Grow Smart Business


Search Articles

Posts Tagged ‘small business taxes’

Small Biz Resource Tip: ExpenseCloud

June 10th, 2011 ::


When it’s time to balance your business’s books, all the receipts and random expenses employees have turned in can leave you drowning in a pile of paperwork. ExpenseCloud wants to be your life preserver and help you out of the ocean of credit card bills and reimbursement slips. ExpenseCloud can help you automate employee expense reports, streamline your expense approval process and show you where to cut on unnecessary employee spending. You can even download helpful apps for your iPhone or Blackberry to scan receipts, input mileage and more.

Start Tax Planning Now, Save Money Next Year

April 18th, 2011 ::

By Rieva Lesonsky

Tax day has come and gone (well, unless you applied for an extension, of course). So why am I talking about tax planning now? Because it’s never too soon to start planning now for next year. Here are some steps you can take to ensure that for 2011, you keep more of your money and give less to Uncle Sam.

Assess what went right—and wrong. Did you end up scrambling to get your business taxes in on time? Did you show up to your meeting with your accountant toting a bunch of receipts stuffed in shoeboxes? Did you forget to show up at all? Make a vow to get it together for next year. Plan now for when you’ll have your documentation to your tax preparer next year—put it on your calendar.

Work with your accountant. Yes, you just met with him or her to get your taxes in order, but schedule another meeting as soon as possible to discuss the best strategic tax moves for your business in 2011. Your accountant can be one of the biggest tools in helping your business grow—but only if you truly take advantage of the advice he or she can offer.

Make some projections. How will your business’s 2011 finances be different from 2010’s? With the first quarter of the year already under your belt, you should be able to make some sales projections and estimate whether your revenues will grow, shrink or stay pretty much the same in 2011 compared to 2012. If there is a substantial difference, talk to your accountant about how that will affect your tax bill.

Consider upcoming expenses. Do you have big plans for 2011, such as hiring new employees, adding more benefits, changing locations or buying new business equipment? Work with your accountant to figure out the best way to pay for all of this, as well as when to make the purchases and how to take advantage of any tax credits or deductions involved.

Get automated. If you’re not already using accounting software for your business (you’d be surprised how many small businesses still aren’t), talk to your accountant about the best applications for your industry and business size. Learn to use it and you’ll find accounting software is a huge benefit in helping grow your business.

Image Courtesy: Karen Axelton

 DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

IRS Eases Up on Back Taxes and Liens

March 17th, 2011 ::

By Maria Valdez Haubrich

It’s tax time, and depending on where you are in the process of filing and how much your business owes, you might be happy . . . or not so much. If you were already facing a tax lien or owed back taxes, you’re probably not too thrilled.

However, there is some good news if this is your situation: The Internal Revenue Service (IRS) recently announced a series of new steps to help individuals and small businesses get a pay back taxes and avoid tax liens. The changes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens. This amount has been updated to adjust for inflation.

• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill. Liens will be able to be withdrawn once the bill is paid in full, and streamlined internal IRS procedures will enable collections employees to withdraw the liens.

• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement. Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

• Open streamlined Installment Agreements to small businesses with $25,000 or less in unpaid tax, including those that file as individuals. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less. Small businesses need to enroll in a Direct Debit Installment Agreement to participate.

• Expanding a streamlined Offer in Compromise program to cover taxpayers with annual incomes up to $100,000 and tax liability of less than $50,000.

“Small businesses are an important part of the nation’s economy, and the IRS should help them when we can,” IRS Commissioner Doug Shulman said. “By expanding payment options, we can help small businesses pay their tax bill while freeing up cash flow to keep funding their operations.”

For more details about these changes, visit the IRS website.

Image Courtesy: Karen Axelton

DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

Will Barter Affect Your 2010 Business Taxes?

February 22nd, 2011 ::

By Maria Valdez Haubrich


Did you use barter in 2010 to help your business save money and conserve cash? Smart move. More and more business owners turned to barter to get through the tough times of the recent recession. But if you don’t handle the tax consequences of barter relationships properly, you could lose more money than you saved.

Barter can enable you to trade for services such as website design, accounting or consulting, marketing and more. You can even barter for business products like print materials, office equipment or premiums and promo items. But whatever you barter, the Internal Revenue Service (IRS) has strict regulations for how the transaction is reported.

The IRS says income from barter is taxable in the year during which the transaction took place. That means you must report the fair market value of the products or services you received in any 2010 barter transaction on your 2010 tax return. In addition to this, you may also have to pay income tax, excise tax or self-employment taxes related to the barter activity. Finally, barter could result in capital gains, capital losses or nondeductible personal losses.

