April 16^th is National Accountant Appreciation Day. After months of hard work, it is time to give back to the person who waded through the raging river of your return.

Imagine if you had to prepare your taxes yourself. How much would you tip yourself if you had to put everything together and certify that it all was correct and accurate to the best of your ability? Take that idea and triple it and you’ll have an idea about the actual worth of your CPA.

Here are some ideas for things you can do to show your tax accountant that you truly appreciate their time and energy spent in keeping the IRS satisfied:

Pens and pencil sets

A nice pen set will always go a long way with professionals. There is just something about feeling the weight of a well-balanced pen or nice mechanical pencil in your hand. Adding engraving or a special holder will personalize the thank you even more.

Donations to charities

Making donations in your accountant’s name, or the name of their business, will also go a long way to show your appreciation.  While they are focusing on your business and how to maximize your deductions, they may miss out on some of their own donations, and thusly, their own business deductions.

Gift certificates

After spending so much time away from their family, your CPA deserves a family night out. Why not get together with some of the other clients on your CPA’s roster that you know and all chip in for a nice meal at that fancy new restaurant in town.  Or, how about a weekend getaway for your accountant and his family. Showing your accountant that you are aware they have a family and that they often put their family on hold during tax time for you, let’s them know that you really care about them and their personal life.

Recommend your accountant to others

Letting your friends and family know about what a good job your CPA does, not only helps their business out, it also shows that you think highly of them and appreciate their good work. Helping grow their business will pay off dividends because you become a personal marketing team and your accountant will go the extra mile to help you wherever he or she can.

When all else fails, ask

If you still have no idea what to get your CPA for all their hard work, just ask them what you can do for them.  Tell him or her that you sincerely wish to appreciate their hard work with something tangible, a token, something they will enjoy and use.  Just make sure that you follow through with their request.

No matter what you decide to do, make it a point, on April 16^th, to do something to show your accountant you appreciate them. Bring them food, buy them something nice, treat them to a meal, or help them build their business by spreading the word about their services. If you don’t have any ideas, make it a point to ask your accountant what they would like.  Then follow through to make Accountant Appreciation Day a very good day for you and the accountant you appreciate.

Getting your tax return is one of the happiest feelings we tax payers know.  But, that money may be burning a hole in your pocket which makes it ripe for impulse spending.

Many times, people get their tax refund back and are not really sure what to do with it. This usually leads to poor decision-making and a loss of precious funds. Here are some useful ideas for how to use your tax refund this year.

1. Pay debts – individuals use their tax refunds to pay off old debts, so why not do the same for small businesses? Pay off that dangling bill for the electrical work you had done, or finish purchasing the forklift you started paying on last October. Paying off smaller debts is a great way to use your tax return because it increases your net worth; less debt means more overall value.
2. Invest – Stocks and bonds are a great way to think of investing, but you own a business now. What kinds of investing can you do that will pay you back in returns? How about servicing the company car that would improve gas mileage? Perhaps re-configuring the layout of an assembly line will produce more efficient movements in your workers.  Perhaps upgrading equipment in your home office will produce more efficiency.
3. Pay workers – This goes right along with investing. Happy people make productivity go through the roof. Right now, everyone could use a little extra in his or her pockets. Why not show your employees you care about them and their families by helping them make ends meet. This will produce loyalty like none other and people will be more willing to stay productive if they know you are behind them in their personal life.  Are bonuses in order?
4. Return to community – Donating to charity is always a worthy cause. Putting back in to the community is not only rewarding and great media publicity, but also counts towards your tax write offs for the next year. Using the funds to help build up the community also makes a better place to live and do business and usually, those you help are more than willing to help you out when it comes time.
5. Save – Putting money away for a rainy day is what usually saves most small businesses. With the rates that businesses go under even in a perfect economy, having a little savings in the bank is a great place to gain stability. Find a good bank that will give a decent rate and put your money in for the long haul, or until you are ready to invest it in your business.

