TK Accounting & Consulting

E-Commerce Tax Considerations

If you run an E-commerce business you’ve got to be prepared for the upcoming items.

Payment Gateways
Trademarks, copyrights & patents
Possible shipping restrictions
Specific lease requirements

Sales tax laws can be very tricky since the are so different from state to state laws. This large variation in rules is mainly due to the fact that many e-Commerce companies handle a much larger market due to the structure of their business. If you need assistance figuring out taxes, we’re here to help. From a brief history, potential considerations, assistance in filing state sales tax and the benefits that come from working with an experienced accountant with this process.

SALES TAX & E-COMMERCE

When you consider opening up an e-Commerce store, one top priority is figuring out your state and local sales taxation laws.

The History of e-Commerce Taxation

The governing bodies responsible for e-Commerce sales tax considerations were the U.S. Advisory Commission on E-Commerce. This 19 member advisory panel was created in October 2001 as a stipulation of the Internet Tax Freedom Act, which created structure around researching the impact of taxation on e-Commerce and the national and global economy.

Today, e-Commerce business owners a required to collect taxes in any state where they have a physical presence, or nexus. This can become more difficult when the e-Commerce business has a headquarters in one state but keeps inventory and distribution in another, or in several others.State-by-state rules for sales tax apply to all businesses regardless of size and whether or not there is a physical location.

There are a few like, Alaska, Delaware, Montana, New Hampshire and Oregon, these are all states that don’t have sales tax. Additionally, businesses that have headquarters or keep inventory stored in these states aren’t required to collect sales tax on in-state transactions.

Typically, sales taxes are collected on a quarterly basis, and failure to comply with the tax schedule could lead to high fees amounts.

Establishing Sales Tax Nexus

The Concept of developing a nexus is the center for the sales tax laws. The develop on the nexus depend on the following:

Nexus is located in your home state.
The physical location of your business, whether it be the store front, office or inventory warehouse.
Your staff or anyone working for your business typically generate a sales nexus.
Business stock in a specific area’s location typically generate a sales tax nexus.

E-Commerce and the Nexus

Explained, nexus describes any place where a business takes up physical space, but there are more factors to consider. Actually, as your e-Commerce business grows, it could be developing a sales tax nexus without intention. For example:

Activity generated nexus: This can be a delivery, service call, trade show or other events that grow your business’s physical presence greater then normal.
Vendor created nexus: A business’s hosting service that manages the e-Commerce website in an alternate state from the e-Commerce retailer can generate a taxable nexus.
Affiliated nexus: A marketing agency in a different state that assists in generating new revenue has the potential to generate a nexus.

Drop Shipping

A drop shipment takes place when you have business distributors ship items directly to the business’s buyers. In traditional businesses, these transactions are typically tax exempt but that’s not always the case for e-Commerce businesses. With running an e-Commerce business, a retailer has to pay sales tax to a supplier if the supplier is registered in the state they are shipping to and the retailer isn’t. There’s an exception, that only occurs if a tax exemption has been issued to the retailer, in which case proof of such this exemption is required.

Variations

Tax law are very confusing and it doesn’t help that they vary so differently in every state. To make sure you fully understand tax law it’s always a good idea to consult an expert, whether a CPA or an accountant to make sure you’re organizing your company correctly.

HOW TO FILE YOUR SALES TAXES IN 5 STEPS

Once you are registered with your state, you will have to file estimated taxes on a quarterly basis. Then, annually at tax time, your business may owe additional taxes or are due a refund.

Step 1: Register for Sales Tax Permit

Once you have determined that there is a sales tax nexus, you must register for a permit. This will allow you to collect sales tax as well as file for the taxes you’ve collected. In many states, it is illegal to collect sales tax with a valid permit.

Collect business documentation, including EIN number
Register your business with your states Dept of Revenue site
Navigate to the “Sales and Use Tax” section of the website
Click on the link to Register Business

Step 2: Determine Tax Rate

After you have registered in each state that your generate a nexus you will have to decide the percentage of sales tax to apply to your merchandise. The amount may change from state to state, you need to research the appropriate tax laws.

Step 3: Collect Taxes

After you get your permit if required, you may begin collecting taxes. The sum of tax must be separately listed from the total cost of the merchandise in America. To help with this you should make sure that your e-Commerce shopping cart automatically adds this function in the state of the nexus. In all other states that have sales tax, e-Commerce retailers may not be required to collect and file them. This responsibility to pay sales tax on online purchases next falls on the consumer to file with the state for items they purchased.

