Monthly Archives: October 2016

Considerations for Small Business Owners in Voting for a New U.S. President.

After a long, contentious, and heavily covered race to the U.S. presidency, the 2016 campaign cycle is coming to end in only a few weeks. Chances are you’ve been overloaded with news and commentary and—whichever candidate you support—you’ll be somewhat relieved after the results are announced on November 8th.

A side-by-side picture of Hillary Clinton and Donald Trump

But that doesn’t mean you should tune out until then. Between the candidates’ platforms, tax plans, and stances on topics such as healthcare, immigration, and consumer protection, there are important issues at stake that may directly affect your business and industry.

Which Election Issues Matter Most to Entrepreneurs?

As a business owner, you have several political agenda items to consider before you vote on Election Day:

What Will the Proposed Healthcare Reform Mean for Your Small Business?

The Affordable Care Act, signed into law in 2010 and commonly referred to as “Obamacare,” made healthcare a focal point of political discourse—in large part because of its effects on America’s businesses. Some business owners support the Affordable Care Act for providing employees with mandatory insurance coverage, while others complain that the law places an excessive financial burden on employers.

Have You Analyzed Each Candidate’s Tax Plan?

Although virtually every presidential candidate in recent history has pledged to make taxes more advantageous to small businesses, tax plans vary wildly by administration when it comes down to the details. A business owner would be wise to scrutinize each candidate’s proposals to determine:

  • The tax breaks and incentives for business owners
  • Which types of taxes will be increased
  • Whether income brackets and business categories are changing, and if so, to what extent

How Will Federal Regulations Impact Your Industry?

From safeguarding consumer privacy to providing accommodations for disabled employees, companies are subject to all kinds of federal regulations, though some industries are more regulated than others. The two major parties fundamentally disagree about the scope and authority of these regulations and the agencies in charge.

The Consumer Financial Protection Bureau (CFPB), which lawmakers established in 2010 as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Republicans believe the CFPB has too much unchecked power over financial institutions, while Democrats argue for the agency’s necessity and seek to sustain it—if not expand its influence.

Where Do You Stand With Minimum Wage?

Several states have recently passed legislation increasing state minimum wage, and the subject is a hotly debated one in Washington as well. A federal minimum wage hike is not simply an issue of cost versus savings, but large-scale economics and government intervention.

Some business owners advocate for raising the minimum wage, citing that better pay increases productivity and reduces turnover. Others contend that a $12–15 minimum wage would put their organizations out of business or cause them to lose their competitive edge domestically and globally.

What About Federal Loan Availability for Rising Entrepreneurs?

Do you believe it should be easier for business owners to borrow credit? A “yes” or “no” answer places you firmly on one side or the other of the political spectrum. The parties’ stances on banking regulations and Wall Street reform tell you a lot about what the availability of loans under their administrations would look like, but there’s more to the story than that.

Aside from the candidates’ promises to promote small business growth, the various outcomes of the election could have significant repercussions on the economy, as consumer attitudes shift and lenders become more or less confident as a result.

Does Your Small Business Depend on International Trade?

Speaking of broad economic impact, each candidate’s attitudes on international trade could weaken or strengthen U.S. businesses, depending on your perspective. It may be easier or more difficult during the next few years to establish overseas corporate partnerships, reach consumers in different countries, and sell products and services all over the world.

What’s Your Take on Immigration & the Startup Visa Proposal?

According to the Partnership for a New American Economy, over 40% of Fortune 500 companies were founded by immigrants or children of immigrants. America’s policies on immigration fuel innovation and competition, which aren’t necessarily net-positive or net-negative effects for each and every company.

So, while border control is a deeply personal issue for many on all sides of the debate, there’s a business case to be made either way—so long as you can differentiate the facts from the rhetoric.

Where Can You Go for Detailed Information About Each Candidate?

In the next few weeks, take the time to educate yourself on each candidate’s positions. Here are a few resources that will help you start researching before you cast your vote:

If at any point during your research you wonder how certain regulations and tax codes will affect your specific business don’t hesitate to contact us.

