As we approach year end, you may want to consider accelerating the payment on things like medical expenses, charitable contributions, state and local tax payments, etc.
These itemized deductions are deductible when paid, not when incurred or due. As a result, if you find that you have a spike in your income this year, you may be able to offset that income by paying your real estate taxes now rather than wait until January of next year.
If you have any questions about the tax deductibility of certain items, feel free to email me at gtvcpa@yahoo.com.
Wednesday, December 26, 2007
Wednesday, December 12, 2007
Wednesday's tax tip - Volume 13
Reminder.....
If the 4th quarter, 2007 federal and state of Ohio estimated payments are due before 1/15/08. I recommend that if you itemize, pay your state estimate prior to 12/31/07. By doing so, you'll be able to deduct the estimate for 2007.
If you have any questions about your estimate, email me at gtvcpa@yahoo.com.
If the 4th quarter, 2007 federal and state of Ohio estimated payments are due before 1/15/08. I recommend that if you itemize, pay your state estimate prior to 12/31/07. By doing so, you'll be able to deduct the estimate for 2007.
If you have any questions about your estimate, email me at gtvcpa@yahoo.com.
Wednesday, November 14, 2007
Wednesday's tax tip - Volume 12
I've hesitated to post on the following issue because I have been anticipating a change in tax law since it was addressed by the media. But, to date, it does not look like anything will change in the near term.
The issue, the capital gains tax rate.
Next year, if your marginal tax rate is 0%, you will have any capital gains will be taxed at a 0% rate. This is an ideal situation for people with children in college who have little earned income.
A good strategy is to gift your child shares of appreciated stock and sell the stock in their name. Since they may be in the 0% bracket, you may be able to elude any capital gains tax on the transactions.
To date, Congress has not closed this loophole, but look for them to do so in the future.
The issue, the capital gains tax rate.
Next year, if your marginal tax rate is 0%, you will have any capital gains will be taxed at a 0% rate. This is an ideal situation for people with children in college who have little earned income.
A good strategy is to gift your child shares of appreciated stock and sell the stock in their name. Since they may be in the 0% bracket, you may be able to elude any capital gains tax on the transactions.
To date, Congress has not closed this loophole, but look for them to do so in the future.
Friday, November 2, 2007
Business Tip #14 - Record keeping
Every entrepreneur I've ever met has started a business because they either 1) believed they could sell a product or service better than the next guy 2) believed they could produce a product or service better than the next guy or 3) both.
Never have I met an entrepreneur who's primary interest was to administer their business better than the next guy.
Yet the administration is just as important as the selling and producing of your product.
If you are still running your business out of a shoe box, brief case or excel spreadsheet, consider upgrading your accounting skills to an accounting software such as Quickbooks.
I am a Quickbooks Certified ProAdvisor and I can provide you with a free copy of the Quickbooks program Simple Start.
If you have an interest, please email me at gtvcpa@yahoo.com.
Wednesday, October 31, 2007
Wednesday's tax tip - Volume 11
If you are looking to make any type of energy saving improvements such as installing new windows, doors, furnace, etc. You may want to accelerate your purchase of these items during 2007.
The residential energy credit expires at the end of 2007. To date, there is no indication that the credit will be extended.
To see what all qualifies for the credit, click here for IRS guidance.
The residential energy credit expires at the end of 2007. To date, there is no indication that the credit will be extended.
To see what all qualifies for the credit, click here for IRS guidance.
Friday, October 19, 2007
Business Tip #13 - Character
Keeping in line with the five "c's" of credit. This week's "c" is character.
How does a bank measure "character"? Especially, in the context of a business loan.
First, nearly all small businesses require the personal guarantee of the owner(s). Why? Because a business owner might be the best indicator of what's going on inside the business. As I used to tell customers "If you're not willing to stand behind your business, why should I?"
Other things, that banks look at to assess character are personal credit bureaus, Dunn and Bradstreet reports, and your personal financial statement.
When I was a banker, I always thought it was important to evaluate the lifestyle of the owner of the business. In my mind, if an owner is someone who takes all the earnings of the company to fund retirement plans and savings, it says something entirely different than an owner that needs cash to fund trips to Vegas, cars and jewelry.
How does a bank measure "character"? Especially, in the context of a business loan.
First, nearly all small businesses require the personal guarantee of the owner(s). Why? Because a business owner might be the best indicator of what's going on inside the business. As I used to tell customers "If you're not willing to stand behind your business, why should I?"
Other things, that banks look at to assess character are personal credit bureaus, Dunn and Bradstreet reports, and your personal financial statement.
When I was a banker, I always thought it was important to evaluate the lifestyle of the owner of the business. In my mind, if an owner is someone who takes all the earnings of the company to fund retirement plans and savings, it says something entirely different than an owner that needs cash to fund trips to Vegas, cars and jewelry.
Monday, October 15, 2007
Personal Financial Tip # 14 - Identity theft
If you're like me, you're probably already know that you should never disclose personal data on solicited emails. However, a latest scam involving the IRS makes it worth repeating.
There is a current scam where the IRS will direct deposit $80 for completion and submission of a customer service survey. The IRS has information related to the scam on it's website.
Do not fall for it.
Once a scammer, gets your bank account information, it's all she rode.
As a reminder, never send vital personal data (names, addresses, social security numbers, bank account information) to an unsolicited emailer.
No business will ask for this information via email. Even if they do, it's a bad personal practice. So Just Say No.
There is a current scam where the IRS will direct deposit $80 for completion and submission of a customer service survey. The IRS has information related to the scam on it's website.
Do not fall for it.
Once a scammer, gets your bank account information, it's all she rode.
As a reminder, never send vital personal data (names, addresses, social security numbers, bank account information) to an unsolicited emailer.
No business will ask for this information via email. Even if they do, it's a bad personal practice. So Just Say No.
Friday, October 12, 2007
Business Tip #12 - Collateral
A few weeks ago I outlined the five c's of bank credit. One of those "c's" is collateral.
The bank will consider all the following business assets as collateral.
Accounts receivable - banks may loan factor anywhere between 50-75% of outstanding receivables for a collateral base. A great depends on the quality of the receivables such as age, quality of customers, industry, etc.
Inventory - banks may advance anywhere from 25 - 50% on inventory values. Again much depends on the quality of the inventory. Is the inventory commodity in nature? Is it easily subject to theft and/or spoilage?
Real Estate - In general, most banks will advance up to 80% of the value of real estate. Again, the marketability of the real estate is important. Does the real estate have wide spread appeal and/or market. What is the real estate market doing in general?
As I inform clients, most banks will not lend strictly on asset values without corresponding cash flow. It's almost a chicken/egg game.
As an example. Assume you have inventory "worth" 100,000 retail value. A bank would be hesitant to loan up to the $100,000 value. Why? Because if you cannot turn around your inventory to pay off the bank, the bank isn't going to be able to do it either.
So it's important to realize that the turn of assets into cash is what the bank tries to evaluate. If you cannot turn your business assets into the cash that will be used to pay back the bank, your collateral will have little value to the bank since they will have a hard time liquidating your collateral to cover any debt balances.
The bank will consider all the following business assets as collateral.
Accounts receivable - banks may loan factor anywhere between 50-75% of outstanding receivables for a collateral base. A great depends on the quality of the receivables such as age, quality of customers, industry, etc.
Inventory - banks may advance anywhere from 25 - 50% on inventory values. Again much depends on the quality of the inventory. Is the inventory commodity in nature? Is it easily subject to theft and/or spoilage?
Real Estate - In general, most banks will advance up to 80% of the value of real estate. Again, the marketability of the real estate is important. Does the real estate have wide spread appeal and/or market. What is the real estate market doing in general?
As I inform clients, most banks will not lend strictly on asset values without corresponding cash flow. It's almost a chicken/egg game.
As an example. Assume you have inventory "worth" 100,000 retail value. A bank would be hesitant to loan up to the $100,000 value. Why? Because if you cannot turn around your inventory to pay off the bank, the bank isn't going to be able to do it either.
So it's important to realize that the turn of assets into cash is what the bank tries to evaluate. If you cannot turn your business assets into the cash that will be used to pay back the bank, your collateral will have little value to the bank since they will have a hard time liquidating your collateral to cover any debt balances.
Monday, October 8, 2007
Personal Financial Tip # 13 - Security sales
It's getting to that time of the year that you want to review your investment portfolio (if you haven't done so to date).
Questions you want to ask yourself about your portfolio.
1) Has my personal life situation changed? If so, should my portfolio change as a result.
2) Are the investments I'm in still consistent with life objectives?
3) Do I have adequate diversification with my portfolio?
4) What are the tax implications in rearranging my portfolio?
Please note. The fourth question, while important, is really not part of your investment strategy.
As I always recommend to clients. If you are unhappy with an investment or believe that it's at it's high, you need to sell without regard to the tax implication.
For instance, If I purchase a security for $10,000 and it's now worth $15,000 and I believe it's reached it's high. I'm selling and I'll pay the taxes.
On the flip side, if I purchase the same security for $10,000 and it drops to $8,000 and I do not
like the long term potential of the security. Again, I'm selling without regard to the loss involved.
So now's the time to review your portfolio with an adviser and rearrange it to your personal financial objectives.
Questions you want to ask yourself about your portfolio.
1) Has my personal life situation changed? If so, should my portfolio change as a result.
2) Are the investments I'm in still consistent with life objectives?
3) Do I have adequate diversification with my portfolio?
4) What are the tax implications in rearranging my portfolio?
Please note. The fourth question, while important, is really not part of your investment strategy.
As I always recommend to clients. If you are unhappy with an investment or believe that it's at it's high, you need to sell without regard to the tax implication.
For instance, If I purchase a security for $10,000 and it's now worth $15,000 and I believe it's reached it's high. I'm selling and I'll pay the taxes.
