by Gina Edwards, CPA

Starting a new small business can be overwhelming and stressful.  With many Americans losing their jobs in this tough economy, it’s becoming more and more common for people to go after the American Dream of owning their own business.  The IRS recently published these Six Tax Tips for New Business Owners:

1. First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
4. Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
6. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Still confused??  We offer consulting on business start-up and would be happy to assist you in sorting out the questions you have when starting something new.  Contact Us and schedule a complementary appointment today.

by Brent J. Taylor, CPA

If you’re a shareholder in a closely held C Corporation, some of your tax rates related to your individual tax return are about to change starting in 2011.  If the company you are a shareholder in pays you a dividend this year, the maximum federal income tax rate will only be 15%, and the same 15% rate will apply to 2010 corporate payouts or stock sales that generate long-term capital gains. 

However, the new rates in 2011 will mean both higher taxes on dividends and higher taxes on long-term capital gains.  The maximum federal rate on dividends will automatically jump from 15% to 39.6% on January 1, 2011.  President Obama has been quoted as saying that he will limit the maximum rate on dividends to increase only to 20%, but Congress has not acted on that yet.  Also, on January 1, 2011, the maximum federal rate on long-term capital gains will automatically increase to 20% from the current 15%.

So, you’re now facing an upcoming increase in these federal tax rates, but luckily you still have some time to take advantage of this year’s low tax rates on dividends and long-term capital gains.  The following are some tax strategies to work on right now, while the rates are still low.

• Consider some corporate distributions to shareholders.  With the federal tax rates on dividends set at 15% in 2010, the taxes on these dividends will be much lower compared to what the taxes will be in 2011 and beyond. 
• Another way to get some cash out of your business at lower tax rates this year is with a stock redemption deal.  This is where you sell back some or all of your shares to the company.  To the extent of your corporation’s E&P balance, any stock redemption payment is usually treated as a taxable dividend.  It would be a good idea to have this take place in 2010 while the federal rate is still 15%. 
• Finally, selling shares this year and paying 15% on any gains you have will be better than paying the 20% or more on gains from sales in later years.

For assistance with these strategies or for a consultation regarding tax planning Contact Us for an appointment today.

By Gina C. Edwards, CPA

Has your business recently hired employees?  If so you may be able to claim a special credit on your next quarterly payroll return.  President Obama signed the Hiring Incentives to Restore Employment, or HIRE Act on March 18, 2010, and the second quarter payroll tax returns are the first opportunity to claim some of these new tax credits for businesses.  Here is a general overview…

There are two new tax benefits available to employers who hire previously unemployed workers.  The “payroll tax exemption” provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees.  Here are a few of the guidelines:

• To be a Qualified Employee:
  • The individuals must begin employment with a qualified employer after Feb 3, 2010 and before January 1, 2011. 
  • The individual must have been unemployed or employed for 40 hours or less during the 60-day period ending on the date such employment begins
  • The individual cannot be employed to take another employees position unless the previous employee voluntarily left, or was terminated for cause.
  • The individual cannot be a family member of or related to the employer
  • To be a Qualified Employer:
    • Taxable businesses and tax-exempt organizations that are subject to federal social security tax qualify (including employers in US territories)
    • Public colleges and universities can qualify
    • Indian tribal governments also qualify
    • Federal, State or local government employers DO NOT qualify
    • Household employers do not qualify
    • Wages have to be paid from the period of March 19, 2010 through December 31, 2010.
    • This credit is claimed using the new Form 941; lines 6a-6d.  You can download the new form at http://www.irs.gov/pub/irs-pdf/f941.pdf

The second credit, in addition to the “payroll tax exemption” is the “business credit for retention of certain newly hired individuals in 2010.”  This credit is a general business tax credit and maxes out at $1000 per new employee.  Here are the guidelines to qualify:

• Employer may claim credit for each new employee who remains an employee for 52 consecutive weeks
• The new employee’s pay cannot significantly decrease in the second half of the year
• The credit is the lesser of $1000 or 6.2 percent of wages paid by the employer to the retained qualified employee during the 52 week period.
• This tax credit is claimed on the employer’s 2011 income tax return.

If you believe that you may qualify for one of these credits, but you’re not sure how to claim them or complete the paperwork, EHC can help.  Just Contact Us and make an appointment and we’ll make sure your business is taking advantage of all of the benefits and tax credits available.

by Brent J. Taylor, CPA

During the past year there has been a large amount of regulation pushed through to help put an end to abusive practices by banks.  A few of these practices included excessive overdraft fees and raising interest rates on credit cards when a payment is late.  The new rules and regulations are going to take billions from the bank’s profits, but don’t think that these banks are going to be giving up all of those revenues that easily. 