There are plenty of things to do with your tax return, but there are only a few things that make good business sense. Before you start spending your tax return, talk to your CPA about what would make the most sense for your business, now and in the long run. You will know what you are supposed to do when it all feels right and makes the most sense financially.

Tax season can be gruesome if you are constantly stressed out while trying to get all of your financial information together for the IRS. It doesn’t have to be this way and can actually go quite smoothly.  Instead of waiting until midnight on April 15^th to finally file your taxes, here are a few tips to prepare in advance and reduce the stress during tax season.

1. Be prepared – You know April 15^th is coming. Every year it happens on the same date; 4/15. Keeping in mind that tax time is right around the corner will help to reduce some of that stress because you will be more prepared when it actually arrives.
2. Keep good records – Right along with being prepared, is keeping good records. Keeping your records organized and exact on a daily basis, helps keep you from stressing over the deductions you have been missing.
3. Start early – Starting at the end of January will always reduce the stress of tax season. Starting on April 10^th, however, will most likely do the opposite.
4. Finish early – Even though you started early, in your effort to reduce stress, finishing early is another big component. If you start early, but put completing your tax forms, it will make it even more stressful.
5. Stay on task – Studies have shown that sticking with a task will reduce stress and also allow you to finish it up faster than if you tried to multitask. Decide to finish what you start instead of being distracted by another task.
6. Take breaks – Taking a short break every hour will help your body to reduce stress by staying loose. Taking a break does not mean sitting there at the computer and surfing the web.  Stand up, get a cup of tea, look out into the distant horizon to relax your eyes, and breathe deeply.  In other words, relax.
7. Double check – Once you have the weight of the world off your shoulders because your taxes are finally finished, you should probably double check to make sure everything is filled in correctly and signed. If you don’t take a second glance, chances are you will stress over that one thing you “know” you forgot to do.
8. Exercise – Getting up and moving around is good to get the blood flowing, but actually taking the time to exercise will greatly reduce stress. By increasing the oxygen to your brain by exercising your body, your mind will be able to focus on the task at hand.
9. Get professional advice – Getting a professional opinion on your tax return will greatly reduce your stress because you will have peace of mind that, in the eyes of someone who prepares taxes for a living, you have done everything correctly and in accordance with the latest laws.
10. Get a massage or facial – This doesn’t have anything to do with taxes, but it will reduce stress if you get a nice massage or facial. This is a great reward for yourself on April 16^th, or sooner if you take the advise from above. Just imagine, while you are getting your massage or facial, how nice it is to not feel the stress.

While others are trying to beat the deadline, you’re being pampered. There is no better feeling than the absolute absence of tax time stress!

Tax time is extremely stressful for most small business owners.  This is due usually to a last-minute rush to try and find the necessary paperwork needed by your tax accountant or CPA, in order to finalize and file your small business tax return.

There is an easier way to avoid the stress of tax season.  Know what exactly your accountant needs in order to do his or her job properly and get those items together ahead of time.

There are a couple reasons to have your items together before visiting your tax preparer:

1. You save time, which is money, by not trying to piece together information with multiple trips back and forth to your tax preparer’s office.
2. Your tax preparer is allowed more time to find all the deductions possible because your detailed records are available immediately.
3. Your information is all together in one place which makes retrieval in case of an audit much easier and faster, saving you money, time, and a great deal of stress.

Now, what sort of information will you need to provide your tax preparer at tax time?  Here is a list of items you should have ready and available for your tax preparer on your first meeting during tax season. (Depending on your business, this list may not be all inclusive, but it’s a good start.)