Step 4: Collected Sales Tax

It’s critical that e-Commerce businesses keep up to date records of the taxes they collect, even just to protect the company.

Step 5: Report & Pay Sales Tax

Quarterly, e-Commerce businesses must file reports on sales tax including payment. This may be done online, but can vary from state-to-state.

Accountant assistance

State-to-state laws can make juggling taxes a very tedious process for e-Commerce business owners who already juggle much more. Laws aren’t dependent on size, so huge online retailers are using to the same sales tax regulations as sole proprietors. Also, depending on your business structure there could be additional stipulations for filing. There are many benefits for hiring professional tax assistance:

Helping keep you sane

Hiring an outsourced accounting service saves money, time and relieves businesses of the insane stress of going it alone.

Helping make good decisions

Bringing on an accountant give you a chance to ask the important questions and makes sure that you have an all around better understanding of the taxes specific to your business as well as additional financial questions. This allows for a better understanding of your business’s standing to make better and more sound business decisions and a better understanding of how your company functions.

Helping to plan for future growth

A good accountant will help their client’s company grow and achieve their dreams. Even if it starts small and the accountant only removes a few tasks from your plate, this allows you to focus on your business and the potential for growth.

Helping organization

For small business owners, e-Commerce retailers are different, but they have their own methods for documenting and record keeping. Working with a trusted accounting firm can assist businesses in organizing and staying that way for each tax season and yearly reviews.

Helping delegate

For small businesses owners it can be difficult to let go of control of the financials related to your business. Bringing on an accountant can relieve the stress of tax times to helps business owners learn to delegate.

Late Filing Tax Tips

With the extension of tax day currently dated for July 15, 2020 you now have more time to prepare for filing, but if you’re waiting until the absolute last second to file your taxes, don’t worry, you’re not alone.

Truthfully about 20% to 25% of Americans wait to prepare their returns. But delaying may cause more trouble this year because it’s the first time taxpayers are filing under the Tax Cuts and Jobs Act.

You still have time, check out these tips before filing:

1. Beneficial IRA contributions

While 401(k) contributions have to be made before the end of the year, taxpayers have until April 15 to contribute to their IRA or Individual Retirement Accounts and still receive a deduction on their return.

If you don’t take part in a workplace retirement plan, you can still deduct up to $6,000 in IRA contributions and add in another $1,000 “catch-up” contribution if you’re over age 50.

If you do participate in a 401(k) plan with your company, you can still fully deduct IRA contributions up to the amount of your contribution limit .

Even if your spouse has a company plan, you can still contribute to a spousal IRA and get a full deduction, as long as your combined gross income is $196,000 or less.

The amount you save for making a contribution may vary. For example, a married couple with an Adjusted Gross income of, say, $60,000 could save $400 on their 2020 tax bill by contributing $2,000 to each ($4,000 total) of their IRAs (the 10% level). If they managed to contribute $4,000 with an income below $39,000, their tax credit would be $2,000 (50% of their contributions).

2. Health savings account contributions

If your coverage for 2019 was considered a high-deductible insurance plan, you can still contribute to a health savings account and claim it as a deduction on your 2019 taxes, regardless of your income.

HSA contribution limits for tax year 2019 have increased to $3,500 for an individual and $7,000 for a family. Plus, if you’re 55 or older, you can add $1,000 in “catch-up” contributions to those limits.

To save money this way, you’ll have to set up an HSA and add funds before midnight of the Monday prior to the tax filing deadline.

3. Business Expense write offs

Freelancers are considered business owners, and have the ability to write off expenses for business-related meals, lodging, legal expense, office expenses and required equipment or materials. Especially if you are working from home, a percentage or your home is being utilized as an office as well as your utilities, internet, phone bill.

According to the IRS, those expenses must be ordinary and necessary. Which means that if it’s something you would have purchased regardless of your freelance gig, it likely would not qualify for a deduction.

With that said, you can still take the home office tax deduction if you legitimately have a room or portion of your home dedicated as your working area. If so, you can write off some potentially hefty expenses, including rent, utilities, insurance and housekeeping. The percentage of the cost that is deductible is based on the square footage of the office to the total area of the house.

If you don’t know the exact amount of your bills you have for working from home or haven’t kept the receipts, you can choose the standard home-office deduction of up to $1,500 for the business use of your home.

4. Dependent care costs add up

Parents are able to claim up to 35% of their child-care expenses as a tax credit each year, or up to $3,000 for a single child or $6,000 for two or more children, to cover the costs of dependent care such as day-care programs, preschool and summer camps. For children 12 and under, these can even include music camps and athletic camps etc. If the cost of transportation to and from camp is included in the camp’s fees, then that counts as well.

