Author: kathy-beck

Many companies meet tax season unprepared. If you find yourself stressing to scour up records and financials at tax time, your system may be in need of reform. Maintaining good records year-round not only helps you keep track of the transactions you made throughout the year, but it also aids in reducing the stress of tax filing. Well-organized records also prepares you to answer questions should your return be selected for examination.

The IRS has developed a list of the few things that could help you properly manage your records. For the most part, the IRS does not require you to keep records in any special manner. You should, however, keep record of any and all documents that many impact your federal tax return.

Individual taxpayers should keep records of the following information for at least three years:

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any proof of payment
• Any other records to support deductions or credits you plan to claim on your return

Records related to property should be maintained for at least three years after you sell or dispose of the property. The following are examples of property records you should keep:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

Small business owners must keep additional records in preparation for tax time. You must keep all employment tax records for at least four years after the tax becomes due or is paid. Business owners should save and file the following documents:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099 – MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

Ultimately, maintaining good records year-round will greatly reduce the stress associated with tax time. Whether you are an individual tax payer or a small business owner, keeping these tips in mind will ensure your success during tax time.

For additional tips to keep tax time stress at bay, review our list of solutions to tax time problems.

Planning an event can be both exciting and challenging. While the details and plans can be engaging, the logistics can be daunting. The success and profitability of an event or meeting is determined by three crucial components: budget development, planning and implementation. Meeting the pre-determined budget is not about cutting costs alone; it’s about planning ahead, time management and revisiting past years meetings and making changes. In order to plan a successful event, you must review past budgets and observe trends in your industry and events like yours. Establishing a budget development planning process in order to meet your needs and goals will ensure the success of your upcoming meeting or event.

First of all, you must revisit past events. Review the supplier contracts from previous and current events in order to get a grasp of what you can spend. Examine budget processes from previous events and make necessary changes. Research historical trends in your industry and past events to determine what needs to be thrown out, or added, to make your event a success.

Once you have reviewed past events, you need to focus on the tasks that need to be accomplished right now. Discuss the profitability goals for the company and each event. Establish areas of the event that need more dollars than other areas. Review attendance goals for the event, keeping in mind “fall out” trends to determine true attendance. Negotiate and streamline supplier contracts in order to ensure top profitability. Develop a tracking system and monitor daily expenses and profit goals.

There are many on-site expenses that companies often forget when developing event budgets. On-site expenses include hotels, F&B, Audio/Visual, Trade Show, Staffing, etc. Make sure to manage all of these expenses properly. Advise your team on unplanned expenses as they arise and determine the worthiness of each expense. Throughout the process, continue to track all expenses in order to maintain margins.

The post event review is one of the most important steps in event budgeting. Review all supplier billings and make sure they coincide with your previous agreements. If you find additional charges, dispute the unapproved expenses. Once all payments have been reviewed, present final billing and be sure to maintain timely supplier payments. Review the budget vs. actual expenses and provide a report on the variances. Let management know what changes were made and why. Since you continuously monitored the process, you should be able to answer these questions sufficiently. Finally, review all processes and identify problematic areas. Discuss how these should have been handled and plan future events accordingly.

Overall, the keys to developing an event budget are examining past events, developing and maintaining a realistic budget and reviewing the budget and processes post-event. The hard work that goes into creating and sticking to the budget will enable your event to flourish and create maximum profitability for your company. Learn more about budgeting for special events here.

 

There are few things that bring on more headaches than tax season. As a small business owner, you know that doing the taxes yourself can be more than a chore; it’s near to impossible. After reviewing the new tax laws for the year, pouring through financials with calculator in hand and deciphering the code known as Schedule C, many business owners are in need of a vacation far away from the tax world.

If the thought of doing your own taxes this year makes you cringe, you should consider hiring a professional. Their knowledge of current tax laws and small business accounting, which they can advise you on year-round, makes hiring a professional a worthwhile investment.

A good tax advisor will keep you compliant with tax laws.

