How to Survive The Great Recession of 2009, 2010, 2011, 20... Part 2

 

Solutions "CURE" Part 2

This is the rest of the story, Cut taxes by incorporating the government keeps making more regulations which makes it harder to run a business and make a profit.  So we need to help ourselves instead.   When I first started my business 31 years ago, I was a sole proprietor.  Things were simple then...  I hired my wife and she was exempt from payroll taxes.  Does anyone remember that rule?   Well later, the Internal Revenue Service took that exemption away.  So the next year, I became a corporation.  Now, if my wife is a part owner, much of her income and mine is exempt from payroll taxes.  How?  We as investors are allowed stock distributions, which technically is completely tax free because withdrawals from "Retained Earnings" is not taxable for "S" corporations.  Stock distributions are exempt from worker's compensation, provided that we are paid a reasonable salary from our corporations.  If this is something you are interested in doing, I can show you how to incorporate online.  It usually takes about 20 minutes and it is done.  For my clients, I do not charge to make these changes.  If you do it yourself, after you incorporate, the Internal Revenue Service gives you 75 days to request becoming an "S" corporation.  Just file a Form 2553.  I can help with this as well.  Since corporations are generally exempt from 1099's, you are basically on the honor system.  The governement does not know your income until you tell them on your tax returns.

The next thing I would like to touch on is understanding financials as the purpose of a profit and loss statement is to let you know how much income or loss you have made in the current month or year-to-date.  A balance sheet tells you the amount of net worth you have on a given day such as the last day of the year. 

Know that your liabilities or debts should not exceed 77.9% of your assets.  Your top two debts are usually Notes Payable and Loan from Shareholder.  We can compare your numbers with your peers by comparing your business code on your tax return.  Usually it is on top and is similar to your S.I.C. codes. 

Another thing to watch is your cost of goods sold; general administrative expenses; and net income percentages, should be similar to the percentages on the graph examples below.



Knowing your percentages of expenses vs income will go a long way to helping you make the right business decisions.  Understanding these graphs and how they pertain to your business is part of what we do here at Professor Tax.  We have went through the gambit of what makes a business succeed or fail and we always pass on our knowledge to our customers.  Part of that knowledge is in thinking ahead, seeing that something is not working, and be willing to take immediate action to try something new which leads us to my next subject in this article advertising and other methods of marketing.  I have always done some form of marketing the entire 29 years I have been in business.  I used telemarketing from 1992 until 2010 and it always worked.  However at the beginning of this latest recession, it was starting to get difficult to make appointments.  So I tried seminars, network groups and more recently dove into the social media world.  The fact that you are reading this on either my blog entry, from my monthly newsletter or from one of my social media platforms is very encouraging.  Thank you. 

Word of mouth marketing has always been good even during a recession.  You need to ask all your customers, clients, patients etc. for referrals.  If you care about them, they will know and be more than happy to recommend people to your business.  If you don't ask, you don't get.  You can't sit by the phone hoping it will ring.   Become aggressive! You must try to market every day. You may fail but not always.  It is a game of numbers.  Eventually, you will succeed. 

"Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor souls who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat."

--Theodore Roosevelt

Consider joining a networking club like BNI (Business Networking International) or an AMI Team (Adding Needed Solutions Working Every Relationship).  I joined a little over two years ago and already the referrals and new clients I have gained would pay for my membership for life.  You basically become a team and give direct referrals to each other on a regular basis. 

You need to review your current advertising/marketing.  Are you getting results?  If not, stop wasting your money.  Don't be afraid to experiment, but if the results don't come in STOP.

Last item I would like to cover in this blog is evaluating job performance. As I stated before, having employees is very expensive.  During this recession, I have had to eliminate most of the fringe benefits so as not to lay off any employees.  I also require them to produce enough income so that the cost of their wages does not exceed 35% of the revenue they bring in. 