1. All 1099 and 1096 forms including INT, DIV, B and MISC.
2. Any W-2 or W-3 information on you or your business
3. 1098 forms which lists mortgage interest and property tax
4. Schedule K-1 (income/loss from S Corps, Partnerships, Trusts etc.)
5. Bank statements and reconciliation reports from the end of the taxable year and the beginning of the current year.
6. A backup copy of your personal accounting software
7. Petty Cash reconciliation
8. Mileage on all vehicles
9. Payroll reports from software or third party payroll company
10. Information and statements from stocks, bonds or other investment transactions including dates of purchase and cost basis or date of sale and the selling price.
11. List of Inventory and Assets
12. Quarterly tax forms if used to report on a quarterly basis
13. Statements pertaining to any real estate transactions including refinancing or foreclosure
14. Balance sheet, profit and loss statement and trial balance for end of year
15. Withdrawal and Investment information on partners or shareholders from the company account.
16. Any documentation specific to your business not listed above.  This may include home based business expenses not mentioned above.

This list is, by no means comprehensive and many tax preparers have an actual list of documents they will need in order to prepare your taxes. The items listed above are merely for reference so that you can have a good majority of your documents together in one place.  This way you’ll be able to easily sort through your paperwork and bring exactly what you will need to your accountant’s office when the time comes.

There are many reasons to keep your documents together, but none more important than making sure your accountant has adequate time to find the most deductions possible for your small business.  Don’t let a sloppy record keeping system cheat you out of your hard earned money!

Tax time is right around the corner and it will be here way before you realize it. You might just realize that you only have a couple weeks left and haven’t even started to prepare your return. Here are the top 10 tips to helping you file your taxes from year to year.

1. Start gathering your records – Keeping your records in one place will help when tax time comes.  Now is as good a time to start pulling records together. These documents can include receipts, canceled checks or any other document that supports your claim of an income or deduction.
2. Be on the lookout – W-2s and 1099s usually show up around the end of January. The deadline for employers to have them postmarked is January 31^st. You’ll need these to file your tax return.
3. Try e-file – When you file electronically, the software will handle the math calculations for you. If you use direct deposit, you will get your refund in about half the time it takes when you file a paper return. Filing electronically is now the way the majority of returns are filed, especially if they’re prepared by professional tax preparers. In fact, last year, 2 out of 3 taxpayers used e-file.
4. Consider other filing options – There are many different options for filing your tax return. You can prepare it yourself or go to a professional tax preparer. The IRS actually offers free face-to-face help at some of their offices, usually with a volunteer accountant. Take the time to become familiar with your options and figure out what suits your needs as well as those of your business.
5. Consider Direct Deposit – If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check. You will also be able to track when your return should be deposited.
6. Visit the IRS website – The official IRS Web site is a great place to find everything you’ll need to file your tax return: forms, tips, answers to frequently asked questions, and updates on tax law changes. Not to mention, the IRS website is a free service that can be used to help you file yourself.
7. Check out Publication 17 – Publication 17 – “Your Federal Income Tax” is a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.
8. Double Check Yourself – Don’t rush. Even the most well-trained CPA makes mistakes when he or she is rushed. Not only can mistakes cost you money in the long run, they can also delay your return. Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors when filing by yourself. If you are not good with math, find a suitable software program that works well for you or find someone who will check your math for you.
9. Don’t panic! – If you run into a problem, there are always people willing to help. From your friends and family to the IRS, there is someone you can ask to get your questions answered.

In order to have a successful tax season, there must be year round planning to maximize your deductions in direct relation to the size and income of your small business. This means keeping the upcoming tax season in mind at all times, constantly looking for ways to decrease your bottom line while making the company more profitable.

Start-Up Expenses

The most commonly overlooked expense for small businesses to take advantage of during tax season is the one that got them where they are today – the expense of going into business. Capital expenses, the money used to pay for marketing, overhead and other related expenses, must be deducted over the first five years you are in business. One thing to remember is that these write-offs cannot be deducted before your doors are open and cash is beginning to flow through your business.

Continuing Education And Training

Any education related to your current business, can also be deducted. For instance, a veterinarian specializing in equine medicine can deduct the costs of attending a conference on new cancer treatments in horses. Because this course is related to the veterinarian’s field, the seminar is deductible from yearly taxes.  However, if the veterinarian specialized in small and domestic animals, the conference would not be deductible. There are strict rules to follow about which types of classes actually qualify for deductions.