On the flip side, if I purchase the same security for $10,000 and it drops to $8,000 and I do not
like the long term potential of the security. Again, I'm selling without regard to the loss involved.
So now's the time to review your portfolio with an adviser and rearrange it to your personal financial objectives.
Friday, October 5, 2007
Business Tip 11 - Consistency
If you follow this blog with any regularity, you'll notice that I haven't posted in a while and for that I apologize.
But there is a lesson in my omissions, the lesson being consistency.
Customers, prospects and vendors always evaluate your business based on expectations. As long as you deliver according to their expectations, your business associates will always have a favorable experience with your company.
So if you were a regular reader of the blog, you were probably struck by the lack of consistency with the posts. Especially in light of the fact that nothing was communicated with you as the reader.
So this week's advice is to provide a level of service with your customers, prospects and vendors that is consistent with their expectations. If you don't know what their expectations are, ask.
It will go a long way in establishing your business as a "can do" operation.
But there is a lesson in my omissions, the lesson being consistency.
Customers, prospects and vendors always evaluate your business based on expectations. As long as you deliver according to their expectations, your business associates will always have a favorable experience with your company.
So if you were a regular reader of the blog, you were probably struck by the lack of consistency with the posts. Especially in light of the fact that nothing was communicated with you as the reader.
So this week's advice is to provide a level of service with your customers, prospects and vendors that is consistent with their expectations. If you don't know what their expectations are, ask.
It will go a long way in establishing your business as a "can do" operation.
Tuesday, October 2, 2007
Wednesday's tax tip - Volume 10
If you use your automobile for business purposes, you can deduct the business use of the automobile against your income.
You can use one of two methods of determining your deduction; Actual v. the mileage reimbursement rate.
If you use actual expenses, you need to maintain records of all your expenses related to auto usage; this includes gas, repairs, oil changes, depreciation, interest, car washes, etc...
You then deduct the business percentage of those expenses. For instance if you use you car 15% of the time for business purposes and your expenses amount to ten thousand dollars, you can deduct $1,500 against your business income.
Under the mileage reimbursement rate plan, assume you drive 1500 miles for business purposes. Under the current rate of .485/mile, your deduction would be $728.
Items to keep in mind,
1) You must maintain a log of your mileage related to your car under either scenario.
2) Once you use actual expenses for an automobile, you must use actual expenses for the life of that automobile.
3) There are depreciation limitations related to luxury automobiles. Check with a tax adviser to know the limits.
In my experience, I find the mileage reimbursement rate to be the easier of the two methods and usually provides for the maximum deduction. You do not need to keep a shoe box full of gas receipts and the rate for most cars is fairly generous.
You can use one of two methods of determining your deduction; Actual v. the mileage reimbursement rate.
If you use actual expenses, you need to maintain records of all your expenses related to auto usage; this includes gas, repairs, oil changes, depreciation, interest, car washes, etc...
You then deduct the business percentage of those expenses. For instance if you use you car 15% of the time for business purposes and your expenses amount to ten thousand dollars, you can deduct $1,500 against your business income.
Under the mileage reimbursement rate plan, assume you drive 1500 miles for business purposes. Under the current rate of .485/mile, your deduction would be $728.
Items to keep in mind,
1) You must maintain a log of your mileage related to your car under either scenario.
2) Once you use actual expenses for an automobile, you must use actual expenses for the life of that automobile.
3) There are depreciation limitations related to luxury automobiles. Check with a tax adviser to know the limits.
In my experience, I find the mileage reimbursement rate to be the easier of the two methods and usually provides for the maximum deduction. You do not need to keep a shoe box full of gas receipts and the rate for most cars is fairly generous.
Thursday, September 13, 2007
Wednesday Tax Tip
Just a reminder that Monday, September 17 is the date for paying your 3rd quarter estimated payments.
In addition, if you filed an extension in April, your tax return is to be filed on that date.
In addition, if you filed an extension in April, your tax return is to be filed on that date.
Friday, August 31, 2007
Business Tip Vol. 10 - Cash Flow
Last week, I did a post about the five "c's" of credit. The first one was Cash Flow
How do you measure cash flow?
For most small businesses all you have to do is take a look at your net income from your Income Statement and add back depreciation ( it is a non cash expense) and you have a preliminary cash flow figure.
Let's assume you have net income of $25K with $5K in depreciation. That gives you about $30,000 in cash flow. You can use this cash flow to pay on debt, pay out to shareholders, invest in equipment, etc.
Let's now assume you want to purchase a piece of equipment for $60,000. On a 36 month loan @ 8%, your payment will be $1,880/month or $22,560/ year.
Based on your historical cash flow, you have 133% ($30,000/$22,560) coverage. Meaning that your existing cash flow can cover the debt service. If this number is less than 100%, it means that your business does not generate enough cash to cover the payments on the debt.
Most banks want a debt service cushion. Usually they'll want to see a ratio of at least 125%.
This is obviously an over simplification of cash flow. However, it gives you an idea as to how a bank will look at your loan request.
As always, if you would like to have someone review a loan request and give you an idea as to where it stands, email me at gtvcpa@gmail.com
How do you measure cash flow?
For most small businesses all you have to do is take a look at your net income from your Income Statement and add back depreciation ( it is a non cash expense) and you have a preliminary cash flow figure.
Let's assume you have net income of $25K with $5K in depreciation. That gives you about $30,000 in cash flow. You can use this cash flow to pay on debt, pay out to shareholders, invest in equipment, etc.
Let's now assume you want to purchase a piece of equipment for $60,000. On a 36 month loan @ 8%, your payment will be $1,880/month or $22,560/ year.
Based on your historical cash flow, you have 133% ($30,000/$22,560) coverage. Meaning that your existing cash flow can cover the debt service. If this number is less than 100%, it means that your business does not generate enough cash to cover the payments on the debt.
Most banks want a debt service cushion. Usually they'll want to see a ratio of at least 125%.
This is obviously an over simplification of cash flow. However, it gives you an idea as to how a bank will look at your loan request.
As always, if you would like to have someone review a loan request and give you an idea as to where it stands, email me at gtvcpa@gmail.com
Friday, August 24, 2007
Business Tip Vol. 9 - Obtaining Business Credit
Much has been in the news regarding the current lender problems.
It appears that even commercial banking lenders will soon be having problems of their own soon. One of the reasons both are having problems is that for the past few years they have veered away from prudent lending practices.
As a lender, 11 years ago, me and my bosses continually reviewed the Five "C's" of Credit on each and every deal our bank did. Those "C's are
1) Cash Flow (aka capacity) - Where is the money going to come from to pay off the loan. Usually this is matched with the asset purchased ie If you buy a rental property, the rents will be the cash that pays the loan.
2) Collateral - What I always term the secondary source of repayment. Usually this asset is what secures the loan.
3) Capital (aka net worth) - What other available resources does the borrower have at his disposal to repay the debt. The more liquid the better.
4) Character - The most subjective indicator of repayment. You can usually get some measurement of character by looking at a credit report. Does the borrower pay on time or do you always have to call them for payment?
5) Conditions - What are the general market conditions that could effect your loan? For instance, you would probably rather loan money to technology companies over mortgage companies right now. "Conditions" are generally out of the control of the borrower.
The weaker any one of these "C's" are the stronger the others have to be. For instance, if you have bad collateral, you are going to need to document stronger cash flow and/or capital.
The "C's" are just as important to personal credit as it is to commercial credit.
I can almost guarantee that where a loan goes bad, you will find that one or more of the "C's" was or was becoming a problem before the actual collapse.
In the example of mortgage lenders. Lenders were willing to do 100% financing (collateral) to people who were strapped from day one to make payments (cash flow). When interest rates increased the cash wasn't there to pay the debt and the collateral deteriorated to where foreclosures couldn't pay back the loan.
Beginning next week, I'll illustrate each of these in detail and how you can protect yoruself.
It appears that even commercial banking lenders will soon be having problems of their own soon. One of the reasons both are having problems is that for the past few years they have veered away from prudent lending practices.
As a lender, 11 years ago, me and my bosses continually reviewed the Five "C's" of Credit on each and every deal our bank did. Those "C's are
1) Cash Flow (aka capacity) - Where is the money going to come from to pay off the loan. Usually this is matched with the asset purchased ie If you buy a rental property, the rents will be the cash that pays the loan.
2) Collateral - What I always term the secondary source of repayment. Usually this asset is what secures the loan.
3) Capital (aka net worth) - What other available resources does the borrower have at his disposal to repay the debt. The more liquid the better.
4) Character - The most subjective indicator of repayment. You can usually get some measurement of character by looking at a credit report. Does the borrower pay on time or do you always have to call them for payment?
5) Conditions - What are the general market conditions that could effect your loan? For instance, you would probably rather loan money to technology companies over mortgage companies right now. "Conditions" are generally out of the control of the borrower.
The weaker any one of these "C's" are the stronger the others have to be. For instance, if you have bad collateral, you are going to need to document stronger cash flow and/or capital.
The "C's" are just as important to personal credit as it is to commercial credit.
I can almost guarantee that where a loan goes bad, you will find that one or more of the "C's" was or was becoming a problem before the actual collapse.
In the example of mortgage lenders. Lenders were willing to do 100% financing (collateral) to people who were strapped from day one to make payments (cash flow). When interest rates increased the cash wasn't there to pay the debt and the collateral deteriorated to where foreclosures couldn't pay back the loan.
Beginning next week, I'll illustrate each of these in detail and how you can protect yoruself.
Wednesday, August 22, 2007
Wednesday's tax tip Vol. 19 - Sole Proprietors
I've read numerous articles surrounding increased audits of sole proprietorships.
Because the IRS believes that this is where most of the under reporting of tax exists, they are intensifying their efforts on those businesses. I've read and I know from my own personal experience on audits, the IRS is primarily focusing in on receipts not reported as income.
How do they check this?
In my audit it was as simple as taking all my bank statements and adding up all the deposits. I needed (and fortunately for me, was able) to document any bank deposits that went into my business accounts that were not sales.