You must analyze your staff the same way.  What percentage of sales can you afford to spend on salaries and still make a decent profit?  You cannot go over that magic number.  You cannot carry unproductive employees.  It may require getting more productivity from your performing employees and letting go those employees that don't make you a profit.  Otherwise your company could fail and no one would benefit from working at your company.   Another idea that I have tried is doing more of the work myself.  We, as business owners, have a vested interest in our company and are more productive on average than our employees.  But don't overdo it, because you still have to run your company. 

In conclusion, knowledge is power and having the right knowledge and a clear understanding of it you can build a profitable business.  Professor Tax is here to help.  We are looking forward to meeting you, answering your questions and helping you reach your goals through the clear understanding of your financials and how to make the numbers work for you, not against you!

I hoped you enjoyed reading this as much as I enjoyed writing it.  If I can be of any help, please connect with me!  Call 850-814-9994, Stop by or Email Me!

Henry Baurley - Professor Tax

How to survive the Great Recession of 2009, 2010, 2011, 20....? Part 1

Problems "Go Me" Part 1

We have heard the news read the papers and seen the effects that recession has had on our economy, friends, family and yes even on some of you reading this.

There are many things business owners can do to 'manage' during these trying times.  A main part of that is knowledge. First within government regulations, know that if you are a sole proprietor, limited liability company, or a partnership you have less privacy and pay more taxes than an 'S' corporation if you show a profit as little as $9.00 per week!

For work that you perform, as little as $600 a year, you may receive a Form 1099-Misc. The Internal Revenue Service also receives a copy of the same Form 1099. So far corporations 'S' and 'C' are exempt from receiving Form 1099s.

Sole proprietors, a limited liability company, or partnerships are liable for self-employment taxes on their profits (basically 15.3%). Since 1959 corporations have been exempt from paying these taxes. This can be avoided by switching to an 'S' corporation, you can avoid having to pay self-employment taxes. However, the government does expect that you pay reasonable wages for the work performed if you are an owner.

Again knowledge is power and most business owners don't observe their numbers close enough or if they do, don't grasp what they are looking at and how it can help them. They are too busy running their company to pay attention to the details needed with their bookkeeping. But by not paying attention, they are often shocked by the results of their tax returns prepared by others. You don't need to be an accountant but you should have an understanding of your normal monthly operating expenses.

The three biggest expenses for most companies are: 1) Cost of goods sold (actual product sold); 2) wages and payroll taxes; and 3) rent. But by not paying attention, you may not make the profit you were hoping for. There are many other expenses to pay attention to: advertising; auto expense; bank charges; insurance; outside services; taxes & licenses; telephone; and many others piled under the miscellaneous heading. People who fail in business more times than not, is because of a lack of understanding of bookkeeping and tax rules. Many times, they get in trouble with payroll taxes, and sales tax. Of the four problems and solutions that we will discuss during this two part newsletter, understanding financials is probably the most serious.

You've heard of marketing strategies before and probably have been thinking of getting some support in this area, as there are so many ways of marketing.  By not doing any marketing of any type, you will slowly go out of business. According to the Yellow Pages, we will lose 81% of our customers over a period of 10 years. Not because we made our customers unhappy but because people retire, they move to another area, and they eventually may not need our product or services anymore, etc. The point is, can we survive with only 19% of our current customers?

I have about 150 clients that I do books for every month. If I lost 81%, then I would only have 28 clients left. How could I stay in business? I would have to lay off almost all of my employees and do the work myself. Could I pay my bills? could I ever retire?

Not much fun is it. So we must do marketing everyday in order to stay in business. We as CEO's are the best sales people in our company. We are selling our own products or services. Who could do any better than us?

We will discuss this further in the Solutions "CURE" section of our blog but right now I'd like to dip into the subject of employee expenses. Remember that I said for most companies, the three biggest expenses were: cost of goods sold; wages / payroll taxes; and rent. Well, employee expenses is number two. If we are not careful, wages can get out of control and literally put us out of business. Besides wages, we also have payroll taxes to add to the cost of employees. That could be another 10% or more between social security, medicare, and unemployment taxes. Also, worker's compensation can add to the cost of hiring employees. And what about fringe benefits such as health insurance and retirement plans? With all this additional overhead, having employees can be very expensive if not closely watched.