The credit, which really depends on the taxpayers income, can only be applied for single filers and working, otherwise both parents have to be working.

Due to that, only the cost of day camp qualifies but overnight camp do not. If in the event you have a disabled spouse or elderly parent who is your dependent, care-giving expenses for them may also apply.

Since this is a tax credit and not a tax deduction, this amount directly reduces your taxes “dollar for dollar”. in retrospect, $1,000 tax credit would cut your tax bill by $1,000.

5. If you need more time, get an extension

You can always file an extension and pay the estimated taxes you owe prior to the due date as to avoid penalties and interest charges.

Check out Free File from the IRS to request an extension electronically or submit a paper Form 4868. But keep in mind that while an extension grants additional time to file, you are still responsible for making your tax payments.

3 Business Categories You’re Likely Overspending On

Have you ever looked at your P&L at the end of the year and thought, “Wow, I spent a lot of money” Looking at the categories, typically it would appear that you can’t cut costs here or there because everything seems necessary. After reviewing your It’s usually one of two things: not enough money coming in, or too much money going out. Big trouble occurs when both are happening simultaneously obviously. But those expenses that are necessary may be way overpriced.

To help reduce the amount of money leaving your business, take a closer look at these categories where a business overspends.

VENDORS

In a supply chain, a vendor, or a seller, is usually an enterprise that contributes goods or services. Generally, a supply chain vendor manufactures inventory and stock items and sells them to the next link in the chain. When was the last time you or your business manager conducted a vendor review? An incumbent vendor could be charging you more than competitive market rates for products, services or materials. For example, not many small businesses generate a list to collect commercial insurance quotes from multiple brokers or agents.

Unfortunately, vendor management goes beyond just having a good relationship: it requires constantly comparing what the vendor’s offering to ensure your business is receiving the best value and ensuring that you’re saving money where you can.

Companies often hire or sign up with the wrong vendor for a job, and it costs them money when that vendor proves to be inexperienced, inefficient or even incompetent. It can happen, when a busy business manager reaches out to an existing vendor and asks, “Can you do this for us?” 9/10 times the vendor is all too happy to offer the additional service – even if they may not be qualified to do so.

For example, a supplier working for you in one area of the business (e.g. information technology) does not qualify that they represent the best service choice for other areas (e.g. printing). Make sure to take the time to investigate alternative industries for what your business is looking to buy and ask them to submit a quote.

If you feel your business is being taken advantage of or you aren’t satisfied with their work, speak with your current vendors. Many companies tend to just pay bills as they come and never scrutinize their services or research new options. Take the time to review and negotiate regularly to save your business money and stress.

FINANCIAL SECTOR

The talents that you bring to the table in business may not include finance. And that’s okay. But it is important to work with someone who does specialize and understand the financials involved in your business, you may be overpaying your accountant or accounting firm. Look at the hours put in, ask questions and make sure that your getting your money’s worth, more so;

• Review and interpretation of financial statements to assess year-over-year performance.

• Tax strategies to minimize tax liability and maximize tax savings.

• Reinvestment strategies – to identify which parts of your business should receive more funding or can cut costs.

• Raising capital; advising on options for debt or equity financing.

And, a general lack of financial controls can contribute to out-of-control spending. Every small business should set controls for things like spending limits, check authorizations and vendor selection.

SERVICE PROVIDERS

When was the last time you updated your company’s phones or internet services? Whether you’ve modernized your communications and providers yet, you may be overspending when you don’t have to.

Many businesses are turning to VoIP and other new-age telephone services which are so useful. But too many are still relying on the same hardware and service they bought years ago and paying far more than they have to or should. New technology has given us high-quality, inexpensive options that offer so many helpful business features. The new services can allow you to forward calls from your business line to your cell phone for when you’re outside your office, set up advanced call routing and ring groups, receive voicemails in your inbox and so much more that can be more affordable and beneficial to your business.

These days, companies often have the same complacency with their internet service as their phone service. If you last talked to your internet service provider over a year ago (or even when you first set up the account), it’s a good idea to set up a time to review and explore new options. These providers are unlikely to ever reach out to you with ways you can save money, so be proactive with your internet service as well. Changes here happen often, so you are most likely way overpaying if it hasn’t been revisited in the last few years. Sometimes the provider will match or beat them, but either way you’ll be able to make a better decision on who to spend your money with.

There’s a difference between getting value and getting cheated, evaluate the categories you could be overpaying on. Look up other services and vendors and get the data you need to make the important decisions regarding your business.