So, what other small business issues would you like the candidates to talk about?

_______________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Hurricane Preparations

This post, due to the nature of the topic, will be short.

In light of Hurricane Matthew’s impending arrival I want to say, first of all, that my heart goes out to those who have dealt with or are about to deal with Matthew.

A street with a 'Hurricane Evacuation Route' sign.

Here are a couple of tips that may be of help to you.

For individuals and businesses in Florida and South Carolina, there’s not much time left for preparations. There are two things you can do–or have your kids do:

  1. Take pictures of the interior of the house and important or valuable items, then take pictures of the exterior.
  2. Either take your computer with you or download your most important files onto a flash drive. Accounting records, business data, etc. as well as any personal information such as bank and brokerage account numbers, etc. In the future you should consider backing up the computer to the cloud or to an outboard hard drive (if you don’t already). Make sure you put the flash or hard drive in a waterproof container before leaving the house.

Again, my heartfelt best wishes to those who have been affected by Matthew or who will be dealing with this hurricane very soon.

Bruce

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

A Sole Proprietorship May Be The Easiest Route to Travel for SOME Businesses!

A lot of people think that the first step to starting a business is incorporating or organizing a Limited Liability Company (LLC). While both types of entities can provide your business with additional protection, they’re not the answer for everyone. And that protection comes at a cost. I’ve created a list of some factors that should be reviewed before deciding on an LLC, a corporation, or a sole proprietorship. For the sake of this post, I will assume that your business, at least in the beginning is a one-person show with no partners and no employees. While that leaves out many startups, it encompasses many more.

The Words 'Sole Proprietorship'.

Here Are Some Points to Consider:

Potential Liability. If you’re designing and importing a children’s toys, you will need all the protection you can get. On the other hand, if you’re a carpenter your insurance should be able to handle most liability issues. Many professionals are likely to be sued personally even if the business is incorporated. Things quickly change if you have employees. If that’s the case a corporation or LLC can protect you personally.

Business Debts. In earlier times the corporate form was used mostly to protect owners from being personally liable for corporate debts. Today, it’s used for personal protection from a range of lawsuits. But for most small businesses, owners will be required to personally guarantee any bank, etc. loans. The only advantage to a corporation or LLC may be avoiding accounts payable on a default. And even a corporation or LLC won’t protect you if don’t respect the formalities of the entity.

Cost. If you do it yourself, the cost of setting up (and dissolving if it doesn’t work out) a corporation or LLC may be relatively small (generally between $125 and $800). Using an attorney will add to the cost. There may be annual fees such as filing fees and franchise taxes. These vary widely. Not much of an issue if the business is nicely profitable, but a burden if you’re suffering losses. If you do business as a corporation (S or C) you’ll have a separate return to file. That is a consideration if you have a professional prepare it.

LLC vs. S Corporation. While you could do business as a regular C corporation, you could find yourself subject to double taxes. Most small businesses elect S corporation status where profits and losses are passed through to the shareholders. An LLC with only one member is a separate entity for legal purposes, but is disregarded for federal tax purposes. That is, instead of filing a partnership return (the normal return for an LLC with more than one member (owner)), a single-member LLC reports its income and expenses on the owner’s Schedule C. That, plus the fact no balance sheet is required, can save some preparation costs at tax time.

DBA. If you’re doing business as a corporation or LLC you will decide on a name when filing with the state. While you could use your own name (e.g., Ralph Kramden, Inc.) that’s usually not the case. As a sole proprietorship, the default is to use your own name. That’s fine if you’re Ralph Kramden, Attorney-at-Law, but not so attractive if you want to brand the business. The solution is filing with your state for a Doing Business As (DBA) to do business under an assumed name (e.g., Ralph Kramden doing business as Brooklyn Auto Body). You have to decide if you want the extra work of a DBA.