Many small business owners use informal barter arrangements with other companies. That’s OK with the IRS, but you do need to document in writing what you and the other party are exchanging and its value. If you didn’t set up such an agreement at the time of the transaction, do so now.

Going forward, one way to simplify tracking your barter activity and its tax consequences is by joining a barter exchange. Each year the exchange will send you an IRS Form 1099-B detailing that year’s barter activity for the year, and will report that activity to the IRS. This removes a lot of the headaches and ensures your information is correct.

Whichever method you choose to use—informal or a barter exchange—be sure you keep accurate records of all barter activity. The IRS website has more information about barter, as well as links to all the barter-related tax forms you’ll need, resources and advice for tracking and documenting barter.

Still not sure whether your business’s barter activities comply with IRS regulations? Ask your accountant or tax preparer for help.

Image Courtesy: Karen Axelton

5 Small Business Tax Breaks You Need to Know About

January 25th, 2011 ::

By Karen Axelton

There have been a lot of changes in the tax law and a lot of laws passed in the past year. Have you been keeping track of how it all affects your business? If not, have no fear—the SBA has, and the office recently released a guide to 2011 small business tax breaks entrepreneurs should know about.

These changes, created by the Recovery Act, the Small Business Jobs Act, the HIRE Act, the Affordable Care Act, and the Tax Relief and Job Creation Act, will affect your 2010 tax returns, so read on to see if they affect your business.

1. Up to $500,000 Small Business Expensing Limit

Small businesses can write off a larger portion of the cost of new equipment purchases in the year it’s purchased instead of depreciating the cost over time. This provides an immediate tax benefit. The maximum amount small businesses can expense has been doubled to $500,000 for 2010 and 2011 and the phase-out threshold has been raised to $2 million.

2. Tax Relief for Cell Phone Deductions

The Small Business Jobs Act simplified deductions for business cell phones so that – starting in 2010 – cell phones can be expensed and deducted like other property, without additional reporting requirements.


3. Increased Deduction for Startup Costs

Did you start your business in 2010? Good news: The Small Business Jobs Act temporarily doubled to $10,000 the deduction you can claim for business startup expenditures.


4. New Health-Care Tax Credits and Deductions

The Affordable Care Act gives small businesses tax credits if they provide health-insurance coverage to employees; self-employed business owners can now deduct health-insurance costs for themselves and their families. Specifically:

  • Companies get tax credits up to 35 percent of employee premium costs for certain small businesses for tax years 2010 through 2013. In 2014, the maximum credit increases to up to 50 percent.
  • The Small Business Jobs Act allows self-employed individuals to deduct 100 percent of insurance costs incurred in 2010 for themselves and their families.

5. New Tax Credit for Hiring Unemployed Workers

The HIRE Act provides a 2010 payroll tax credit for businesses that hire employees who have been looking for work for 60 days or more; it also provides a credit of up to $1,000 for retaining them.

There are several more tax changes and deductions you should know about. To read more, visit the SBA’s website.

Image by Flickr user radiotrofa (Creative Commons)

 DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

The IRS Is Not A Bank

April 9th, 2010 ::

The Internal Revenue Service is not a lender of last resort. By not paying taxes, you are ultimately borrowing from the Government, at extremely costly rates. The addition of compounding interest and penalties will make a bad situation much worse. Any unpaid taxes due will garner a daily interest rate, plus a monthly 5% penalty each month up to 5 months for a maximum of 25%.

For businesses, the most common tax payment problems come from not paying the payroll tax. Failure to pay 941 payroll taxes can easily put the entire business in jeopardy and have a drastic affect on the business owners’ assets. If the company is dissolved, the IRS will still require the owner to pay outstanding balances of payroll taxes.

The best advice for tax problems is to be pro-active at all times. Like most bad situations, ignoring it will not make it go away. If there are not enough funds to pay taxes on a timely basis, there is a strong indication the business is improperly capitalized. This can cascade into difficulties that may be hard to get out of, which could create lasting negative obligations.

As far as the IRS is concerned, first they will send a letter for a balance due. Upon not hearing anything from the taxpayer they might send a few more. When the bureaucracy figures out no one  is heeding the message, they will assign a case worker. This means your account has moved down a notch.  At this point either a payment plan is negotiated or a Notice of Federal Tax Lien is filed. Avoiding a tax lien is highly recommended. Once a payment plan is in place, it is imperative that payments are made on a timely basis. With good cooperation a payment plan can be in place without having a formal tax lien.

The latest news is that the IRS is now checking that Federal contractors are in compliance. Meaning, they conduct a review of certifications of non-delinquency in taxes for any companies bidding for Federal contracts. This could potentially kill an active solicitation bid if there are outstanding taxes due.