So if you transfer lots of funds between accounts or borrow money from lines of credit of over draft protection accounts, you need to be able to reconcile those transfers above and beyond sales receipts.
While on it's face it makes sense for the IRS to hone in on this type of activity, it occurs to me that there is a huge amount of business activity that is never reported on any tax return. I would guess that there are tens of thousands of businesses that never report any income because they work "under the table". No 1099's have been issued and as a result, there is nothing to tip off the IRS as to the reporting of any income.
This is becoming a larger and larger issue with illegal immigrants and citizens avoiding child support or paying any tax all together. But we'll let the IRS deal with those issues.
Because the IRS believes that this is where most of the under reporting of tax exists, they are intensifying their efforts on those businesses. I've read and I know from my own personal experience on audits, the IRS is primarily focusing in on receipts not reported as income.
How do they check this?
In my audit it was as simple as taking all my bank statements and adding up all the deposits. I needed (and fortunately for me, was able) to document any bank deposits that went into my business accounts that were not sales.
So if you transfer lots of funds between accounts or borrow money from lines of credit of over draft protection accounts, you need to be able to reconcile those transfers above and beyond sales receipts.
While on it's face it makes sense for the IRS to hone in on this type of activity, it occurs to me that there is a huge amount of business activity that is never reported on any tax return. I would guess that there are tens of thousands of businesses that never report any income because they work "under the table". No 1099's have been issued and as a result, there is nothing to tip off the IRS as to the reporting of any income.
This is becoming a larger and larger issue with illegal immigrants and citizens avoiding child support or paying any tax all together. But we'll let the IRS deal with those issues.
Wednesday, August 15, 2007
Wednesday's tax tip Vol. 18 - Exemptions for the Divorced
If you are or anticipate being divorce in the near future, who claims the dependents on their respective tax returns?
The IRS specifically permits the custodial parent to claim any dependents for their returns regardless of child support or other agreements between the parties.
The only way the IRS permits any noncustodial parent from claiming the dependent(s) is through use of the form 8332 to be completed by the custodial parent. This form essentially grants the non custodial parent to claim an exemption.
Please keep in mind that this form is to be completed regardless of any agreement in a divorce decree. The IRS would tell you they are not in the business of reviewing and determining dependent exemptions for hundred of thousands of decree agreements, some of which can be very detailed.
When and if you are in a position to negotiate the claiming of dependents on your returns, make sure your attorney includes this form as part of your decree documents.
The IRS specifically permits the custodial parent to claim any dependents for their returns regardless of child support or other agreements between the parties.
The only way the IRS permits any noncustodial parent from claiming the dependent(s) is through use of the form 8332 to be completed by the custodial parent. This form essentially grants the non custodial parent to claim an exemption.
Please keep in mind that this form is to be completed regardless of any agreement in a divorce decree. The IRS would tell you they are not in the business of reviewing and determining dependent exemptions for hundred of thousands of decree agreements, some of which can be very detailed.
When and if you are in a position to negotiate the claiming of dependents on your returns, make sure your attorney includes this form as part of your decree documents.
Wednesday, August 8, 2007
Wednesday's tax tip Vol. 17 - Sales Tax
Business owner's ask me often about sales tax. When they should charge or not charge it.
In general, Ohio sales tax is charged on any product not for resale. For instance, if you sell soda to a business who provides it for their employees, you must charge sales tax. If you sell it to a merchant who intends to resale it, you do not charge the sales tax.
If you think of it this way, only one business charges sales tax. The only business that charges sales tax is the business that sells the product to the end user.
To muddy the waters a little more, some services are subject to sales tax. Manicure services, lawn services, massages, etc. are subject to sales tax. Legal and medical services are not subject to sales tax.
In addition, sales tax is not charged to any tax exempt, non profit business.
If a business, communicates that they are not subject to sales tax, you must obtain a copy of their vendor's license for your records. Otherwise, you could be legally liable for the tax due.
If you have a question regarding the sales tax, please email me at gtvcpa@yahoo.com
In general, Ohio sales tax is charged on any product not for resale. For instance, if you sell soda to a business who provides it for their employees, you must charge sales tax. If you sell it to a merchant who intends to resale it, you do not charge the sales tax.
If you think of it this way, only one business charges sales tax. The only business that charges sales tax is the business that sells the product to the end user.
To muddy the waters a little more, some services are subject to sales tax. Manicure services, lawn services, massages, etc. are subject to sales tax. Legal and medical services are not subject to sales tax.
In addition, sales tax is not charged to any tax exempt, non profit business.
If a business, communicates that they are not subject to sales tax, you must obtain a copy of their vendor's license for your records. Otherwise, you could be legally liable for the tax due.
If you have a question regarding the sales tax, please email me at gtvcpa@yahoo.com
Monday, August 6, 2007
Personal Financial Tip Vol. 12 - Credit Cards
I'm often asked about the pro's and con's of refinancing credit card debt via a home refinancing and/or a home equity loan.
In general, here's my answer.
Don't do it.
First, keep in mind that credit card purchases are generally for short lived purchases. To refinance is essentially financing a trip to the Olive Garden for 15 years.
Second, inevitably you'll find that as soon as you pay off those cards, you'll have those very cards racked up in debt again.
Third, going through the process of aggressively paying off cards will develop your budgeting skills to pay off short lived purchases.
Fourth, credit card debt is unsecured, by placing on debt against you're home you'll be making your home subject to creditors and possible foreclosure.
What I recommend is a predetermined budget of your debt as well as all your monthly bills.
Let's say It looks like this
Mortgage $1,000/month (80,000 total)
Car $385/month (15,000)
VISA $154/month (8,750)
Mastercard 137 month (5,750)
Macy's Card 20/month (1750)
Gas card $20 (580)
Start by budgeting for how much you can pay on your debt every month. In this case, let's assume you have 2,100/month for debt payment.
Begin by paying the minimum for everything but the smallest balance. When those are paid place the remaining (in this case $384) on thesmallest balance. Don't worry about the interest rates.
You'll find that as soon as you have that gas card paid off, you'll be building momentum against the remaining debt.
If you don't believe it can be done... believe me it can. I did it and my situation looked worse than this one.
In general, here's my answer.
Don't do it.
First, keep in mind that credit card purchases are generally for short lived purchases. To refinance is essentially financing a trip to the Olive Garden for 15 years.
Second, inevitably you'll find that as soon as you pay off those cards, you'll have those very cards racked up in debt again.
Third, going through the process of aggressively paying off cards will develop your budgeting skills to pay off short lived purchases.
Fourth, credit card debt is unsecured, by placing on debt against you're home you'll be making your home subject to creditors and possible foreclosure.
What I recommend is a predetermined budget of your debt as well as all your monthly bills.
Let's say It looks like this
Mortgage $1,000/month (80,000 total)
Car $385/month (15,000)
VISA $154/month (8,750)
Mastercard 137 month (5,750)
Macy's Card 20/month (1750)
Gas card $20 (580)
Start by budgeting for how much you can pay on your debt every month. In this case, let's assume you have 2,100/month for debt payment.
Begin by paying the minimum for everything but the smallest balance. When those are paid place the remaining (in this case $384) on thesmallest balance. Don't worry about the interest rates.
You'll find that as soon as you have that gas card paid off, you'll be building momentum against the remaining debt.
If you don't believe it can be done... believe me it can. I did it and my situation looked worse than this one.
Wednesday, August 1, 2007
Wednesday's tax tip Vol. 16 - Gift Tax
Maybe one of the most misunderstood tax laws is the gift tax. Here is a FAQ on the IRS site about gift taxes.
In general, the giver of the gift must pay gift tax if the amount of the gift exceeds $12,000 per person, per year (2006 & 2007). The receiver of the gift does not claim the gift as income or need to pay gift tax from receipt of the gift.
For example, let's assume you decide to give your child $20,000. That gift would be subject to gift tax. However, a married couple can each give the $12,000 to that child meaning that no gift tax is now due.
In addition, you could give a family of four up to $48,000 and, if married, up to $96,000 to that family each year.
Another myth buster.... Gifts to individuals are not deductible (for federal income tax purposes) for the giver, regardless of the circumstances. The only deductible gifts are to qualified 501(c)3 charities.
Like most tax advise, this is a simple rule of thumb, if you want an answer to your particular situation, talk to your adviser or email me at gtvcpa@yahoo.com.
In general, the giver of the gift must pay gift tax if the amount of the gift exceeds $12,000 per person, per year (2006 & 2007). The receiver of the gift does not claim the gift as income or need to pay gift tax from receipt of the gift.
For example, let's assume you decide to give your child $20,000. That gift would be subject to gift tax. However, a married couple can each give the $12,000 to that child meaning that no gift tax is now due.
In addition, you could give a family of four up to $48,000 and, if married, up to $96,000 to that family each year.
Another myth buster.... Gifts to individuals are not deductible (for federal income tax purposes) for the giver, regardless of the circumstances. The only deductible gifts are to qualified 501(c)3 charities.
Like most tax advise, this is a simple rule of thumb, if you want an answer to your particular situation, talk to your adviser or email me at gtvcpa@yahoo.com.
Monday, July 16, 2007
Personal Financial Tip Vol. 11 - Identity Theft
If you have watched the news recently, you have heard about the theft of a state of Ohio computer containing over 800,000 names and social security numbers of Ohio taxpayers.
If you want to check to see if your name was on the device, check this address http://ohio.gov/idprotect/lookup/lookup.aspx
If you want to check to see if your name was on the device, check this address http://ohio.gov/idprotect/lookup/lookup.aspx
Thursday, July 12, 2007
Wednesday's tax tip Vol. 15- Homestead Credits
At one time, the state of Ohio maintained a homestead credit for home owner's over the age of 65 provided that they meet certain income parameters.
