When to Incorporate

When is the right time to incorporate?
Many small business owners come to us and ask when and why they should incorporate. There are a number of things to consider before making that decision. Do you have assets that could be exposed to creditors? Do you own equipment? Real estate? What business expenses will you incur? Do you have employees?

The first step in answering the incorporation question is to understand some differences in the legal entities. Generally speaking, small businesses fall into three main categories: Sole proprietors, Partnerships and Limited Liability Companies (LLCs.) Continue reading “When to Incorporate” »

Tax Return Service

A Real World Example of an IRS Audit – and what happens when you don’t keep your documentation

I am in the process of helping a new client through an IRS audit for his 2012 federal income tax return and I thought this lesson learned would be helpful for every American taxpayer out there who takes the time to read this blog post.
Let’s be creative and call my client “James” to protect the innocent. James was flagged for an income tax audit because of high W-2 wages, and a schedule C that showed a significant loss for his first year as a business owner which is typical. He was transitioning from a job as an employee to a sole proprietorship so there was really nothing he could have done differently from an income tax return reporting perspective. Even though the numbers were legitimate, it was still a red flag with the IRS. So, the IRS requested copies of receipts for every single business expense reported on his schedule C.

James wasn’t able to recover some of the documentation he needed, but he wasn’t overly concerned. After all, surely he could rely on the following companies to maintain his records for him, thinking he could pull them up online or call for archived copies of statements any time he needed them:
• His bank (a large national bank)
• His cell phone company (can you hear me now?)
• His airlines company (the #1 airline in America)
• His internet company (a national internet service provider)
• His credit card company (what’s in your wallet?)

Guess what – he was wrong. NONE of the companies listed above could give him the complete set of records he needed for this audit: bank statements, credit card statements, flight records, phone bills or internet bills. It is not THEIR responsibility to maintain records for tax purposes. It is the TAXPAYER’S responsibility. Period.
Think about it – this audit is only for the year 2012 and as of December 2014 which was when he received his first notice from the IRS about the audit, these companies couldn’t go back any further than the fall of 2012!

All in all, he was unable to recover several thousand dollars’ worth of legitimate business expense receipts and could be facing a tax bill that will also include penalties and interest dating back over 2 years.

Don’t let this happen to you! Here is my advice:
1. Keep your documentation for 7 years!!! Is 7 years the magic number? Unfortunately, there is not a one-size-fits-all answer. It depends on the situation. So the safest option I can recommend would be to keep your records for 7 years.
2. Keep hard copies or online PDF versions that are backed up! I can’t emphasize enough the importance of maintaining a backup of your documentation if you store your records electronically.
3. Stay organized by keeping each year’s worth of receipts and business records all in one place so you don’t have to gather records from multiple sources if the IRS ever comes knocking at your door.
4. And finally, know where your records are at all times. Are they in your basement, or in the attic, or in your office filing cabinet? Do a check once a year (at tax time would be ideal) to insure you can account for the last 7 years’ worth of tax returns and more importantly, your supporting documentation.

If you would like to chat more about this riveting subject, feel free to contact us!

Tax Services

Want to save money on your tax preparation fees?

Getting your taxes done is a necessary evil.  We all know it, but most people dread this season and tend to put it off until the last minute.  (Not us CPAs; we love this time of year!)

Leave it to me, your CPA, to help you save tax dollars.  That is my job.  You don’t need to know “the how,” because that is what I went to school for and why I am required to take 80 hours of continued professional education every two years!  But I will take it one step further.  I can also let you in on a few secrets on how you can save money on your tax return preparation fees this year.  All you have to do is click on any “Contact Us” box on my website, fill in your name and email address and comment that you would like my FREE list of Top 10 Ways to Save Tax Prep Fees.

What do you have to lose?  Contact me now!  You will not be disappointed!

Kelly

Breast cancer survivor, cpa

Breast Cancer Survivor, CPA

With October being Breast Cancer Awareness Month and because I am also a breast cancer survivor, I thought it would be the perfect time to share my experience and how that journey has impacted what I do for a living.

When you hear the term CPA, you probably think of taxes, numbers, accounting, finance, money, income, loss, business… and the list could go on. Yes, all of those words are relevant to what I do. But what I enjoy most is the people part of being in business for myself as a CPA. In a way, breast cancer was part of the journey that got me to where I am today.

I was in “Corporate America” for the vast majority of my career, managing large departments of employees who performed a wide variety of accounting functions for a living, and some of those functions even involved, yes – taxes. At the height of my corporate career, I was diagnosed with breast cancer in both breasts. It was only my second annual mammogram. There was no history of breast cancer in my family. There were no signs of the disease, as the cancer was too small to be detected by self-examination. It was caught very early because I followed my doctor’s orders and faithfully got a mammogram every year starting at age 40. Thankfully, my prognosis is excellent and I celebrate being cancer free every day!

I often wonder why my family and I had to go through such an ordeal. I believe things happen for a reason. When I recently had an opportunity to leave the corporate world and pursue my dream of working for myself to help other business owners and individuals with their tax and accounting needs, I embraced it. I wanted my work-life balance back. I wanted to help people (especially other business owners like me) who wanted to help themselves. I wanted to live into my OWN priorities and not someone else’s. And so far, I’m doing all of those things! Taking care of my health, my family and my clients.

If I had not had the unfortunate circumstance of dealing with breast cancer, I don’t think I would be a business owner today because I would not have taken the risk. But cancer changes your priorities, and it certainly changed mine. With every new client I meet, I am so thankful to have the opportunity of serving them and I hope it shows!

My message to you is this: women age 40 or over – get a mammogram every year without fail! Men, please know the warning signs for breast cancer in men because it can happen to you, too! And make sure all the women in your lives read this!

Independent Contractors versus Employees

Independent Contractors versus Employees

Business Owners: You just hired someone to perform a service for your business. Is it an employee or an independent contractor?

The key is to understand the business relationship that exists between you and the person performing the services. Sound like a trivial accounting issue? It’s not. But many business owners who rely on contingent labor make this mistake in wanting to minimize employer payroll tax expenses on their P&L. While the practice sounds economical and affords flexibility, it can lead to tax and legal problems if certain requirements are not managed carefully.

 

Here is how you can stay out of legal and tax trouble. According to the IRS, there are three key factors to examine:

Continue reading “Independent Contractors versus Employees” »