Do you remember when you first started your business? If you were like me, you were able to do all the work yourself and you made a nice profit and had good cash flow. What happened when you expanded and hired employees? You were able to delegate which was nice, but soon you noticed that the cash flow was getting tight and you didn't seem to make as much profit as before. Well this is a problem we need to solve and will address in part two of this blog.

Solutions "CURE" Part 2

Look for part two under Professor Tax USA Blogs!

How to Change from a Sole Proprietor to an S Corporation?

Are you trying to decide whether or not to switch from a Sole Proprietor to an S Corporation? If so, there are many tax advantages when you become an S Corporation. According to irs.gov, one particular tax advantage is that income runs through the corporation without being taxed until it is claimed as income by the shareholders. This in turn keeps your corporate income from being taxed double.

What is an S Corporation?

An S Corp is a distinct type of corporation that allows the shareholders of the company to claim their portion of company earnings on their individual income returns.

What is a Sole Proprietor?

A sole proprietor is owned by an individual or a husband and wife. The owner is not required to file any paperwork with the state or the IRS to begin operations. 

How to Change from a Sole Proprietor to an S Corporation?

1)   Before you switch to an S Corporation it is important to ensure your business will qualify according to IRS requirements. (Do your research)

2)   Apply with the state in which you live.

3)   It is important to follow the instructions very carefully when preparing paperwork.

4)   You will need to submit a 2553 Form. Instructions can be found at irs.gov.

·         Be sure you have each shareholder sign the form.

·         Maximum number of shareholders – 100

·         Must file this form within 75 days of filing your corporation paperwork.

5)   Apply for a new Employment Identification Number (EIN). This is required because you will not be the single owner of your business. You now have partners.

Professor Tax USA wants to provide you with quality information to help you make informed decisions for your business. The more educated you are on a subject the easier it is to make your decision either way. If you would like to contact “The Professor” regarding any tax, bookkeeping or accounting questions, feel free. If you would like a free consultation, he will gladly meet with you regarding any of your small business needs.

Tax Trick Me Not

As a Nationwide tax company Professor Tax enjoys finding deductions we can pass onto our clients.  These days online companies like to throw around the word free to reel in new customers and the majority of tax companies are not exempt to this as almost all online tax preparation companies offer some variation of a free tax software.
The “trick” is in which can qualify for free, as with companies the answer is... not many of us.
So which of you have experience with a “free” product and how many of you were quickly up-sold to a paid version that ended up costing you as much as $69..or more. Add to that another $37 or more for your state return and your tax preparation fee quickly adds up to more than $100, when you thought you were doing your tax return for free! Now go ahead ask yourself did this free software get to know you and your business on a personal & professional level so that you were provided with all the deductions available? Did this free software ask you about your vehicles, debts, business entertainment, travel, interest on your purchases, new equipment...?
So after it's all said and done it's like your parents always told you, “If it sounds to good to be true, it probably is.” Be sure to read the fine print and check the state tax price which is where online tax companies make most of their money.

Unlike other companies Professor Tax includes real services at no extra cost including door-to-door pick up services no matter where you are in the US and we provide all our valued clients unlimited communication with our office.  We understand every business is unique so to show value that uniqueness we personalize our services to meet your needs because although taxes are just a number you are never just a number to us!
Professor Tax isn't just here to prepare your taxes we look forward to helping you minimizing your tax liability. You may need to create a new business, buy rental property, or invest in a pension plan. Whatever your situation, Professor Tax is ready to help!
We strive to fulfill our clients needs by always continuing our education and staying on top of all the latest changes so we can maximize your return - we have yet to meet a client that we could not show them their savings potential within moments of reviewing their past returns.  So just say Tax Trick Me Not and call Professor Tax so we can roll out the savings for you today!