Recently the state eliminated the income requirements so that all home owners over the age of 65 and/or permanently disabled, now qualify for the credit.
Here are the applications for the Southwest Ohio counties.
Hamilton County - Hamilton County Auditor
Clermont County - Clermont County Auditor
Warren County - Warren County Auditor
Butler County - Butler County Auditor
If you have any questions please give me a call @ (513) 683-0520.
Recently the state eliminated the income requirements so that all home owners over the age of 65 and/or permanently disabled, now qualify for the credit.
Here are the applications for the Southwest Ohio counties.
Hamilton County - Hamilton County Auditor
Clermont County - Clermont County Auditor
Warren County - Warren County Auditor
Butler County - Butler County Auditor
If you have any questions please give me a call @ (513) 683-0520.
Wednesday, June 27, 2007
Wednesday's tax tip Vol. 14 - Taxes Avoidance Programs
When I was a college kid, I was studying for a tax course where I worked when a maintenance guy came in and told me "you know it's unconstitutional to pay income taxes". After spending an hour talking in circles about the tax code, he finally confessed to me that he spend 90 days in jail for tax evasion.
So when I get questions about various tax avoidance programs (or schemes as the IRS calls them), I always fall back on this question "is it worth going to jail to pursue this program".
The IRS has recently released a list of various tax schemes that people pursue and why they are illegal. If you find the need to pursue one of these, don't call me, because I don't want my name associated with these at all.
And always remember, it may be unconstitutional but if you end up in jail is it worth the price.
So when I get questions about various tax avoidance programs (or schemes as the IRS calls them), I always fall back on this question "is it worth going to jail to pursue this program".
The IRS has recently released a list of various tax schemes that people pursue and why they are illegal. If you find the need to pursue one of these, don't call me, because I don't want my name associated with these at all.
And always remember, it may be unconstitutional but if you end up in jail is it worth the price.
Monday, June 25, 2007
Personal Financial Tip Vol. 10 - Home employees
Let's assume you need a roof replaced. You talk to a few companies and pick one.
The roofers start the job and one accidentally falls off of your roof and is seriously injured. Who is responsible for his injuries and his care; you or the contractor?
Typically, the employer would be responsible for all expenses related to the employee's injuries and lost wages for the period of time he was off. These expenses are normally covered by workers compensation.
However, let's assume that the contractor had no worker's compensation. In this case, the home owner may be responsible for all expenses related to the injury. This could be covered by your homeowner's policy, but not always.
Whenever someone does work on your property ask them for a copy of a current worker's comp certificate. If they tell you they are fully insured, that does not relieve you of any potential liability.
Having a current copy of a worker's comp certificate, shows that you have done the due diligence necessary to relieve your self of liability.
Getting a copy of the worker's comp certificate will also tell you something about the reputation of the company you are dealing with. A company operating without worker's comp coverage is also the kind of company that would do shoddy work on your job to cut costs.
The roofers start the job and one accidentally falls off of your roof and is seriously injured. Who is responsible for his injuries and his care; you or the contractor?
Typically, the employer would be responsible for all expenses related to the employee's injuries and lost wages for the period of time he was off. These expenses are normally covered by workers compensation.
However, let's assume that the contractor had no worker's compensation. In this case, the home owner may be responsible for all expenses related to the injury. This could be covered by your homeowner's policy, but not always.
Whenever someone does work on your property ask them for a copy of a current worker's comp certificate. If they tell you they are fully insured, that does not relieve you of any potential liability.
Having a current copy of a worker's comp certificate, shows that you have done the due diligence necessary to relieve your self of liability.
Getting a copy of the worker's comp certificate will also tell you something about the reputation of the company you are dealing with. A company operating without worker's comp coverage is also the kind of company that would do shoddy work on your job to cut costs.
Friday, June 22, 2007
Business Tip Vol. 8 - Employees v. Contractors
You are hiring an employee. Is that person an independent contractor or an employee?
Maybe, one of the most confused topics among both employers and employees.
The IRS has a publication dedicated to the whole issue. After you read it, you may still not understand how to classify an employee.
My advice in general.... Ask three questions
Does the person provide their own tools to perform a job?
Does your supervision simply involve the results of the services contracted? Meaning, do you care more that the job gets done over how it's done.
Does that person have the ability to provide the same service to your competition?
If you answer yes to all these, you probably have a contractor. If you answer no to anyone of these, you may or may not have an employee.
Many times I will usually challenge the business owner with this question. Does the service provider perceive himself as an employee or a contractor?
If you still have questions regarding this issue, please email me at gtvcpa@yahoo.com.
Maybe, one of the most confused topics among both employers and employees.
The IRS has a publication dedicated to the whole issue. After you read it, you may still not understand how to classify an employee.
My advice in general.... Ask three questions
Does the person provide their own tools to perform a job?
Does your supervision simply involve the results of the services contracted? Meaning, do you care more that the job gets done over how it's done.
Does that person have the ability to provide the same service to your competition?
If you answer yes to all these, you probably have a contractor. If you answer no to anyone of these, you may or may not have an employee.
Many times I will usually challenge the business owner with this question. Does the service provider perceive himself as an employee or a contractor?
If you still have questions regarding this issue, please email me at gtvcpa@yahoo.com.
Wednesday, June 20, 2007
Wednesday's tax tip Vol. 14 - State of Ohio refund
The state of Ohio recently issued a press release indicating that all refunds for tax returns filed before April 15th would be issued prior to June 23.
I would give you refund about four or five days after that for mail. If you haven't received your refund by then, we should call the hotline.
I would give you refund about four or five days after that for mail. If you haven't received your refund by then, we should call the hotline.
Wednesday, June 13, 2007
Wednesday's tax tip Vol. 13 - State of Ohio Refunds
If you have been waiting for a refund from the state of Ohio... You're not alone.
It's taking in excess of twelve weeks for taxpayer's to receive their refunds.
If you are concerned about your refund check out the state of Ohio website (just click the link below)
https://www.tax.state.oh.us/webz/wmr/wheres_my_refund.html
Or you can call the state's hotline at 1-800-282-1784.
It's taking in excess of twelve weeks for taxpayer's to receive their refunds.
If you are concerned about your refund check out the state of Ohio website (just click the link below)
https://www.tax.state.oh.us/webz/wmr/wheres_my_refund.html
Or you can call the state's hotline at 1-800-282-1784.
Monday, June 11, 2007
Personal Financial Tip Vol. 9 - Personal Equity
Last Friday, I did a post regarding equity (or capital) as it relates to business activity.
But what is your personal net worth? As an exercise, on the left hand side of a spreadsheet make a list of everything you own, savings accounts, retirement accounts (401k's, IRA's, etc.), mutual funds, cars, real estate and their approximate values.
On the right hand side of the sheet, list everything you owe; mortgages, car notes credit cards, etc.
What's your net worth? More importantly, what is ratio of everything you own v. everything you owe.
It's my opinion that a financially "healthy" family will have at least $2 of assets for every one dollar of liability. If you find that your ratio is less than that, budget your monthly income to make it a reality.
But what is your personal net worth? As an exercise, on the left hand side of a spreadsheet make a list of everything you own, savings accounts, retirement accounts (401k's, IRA's, etc.), mutual funds, cars, real estate and their approximate values.
On the right hand side of the sheet, list everything you owe; mortgages, car notes credit cards, etc.
What's your net worth? More importantly, what is ratio of everything you own v. everything you owe.
It's my opinion that a financially "healthy" family will have at least $2 of assets for every one dollar of liability. If you find that your ratio is less than that, budget your monthly income to make it a reality.
Friday, June 8, 2007
Business Tip Vol. 7 - Capital
I believe one of these largest causes of business failures is lack of capital.
Most entrepreneurs enter into business without enough capital to cover their business up to stabilization, weather downturns, and allow for expansion.
Notice that no where in that did I mention financial capital specifically. Granted financial capital is a must but have you considered emotional and trust capital as well.
Many times, you may need to attract "trust" capital via help from trade creditors, banks, and customers. Are your relationships such that you can go to these groups in a time of difficulty?
In addition, owning a business is stressful. Do you have enough emotional capital with loved ones to get their support in difficult times?
When looking at a financial balance sheet, a well capitalized business will have at least two dollars of capital for every dollar of liability. Do you have the same ratio from a trust and emotional standpoint? You might find that subjective capital ratio more important than the financial one.
Most entrepreneurs enter into business without enough capital to cover their business up to stabilization, weather downturns, and allow for expansion.
Notice that no where in that did I mention financial capital specifically. Granted financial capital is a must but have you considered emotional and trust capital as well.
Many times, you may need to attract "trust" capital via help from trade creditors, banks, and customers. Are your relationships such that you can go to these groups in a time of difficulty?
In addition, owning a business is stressful. Do you have enough emotional capital with loved ones to get their support in difficult times?
When looking at a financial balance sheet, a well capitalized business will have at least two dollars of capital for every dollar of liability. Do you have the same ratio from a trust and emotional standpoint? You might find that subjective capital ratio more important than the financial one.
Wednesday, June 6, 2007
Wednesday's tax tip Vol. 12 - Sale of Securities
If you own a stock or mutual fund, you need to keep track of the cost basis (what you paid for it) in order to compute an accurate capital gain.
My recommendation is to keep the statements that show any transaction related to that security.
For instance, if you purchase a stock like GE or P&G, where you purchase shares on a monthly basis keep the statements showing each of those purchases. If you reinvest the dividends for more shares, keep those statements. If you sell, keep those statements.
While it seems like a lot of paper (and it is), you'll find that you'll be able to calculate that gain in a much easier fashion. For some securities, the year end statement will report all transactions for the entire year which means you'll be able to shred all the other documents for that year.
Many times computing cost basis becomes a calculated guess and since it's a guess it may or may not work out in the best interest of the taxpayer.
If you are still not comfortable with the statements you need to keep please email me at gtvcpa@yahoo.com
My recommendation is to keep the statements that show any transaction related to that security.