Save money and stress as a business owner

Typically the more money in the checking account the less you tend to worry but when there’s a smaller amount, this brings the stress. This cycle could be never ending if you don’t begin to manage your money more effectively. We’ll show you 5 strategies to begin to manage your accounts which will lower your stress as a business owner.

Open a Savings Account

Your business has to have a savings account or an emergency fund account like you have personally. This account should be able to cover your expenses and overhead for when your business has a slower month or in case of a disaster/emergency. The fixed amount really depends on the type of business you have. Although, a business with a huge overhead requires a larger amount to cover all your expenses and payroll. Delaying setting up this account can become problematic especially during slow months. Personal bills typically can not be forgiven and may mess with your credit. If your company is able to a good rule of thumb is the 50/40/10 rule. 50% to pay employees, 40% in the checking account that pays bills and miscellaneous expenses, and 10% automatically into your savings.

Prepare for Taxes

Aside from your savings account, you need to have an account or set aside funds to prepare for taxes. It’s common to save at least 20% of your net revenue for taxes. Starting to save early can mentally ready you for tax season that comes every year. Unless you pay your taxes quarterly, which allows you to pay an estimated amount every quarter. Once the end of the year comes, you pay the remainder balance owed or you may get a sum back if you overpaid quarterly. Quarterly payments are more beneficial because they allow you to pay on what you will already owe and you avoid penalties. An accountant or CPA can help you with this and give you some insight on your specific taxes for your business.

Keep Money in the Business

That’s right, set up a savings, prepare for taxes and keep money in your business. The amount that you can keep will really depend on how your business runs, what your profits and profit margins look like. The money you don’t spend on bills and overhead allows you the room to upgrade, purchase new equipment or tools, grow your staff or invest in a larger facility. Profit margins will fluctuate throughout the months, but over the year it should show growth, if this isn’t the case for your business, you can benefit from speaking with a financial advisor or a business consultant to ensure maximum profitability.

Deductibles

Deductibles are the tax-deductible expenses removed from adjusted gross income. Deductibles can be a businesses best friend if you have a solid CPA who can advise you on what to keep track of to save your business money. Deductibles decrease taxable income and in turn reduce your business’s tax liability. This means that deductibles your business incurs are necessary expenses that you had to spend for your business that you end up not paying tax on. Some deductibles include equipment, marketing is a big one, software, legal expenses, accounting expenses, office space, etc. Talk to your accountant or CPA today to get the list of deductibles that can save your business money today.

Business Credit Cards

PROS

Allows you to build credit for your business.
Typically a very high credit limit.
Easy accessible cash if necessary.
Most cards allow you to accrue points for cashback or even travel.

CONS

You can acquire a huge amount of debt if used irresponsibly.
Typically have very high interest rates.
You can actually damage your credit if used irresponsibly.

It’s best to weigh all the options before deciding to apply for a credit card. Does your business really need this? Is it going to be used responsibly? Who will be responsible for purchases? Will you be able to pay the balance off if necessary?

Having debt, running into a slow month and taxes are some of the stresses that come with running a business. But mindful, be aware and research all alternatives, The more you know how to manage your money, the less stressful it will be!

9 tips to improve working from home

As a remote accounting and consulting firm, our team has mastered the working from home ins and outs, because let’s be honest…Working from home is awesome … right up until you’re in a conference call and your kids start playing ring around the rosie for four hours out of the day. Or today is the day that your dog decided that EVERYTHING he sees out the window needs a good barking at. And your neighbor, who you can only assume is building a time machine, starts firing up all kinds of power tools and noisy machinery next door.

For many many professionals, working from home every once in a while is a luxury that our respective companies afford us. But which environment actually allows us to be more productive? The office office or the home office?

1. Getting started first thing in the morning.

When you’re heading into the office, your commute can actually help wake you up and you feel ready to work by the time you get step in. But, at home, however, the transition from your nice and cozy bed straight to your computer can be much less invigorating.

But, the ideal way to productively work from home is to start your to-do list as soon as you wake up (as you’re drinking your coffee of course). Getting started on a project right off the bat can be the key to finishing it gradually throughout your day. Because, what may happen is you’ll delay your breakfast and allow your morning sluggishness to slowly deteriorate your initial motivation.

2. Plan your day as if you were in the office.

When you’re working from home, you’re your own boss. Lacking typical work day agenda items, like in-person meetings to break up your day, you can begin to burn out quickly.

Sticking to a schedule means planning what you’ll do and when you’ll do it over the course of your day. If you utilize an online calendar or task manager, generate personal events and schedule reminders that tell you when to shift gears and begin on new items. Personally our firm likes Google Calendar, Evernote and Hubspot to keep everyone on track.

