

 

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.

Taking advantage of employer tax benefits in your business

As a business owner in New Hampshire, make sure you’re getting these employer tax benefits benefits:

 

1) Dependent Care Benefits—If you incur childcare expenses so that you can work, you should check to see if your employer has a dependent care program. If dependent care benefits are provided by your employer under a qualified plan, you may be able to exclude up to $5,000 of child care expenses from your wages. 

 

2) Employer health care plans allow you to exclude the cost of insurance for you and your family from your wages.

 

3) If your NH employer has a 401(k) plan, you can elect to defer (pre-tax) a maximum of $17,500 for 2013. If you are 50 years or older, the maximum is increased to $23,000. These plans are especially beneficial when the employer provides a matching contribution. 

 

3) Flexible Spending Accounts—Some employers provide flexible spending accounts, which allow an employee to make contributions on a pre-tax salary reduction basis to provide coverage for up to $2,500 of medical and dental expenses. 

 

4) Tax-Free (income excludable) Employee Fringe Benefits—If the employer provides them, the law allows an exclusion from the employee’s taxable income for the following benefits:
 

(1) The cost of up to $50,000 of group-term life insurance.
 

(2) $245 (in 2013) per month for qualified parking.

 

(3) $245 (in 2013) per month for transit passes and commuter transportation.

 

(4) $20 per month for bicycle commuting expenses.

 

Are you getting all the tax free benefits you can out of your NH business? To learn more, 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.

How much tax risk can you take? (Video)

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.

 

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.

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.