For instance, if you purchase a stock like GE or P&G, where you purchase shares on a monthly basis keep the statements showing each of those purchases. If you reinvest the dividends for more shares, keep those statements. If you sell, keep those statements.
While it seems like a lot of paper (and it is), you'll find that you'll be able to calculate that gain in a much easier fashion. For some securities, the year end statement will report all transactions for the entire year which means you'll be able to shred all the other documents for that year.
Many times computing cost basis becomes a calculated guess and since it's a guess it may or may not work out in the best interest of the taxpayer.
If you are still not comfortable with the statements you need to keep please email me at gtvcpa@yahoo.com
Wednesday, May 30, 2007
Wednesday's tax tip Vol. 11 - College Savings II
In the past, I've advised client's to gift shares of stock to children in college to fund their education. When the child would sell the stock, the child would be taxed at a lower rate than the parent would be.
Unfortunately, that strategy has been taken away. Congress has passed an expansion of the kiddie tax, income taxed at the parent's marginal tax rate.
Even though that strategy has been eliminated, I believe it's still a good idea to use capital assets to fund college education (note assuming you do not have 529 plans in place).
The tax rate on capital assets is still a top rate of 15% v. 25-25% for ordinary income.
It still may be a good idea to gift assets to the children since most states have no "kiddie tax".
Again, your college savings plans still provide for a great savings vehicle but should be placed in the context of overall financial plan.
Unfortunately, that strategy has been taken away. Congress has passed an expansion of the kiddie tax, income taxed at the parent's marginal tax rate.
Even though that strategy has been eliminated, I believe it's still a good idea to use capital assets to fund college education (note assuming you do not have 529 plans in place).
The tax rate on capital assets is still a top rate of 15% v. 25-25% for ordinary income.
It still may be a good idea to gift assets to the children since most states have no "kiddie tax".
Again, your college savings plans still provide for a great savings vehicle but should be placed in the context of overall financial plan.
Wednesday, May 23, 2007
Wednesday's tax tip Vol. 10 - College Savings
If you're in the position to start savings for a child's college expenses, avoid using UGTM (Uniform Gift to Minor) accounts.
First, these accounts are fully taxable and, if the income is large enough, taxable at the parent's marginal rate, aka the "kiddie tax".
Second, once a child turns 18 the account is theirs and I've seen it happen where a child has pulled all the money out of the account and blew it. While no one thinks it could happen to their child, if seen happen enough to know that it happens all the time.
If you are saving for a child's education consider a 529 plan. Under the plan the contributions are not deductible for federal tax purposes. However, the proceeds from the plan will be tax free if used for college education purposes.
The best part is the account is under your control so if Child A decides not to go to school, you can transfer the funds to Child B.
The downside of the plans; you are limited in the funds you can invest in. Each 529 plan is sanctioned by a state, so you effectively only have 50 state sanctioned fund family's to deal with.
If you want to know more, please email me at gtvcpa@yahoo.com
First, these accounts are fully taxable and, if the income is large enough, taxable at the parent's marginal rate, aka the "kiddie tax".
Second, once a child turns 18 the account is theirs and I've seen it happen where a child has pulled all the money out of the account and blew it. While no one thinks it could happen to their child, if seen happen enough to know that it happens all the time.
If you are saving for a child's education consider a 529 plan. Under the plan the contributions are not deductible for federal tax purposes. However, the proceeds from the plan will be tax free if used for college education purposes.
The best part is the account is under your control so if Child A decides not to go to school, you can transfer the funds to Child B.
The downside of the plans; you are limited in the funds you can invest in. Each 529 plan is sanctioned by a state, so you effectively only have 50 state sanctioned fund family's to deal with.
If you want to know more, please email me at gtvcpa@yahoo.com
Monday, May 14, 2007
Personal Financial Tip Vol. 8 - Do the numbers
Two weeks ago we did a post "Know Your Number" about your credit score.
This week let's talk about knowing your debt service numbers.
In general, most consumer lenders look at your debt breakdown as follows;
Mortgage loan should not exceed 25% of your monthly income
Total debt (including mortgage) should not exceed 35% of monthly income
So for instance, assume you make $48,000/year or $4,000/month, your monthly debt service for housing should not exceed $1,000/month. The rest of your debt should not exceed $400/month.
I would offer that your 25% should income your real estate tax, insurance and PMI escrow amounts.
While the 10% of the remaining debt uses your minimum credit card payment as part of the additional debt, I would offer that to be in good financial shape you should take your credit card balance(s) divided by 12 (should result in a higher number) in your calculation.
Managing debt is difficult. Too often we all can be caught in the allure to "have something new and have it now". Remember Lay-a-way at the local department store? They were places you actually made periodic payment before you received your goods. With our US consumerism in full force, we are all subject to "have it now" message 24/7 & Lay A Way went extinct with the dinosaurs.
The good news is with debit cards readily available, we can now pay for many consumer items without carrying a lot of cash; making the need for credit cards less and less and thus keeping us out of the debt trap.
This week let's talk about knowing your debt service numbers.
In general, most consumer lenders look at your debt breakdown as follows;
Mortgage loan should not exceed 25% of your monthly income
Total debt (including mortgage) should not exceed 35% of monthly income
So for instance, assume you make $48,000/year or $4,000/month, your monthly debt service for housing should not exceed $1,000/month. The rest of your debt should not exceed $400/month.
I would offer that your 25% should income your real estate tax, insurance and PMI escrow amounts.
While the 10% of the remaining debt uses your minimum credit card payment as part of the additional debt, I would offer that to be in good financial shape you should take your credit card balance(s) divided by 12 (should result in a higher number) in your calculation.
Managing debt is difficult. Too often we all can be caught in the allure to "have something new and have it now". Remember Lay-a-way at the local department store? They were places you actually made periodic payment before you received your goods. With our US consumerism in full force, we are all subject to "have it now" message 24/7 & Lay A Way went extinct with the dinosaurs.
The good news is with debit cards readily available, we can now pay for many consumer items without carrying a lot of cash; making the need for credit cards less and less and thus keeping us out of the debt trap.
Friday, May 11, 2007
Business Tip Vol. 6 - Accounting Systems
How are your accounting systems?
In my 22 years of working in the accounting/banking business, I have yet to run into an entrepreneur who was a great financial person.
It stands to reason that most business owners are out to sell and make, not to count.
For most business owners, their financial analysis consists of this question... How much money is in the account? A lot means you're making money; not such much means you're losing money.
But there is so much more to good financial analysis, all of which could mean more profits for you in the long run.
How is your current ratio? What about your projected debt service? Are your inventory turns improving? What are your future CAPEX requirements? How are your profit margins holding up to industry standards?
I can attest to my own business, once I started really looking at my numbers and getting a true view of the financial strengths and weaknesses my profits started going up.
Just taking a couple of hours a week looking over the financial side of the business is 90% of the battle. Once you become conscience of the company's weaknesses, you can address most of them in the general operation of the business; thus improving profits.
In my 22 years of working in the accounting/banking business, I have yet to run into an entrepreneur who was a great financial person.
It stands to reason that most business owners are out to sell and make, not to count.
For most business owners, their financial analysis consists of this question... How much money is in the account? A lot means you're making money; not such much means you're losing money.
But there is so much more to good financial analysis, all of which could mean more profits for you in the long run.
How is your current ratio? What about your projected debt service? Are your inventory turns improving? What are your future CAPEX requirements? How are your profit margins holding up to industry standards?
I can attest to my own business, once I started really looking at my numbers and getting a true view of the financial strengths and weaknesses my profits started going up.
Just taking a couple of hours a week looking over the financial side of the business is 90% of the battle. Once you become conscience of the company's weaknesses, you can address most of them in the general operation of the business; thus improving profits.
Wednesday, May 9, 2007
Wednesday's tax tip Vol. 9 - Business or Hobby
The Wall Street Journal has an interesting piece today regarding the distinction between business and hobby losses.
In general, business losses are fully deductible against other income where as hobby losses are not. The rules and application of those rules leaves a lot of murky water around the issue.
How do you determine whether an activity is a hobby or business?
First, Time. How much time do you spend on the activity? If you attend a bass tournament every weekend that could be enough time to justify business expenses against the income.
Second, Pursuit of income. Are you actively pursuing income for the activity. For the example above, if you can show that sought out sponsorships or you maintained a web site or other means of generating income it would go a long way of showing your activity as a business.
Finally, Organization. Do you have your business in an LLC or Corporation entity? Having a definitive business entity with segregated bank accounts and activity goes a long way in proving your activity is a business.
The fact that you enjoy the activity is by no means a test of it being a hobby. A power boat owner recently won a Supreme Court case for business losses even though the owner outright admitted he loved the activity.
These are just a few of the tests that the IRS may use in determining the profit motivation of your activity. Talk to your adviser about your specific activity.
In general, business losses are fully deductible against other income where as hobby losses are not. The rules and application of those rules leaves a lot of murky water around the issue.
How do you determine whether an activity is a hobby or business?
First, Time. How much time do you spend on the activity? If you attend a bass tournament every weekend that could be enough time to justify business expenses against the income.
Second, Pursuit of income. Are you actively pursuing income for the activity. For the example above, if you can show that sought out sponsorships or you maintained a web site or other means of generating income it would go a long way of showing your activity as a business.
Finally, Organization. Do you have your business in an LLC or Corporation entity? Having a definitive business entity with segregated bank accounts and activity goes a long way in proving your activity is a business.
The fact that you enjoy the activity is by no means a test of it being a hobby. A power boat owner recently won a Supreme Court case for business losses even though the owner outright admitted he loved the activity.
These are just a few of the tests that the IRS may use in determining the profit motivation of your activity. Talk to your adviser about your specific activity.
Friday, May 4, 2007
Business Tip 5 - How efficient are you?
An old axiom in the accounting business; The mark of an efficient practice is 1/3 of sales for payroll, 1/3 for overhead and 1/3 for you.