Spring Cleaning | Organizing Your Books

Now that tax season is finally over let the Spring Cleaning begin! That’s right, now is the time to get your books organized and begin planning for next year. Maintaining good records will ultimately make filing your return next year a lot easier.  Shred what you don’t need any more and keep the records you need in case of an audit.

If you’re a business owner it is extremely important not to mix personal and business. You should keep your books and taxes separate.

Now let us help you get organized:

1)   Keep all of your tax records in a designated location. This will save you time when looking for important documents.

2)   Keep all CASH receipts.

3)   Hold onto Bank Statements

·         The IRS will want to see Check Stubs and pictures of checks that cleared

·         Sales information - deposits or sales reports (total of invoice) most are cash method and sales tax

·         Payroll Summary - QuickBooks or via a payroll company

4)   Stay on Top of Payroll

·         It is important that your payroll taxes are taken care of, so that you do not receive a penalty.

5)   If you receive your documents electronically, you can simply save them to your computer. Create a file for the current year; then create subfolders for each type of document. This will help you stay organized, while saving paper.

6)   If you are saving important documents to your computer it is important to back this information up.

·       You can save  your  information to an external hard

    drive that simply plugs into your computer

·       Or burn a CD

·       Ideally you backup your data offsite, not only with an external hard drive or CD.

    

If you own a business, below are the types of business paperwork you should keep:

Receivables: All of your gross receipts; cash register tape records, bank deposit paperwork, receipt ledgers, all your invoices, log of all credit card receipts.

Purchase: All canceled checks, credit card records and invoices

Expenses: All canceled checks, bank account statements, credit card records, invoices and all your petty cash slips

Assets: Receipts for all equipment purchases, capital investment or improvements in the business, property records for any real estate purchases.

As you can see, just because tax season has come to an end doesn’t mean you can forget about your taxes and books. “Spring Cleaning” is a great way to be prepared for next year. If you are new… let us help you get caught up on your taxes. Professor Tax USA not only takes care of your personal and business taxes, we will take care of your bookkeeping and accounting needs. Live out of state? We will come to you. We travel all around the United States.

How Long Should I Keep My Records?

How long should I keep my records? That is the question. The length of time depends upon the expense or event that the document contains.  It is important to keep your records until the period of limitations for the document expires.

What is the period of limitations? - The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax.

Accordingto the IRS you should keep your tax records for 3 years if you do not owe additional tax and the following situations do NOT apply to you:

1)   You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years. 

2)   You file a fraudulent return; keep records indefinitely. 

3)   You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. 

4)   You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years. 

5)   Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

So a good rule of thumb is to keep your records at least 5 years, due to the state goes back 5 years when it comes to sales tax and the IRS can audit up to 3 years. Don’t go overboard with your record keeping. Pay attention to dates and toss out what you don’t need. If you would like “The Professor” to review your tax documents with you feel free to contact us and we will set up an appointment. We are here to make taxes easier for you and to keep you informed on the ever changing law.

I Received My Tax Refund, Now What?

So you have received your tax refund? Are you trying to decide what to do with the money. Should you invest or go on a shopping spree? That is usually the struggle that many people deal with every year.

Let us help you decide what to do with your tax return.

Pay off Debts:

Ø  Credit cards

Ø  Pre-pay mortgage

Ø  Pay off student loans

Ø  Car loan

Remember to do this in baby steps. Pay off the smallest debt first, then stack that payment onto another debt and so forth. This will help you pay off debt more quickly. You’re already paying out each month, so why not get out of debt?

Savings and Investing:

Ø  IRA (Individual Retirement Account)

·       Use your refund to increase your retirement plan contribution

·       If you don’t have a retirement plan at work or if you’re contributing  the minimum, you can use your tax refund to contribute to a Roth IRA.

Ø  529 Plan or Qualified Tuition Programs (QTPs) 

·       This is an education savings plan operated by the state or educational intuition designed to help families save money for their children’s college tuition.

Emergency fund:

Ø    This fund is in case of an actual emergency, such as the loss of a job, an illness or major expense. A good rule of thumb is to have at least enough money saved in this account to cover at least 3-6 months of living expenses.