Your choice in a tax advisor is an important decision. Just as you would not choose anyone off the street for your spouse, you must put extensive thought into who you choose to handle your taxes. First in foremost, since you will spend a substantial amount of time talking to each other, you must choose a tax advisor who can communicate well with you. He or she must be knowledgeable of the tax laws, sensitive to the needs of your business, and available to answer your questions and respond to your needs.

Before you begin your search, you need to define your needs. Start with asking questions such as these:

• What do you need from a tax advisor?
• What are your expectations?
• Can he or she help you with those persistent accounting problems?

True tax advisors not only puts together your annual tax return, they also provide many additional services, such as bookkeeping and payroll services, ongoing financial counseling, helping set financial goals and aiding in the decision process for making major purchases or investments. Because tax advisors keep an eye on tax implications, their input year-round is beneficial to your company’s financial health. Find a tax professional you can trust not only with your taxes, but also with your business decisions.

Interview potential tax advisors in order to find one who meets your needs.

Once you have defined your needs, start searching for the right candidate. Ask fellow business owners, your lawyer, or your banker for recommendations. Once you have collected several names, check out their background and give each of them a call. Any advisor should be able to set aside some time to meet with you, under no obligation. In that initial meeting, thoroughly question your CPA. This is, after all, a job interview that will lead you to the right candidate. Here are some important questions you will want to ask:

• How much do you charge?
• How quick is your turn-around?
• How many people will be working on my account?
• Can I reach you by both phone and email?
• How many clients do you personally serve each year?

When you ask questions, pay attention to language as well as the answers. If he or she isn’t able to get the message across in a way that you understand, the relationship will not be successful.

Before choosing a tax advisor, always ask for personal references.

After you have interviewed all the candidates and narrowed your choices down, look at their knowledge and experience in your particular industry. Do they know the tax laws well? Have they worked with other businesses in your industry? Ask for references (two or three names) from companies similar to your own – in type, size and situation. Ask them about the tax advisors’ response time and track record. Your references will provide you a much needed outsider’s view.

Finally, look for an accountant with long-term potential. Ask yourself, “Will this particular tax advisor grow with my business?”. If you trust that the tax advisor will give you good advice should you expand, and he or she meets all the criteria you defined for your accountant, you have found the perfect tax advisor for you. For information about our tax advising services, visit our About Us page.

Starting a business can be exhilarating and terrifying all at once. You never want to be the one that says, “If I knew then what I knew now, I never would have…” As business consultants, we hate to see small business owners paying the price for mistakes made due to lack of information. Therefore we are providing this list of five easily avoidable errors that small businesses make:

1. Investing your Retirement Savings into your Business.
   Many receive their 401K or IRA statement and are tempted to use the extra capital for their fledgling business. Don’t do it! Your retirement should be protected like Fort Knox. If, for any reason, your business doesn’t succeed and you have to file personal bankruptcy, your retirement is generally safe from
   creditors. That fund will give you something to fall back on even if you come close to losing everything.
2. Deciding on a Sole Proprietorship
   Yes they are easy and fast to set-up, but sole proprietorships leave you vulnerable to have your personal assets taken by business creditors. Your home, bank accounts and possessions are free game to creditors and they will not hesitate to take them. A limited liability corporation (LLC) keeps the liabilities where they belong – in your business.
3. Neglecting to Read the Fine Print
   Although you may have already established your business as an LLC, your personal assets may still be at risk. Business credit cards, bank loans, tenant agreements and more may have “personal guarantee” language that will require you to personally pay your businesses debts. Look for that kind of language in
   every agreement you sign and strike it from the contract.
4. Forgetting to Get Insured
   According to entrepreneur.com, about 8 million business owners operate out of their homes in the United States. Home insurance policies do not offer the same level of coverage that most small businesses need, especially when their homes house expensive equipment. General liability insurance offers a broad range
   of policy options at a relatively inexpensive cost. 
5. Being too Trusting
   Unfortunately theft is highly common in small businesses. Sometimes it is as small as a few office supplies and sometimes it is as serious as an employee rerouting funds to their personal accounts. Watch your books and inventory and keep an eye out for discrepancies. If you’re not sure how to do it, find an expert
   that can review your books on a quarterly basis and help you identify and address any red flags.