I taken that and altered it for manufacturing sector; 1/5 for payroll, 1/5 for direct costs, 1/5 for CAPEX , 1/5 for overhead and 1/5 for you.
How does your business match up?
Wednesday, May 2, 2007
Wednesday's tax tip Vol. 8 - Home office Deduction
Many client's have always had the impression that home office deduction is a red flag to an audit.
My typical response is "if it's a legitimate deduction and we can document it, we should take it".
The general rules on home offices are 1) it must be your principal place of business and 2) the space must be exclusively used for the business purpose.
Once you have met the test requirements then it becomes a matter of calculating the total expenses related to the house. Interest, real estate taxes, insurance, PMI, utilities, water, trash removal, home owner association dues, depreciation on the business portion of the home, repairs, etc.
Establishing a home office could have other implications by not claiming it. For instance, if you do not have a home office are your commutes to clients deductible?
So go through the exercise and see what the tax implications of the home office deduction is worth to you.
My typical response is "if it's a legitimate deduction and we can document it, we should take it".
The general rules on home offices are 1) it must be your principal place of business and 2) the space must be exclusively used for the business purpose.
Once you have met the test requirements then it becomes a matter of calculating the total expenses related to the house. Interest, real estate taxes, insurance, PMI, utilities, water, trash removal, home owner association dues, depreciation on the business portion of the home, repairs, etc.
Establishing a home office could have other implications by not claiming it. For instance, if you do not have a home office are your commutes to clients deductible?
So go through the exercise and see what the tax implications of the home office deduction is worth to you.
Monday, April 30, 2007
Personal Financial Tip Vol. 7 - What's your number?
What's the most important number in you every day life. Social security number? Phone number? ATM PIN?
Try your credit score. Your credit score is getting used for everything from insurance rates to employment review.
The three big credit bureaus use what called a FICO score to determine your credit worthiness. A score of over 700 is considered a good score.
While each of the credit services, Experian, Trans Union & Equifax will provide you with a copy of your most recent credit report (required by law). They usually will not provide you with a FICO score without a subscription.
If you contemplate making a move, buying a house or call, it's a good idea tho pay for the subscription so that you know how strong you are in the financing game.
Try your credit score. Your credit score is getting used for everything from insurance rates to employment review.
The three big credit bureaus use what called a FICO score to determine your credit worthiness. A score of over 700 is considered a good score.
While each of the credit services, Experian, Trans Union & Equifax will provide you with a copy of your most recent credit report (required by law). They usually will not provide you with a FICO score without a subscription.
If you contemplate making a move, buying a house or call, it's a good idea tho pay for the subscription so that you know how strong you are in the financing game.
Friday, April 27, 2007
Business Tip Vol. 4 - Reach out and touch someone
When is the last time you reached out and touched a customer?
If you're in a business where you may only see your customers once a year or less, what have you done to keep your name in front of them?
When I first started in business, I got a lead from a friend about someone looking for an accountant. When I called the guy up he told me that he wasn't looking for one at that time. However, he would do me a favor and put my name on a post it & note stick it on his desk. After the note dried up, he was going to crumple it up and throw it away. My job was to "make sure I put a fresh post it on his desk" to remind him of who I was.
It was a lesson I've kept close for all these years. Now this man was a prospect, but do we do the same for our existing customers? As a consumer, I get really frustrated when I get so much attention from companies as a prospect then I do as an already paying customer. I was actually astounded once when I received a $20 credit on my bill from a phone company simply because they "appreciated my business". They've had my loyalty since.
So I would offer that mining your existing client base for business could be more profitable for you than spending resources on prospects. So reach out and touch a customer today.
I'll close with a joke.
A banker dies and went to St. Peter's gate. St. Peter asked the banker if he would prefer heaven or hell. The banker thought this was an odd question but St. Peter told the banker he could spend a day in hell to check it out.
Knowing that he could spend a the rest of his life in heaven he thought he would check out hell to see if it was everything he thought it would be.
He goes down there and the devil shows him around and everyone's partying, drinking and having a good old time... nothing like he originally thought.
So banker decides that he's lived the conservative life for too long, he's going to have a great eternity in hell. So he tells St. Peter to send him to hell.
The next day, he's awakened by a whip in the back and told to get to work. He's toiling in the inhumane heat, chained to a bunch of other guys.
The devil walks by and the banker says to him, "Hey what happened to the women, the music, the booze, all the fun..."
The devil looks at him and says "Yesterday you were a prospect. Today you are a customer".
If you're in a business where you may only see your customers once a year or less, what have you done to keep your name in front of them?
When I first started in business, I got a lead from a friend about someone looking for an accountant. When I called the guy up he told me that he wasn't looking for one at that time. However, he would do me a favor and put my name on a post it & note stick it on his desk. After the note dried up, he was going to crumple it up and throw it away. My job was to "make sure I put a fresh post it on his desk" to remind him of who I was.
It was a lesson I've kept close for all these years. Now this man was a prospect, but do we do the same for our existing customers? As a consumer, I get really frustrated when I get so much attention from companies as a prospect then I do as an already paying customer. I was actually astounded once when I received a $20 credit on my bill from a phone company simply because they "appreciated my business". They've had my loyalty since.
So I would offer that mining your existing client base for business could be more profitable for you than spending resources on prospects. So reach out and touch a customer today.
I'll close with a joke.
A banker dies and went to St. Peter's gate. St. Peter asked the banker if he would prefer heaven or hell. The banker thought this was an odd question but St. Peter told the banker he could spend a day in hell to check it out.
Knowing that he could spend a the rest of his life in heaven he thought he would check out hell to see if it was everything he thought it would be.
He goes down there and the devil shows him around and everyone's partying, drinking and having a good old time... nothing like he originally thought.
So banker decides that he's lived the conservative life for too long, he's going to have a great eternity in hell. So he tells St. Peter to send him to hell.
The next day, he's awakened by a whip in the back and told to get to work. He's toiling in the inhumane heat, chained to a bunch of other guys.
The devil walks by and the banker says to him, "Hey what happened to the women, the music, the booze, all the fun..."
The devil looks at him and says "Yesterday you were a prospect. Today you are a customer".
Wednesday, April 25, 2007
Wednesday's tax tip Vol. 7 - Charitable Donations
A number of tax publications seem to be of the belief that that IRS is going to be checking on large non cash donations of clothing, appliances and furniture to thrift operations. As a reminder, your donations of such items need to be in good to better condition and the charity is supposed to acknowledge such.
A good practice is to document a list of a non cash donations so you can be specific as to the donations of such goods. My guess is that the more detail you can provide the more apt your donation will be considered acceptable.
I have recently put together a schedule to aid in your records keeping of such charitable items. On the back of the form is a Goodwill guideline of the value of clothing items, appliances and furniture. If you would like for me to get you one email me at gtvcpa@yahoo.com.
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Monday, April 23, 2007
Personal Financial Tip Vol. 6 - Marketable skills
In my practice, I meet lots of people all over the financial spectrum, and one of the things that you'll notice among the wealthier clients as well as the not so wealthy is that there are common themes amongst the two groups.
Of my wealthy clients, you'll notice one of the themes is the constant upgrading of their skills as compared to the market place. Of my non wealthy clients, you'll notice the lack of improved marketable skills.
To the side is a graph. I lecture this graph to every man, woman and child that will hear it. It shows the supply/demand curve in a somewhat different format. It shows the correlation between income and marketable skills.
The days of increasing income just from years of experience are over. As a recruiter once told me "there's a difference between 12 years of experience and 12 x one year of experience". The days of having a nice job for decades earning an above average income are over.
Think of it in terms of an accountant doing tax returns with paper and pencil. I could never produce the volume of returns I do today simply using paper and pencil, the business has required me to learn computer skills and improving my knowledge of the tax codes. Without that, my earning potential would be extremely limited.
In the 21st century, we will all be required to increase our skills in order to yield increases in pay. Those that don't will end up watching the wealthy pull away.
Wednesday, April 18, 2007
Wednesday's tax tip Vol. 6 - A Day off
There will be no tip today since I will be taking the day off after the tax season. See you next Wednesday.
Monday, April 16, 2007
Personal Financial Tip Vol. 5 - College Tuition
If you haven't noticed lately, college tuition increases have more than doubled the cost of living rates.
Most schools have resorted to dramatically increasing the "sticker price" on their base tuition. During the admissions process, the schools review the students admission information and "kick back" tuition dollars in the form of scholarships and grants to get your student in.
An example, let's assume your child applies to a top level engineering program. If the student has the minimum SAT and grade point averages for admission, there will be little if any scholarship money available.
However, if you have exceptional grades and SAT scores and are willing to be patient you'll find that schools will offer substantial scholarship money in order to fill their admissions quota and maintain a high quality admission student.
So while I'm not a fan of chaining you student to a desk to get the maximum scholarship money, the student needs to be aware that a little extra elbow grease will go a long way in taking the inflation bite out of tuition
Most schools have resorted to dramatically increasing the "sticker price" on their base tuition. During the admissions process, the schools review the students admission information and "kick back" tuition dollars in the form of scholarships and grants to get your student in.
An example, let's assume your child applies to a top level engineering program. If the student has the minimum SAT and grade point averages for admission, there will be little if any scholarship money available.
However, if you have exceptional grades and SAT scores and are willing to be patient you'll find that schools will offer substantial scholarship money in order to fill their admissions quota and maintain a high quality admission student.
So while I'm not a fan of chaining you student to a desk to get the maximum scholarship money, the student needs to be aware that a little extra elbow grease will go a long way in taking the inflation bite out of tuition
Wednesday, April 11, 2007
Wednesday's tax tip Vol. 5 - Extensions
If you have not filed your return to date you may want to consider an extension. April 17th is the filing deadline. Note an extension does not give you an extension to pay. I advise clients to file their returns "as is" even if they cannot pay the amount due. That avoids other potential penalties. For instance, your extension can be denied if you did not make an reasonable estimate of your tax liability, which could mean an additional late filing penalty which is much worse than a just simple late payment penalty.