3. Choose a dedicated work space.

Just because you’re not working at an office doesn’t mean you can’t, well, have an office. Rather than cooping yourself up in your room or on the couch — spaces that are associated with leisure time — dedicate a specific room or surface in your home to work.

4. Do more.

It never fails, projects always seem to take longer than you initially plan for. Because of that, you’ll typically do less than you originally wanted to do. So, just like you’re planning to complete the entire scope of the project, you should plan how much time you will spend doing one thing, you should over plan the things you’ll do during the day. Even if you don’t complete your goal, you’ll still finish the day with a full list of completed tasks.

5. Don’t rush into calls first thing in the morning.

Most people aren’t morning people. As they plan out their day and you begin calling, it’s inevitable that you may get somebody who woke up on the wrong side of the bed. You shouldn’t have to wait too much to become productive in the morning, but allow yourself some extra time before immediately calling out. For example, you can make phone calls, have meetings, and any other collaborative work for when you’re ready and up (After coffee usually works).

6. Plan out what you’ll work on before the day.

Taking time to plan out what you will work on today takes away from actually working on those things. Then, you’ll have set up your task list so soon that you may be tempted to switch gears on the go.

It’s without saying that you can allow your agenda to change if it needs to, but it’s equally as important to remain committed to a plan that outlines every task before you start. Try nailing down your schedule the day before if not a few days before, allowing it to feel more legitimate when you wake up the day of, and get working on it.

7. Stay connected.

Working from home may end up helping you focus on your work, but because it’s from home, it can also make you feel cut off from your company. Tools like video chatting and instant messaging allow for an easy way to touch base with coworkers and superiors and keep you motivated on how your work is beneficial long term.

8. Breaks are necessary.

It’s easy to get distracted working from home that you may begin to avoid breaks altogether. Don’t allow the idea of working in the same place you live in prevent you from taking five to gather your thoughts. Don’t just hop on Facebook and scroll the timeline, rather use your break to step away from your desk and devices all together. however. Check the mailbox, do some laundry, talk to others in the home, it’s okay.

9.Define the end of your day.

You may think that when you work from home you have to maintain this work-life balance, this assumption can be tricky. When you work from home, you tend to get so caught up in an assignment or project in an unbothered environment that you can lose track of time altogether.

Instead, set a timer or alarm for the same time every day to mark the end of your day. This time can vary day to day depending on what you can get done in your time frame, but having a time when you know that your work day is technically over can set you up for saving your work and actually ending your day to enjoy your off time.

SBA LOAN 2020

Small Business Administration 7(a) better known as the SBA Loan is an amazing tool to finance your business. Because they’re guaranteed by the federal agency, this allows lenders to provide lower interest rates and more flexibility with terms. Especially during these difficult times this loan can help grow or maintain your business without bringing on additional heavy debt. With all the benefits the SBA loan brings, it can be an extremely difficult loan to qualify for. Even still, this program is currently the best way to secure the future of your company once this tough time is over.

WHAT IS AN SBA LOAN?

Small Business Administration 7(a) are loans guaranteed by the SBA provided by lenders who are mostly banks. This loan can provide assistance and eligible recipients may qualify for a loan up to $10 million dollars, which is determined by 8 weeks prior average payroll plus an additional 25% of that amount. This is double the amount of the original SBA Loan. Additionally these payments will be deferred for up to six months.

HOW TO APPLY FOR AN SBA LOAN

Typically applying for an SBA loan can take weeks or even months. With the current crisis at hand there is a much faster turnaround time. It’s easy to apply for the SBA loan by visiting sba.gov, certain requirements may weigh heavy on your application. One of the main upper hands is to make sure that your personal and business finances are in the best shape possible. We can help you every step of the way and make sure your application is the most accurate representation of your company and how your company is presently affected.

Typical issues your Business may be encountering:

Supply Chain, Inventory, Production issues
Workers and working capabilities
Capital Access
Facility Cleaning In-capabilities due to increase of costs
Business insurance lack of coverage
Decrease in demand
Inability to fund marketing campaigns to communicate effectively with customers
Change in original planning for the year

BENEFITS OF THE SBA LOAN

This loan will ensure that all or most of the expenses your business incurs are covered during the window of the unforeseeable future. This will include payroll support for your employees, including paid sick leave, medical leave, and family leave. As well as the costs typically related to the continuation of health insurance during those leaves. As well as maintaining employee salaries, mortgage payments, rent, utilities as well as any other expenses that your business incurred before the covered period. This all goes to ensuring that when this is over, your business as well as your staff aren’t more affected then they already are.