Many of these banks are currently experimenting with new ways to drive revenue from their clients.  The biggest change that is expected to affect the majority of consumers is the end to free checking accounts.  For over a decade free checking accounts have brought many people to the banking system for the first time.  Banks have given away their checking services to establish relationships with customers who might give them more business in the future.  Now, many customers will likely be required to pay monthly maintenance fees on their checking accounts. 

Banks are also looking at other new revenue sources from its customers by having new charges for services like fraud alerts, online bill pay, and credit reports.  Another possible new fee that could affect many consumers is a monthly debit-card fee that will be charged unless a customer has a certain level of activity on their card. 

The confusing part for consumers is that the new fees will most likely be disclosed in the ordinary looking correspondence that most consumers throw away without reading.  This will lead to customers finding out about the new fees only after receiving their monthly statement and seeing that a charge has already taken place. 

There will be ways to avoid some of these fees, such as maintaining certain account balances or frequently using other banking services at the same bank.  Local community banks and credits unions are expected to continue free checking longer than the bigger banks, so it might be worth looking into opening an account at one of these places if you are unhappy with the new fees from your current bank.  There are also some internet based banks, such as INGDirect.com, that still advertise no fee checking and no ATM fees. 

What can you do?  Keep an eye on all correspondence you receive from your bank to see if you will be affected by any new fees.  Also, be proactive and complain to your bank if you’ve already been charged a fee you’re not happy with, if a customer complains enough, a bank might be willing to waive it or extend the current service for a certain period of time before the fees start.

In an effort to incentivize small businesses to offer employee health care or to continue it if they’ve already done so, federal tax credits may be available for 2010.  The credit can be as much as 35% of the company costs for health care premiums.  For some small businesses this could be thousands of dollars of tax savings realized in the next four years.  The tax credit is set to increase to as much as 50% by 2014.

To qualify for the credit, a small business must have fewer than 25 full-time (or equivalent) employees, pay average wages of $50,000 or less and pick up at least 50% of a single (employee-only) premium.

Don’t wait to find out if you are eligible. We have attached examples provided by the IRS of how this tax credit works. Call Gina Edwards or Mary Hayslett today.  We can do a quick on the phone survey of your existing business and let you know if you are eligible and how much your potential credit will be. 

Examples Health Ins Tax Credit 

What type of client are you?

Edwards, Hayslett & Co., LLC helps all types of clients with Accounting, Tax, and Financial Services.  There are several services that EHC can provide that can ease the burden on business owners, but one of the main services that helps businesses is Outsourced Accounting Services.  Outsourced Accounting Services are a wonderful resource for businesses that are dealing with too much paperwork, too much overhead, not enough time and not enough expertise.  Does your business fall into one of these scenarios?

The ONE Man/Woman Show

This business owner does it ALL—from managing the business, to paying the bills; this business owner is stretched thin and pulled in multiple directions.  Paper-work is at the bottom of the to do list and customer invoices are not going out on time.  Small business owners can get the assistance they need with a reasonable price tag at EHC—we can take care of filing sales/use tax returns, file payroll returns, provide your banker with your financial statements and assist you in obtaining financing. We can also provide full service accounting to your small business which includes processing your invoices to your clients and paying your bills.  When compared to the price of even a part time employee, EHC is an economical option, plus you get the added value of having an expert on your team.

Too Large but Too Small or Seasonal Business

Is your business large enough to have an accountant on your staff, but too small to keep them working busily and efficiently for 40-hours a week?  Does your business have a season that makes it difficult to keep an accountant gainfully employed?  Many small businesses struggle with finding the balance and fit for a full time accountant on their payroll, yet they can’t afford to have an under-qualified person working for them.  This can get expensive and you may feel like you don’t have a choice.  EHC provides an answer to this balancing act.  With EHC, you have an accountant that can cater their hours directly to your needs, minimizing your overhead but not compromising the expertise and quality of the work.  We have saved numerous clients significant amounts of payroll/overhead costs by being their “Accountant on Staff” along with adding to the quality of their financial record keeping.

You Need a CFO/Controller

Do you already employ a CFO or Controller at your company?  In a market where expertise and experience come at a premium, the cost of employing a CFO or Controller who has the CPA credentials can be significant.  EHC currently has four Certified Public Accountants on staff and boasts over 80 years of experience in the accounting field.  What makes us different is our involvement in the growing process of your business.  Our clients trust us and depend on us to help them make sound financial decisions that will put them on a path to achieving their goals.  Consider the alternative and eliminate vacation, payroll tax and personnel issues by outsourcing this key position to a qualified and experienced Professional at a fraction of the cost of hiring directly.

Can we help you and your business? If so, we’d love to hear from you!