If you need an extension form go to irs.gov and download form 4868.
The states of Ohio, Kentucky and Indiana recognize the federal extension but most cities do not.
Most cities will accept a letter requesting an extension but some do not. Check the link to the side to locate your city and review your options on filing city extensions.
Filing an extension does not increase or decrease your audit exposure and as I tell clients "I'd rather have it right than fast".
If you have any questions about your individual issues email me at gtvcpa@yahoo.com.
If you need an extension form go to irs.gov and download form 4868.
The states of Ohio, Kentucky and Indiana recognize the federal extension but most cities do not.
Most cities will accept a letter requesting an extension but some do not. Check the link to the side to locate your city and review your options on filing city extensions.
Filing an extension does not increase or decrease your audit exposure and as I tell clients "I'd rather have it right than fast".
If you have any questions about your individual issues email me at gtvcpa@yahoo.com.
Monday, April 9, 2007
Personal Financial Tip Vol. 4 - The power of stability
Year after year, I have clients come in and seem to be treading water financially despite above average incomes.
One of the things I notice most about these people is the lack of stability in their lives. Job changes, new houses, kids, new cars, divorces, remarriages, etc. It appears that each and every year there's at least two significant life changes that really keeps the people sustaining any kind of financial momentum.
To add to these life changes, these same people seem to be the ones who dive into network marketing businesses in the hopes of making extra money; things such as Amway, Mary Kaye, Avon, Longaberger, etc.
It's extremely rare for people to make any long term money in these businesses.
The secret to establishing long term wealth is simply having a plan, working the plan and dropping the drama of life style instability. You'll find that just doing these three things will go a long way in establishing your retirement at 55 rather than 70.
One of the things I notice most about these people is the lack of stability in their lives. Job changes, new houses, kids, new cars, divorces, remarriages, etc. It appears that each and every year there's at least two significant life changes that really keeps the people sustaining any kind of financial momentum.
To add to these life changes, these same people seem to be the ones who dive into network marketing businesses in the hopes of making extra money; things such as Amway, Mary Kaye, Avon, Longaberger, etc.
It's extremely rare for people to make any long term money in these businesses.
The secret to establishing long term wealth is simply having a plan, working the plan and dropping the drama of life style instability. You'll find that just doing these three things will go a long way in establishing your retirement at 55 rather than 70.
Friday, April 6, 2007
Business Tip Vol. 3 - Time Management
Where do you spend most of your time running your business?
If you had to allocate a normal 40 hr work week between Sales, Production and Administration what would be the percentage breakdown between all three?
I've devised the 40/40/20 rule. 40% of your time on sales, 40% on production and 20% on administration.
As businesses grow, we all have a tendency to skew those figures and end up spending more time on production than sales. But the time and resources on sales is what grows your business. Think of it as a large pipeline. You have to prime that pump for a while to get the oil flowing. Once the pump starts to fill you have to manage what comes out the other end. However, if you don't keep working to keep the oil going into the pipeline it will ultimately drain and you'll have to spend more time priming again.
For now, just observe and note your time management. Just observing your time will have you changing course in no time.
If you had to allocate a normal 40 hr work week between Sales, Production and Administration what would be the percentage breakdown between all three?
I've devised the 40/40/20 rule. 40% of your time on sales, 40% on production and 20% on administration.
As businesses grow, we all have a tendency to skew those figures and end up spending more time on production than sales. But the time and resources on sales is what grows your business. Think of it as a large pipeline. You have to prime that pump for a while to get the oil flowing. Once the pump starts to fill you have to manage what comes out the other end. However, if you don't keep working to keep the oil going into the pipeline it will ultimately drain and you'll have to spend more time priming again.
For now, just observe and note your time management. Just observing your time will have you changing course in no time.
Wednesday, April 4, 2007
Wednesday's tax tip Vol. 4 - School District Income taxes
Last week we went over the city income tax. Because of the way it's paid, many people can get it confused with the school district income tax.
The school district income tax has become popular in many rural districts where property taxes can be extremely high on elderly people. However, the tax is becoming more popular across the state, and, my prediction, will ultimately be how we end up funding schools in nearly all of Ohio.
The income tax is only for residents of the school district, not businesses or people working in the district. So if you are a resident of Goshen School District you are required to pay Goshen School income tax regardless of where you work, actually, even if you are retired.
Finally, many school districts mirror city incorporation limits so don't be confused if you live in my home town of Lancaster and have to pay city income tax and school district tax; two separate taxes funding two different entities.
The school district income tax has become popular in many rural districts where property taxes can be extremely high on elderly people. However, the tax is becoming more popular across the state, and, my prediction, will ultimately be how we end up funding schools in nearly all of Ohio.
The income tax is only for residents of the school district, not businesses or people working in the district. So if you are a resident of Goshen School District you are required to pay Goshen School income tax regardless of where you work, actually, even if you are retired.
Finally, many school districts mirror city incorporation limits so don't be confused if you live in my home town of Lancaster and have to pay city income tax and school district tax; two separate taxes funding two different entities.
Wednesday, March 28, 2007
Wednesday's tax tip Vol. 3 - City income taxes
People moving to the state of Ohio and our own residents are often confused with the city income tax structure.
In general, you owe a city wage tax for each city you work in. In addition, you owe city tax for your resident city.
Now most cities allow a resident credit for the wages you pay for working in another city, but not all do.
Hopefully that gives you a background to city tax. Now the tax tip is this. If you travel a good bit for your job, you may find that it's worth filing for an out of city work refund. For instance, Let's say your office is in the city of Cincinnati but you are out of the office for 10% of the time. You may receive that 10% back as a refund.
In general, you owe a city wage tax for each city you work in. In addition, you owe city tax for your resident city.
Now most cities allow a resident credit for the wages you pay for working in another city, but not all do.
Hopefully that gives you a background to city tax. Now the tax tip is this. If you travel a good bit for your job, you may find that it's worth filing for an out of city work refund. For instance, Let's say your office is in the city of Cincinnati but you are out of the office for 10% of the time. You may receive that 10% back as a refund.
Monday, March 26, 2007
Personal Financial Tip Vol. 3
Anyone who knows me for any considerable amount of time has heard this from me
I don't know if it's a "misery loves company" scenario or if people naturally evolve to fit in with the group. Regardless, if you really map out the most influential people in your life you'll see the common threads.
So if you have issues around money, you'll find that you're surrounded by people with issues around money. Maybe when you look at your family and friends, you say "we never talk about money" and that may be the point. People can be so stressed about money that they can't really have an honest conversation about it.
So whatever problems you find in your life look at the people in your life. As a good friend of mine says... "If you can't change the people around you.... you need to change the people around you".
"You are the people you hang around with"If you find that you are stressed about anything going on in your life, you'll find that you are surrounded by people with same issues.
I don't know if it's a "misery loves company" scenario or if people naturally evolve to fit in with the group. Regardless, if you really map out the most influential people in your life you'll see the common threads.
So if you have issues around money, you'll find that you're surrounded by people with issues around money. Maybe when you look at your family and friends, you say "we never talk about money" and that may be the point. People can be so stressed about money that they can't really have an honest conversation about it.
So whatever problems you find in your life look at the people in your life. As a good friend of mine says... "If you can't change the people around you.... you need to change the people around you".
Friday, March 23, 2007
Business Tip Vol. 2 - Core Competencies
Last week, I posted some thoughts about your company's core competencies.
If you would place your business in only one of these three categories, which would it be.
1) Low cost provider
2) Product or service innovator
3) Exceptional service provider
Most small business owners make the mistake of attempting to straddle between low cost provider and exceptional service provider, mainly because they maintain a low overhead operation. Big mistake.
I would offer that almost any small business needs to position themselves as the exceptional customer service provider. Most small businesses don't have the economies of scale to compete with larger competitors.
As a result, don't give away pricing and provide the quality service the extra pricing pays for. Listen to customers in the market place, most of their complaints are usually focused on the vendor becoming a problem for the customer to manage, not the other way around.
The fact that you may maintain a low overhead operation allows you the resources to offer a higher quality product and service.
The other reason you don't want to position your self as the low cost provider is that the market place will never allow you to be anything but the low cost provider. Just look at a company like Walmart, who attempted to offer high quality more expensive merchandise... it was a complete flop.
Next week, I'll address the other pitfalls of being the low cost provider.
If you would place your business in only one of these three categories, which would it be.
1) Low cost provider
2) Product or service innovator
3) Exceptional service provider
Most small business owners make the mistake of attempting to straddle between low cost provider and exceptional service provider, mainly because they maintain a low overhead operation. Big mistake.
I would offer that almost any small business needs to position themselves as the exceptional customer service provider. Most small businesses don't have the economies of scale to compete with larger competitors.
As a result, don't give away pricing and provide the quality service the extra pricing pays for. Listen to customers in the market place, most of their complaints are usually focused on the vendor becoming a problem for the customer to manage, not the other way around.
The fact that you may maintain a low overhead operation allows you the resources to offer a higher quality product and service.
The other reason you don't want to position your self as the low cost provider is that the market place will never allow you to be anything but the low cost provider. Just look at a company like Walmart, who attempted to offer high quality more expensive merchandise... it was a complete flop.
Next week, I'll address the other pitfalls of being the low cost provider.
Tuesday, March 20, 2007
Tax tip Vol. 2 - State of Ohio Marriage Penalty
The state of Ohio has one of the most injurious marriage penalties in the country.
Most people are not aware that by filing separate tax returns they dramatically reduce their state income tax liability. In general, the closer the spouses wages are, the more like a separate filing will save tax dollars.
In our practice, approximately 15% of married filers benefit from filing separate returns.