DOES YOUR BUSINESS QUALIFY FOR THE SBA LOAN

A small business with fewer than 500 employees
A small business that otherwise meets the SBA’s size standards
A 501(c)(3) with fewer than 500 employees
An individual who operates as a sole proprietor
An individual who operates as an independent contractor
An individual who is self-employed who regularly carries on any trade or business
A Tribal business concern that meets the SBA size standard
A 501(c)(19) Veterans Organization that meets the SBA size standard In addition, some special rules may make you eligible:
If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.

You won’t qualify if your business is involved in any of the following:

Engaging in any illegal activity
Owe more than 50% or are more than 60 days late on court ordered child support
If your business is agricultural (farming) , aquaculture enterprise, agricultural cooperative or a nursery.
If your business presents productions that are sexual in nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or services or the presentation of any depictions or displays of prurient sexual nature.
If you obtain more than one third of your gross annual revenue from legal gambling.
If you are not in the business of lobbying.
You cannot be a state, local, or municipal government entity and cannot be a member of congress.

Do I have any other options besides an SBA Loan??

Of course, it’s just the safest and most efficient tool out there presently to businesses who may not have any ideas where to begin to seek help. But you have other options, you can always scout out additional lenders not listed through the SBA. If you’re simply trying to take care of your employees during this time. They will soon release the paycheck protection program, it may not cover the rent but it will allow you to maintain paying your employees and their health insurance so nobody goes without coverage during this time when they may need it most.

PAYCHECK PROTECTION PROGRAM

The administration has yet to release the list of lenders who will be offering loans under this program. But these have released the guide lines in order to help you be prepared for applying when that time comes.

When lenders are evaluating eligibility, they’re advised to consider if
the business was in operation before February 15, 2020 and had
employees that they paid as well as payroll taxes.
Lenders will also ask you for a good faith certification that:

1. The uncertainty of current economic conditions makes the loan request necessary in order to support the company’s ongoing operations. 2. How the borrower may use the loan to maintain workers as well as payroll and or lease, mortgage and utilities. 3. If the borrow has or does not have a pending application for a loan that is similar to the current loan they’re applying for. 4. Prior to February 15th, 2020 to December 31st 2020, if the borrower has not received a duplicate loan for the purpose and the amounts applied. If the applicant is a sole proprietor, self employed individual, or an independent contractor. Lenders may need the following as well as additional announced documents, such as payroll tax filings, 1099-MISC as well as income and expense from the sole proprietorship.

WHAT LENDERS WILL NOT LOOK FOR

If the borrower was unable to obtain credit elsewhere.
Personal guarantee is not required for the loan application.
No collateral is required for the loan.

HOW MUCH CAN YOU BORROW?

Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

FOR EMPLOYERS:

the total of payments of any compensation that is as follows:

• salary, wage, commission, or similar compensation;
• payment of cash tip or equivalent;
• payment for vacation, parental, family, medical, or sick leave
• allowance for dismissal or separation
• payment required for the provisions of group health care benefits, including insurance premiums
• payment of any retirement benefit
• payment of state or local tax assessed on the compensation of the employee

FOR SOLE PROPRIETORS, SELF-EMPLOYED INDIVIDUALS or INDEPENDENT CONTRACTORS:

The total of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

WHAT’S EXCLUDED?

Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
Payroll taxes, railroad retirement taxes, and income taxes
Any compensation of an employee whose principal place of residence is outside of the United States
Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act

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What’s in a P&L?

What is a Profit & Loss Statement (P&L)?

This is a financial statement that easily summarizes revenues, costs and expenses over a specific period of time. This can be monthly, quarterly or yearly depending on the time frame needed. This document provides information about a company’s opportunity to generate additional profits by increasing revenue or reducing costs even both.

SALES

Reviewing your sales first allows you to gain the knowledge on where your sales currently stand. Generally speaking if sales have increased, this is the best way to improve profitability for the future. If you think that a specific month was exceptionally better than the rest, try to remember why and what was done differently so you can duplicate what was done in the profitable month again.

SOURCES OF INCOME (Sales)

This section ties in directly to your sources of income. This is the opportunity to review the sources of income and double check if they are profitable and beneficial to your business. You can look at the ones that are very time consuming with low margins.