Transactions Between You and Entity. If you’re doing business as a separate entity, you’ve got to respect the formalities. Business assets are purchased and titled in the name of the entity. Assets transferred to shareholders or LLC members should be accounted for on the books and for tax purposes. Loans are taken out in the name of the entity. Not in your name personally. Paying a corporate loan (or other expense) with a personal check won’t get you a deduction. The proper approach is either to make a loan or equity contribution to the business so the business can pay the expense and get the deduction. Alternatively you can submit an expense report and have the business reimburse you. Paying personal expenses with a business check as well as not respecting other formalities such as making customers, creditors, etc. aware that you’re doing business as an LLC or corporation can allow outsiders to challenge the existence of the corporation or LLC. It sounds simple enough, but most small business owners don’t follow through. A sole proprietorship doesn’t have these problems.

Switching Entities. If you start a business as a sole proprietorship and later decide to incorporate or change to an LLC, doing so is relatively straightforward and there are generally no tax consequences. Going in the other direction can be more complicated, particularly if you have fixed assets. In some cases there may be tax consequences.

The Best Approach? If you have or will have shortly, owners in addition to yourself, you might as well use a corporation or LLC from the businesses inception. If additional owners are unlikely (at least for some time) a sole proprietorship should be considered if the liability protection of an LLC or corporation isn’t needed. You should discuss the issue with your attorney and with your tax advisor.

Keep in mind that this discussion is in no way inclusive of all factors to be considered in starting a business.

So, if you are considering starting a business (or already have a business) give us a call for a consultation. Your business will thank you.

We can be reached at: (845) 344-1040. You can also learn more about us at our website:
SolidTaxSolutions.com.

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Uh-Oh! The IRS is Riding the Debt Collector Train. Again!

Sooooooo, the IRS has recently announced (on September 26) that it plans to begin a private collection program (authorized by the Fixing America’s Surface Transportation Act) for certain overdue federal tax debts next spring and has selected four contractors to implement the new program.

A 1040 tax return with the word 'Overdue' stamped on it.

The IRS Has Hired Private Debt Collectors to Collect Back Tax Debt.

The IRS has attempted to use private contractors twice in the past, both times finding it not cost effective. Now, under the law, the IRS is required to use qualified contractors to collect inactive receivables. An inactive receivable is one that meets one of the following requirements:

  1. At any time after assessment, the Internal Revenue Service removes such receivable from the active inventory for lack of resources or inability to locate the taxpayer,
  2. More than 1/3 of the period of the applicable statute of limitation has lapsed and such receivable has not been assigned for collection to any employee of the Internal Revenue Service, or
  3. In the case of a receivable which has been assigned for collection, more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection of such receivable.

Certain receivables are not eligible for collection using private collectors. They include:

  • Those subject to a pending or active offer-in-compromise or installment agreement,
  • Those classified as an innocent spouse case,
  • Those involving a taxpayer identified by the IRS as being:
    1. Deceased,
    2. Under the age of 18,
    3. In a designated combat zone,
    4. A victim of tax-related identity theft,
    5. Currently under examination, litigation, criminal investigation, or levy,
    6. Subject to pending or active offers in compromise,
    7. Subject to a right of appeal, or
    8. In a presidentially declared disaster areas and requesting relief from collection,
  • those currently under examination, litigation, criminal investigation, or levy, or
  • those currently subject to a proper exercise of a right of appeal under this title.

The new program, authorized under a federal law enacted by Congress last December, enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables. As a condition of receiving a contract, these agencies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. The IRS has selected the following contractors to carry out this program:

    • CBE Group 1309 Technology Pkwy Cedar Falls, IA 50613
    • Conserve 200 CrossKeys Office park Fairport, NY 14450
    • Performant 333 N Canyons Pkwy Livermore, CA 94551
    • Pioneer 325 Daniel Zenker Dr Horseheads, NY 14845

These private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.

The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer. Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.

The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.

Private collection agencies will not ask for payment on a prepaid debit card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.

If you owe back taxes to the IRS, give Solid Tax Solutions a call (we are open year-round) at: (845) 344-1040.

We are also on the web at: SolidTaxSolutions.com.

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).