The trap... your filing status for Ohio must be the same as the federal return. However, any extra tax on your federal returns may be offset by the the savings on your state returns.
Recommendation. Prepare your return both ways to see which way results in more money in your pocket.
Most people are not aware that by filing separate tax returns they dramatically reduce their state income tax liability. In general, the closer the spouses wages are, the more like a separate filing will save tax dollars.
In our practice, approximately 15% of married filers benefit from filing separate returns.
The trap... your filing status for Ohio must be the same as the federal return. However, any extra tax on your federal returns may be offset by the the savings on your state returns.
Recommendation. Prepare your return both ways to see which way results in more money in your pocket.
Monday, March 19, 2007
Personal Financial Tip of The Week 2
I get lots of question regarding home ownership and here are my main thoughts on such.
In general, I believe that people in today's market are buying way too much house. Let me show you some math.
Let's assume I buy a $200,000 home, the appreciation in that home is going to much higher than if I buy a $150,000 home, isn't it?
Let's do the numbers...... Let's assume you buy a $200,000 home (100% financing) and you're able to get an 8% annual return on investment (generous for a home), at the end of 5 years your home is now worth 293,000 (a gain of $93,000). Now compare that to the home I bought for $150,000, assuming the same 8%, after 5 years, my home is worth roughly $220,000, a gain of about $70,000.
On it's face, looks like a great deal... right?
Except that you can't forget to factor the extra $386/month I got to put in a mutual fund because I had a lower monthly mortgage payment. After 5 years, 8%, I have an extra $27,000 in actual liquid assets in the fund bringing my total increase in net worth to $97,000. In addition, I have the benefit of diversity in my net worth whereas you have your's tied up in the real estate market.
But let's assume that the increase in net worth is a push. How much more do you have to pay in real estate taxes, insurance, PMI insurance, plumbing repairs, homeowner association dues, maintenance, furnishings, roofs, water heaters etc, etc.. No one ever factors these costs in the return on their real estate and the fact is, the more expensive your home, the more these things cost.
In addition, by saving the money instead of having it locked into a mortgage payment, I have the ability to weather financial storms and the freedom to vacation, etc.
Yeah, but what about the write offs related to owning a home? As I tell clients all the time, I'd rather have tax on income rather than the deduction for losses. If you ever want a write off to lower your tax liability, I'll give you a tax preparation bill equal to your income, that will wipe out any tax liability you might have and I'll have to pay the taxes. Yet, I'm still waiting for the first person to take me up on my offer.
My advise on homes.... buy it like you would an apartment, find the location, budget, schools, etc. Don't over buy. You wouldn't rent a four bedroom apartment for two people would you? Don't do the same for your house. You'll find that being able to sleep at night is a lot easier when you don't have bill collectors calling your home.
In general, I believe that people in today's market are buying way too much house. Let me show you some math.
Let's assume I buy a $200,000 home, the appreciation in that home is going to much higher than if I buy a $150,000 home, isn't it?
Let's do the numbers...... Let's assume you buy a $200,000 home (100% financing) and you're able to get an 8% annual return on investment (generous for a home), at the end of 5 years your home is now worth 293,000 (a gain of $93,000). Now compare that to the home I bought for $150,000, assuming the same 8%, after 5 years, my home is worth roughly $220,000, a gain of about $70,000.
On it's face, looks like a great deal... right?
Except that you can't forget to factor the extra $386/month I got to put in a mutual fund because I had a lower monthly mortgage payment. After 5 years, 8%, I have an extra $27,000 in actual liquid assets in the fund bringing my total increase in net worth to $97,000. In addition, I have the benefit of diversity in my net worth whereas you have your's tied up in the real estate market.
But let's assume that the increase in net worth is a push. How much more do you have to pay in real estate taxes, insurance, PMI insurance, plumbing repairs, homeowner association dues, maintenance, furnishings, roofs, water heaters etc, etc.. No one ever factors these costs in the return on their real estate and the fact is, the more expensive your home, the more these things cost.
In addition, by saving the money instead of having it locked into a mortgage payment, I have the ability to weather financial storms and the freedom to vacation, etc.
Yeah, but what about the write offs related to owning a home? As I tell clients all the time, I'd rather have tax on income rather than the deduction for losses. If you ever want a write off to lower your tax liability, I'll give you a tax preparation bill equal to your income, that will wipe out any tax liability you might have and I'll have to pay the taxes. Yet, I'm still waiting for the first person to take me up on my offer.
My advise on homes.... buy it like you would an apartment, find the location, budget, schools, etc. Don't over buy. You wouldn't rent a four bedroom apartment for two people would you? Don't do the same for your house. You'll find that being able to sleep at night is a lot easier when you don't have bill collectors calling your home.
Friday, March 16, 2007
Business tip of the week
After last week's post, hopefully you've come with a couple of adjectives that you want to resonate though out your business.
Now I'd like to for you to consider this.
You would consider your business to be which of the following.
1) Lost cost provider - Are you the lowest priced product or service in the market place?
2) Product or service innovator - Do you have the latest/greatest product or service available in your market?
3) Exceptional customer service - Are you the leader in tending to your customers' needs?
Give some thought to these. Consider that you can only be one of these not a combination of two and just like last week, are all your relationships within your business (customers, suppliers, employees, competitors) consistent with being one of these.
Next week, I'll go over the common mistakes that most business owners make in their analysis.
Now I'd like to for you to consider this.
You would consider your business to be which of the following.
1) Lost cost provider - Are you the lowest priced product or service in the market place?
2) Product or service innovator - Do you have the latest/greatest product or service available in your market?
3) Exceptional customer service - Are you the leader in tending to your customers' needs?
Give some thought to these. Consider that you can only be one of these not a combination of two and just like last week, are all your relationships within your business (customers, suppliers, employees, competitors) consistent with being one of these.
Next week, I'll go over the common mistakes that most business owners make in their analysis.
Wednesday, March 14, 2007
Wednesday's tax tip
I receive lots of questions about items that are deductible against business income. The IRS deems any expense that is "ordinary and necessary" as a deductible expense.
What I usually tell clients is that any expense you incur with the intent to generate income is going to be deductible to you in some manner. My goal is get people to develop peoples' antennae for identifying deductible expenses.
So if you use your cell phone for business purposes, keep record of it; you buy a prospective client a gift, keep record of it; you drive to the office supply store for business supplies, keep track of it.
Some expenses such as cell phones, computers, etc. have personal usage limitations related to them but the point is still the same; keep track of those expenses.
What if I am an employee? The same rules apply, expenses such as union dues, unreimbursed mileage, professional licenses, uniforms, special shoes, etc. Again, are all deductible employee business expenses.
I think that often too many expenses incurred by taxpayer's are never deducted simply because the taxpayer never thought about them being deductible. So let's start keeping track of those now.
What I usually tell clients is that any expense you incur with the intent to generate income is going to be deductible to you in some manner. My goal is get people to develop peoples' antennae for identifying deductible expenses.
So if you use your cell phone for business purposes, keep record of it; you buy a prospective client a gift, keep record of it; you drive to the office supply store for business supplies, keep track of it.
Some expenses such as cell phones, computers, etc. have personal usage limitations related to them but the point is still the same; keep track of those expenses.
What if I am an employee? The same rules apply, expenses such as union dues, unreimbursed mileage, professional licenses, uniforms, special shoes, etc. Again, are all deductible employee business expenses.
I think that often too many expenses incurred by taxpayer's are never deducted simply because the taxpayer never thought about them being deductible. So let's start keeping track of those now.
Monday, March 12, 2007
Personal Financial Tip of The Week 1
This weeks personal financial tip of the day.
If you are annoyed with the barrage of pre approved credit card solicitations you can go to this website https://www.optoutprescreen.com and put your name on the list. This is supposed to prevent credit bureau operations from selling pre screen credit rating information.
For instance, I can buy a listing of everyone with a credit score of 700 or better. By enrolling on this website, you prevent the credit card companies from including you on these lists.
If you are annoyed with the barrage of pre approved credit card solicitations you can go to this website https://www.optoutprescreen.com and put your name on the list. This is supposed to prevent credit bureau operations from selling pre screen credit rating information.
For instance, I can buy a listing of everyone with a credit score of 700 or better. By enrolling on this website, you prevent the credit card companies from including you on these lists.
Friday, March 9, 2007
What are you passionate about?
Too often when I'm talking to clients and friends about business I'm always struck by the answer to this question.
Why do you own your business?
The first response is usually, money. But frankly, money is not the reason. You can earn money working for someone else. It has to be other things.
This is the exercise I offer every person I talk to. If you were to name 2-3 adjectives that you want every person that does business with your company to use what would they be?
Thorough? Personable? Professional? Timely? it could be a myriad of things. Regardless, I then challenge my clients. Are these traits applicable to every relationship in your business? to your employees? vendors? customers? prospects? If the answer is no to any of these then it's no for all of them.
So think about what it is that makes you touched, moved and inspired about the ownership of a business and let's start by making those things consistent throughout the business.
Why do you own your business?
The first response is usually, money. But frankly, money is not the reason. You can earn money working for someone else. It has to be other things.
This is the exercise I offer every person I talk to. If you were to name 2-3 adjectives that you want every person that does business with your company to use what would they be?
Thorough? Personable? Professional? Timely? it could be a myriad of things. Regardless, I then challenge my clients. Are these traits applicable to every relationship in your business? to your employees? vendors? customers? prospects? If the answer is no to any of these then it's no for all of them.
So think about what it is that makes you touched, moved and inspired about the ownership of a business and let's start by making those things consistent throughout the business.
First post
Here is the first post for this blog. This my goal for this blog.
Every Wednesday I'll post a relevant tax tip for the week. Each Friday, I'll post a relevant financial advice tip and/or business tip.
Enjoy.
Every Wednesday I'll post a relevant tax tip for the week. Each Friday, I'll post a relevant financial advice tip and/or business tip.
Enjoy.
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