(Ex. Sources of income are selling smoothies and fruit bars. Neither of them are directly negatively impacting the business right? But the fruit bar sales have dropped tremendously. So it may be time to decide to eliminate the product or change the product)

SEASONALITY

Seasonality refers to periodic fluctuations in certain business areas and cycles that occur and how your business is affected based on the season. It can reflect in both your business’s sales and expenses. It’s important to remember when tracking economic data. Economic growth can be affected by additional seasonal factors (i.e. holidays, weather, natural disasters)

COST OF GOODS SOLD

This section is very important when evaluating your P&L. This number should increase as the revenue increases because these expenses directly link to your product. If this does not occur it may be a red flag. But when you are reviewing costs of goods sold you can take a look at this section and evaluate ways to reduce these expenses, not eliminate them. Finding ways to lower the costs of goods sold will help increase the bottom line and your business’s profit margin.

NET INCOME

This should be the fun part, your profit and is one of the most important parts of the business if you plan for it to succeed and become more sustainable over time. Profits should be positive (In the black) But there are some exceptions where it’s acceptable to see profit loss. For example, if the company made a large, strategic investment in an attempt to decrease cost or increase sales.

(Ex. From our example earlier, if this business owner decided to purchase cups, straws, napkins and sugar as a bulk purchase to last the entire year in the month of February. This could bring the company into a loss for that month alone, but the expense is recouped with savings and higher profit margins throughout the remainder of the year)

NET INCOME-PERCENTAGE of SALES known as Profit Margin

This is your bottom line, it’s still important to calculate this number and determine your net income percentage so that it can be used to compare across other time periods as well as additional companies in the same industry. Determining the net income as a percentage of sales. Divide the net income by the net revenue, next multiply the amount by 100.

( Ex. $457.07 -Net income for February- divide it by $689.01 – total sales in February- equals 0.6633 Then multiple this number to get 66.33%.) Once you have this percentage, you can use this to assess if your profit margins are increasing (yay) or decreasing (bad) or staying the same. This data can also be compared to other companies in the same industry.

Think twice before using an online tax preparer

Can I trust tax websites?

To receive your return as soon as possible, the IRS always recommends filing electronically and also choosing direct deposit. Typically this method takes no less than 21 days to receive a refund after submitting.

Many Americans are eligible to file for free under the free federal tax filing, unless you earn freelance income or have a more complicated tax situation, you may likely be required to pay tax filing fees to prep for your state and federal returns.

These days the popular idea is using an online service like TurboTax, H&R Block or even TaxAct. Although it may seem like an easy choice, since they advertise this free that free.. But are they really free? They may not require money up front, but you’ll typically pay many hidden fees once you’re ready to submit your return.

We’ve all gone through the process and questioned if that return was really accurate despite who prepared it? How can a website be sure? What if I want to itemize more? Will it show me what I can itemize? The IRS estimates that it takes an average person approximately four hours to complete and file their return. Once you reach the finish line and are ready to finish is the time these sites ask for payment. At this point you may be looking for the quickest way to finish up, you’re given the option to pay for the service with a debit or credit or taken from your refund. If you choose the easier option and take the payment from your refund, nothing else is required but this is where you need to be careful: Many preparers take this opportunity to add on extra fees for this method of receiving your payment and it can be a hefty charge.

We all question these sites, a popular site being Turbotax, they have been known in the past to intentionally hide it’s free tax filing services from searching on google. Intuit being Turbo Tax’s parent company, a report from ProPublica states “TurboTax deliberately hid it’s free file age from search engines”. Intuit intentionally added code to robots.txt file on it’s own site that instructs google to leave TURBO TAX FREE FILE out of search results. Which doesn’t seem very honest or fair. Additionally H&R Block and TurboTax each charge additional fees if you pay from your refund, starting price of $40.00 on top of the fee you’re paying for any of the packages you selected. TaxAct is another site that has its own fees and “bank fees”.

We’re not saying that these sites may not be worth your time, and depending on your situation could be easier for you. But if you want to get the most from your refund, be sure of what you are paying for and don’t just settle for the easiest option. Take a moment to review the charges as well as your information. Your accountant will typically ask you more questions and be able to decide how best to itemize and file your return.

Click the link below to view

How to choose what preparer to use this tax season

Is there a difference between a Bookkeeper and an Accountant?

“So you’re an accountant, isn’t that just a fancy name for a bookkeeper?”

Well.. then what’s the difference between the two?

We get this question all the time, as we jump between titles to perform different tasks and services. So we decided to break it down into the certain jobs that come with each role.

A bookkeeper to start, is an instrumental part of keeping up with your business financials. A bookkeeper is someone that will continue to help you with transactions and financial recording. This helps maintain the smooth operations of your business for the future to come.