Professional Service Fees

The fees charged by your accountant to do your taxes, are actually tax deductible. The only rule for this deduction is that if the work being done relates to future years, the deduction must be taken over the complete term of the benefit.  An example of this would be hiring an architect to help design a building that will take two years to construct. The fees for the architect must be spread over the two years in which the building is actually being constructed.

Bad Debts

If you are in the business of selling goods, and a customer doesn’t pay you for the goods you sold them, that debt is deductible.  However, businesses that provide services instead of goods cannot take this type of deduction because it would be difficult for the IRS to prove a bill was not “inflated” for services provided in order to claim larger deductions for the bad debts.

Other Deductible Expenses

There may be other expenses that are tax deductible in your business.  You can start by referring to the IRC § 162, which outlines different trade and business expenses. This section of the Internal Revenue Code is the basis for determining whether or not a taxable expense is deductible. If the wording is confusing, take the code to your tax accountant along with the expenses you are questioning. Your tax accountant will be able to point you in the right direction and clear up any confusion.

Don’t guess about your small business deductions.  Ask your tax accountant to be sure you’re handling every deductible properly on your small business tax return.

Imagine having this nightmare:  The IRS suddenly audits you for a mistake you made on your tax return ten years ago. It seems you transposed two numbers and now you owe the federal government because you filled in a box with the number 730 instead of 370.

If this happened to you, what would you need to bring to an audit?  Would you still have your documentation?  How long should you actually keep your tax documents? Good question.

Let’s take a look at a few situations and the suggested length of time to hold onto your documents.

If you have been withholding taxes from your paycheck but find that you still owe additional taxes when you file, the rule of thumb is to keep these records for three years. There is one exception to this rule and that is if you do not report income that should have been reported at the time you filed your tax return. If the additional funds are more than 25% of the gross income you reported when you filed, those records should be kept for six years.

There are times when tax information should be kept indefinitely. This procedure needs to be followed if you file an inaccurate return, fraudulent return, or if there is no tax return filed at all. The reason these files should be kept indefinitely is because you will need to show proof of income when the IRS requests it, which could be at any point in time.

Special consideration is required if you have a small business.  Employment tax records are important documents and require special handling. These records should be saved for at least four years from the date the tax is due, if paid on time. If the payment is late, the records need to be kept for four years after that date in order to verify employee incomes if requested.

Filing tax credits after filing your return can also add additional time to your record retention time. In order to determine how long you should keep the files, choose the latest date between when you filed your original return and when you actually paid the tax and keep the records for three years from whichever date is later.

When you file a claim for a loss from worthless securities or take a deduction for bad debt, you will need to keep the records for seven years. This allows the IRS ample time to investigate your claim. When filing a bad debt deduction, it’s imperative to hold onto the files and have adequate records to prove your bad debt claim.

The general rule of thumb is to keep your tax documents until the period ends when you are able to file a tax credit or refund, or, until the IRS closes your case file. In most cases, retaining records for about 4 years is adequate. There are some cases, however, that require tax documents be kept anywhere from three years to ‘indefinitely’ so check with your tax accountant before you discard any tax files.

The IRS is all about accuracy and proof, so make sure you keep impeccable records and retain all your records for the appropriate time frame. These steps will keep your finances safe and  make tax time go a little more smoothly year after year.

Recently a tax client was upset that their K-1 indicated that they had “Ordinary business income” of $1425, when they didn’t actually receive any cash from the business. This was my explanation..

“The K-1 doesn’t necessarily show money you received. It shows your share of the business’ income for the year. As one of three equal partners/owners, you are entitled claim to 1/3 of any losses the company may experience, but you are also responsible for paying 1/3 of the tax on any gains the company may experience.