Most small business owners are optimistic by nature and don’t want to address the possibility of things going wrong. By preparing for the worst, you will ensure that you are protected and set-up for success. Minimize your risk to save yourself from headaches, heartaches and big money losses.

For more business tips, check out our article on how to avoid the top five financial mistakes that can put you out of business.

Nonprofits always have worthwhile missions and heartfelt causes but they don’t necessarily approach their brand presence with the same commitment that businesses do. It’s important for nonprofits to take a page out of the business book to attract large donors. Many of the donors with deep pockets amassed their fortunes in the for-profit world – and they expect a certain level of professionalism. Here are a few lessons you can learn from business:

Be Transparent and Accountable

Businesses that seek investors are an open book. You can learn about the individuals that run the organization, their total sales, their growth strategy…etc. Your donors expect the same amount of visibility. They want to know everything about your organization before they “invest” in your mission. Make it easy for them to see the breakdown of how their money is spent and you will find that people are more willing to open their checkbook.

Track and Measure Results

We are all good at saying how many people we have served or how long we have been active in the community but that is only the beginning of the story. Big donors want to know if your efforts are effective over the long term. If, for example, you help people with low incomes secure mortgages, how long are they staying in those homes and making timely payments? How have their lives changed five years after you helped them? It’s
important to let donors know that you are making a lasting impact on the community.

Professionalize your Marketing and Development Efforts

Marketing is an easy thing to cut when funding dips and you’re worried about keeping programs intact. Remember that without marketing and development, your funding will continue to drop. Businesses always invest in some level of marketing and nonprofits should as well. There are many firms that offer outsourced marketing if you don’t have internal resources available. Whether you outsource or keep it in-house, be sure to make it happen.

Have a Web-based Presence

Believe it or not, many nonprofits do not have a website. If you are one of them, it is essential that you get one up as soon as possible. There are many user-friendly templates and affordable options available online that make set up a snap. It’s the first place most donors go to research your organization and your cause.

If you already have a website, keep it updated with upcoming events and current programs. An out of date site can seem like a lack of commitment to a potential donor.

Actively Promote your Brand

Even if you already have all of these pieces in place, be sure to do a self evaluation every few months. How easy is it for donors to find you? Is your brand messaging clear and easy to understand? Can they easily determine who you are, what you do and why they should be a part of your cause? If not, think about how a business approaches their branding and update your approach accordingly. The donors will find you once you do.

According to Philanthropy.com, charities got good news about the year-end giving season in a poll released on October 26th of this year. Three out of four Americans say they plan to give at least the same amount as they did last year if not more. That’s better than last year, when only 63 percent of Americans said they would give at least as much to charity as they did in the previous year. Follow these three simple guidelines to ensure that your year-end donations maintain or even exceed levels from last year.

• Send More Appeals: Many successful nonprofits are reaching out to their potential donors with shorter but more frequent appeals and garnering tremendous results. A camp and retreat organization for children with special needs increased their email appeals from 1 per month to 3 per month and doubled the total donations in 2010. A cancer research center also saw a big difference when they increased the frequency of their donor appeals. An email was sent a week before the mailing to let them know to be on the look-out for the donation packet. Calls and follow-up emails were placed on the last Monday, Wednesday and Friday of the year by internal staff. This small change increased revenue by 35%. The lesson? Keep it short and consistent for better results.

• Show them the Results: It’s easy to talk about all the fantastic things their donations will buy but donors often respond to a more emotional appeal. Show them how your charity has specifically helped an individual that has been affected by your cause. This will have a much greater impact. A charity that provides a backpack with school supplies to under-privileged children learned this in 2010. They originally appealed to donors by impressing the need for the children to have school supplies and talked about how far their money would go. They shifted their marketing to showcase pictures and video of the children as they received the backpacks and donations increased significantly. People want to see the people they are helping.