In some cases a factoring company can actually assist in situations where there is a delinquency. But once a lien has been levied against a company it will require written subordination from the IRS in order for any commercial finance company to even consider funding. . When a payment schedule is in place, the factor may send advances from invoices directly to the IRS. This insures that payments are being made in a timely fashion per the IRS agreement.

Fortunately tax problems can be remedied, but they can’t be ignored.

An Interview with the Taxgirl

April 1st, 2010 ::

Kelly Phillips Erb is the Tax Girl — not only is she a top-notch blogger covering the topic of taxes, but she also is a top notch tax lawyer. She took some time to answer our questions about taxes for small businesses.

How did you get to be Tax Girl? What’s your background as a tax expert?

On my site, I joke about being in law school in Moot Court wearing an oversized itchy blue suit and hating it. But it’s true. It was horrible. In a desperate attempt to avoid anything like that in the future I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I had a LL.M Taxation. I worked for other law firms for a few years after graduation and decided that I could do it better on my own – so I convinced my (not quite yet at that time) husband to quit his BigLaw firm job and work with me. We opened our firm ten years ago.

The blog kind of grew organically out of opening our firm. I was updating our firm web site fairly constantly because tax law changes so quickly. I was looking into a better way to do it (because that’s how I’m always thinking) and I came across this notion of a blog – this was years ago when the word wasn’t even in mainstream vocabulary. I loved the idea of a site that was constantly moving and encouraging dialogue about tax. So I started blogging about tax. A bit after I started, I took the plunge and made an offer for the domain (taxgirl.com) since it had been my moniker for years. I bought it and I’ve been at taxgirl.com ever since.

What’s the strangest tax question you’ve ever gotten?

Gosh, I get literally thousands of questions so it’s hard to pin down the strangest… The absolute oddball ones tend to be related to tax evasion schemes, like the notion that if you’re service based and not product based that you don’t have to pay taxes or the ones that say the government has “secret accounts” that you can access. But the ones that really blew my mind were the folks trying to maximize rebate checks that were based on the number of dependents – one guy had something like 10 kids that he had not been supporting and he was wondering if the government would chase him for back child support if he claimed the kids this year. It’s unbelievable what people will say and do to get a refund.

What would you say are the key differences between completing your taxes as an individual and as a business owner?

Individual taxes are much easier because there’s usually just the one (income tax). Business taxes tend to be more complex because you may have other issues to worry about – corporate tax reports, franchise taxes, sales & use taxes, use & occupancy taxes, payroll taxes… Depending on what kind of business owner you are, the list can be fairly extensive.

I think, because of the sheer number and types of taxes, business owners have to focus on tax planning and compliance all year round as opposed to your individual taxes which, for better or worse, you can typically crank out your individual obligations in a day or two. Perhaps a painful day or two, but still…

What sort of key problem areas should business owners be on the look out for when tax season rolls around, especially if they’ve already been in business for a couple of years?

It’s easy to lose track of tax items that you may have already elected to report a certain way like depreciation, use of your car, etc. That’s why having a regular accountant can be helpful.

I think business owners tend to fall down on the record-keeping side when it comes to meals and entertainment. Inevitably, on examination, business owners struggle to remember what they were doing at a meal – and with whom. Contemporaneous record-keeping, even if it’s just writing little notes on the backs of receipts, helps a lot.

The same issue comes up on the home office side. It’s a wildly misunderstood deduction and there’s just so much bad information out there that I don’t think taxpayers always keep the right kind of records. I recently wrote a post about home offices and the comments, even from alleged tax professionals, just showed a real lack of comprehension about what’s acceptable. That actually ties in with the idea that overall knowledge about what is and is not deductible is pretty lacking – of course, I don’t blame taxpayers, I blame Congress. The rules and the changes are just out of control.

As a tax professional, what characteristics do you think are key for a business owner looking to find help with his taxes?

Trust and communication. You have to feel comfortable with your tax professional. If you feel intimidated or stupid around him or her, it’s time to find someone new. You need to feel as though you can ask any question and get a good, complete answer.

If you can only offer one piece of tax advice for a small business owner, what would it be?

Be educated. You don’t have to know everything about taxes but you need to know enough to make smart decisions. Don’t rely on your tax professional or anyone else to tell you about your business – that’s your business, to know what’s going on. You don’t have to know the intricacies of the Tax Code (that’s what you’re paying someone else to do, right?) but you need to know the basics: what constitutes income, what kinds of things are generally deductible, and the timing and nature of your filing obligations. Don’t be that business owner that just signs returns each tax season: know what (and why) you’re signing.