The IRS has finally released the new Form 5405 and taxpayers claiming the “First-Time Homebuyer” tax credit can now file for a refund.  However, the IRS released this Q&A on their website recently managing the expectations of these taxpayers and telling them they can file now but they will have to wait for the money:

“Q. Do I have to wait to file my return?

A. No. With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, you can go ahead and file your 2009 tax return. Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached.  If you file in January or early February, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March. For some of the earliest filers, the updates that the IRS must put into place may mean that refunds will take an additional two to three weeks.”

Too bad you won’t receive interest while you wait…

The resignation of a controller can cause serious disruption within a golf course organization. Especially if the general manager isn’t up to speed on the accounting processes, software, network and payroll. Golf course owners need to have a backup plan in case this happens..

Edwards, Hayslett & Co., LLC is a CPA firm in Kansas City, MO that provides specialized accounting services to golf clubs. Their business is growing as Golf Course owners and their managers recognize the economic benefit of outsourcing accounting tasks as oppose to having a full-time controller. EHC partner, Mary Hayslett, states,

“Our clients tell us, not only are they saving money, but the level of service provided has improved. We offer both the technical and financial knowledge base that exceeds the skill levels of the typical Controller.”

Outsourcing accounting services is an affordable alternative golf course owners may not know about. Because of the online environment today, outsourcing accounting tasks is easily accomplished with the right CPA firm. Onsite accountants/bookkeepers are no longer needed because of the advances in remote and secure online access.

            Often times, an 18-hole golf course has one full-time person to keep the books. No backup is readily available for the position. Internal Controls are difficult to implement, software utilization is mediocre at best and many general managers are left wanting reporting of member spending analysis, top sales items in the pro shop, etc. These are reports that staff members may not have time to provide, don’t know how to obtain or haven’t properly established in the software the parameters necessary to gather and summarize the data. Accounting firms outside the confines of your club, have the expertise and staff to make the software do what it was designed to do.

            Other benefits to outsourcing accounting tasks for Golf Clubs include: 

• Department heads will be forced to get more involved in the numbers.
• The outside accounting firm will not be present to “baby-sit” department managers.
• The department heads will become the contact for member charge discrepancies and their resolutions, providing immediate feedback on service levels.

The choice to go with outside professionals will bring your managers up a level as they communicate and correspond with CPAs. Removal of the onsite staff eliminates the collusion and camaraderie that can exist. Members or owners will enjoy the comfort and security of knowing CPAs are preparing the monthly financials.

Choosing Edwards, Hayslett & Co., LLC has the added benefit of industry specialization. They know the nuances that come with golf course ownership and can share industry knowledge during your budget process. They will work with your management group to assist in finding the right personnel for your club. They will train your staff to perform the managerial functions necessary to track daily performance compared to the budget.

The loss of a golf course controller can be positive, bringing an opportunity to evaluate your needs and realize now is your chance to reduce payroll, reduce employment benefits and related insurance expenses, reduce costs of independent audits and tax return processing fees, while improving your financial reports. Now is the time to think outside the box and find an outsource accounting partner.

Asset protection takes on a different meaning when it comes to the elderly and disabled population. Sometimes an elderly or disabled loved one reaches a point in life where he or she is no longer able to make financial decisions in his or her best interests.  It may be that the spouse handling the financial affairs of the couple has passed away or become unable to continue. A patient with Alzheimer’s disease may become subject to fraud from unscrupulous persons. Adult children of the couple may not live close by to handle the routine daily affairs of their parent.    Perhaps the parent is not yet ready to relinquish their private financial affairs to their children.  Whatever, the case may be, this is the time to consider utilizing the services of a CPA offering elder care accounting services.

The establishment of a relationship with a CPA who can provide this assistance, should occur well ahead of the time described above.  The CPA preparing your parents tax return is the starting point.  If they do not offer the services for elder financial care, they will likely know someone who does.  This service, when done properly, will gather and pay all bills, visit weekly with your parent, monitor investments to see that CD’s are renewed timely, dividends earned and pension payments are collected and fund transfers such as that required from retirement funds will occur as needed.  Maximizing your benefits regarding social security and keeping your tax liabilities at a minimum is monitored by the CPA. Furthermore, they can become an important advisor saving you time and costs you might incur with an elder care attorney for the transfer of assets in anticipation of nursing home or other long term care concerns.  The cost of planning ahead with a good financial care plan is money well spent.

Choosing the right CPA is critical in your decision-making.  They can be your most trusted advisor, as their profession is held to the highest of ethical integrity.  Your parents have worked hard all their lives, saved and invested to have their money last a lifetime, while hoping to pass on as a legacy to their children and grandchildren the financial rewards of their work.  As their adult child, you owe it to them to work with professionals to be sure their assets are protected.