• Go Online: While traditional email, mail and telemarketing are effective tools for fundraising, social media can greatly expand your reach. Find blogs or Facebook pages that have a similar audience and talk them about doing a guest posting. You can offer the same thing to them and both organizations will gain exposure to an entirely new audience. Don’t forget to stay active on your Facebook and Twitter pages as well. Post pictures of people that you have helped and invite them to share their stories. If they are tagged in the post, all of their “friends” will learn about your services as well.

Your financial story can also help raise donations. Read our blog article, The Value of Effective Financial Reporting for Nonprofit Organizations to learn more.

Communication mistakes happen to everyone…but what if they are hindering the level of donations that you can expect this year? We have five mistakes that are easy to make and even easier to fix. Review your existing fundraising text to make sure you are not guilty of these offenses:

1. Assumed Familiarity

We are all so familiar with our cause and our organization that it’s easy to assume everyone else is too. However most donors only know a fraction of what you do. Their main focus is in learning who you are and how they can help. Here is a great list of “Don’ts” from Karen Zapp’s Nonprofit Blog:

• Don’t assume donors know much about your organization.
• Don’t assume donors remember their last gift, date, or amount.
• Don’t assume donors consider you their pal and want to chit-chat; especially when they don’t even know who they’re talking to yet.
• Don’t assume donors remember everything you’ve told them or everything you’ve written to them (because they probably only read a fraction of it).

2. Telling them EVERYTHING you do

Most nonprofits have many programs and want to tell the public everything they do for the community…in one email. The hope is that at least one program will resonate with the potential donor but this often has the opposite effect. The reader gets overwhelmed and stops reading quickly. Focus on one program at a time and make your marketing emotionally charged and full of impact. In a world of constant information, a short and emotional appeal will garner better results.

3. Failing to Show How the Donor Makes a Difference

Your donors are looking for a reason to give, and if you do not give them one in your marketing messaging, you will quickly lose your audience. Show how their life will be different because of the donation. Who will they help? What, specifically, will their money go towards? How will they be emotionally rewarded? Keep those points in mind while writing an appeal to make it more, well, appealing.

4. Using text Written by a Committee

Sharing text with a team of five people and dealing with each of their perspectives dilutes it faster than anything. Write it out then share it with a go-to proofreader to make sure you haven’t made any egregious grammatical errors. You will end up with more authentic messaging that gets to the heart of the matter quickly and effectively.

5. Your text is ALL about YOU

When you say, “Our charity provided a prosthetic limb to this veteran,” or “We flew this man 250 miles for his cancer treatment,” you are not telling the truth. Your donors did those things and your communications should read that way. This will connect the dots for donors so that they see that it is their money or time that is making these things happen. The donations will increase when they see they are making a personal impact.

The word “audit” brings fear to most businesses. Navigating tax law for the first time can be stressful, time consuming and potentially expensive especially for small business owners. James Guarino, a certified public accountant and a partner at Moody Famiglietti & Andronico in Tewksbury, Mass., shares these tips for making an audit less painful.

1. Keep things in Perspective
Most people imagine a full scale probe into their finances when an audit is triggered but this is rarely the case. It is often a small math error that raises concerns. For example, the supporting documents such as 1099s may not match the figures on a company’s return. The problem can easily be fixed by correcting the 1099 and recalculating the tax on the form.

Sometimes a single loss or write-off can raise a red flag for the IRS. “Professional real-estate investors can claim losses and write-offs that casual investors might not be able to,” Guarino explains. “But you have to meet certain criteria to be a professional rather than run-of-the-mill investor.” If the activity you have listed doesn’t fall into the normal range, the IRS will ask for further documentation to confirm that it was a legitimate claim.

2. Get help.
An audit can be emotionally straining, especially when you feel as if you are defending your business. Hiring an attorney or CPA to manage the audit will remove you from the situation. They will be able to identify issues that are not as black and white as the IRS represents them and fight for you. If the IRS alleges that money is owed, your CPA is capable of arguing those points on your behalf. Many times they end up winning because the IRS does not want the case to go to court.