Ø    A CD fund or money market account are great options.

Save:

Ø    Of course you can save your refund to go toward purchasing a new vehicle. If possible save up enough money to buy a new vehicle with cash that way you don’t have to worry about payments.

Ø   How about saving for a family vacation. We all need to have fun and get away every once in a while!

Donate to charity:

Ø    If you have things caught up, you can always help those in need. Now more than ever, charities are in desperate need of donations.

As you can see there are many ways in which you can use your tax return. We wanted to give you some ideas of the best ways to invest, save and get out of debt. If you would like to find out more ways to use your tax return or simply would like a consultation regarding taxes, bookkeeping or accounting, contact us and we will gladly help you.

Maria Enjoys Reliable Accounting Services with Professor Tax USA, Inc.

Professor Tax continues to travel to New Mexico! We want you to meet another one of our magnificent clients, Maria Flores. Maria is the owner of I & B Transport & Storage Inc. located in Columbus, New Mexico. I & B Transport and Storage is a private company that was established and incorporated in 2005.

I & B offers two types of services:

1.   Transportation

2.   Storage

Their transportation services use big rigs (AKA 18 wheelers) to transport. One type of trailer used for transportation is a flatbed trailer for heavy equipment and other large items. The second type is a Reefer trailer for other goods, such as produce. Reefer trailers are enclosed and contain an air conditioner. This keeps produce cold when being transported to the grocery store.

I & B Transport and Storage have been clients of Professor Tax USA since 2005. They were in need of a new accountant and Henry came in at exactly the right time. Professor Tax provides a variety of services for I & B. He takes care of the taxes, bookkeeping, accounting, corporate paperwork, quarterlies and more. Henry and Daryl alternate coming out every 2 months to I & B Transport and Storage for a personal consultation and take care of any needs the business may need.

“Henry is easy to contact”, says Maria. “He’s always there when you need him and he will always help you out.” “He is very friendly!”

When asked, what is the best way to describe the services you have received from Professor Tax? Maria says, “I don’t have the words for that.” “He’s there anytime you need him if you have questions.”

Maria states, “I wish there were more reliable people like Henry.” When he goes on vacation you can leave him a voicemail and he will contact you.”

As you can see, “The Professor” will travel to you. Your business is important and Professor Tax knows this and wants you to be less concerned about taxes, bookkeeping and accounting.  Contact Professor Tax if you would like a FREE face to face consultation.

Proud Members of Northwest Florida’s Better Business Bureau - Professor Tax USA

Did you know Professor Tax USA has an A+ rating with the Better Business Bureau? They have been BBB Accredited since February 14, 2001.

The BBB rates your business on a scale of A+ to F. There are 16 Rating factors that determine your BBB rating.  Several factors that raised Professor Tax USA’s rating are:

§  Length of time business has been operating.  Over 30 years of experience.
    

§  No complaints filed with the Better Business Bureau.

§  BBB has sufficient background information on this business.

BBB Accreditation Standards

§       In order to be accredited by BBB a business or organization confirms that it meets and will abide by the following standards:

§        Build Trust
Establish and maintain a positive track record in the marketplace.

§        Advertise Honestly
Adhere to established standards of advertising and selling.

§       Tell the Truth
Honestly represent products and services, including clear and adequate disclosures of all material terms.

§        Be Transparent
Openly identify the nature, location, and ownership of the business, and clearly disclose all policies, guarantees and procedures that bear on a customer’s decision to buy.

§        Honor Promises
Abide by all written agreements and verbal representations.

§        Be Responsive Address marketplace disputes quickly, professionally, and in good faith.

§        Safeguard Privacy
Protect any data collected against mishandling and fraud, collect personal information only as needed, and respect the preferences of consumers regarding the use of their information.

§        Approach all business dealings, marketplace transactions and commitments with integrity.

As you can see Professor Tax USA is highly accredited. If you need bookkeeping or tax advice or services for your business be sure you contact Professor Tax USA! Can't get out of the office, your in luck, "The Professor" will travel to you!