“This does not mean that you actually received the money. The cash itself can stay in the business’ checking account. The place where each year’s gain and/or loss shows up is on the balance sheet. Each owner’s share of the gains and losses are reflected in that particular owner’s “Equity” in the company. If you were to take a draw (take money out), it would then reduce your equity in the company.

“So your share of the company’s 2009 gains was added to your equity in the business, on the balance sheet. If you want to take a cash draw, you will need to arrange that with your partners, since the business checking account may not have the funds available at this time.

“The tax on your portion of the earnings of the company needs to be paid whether you received the cash or not. In the future, you will not have to pay tax on any  draws you take, up to the amount of equity you hold in the business. If your withdrawals total more than your equity, then you would pay tax only on the withdrawals over and above the amount of your equity.

“For an LLC, the company’s gains and losses flow through to each owner’s personal tax return at the end of each year. If you want the gains and losses to stay within the business as a separate entity, you would need to convert the business from an LLC to a C-Corporation (the standard corporation type). Then, the gains and losses will stay within the business and be carried forward on the business’ tax return from one year to the next.

“However, keep in mind that if the business were to experience a loss during a particular year, that loss would not be able to be carried over to your personal tax return and you would therefore not be able to take the loss as a write-off on your personal taxes. A C-Corporation’s gains and losses cannot be transferred to the individual owner’s tax returns, until that owner sells or relinquishes their interest in the business, at which time, they may take the gain or loss (whatever the case) on their personal tax return.

“Again, the decision to incorporate is something you would need to discuss with your partners, since it would affect their tax status as well. Generally, it is not advised to incorporate for a business as “small” as yours, but if it really bothers you that the business’ gains and losses are flowing through to your personal tax return, then you may want to explore that option.”

Most business owners subscribe to the thought that you “must spend money to make money”. This can be true, but you also must know exactly where that money is going and the results it brings.

Some ways that your business might waste money includes the following:

1. Manage your credit cards – If you have several cards, develop a computer program that will show you the exact balances, due dates, and the interest rate you are paying. Always be aware of other solicitations that save you money and possibly change your balances over to a new company. If you have any employee cards, see if you can set a limit on them. If not with the credit card company, make sure that the employees know their limits. Manage your credit cards wisely and never, ever miss a due date.

2. Develop an annual plan so you know where you will spend money. This helps you in several ways. The business person will be aware of what portion of the profits are going to advertising, towards incentives, towards accounting and other internal expenses, etc.

3. Do not over-purchase any products or services for a business. If you buy in bulk, the money is tied up and a place must be provided to keep the extras. That might be an unnecessary expense.

4. Developing an advertising budget and knowing just what resources to use is key to keeping money under control in a small business. You must advertise, but you also must get value for your money or you will soon be out of business. Keep a record of how much is spent, can you get payment terms, when is the most efficient time to advertise your particular product or service to get the most value for the dollar. Every dollar must be accounted for in advertising because the lifeline of your business depends on new and paying customers. Advertising is the way to get the word out to the community or the Internet.

5. A small business owner will sometimes be under self-induced stress to manage all aspects of the business. Sometimes, leaving the control and decisions to others that are qualified is the best way to manage the business. Releasing control may be hard to do sometimes, but in a lot of businesses, money can be wasted because the owner cannot possibly be as efficient as the person who has studied or is knowledgeable about a particular field. For instance, if a business owner does not know accounting, many mistakes in reporting income and taxes can be made. A qualified accountant can possibly save more than the cost of their services in reduced taxes.

Take a hard look around your business and do not let anything be set in stone if saving money is the goal. Challenge everything that will cost money and see what can be done to change the situation. Any money that is saved is money that can be put back into the business either in profits or in growth.

A business owner wants their business to be successful and will work hard to sustain growth. A business owner wants a way to continue making and growing money from a product or service that is interesting to them. After growing a business and being smart with cash flow, many business owners will sell their businesses only to start another business.

The reason is that business owners are independent types and challenges are rewarding when met and faced. Saving money through every day operations will help the business owner to meet their financial and emotional goals.