3. Provide exactly what the agent asks for.
It can be tempting to be forthright with any information that may be helpful in the audit but less is always more. Restrict your answers to the matter at hand and the audit will end quickly. If you talk directly to the audit agents, Guarino says, answer with direct speech: “Yes; no; I’ll look into it,” he says. “Any tidbit of information that you offer could bring things to the auditor’s attention that he might not have thought of otherwise. That could open a can of worms.”

This is another example of how an attorney or CPA could help you in an audit. They are trained to answer questions in a limited fashion and will keep the process focused and moving forward.

4. Don’t assume the IRS is right.
Mathematical errors are just as easy to make for IRS agents as they are for you. They could easily miss an important document or, when a law is open for interpretation, choose the side that benefits the IRS. You have the right to argue your point of view and provide supporting documentation for each question raised.

5. Decline requests to extend the IRS’s deadline.
The IRS has a statute of limitations that restricts an audit to the three years previous. Because of the high volume of cases, the IRS often asked companies to extend that deadline. Say no. Although the letter may seem more like a requirement than a request, you do have the right to decline the extension. Consult at tax advisor that can decode the legalese before formulating your response.

A request for a waiver will not, however, release your from the audit. The IRS agent will do as much as possible in the time allotted and let you know if money is owed.

Need help navigating an upcoming audit? Take a look and Beck and Company CPA’s Audit Services.

The phrase, “This donation is tax-deductible,” can be just the thing a potential donor needs to hear. Although this isn’t the only reason they donate, it’s certainly an important factor. About 85% of all charitable contributions are made by individuals who deduct their donations.

It is important to note that their donation is not always tax deductible. Whether or not it qualifies can depend on a variety of factors: who the donation is given to, when the donation is made, the purpose of the donation and the donor’s particular tax situation.

The good news is that it is up to the donor and their tax advisor to decide whether or not a donation is tax deductible. The nonprofit is not required to report donations to the IRS. Their only responsibility is to make sure they comply with any substantiation and documentation requirements for the donations they receive.

What are the Deductible Donation Guidelines?
Each donor’s situation is unique and there is never a straightforward way of knowing that their donation will be deductible. Thus, no matter what your experience may tell you, never give a donor specific tax or legal advice for the donation you receive.

Many nonprofits use the line, “Your donation is tax deductible”. In many cases this can be true, however it is less misleading to state that your nonprofit is a Section 501(c)3 nonprofit and that their gift may qualify as a charitable deduction for federal income tax purposes. Encourage donors to consult a tax professional before declaring that their gift is deductible.

Who Should Know the Rules?
Members of your organization that are involved in fundraising efforts should have a basic understanding of charitable deduction rules. This may include your executive directors, key writers of your newsletter or other communications, board members or any volunteers who help raise funds.

How Can I Take Advantage of Tax Laws?
There may be other tax advantages to donating to your particular organization. If so, include that benefit in your emails, letters, newsletters and phone calls. This may increase donations as people realize the additional advantages of donating to your organization.

Make the basic rules available to your donors through your website in the form of an FAQ (frequently asked questions) or a direct link to the IRS rules. The IRS offers a full document called IRS Publication 526, Charitable Contributions. You can find a link to it on www.irs.gov.

How to Manage Thank you Gifts
If you invite donors to a gala, then send a fruit basket or offer a coffee mug in exchange for a donation, only a portion of their donation will be deductible. The value of the gift must be subtracted from the donation amount before being reported to the IRS. To help donors estimate the deductible portion of a donation, include a statement at the end of a thank you letter that says, “The estimated value of goods or services provided in return for your donation is $____.” This will help them know exactly how much they can deduct.

Don’t forget to remind them to keep the thank you letter as an acknowledgement of their donation. Their tax professional will thank you for it!

If you liked this article, you may also enjoy, Business Tax-Time Problems Grow from Past Mistakes.