On the other hand, an accountant can analyze the data entered by your bookkeeper and produces reports on this data. An accountant is better suited to give you the financial advice, and the direction you are headed. An accountant is more educated about taxes, tax processes, tax requirements etc., and is better able to assist you within that area come tax season.

Bookkeeping Duties:

Processing receipts, payments as well as invoices
Review and input all financial transactions
Processing Accounts Payable and Accounts Receivable Reports
Setup and continue processing your payroll for your business
Prepare initial financial statements and reports
Performing diligent reconciling on accounts and pulling reconciling reports

Not to say that accountants can’t do what bookkeepers do, they are also qualified to assist you with the bookkeeping tasks. Keep in mind though because they have a larger skill set, accountants typically charge more than bookkeepers to perform them. Most good accounting firms will have different services at an accounting rate vs a bookkeeping rate so that you are not being over charged.

Accounting Duties:

Conducting Audits
Reporting on Corporations and their compliance
Assistance in establishing your Business ie. S-Corp
Management of financials and advising you on this and alternatives
Tax preparation, planning and advice

So to answer the questions, yes there is a huge difference between an Accountant and a Bookkeeper.

Biggest Issues for Dental Accounting

With a new year comes old problems… or not? We’ve done extensive research and received an insight from some of our dentistry clients to address some of the issues they have faced and how they addressed these problems.

1. Annual Budgets.

It’s pretty common to have the idea to create a budget. Where many fall short, if they actually do prepare one, is the follow-through. It’s too easy to spend outside of the budget on miscellaneous expenses that once it’s attempted, and fails. People tend to give up.

To start a budget, it’s easy. Simply use the previous years’ financial report and use the key benchmarks to set the standard for the year ahead. But you can’t just start and stop there, and file it away. Today, with programs like QuickBooks, a budget can be prepared rather easily. This can be a wonderful program to use to understand the company’s financial standing. Use this information as a reference guide about where the business is heading and how it can grow. These reports will help you establish and understand certain spending trends and show struggling areas. Your accountant is a quickbooks expert. Many firms will train you how to utilize this tools more efficiently.

Fee Scheduling

Another system that is typically overlooked or forgotten is updating your fee schedules. Can you remember the last time the owner or the billing staff made this update? Chances are its time to give those fees some reevaluating. Even making small changes to routines can make all the difference in the company’s progress. Generating strong financial policies that are stated clearly, understood and accepted by patients with specific treatment plans can only benefit the Company’s growth.

Reviewing internal controls

Monthly or Quarterly reviews on cash and receivable adjustments can keep any practice from becoming complacent and comfortable with the current procedures, especially if cash flow is in good standings. Even with this, you can’t overlook your receivables. Keeping tabs on when you are receiving collections… Are they 60 days? 90 days late?

For this you may need to work with an experienced accountant to generate an efficient policy for collections that works for the busy and the slow periods of the year. But here are some ideas before you’re ready to hire an accountant. For lower, more inexpensive treatment plans, ask your patients for up front payments. This process ensures that the patient is less likely to miss their scheduled appointment. This also avoids delays in your dentists scheduling and decreases the hefty accounts receivable report. Remember, you’re a Dentistry practice, not lending tree.

Communication with your patients

Patient satification can vary tremendously from dentist to dentist. One of the most common found reason for this is the communication between Dental offices and their patients. Maintaining this open way of communication with your patients is one of top priority. Keeping them in the loop and explaining as well as answering all their questions can make a world of difference in how much they value your services.

Explaining potential problems or complications from procedures
Changes that have been made to certain fee schedules
New treatment possibilities
Your company’s availability to perform treatments and certain exams
If you believe something is important to your patients, it doesn’t hurt to bring this to their attention.

Creating a more positive relationship with your clients and patients is one of the easiest and best ways to help your practice grow.

Tax Troubles

The average dentist earns about $125,000 a year, which places them in the 28% tax bracket. That is after they pay nearly $20,000 in FICA taxes. Due to this taxes are a huge burden on your practice. This problem may grow due to the constant target anyone making over 6 figures has on their backs from law makers. The troubles also grow if you put your taxes on the back burner. The first third of the year tends to be busier. If the practice doesn’t pay enough taxes while it is busy, it can have a lot of trouble making up for it in the following months. Determining whether you need to pay sales tax on certain items is also a big challenge for many practices. For example, if your practice sells items directly to it’s patients, such as toothbrushes, toothpaste, whitening products. Or, if your practice purchases equipment such as bibs, gloves, dental masks, you may be subject to sales and uses taxes. Its best to know and understand the tax codes specifically.