February 15, 2018
According to a recent Gallup study, 43% of Americans report at least part of their time working from home. With more employees making the transition to home offices, the question inevitably comes up; What can I deduct?
The IRS has two requirements that need to be met in order to claim the home office deduction. The first requirement is the space you intend to claim needs to be used as a home office regularly and excessively. The second is your home office has to be the principal place of your business.
Regular and Exclusive Use
The IRS is very particular about this portion. You must use your home office frequently for it to be considered eligible. This means that if you use your laptop on the couch, kitchen table, and the bedroom, you’re not eligible for the home office deduction. To keep your audit risk low, make sure your home office is:
- An established place where you complete the majority of your work
- Preferably a separate room that is designated for work only
- A place where you work for a minimum of 12 hours a week
Principal Place of Your Business
Flexibility is a benefit here when it comes to your home office. The IRS is fairly understanding to the location of your home office as long as it’s used primarily for work. That means your garage, a corner of the living room, or a spare bedroom can all be used as a home office. To take advantage of the home office deduction, here are a few things you should know:
- Choosing the simplified home office deduction allows you to allocate a percentage of your home as your home office.
- Separate stand-alone buildings can be deducted if they are used primarily for business purposes.
- Your home office should not be a communal area such as a family computer room.
Follow these two guidelines and you’ll be well on your way to claiming your home office tax deduction. To help maximize your deductions, BIG can help you get the most back with our tax preparation services.
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January 29, 2018
Freelancers are getting a big help from the new tax plan's pass-through deduction.
You may not realize you are doing this as a freelancer, but you are. If you end up claiming the revenue your LLC or S-Corp makes as your income and use itemized deductions to lower your taxes owned then you are participating in the pass-through deduction.
This pass-through provision will allow you / freelancers to deduct 20% of your revenue from your taxable income.
With the new law it has loosened restrictions so that not only the rich will benefit. You will get a nice savings as well.
This deduction, paired with new, lower tax rates means most freelancers will pay less in federal taxes in 2018 than they would have under the former tax code.
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December 30, 2017
Choosing the right business structure is key to making the most out of your small business. It can be difficult to decide what type of entity to register as. The most common types of entities include sole proprietorships, partnerships, corporations and limited liability companies. Read up on our cheat sheets to decide what the best type of business entity is right for your business.
A sole proprietor owns an unincorporated business by him or herself.
Easy and least expensive to establish
Owner can deduct net business loss from personal income taxes
Owner is liable for any debt, judgements or other liabilities
Harder to raise capital
A partnership is a relationship existing between two or more people who come together to create or carry on a business. Each individual contributes property, labor, money or skill and has a share in the profits or losses.
Greater possible capital
Easy to form and operate
All owners are personally liable
Divided authority amongst owners
S-corporations are corporations that elect to pass corporate income, losses and deductions to their shareholders for federal taxes.
Limited liability to stockholders
Lifespan, the business is a legal entity and can grow
Expensive with more paperwork
Interest of owners determines their incomes from business profits
In a corporation, shareholders exchange money and property and can take special tax deductions. A corporation distributes profits to shareholders and recognizes net income or loss.
Unlimited number of shareholders
Some benefits can be deducted as business expenses
Must pay its own taxes as a separate tax entity
Extensive paperwork must be filled out to start a corporation
5. Limited Liability Corporation (LLC)
This is a business structure where owners are called members and allowed by state statute.
Owners can choose how the entity should be taxed
Allows great flexibility on business structure
Most expensive to establish
Some states only allow one member in the LLC
No matter what type of business entity you are interested in or that is the best fit, our experienced team here at BIG can help you get started.
December 15, 2017
Business mentoring provides companies of any size number benefits that range from boosting company morale to providing industry expertise. Many businesses don’t see the need for business mentors however, these signs will tell you if you should invest in one.
Often times, when someone new comes on in the sole leadership position, they try to be exactly like the person before. A business mentor can help bridge the gap between the old and new leader. They can discuss new ways to manage the company or business while keeping the same values.
No Business Growth
An obvious sign of needing a business mentor is if you aren’t seeing any real growth within the business such as revenue, clients, etc.
Business often struggle to retain employees and lose talented workers. If you are noticing a high turnover rate, it may be time to invest in a business mentor. Mentors have reduced turnover rates by helping you create an inviting atmosphere for employees. Mentors suggest ways for you to better support and empower employees.
Need for Change
The more a business grows, change is inevitable. Whether it is bringing on more employees or internal structure changes, a business mentor can help guide you. They can talk you through the necessary steps to get you to where you want to be and give realistic advice to help you reach your business goals.
Employee motivation and morale are low
The morale and motivation of company employees is crucial to success. Business mentors can suggest ways to increase internal comradery to motivate employees to put their best foot forward day in and day out. Through this, business leaders will gain support and personal motivation as well.
Business mentoring can guide your business to success. From basic morale suggestions to ways to reduce turnover rates. Contact us for your business mentor needs at http://www.bizimprove.com/contact/.
November 30, 2017
Management accounting generates monthly or weekly reports for a company or business’s employees including managers and the CEO. These reports show the available money, sales revenue, state of accounts payable, debts, charts, analysis and other statistics.
This system and type of reporting is used by company leaders to make decisions about day to day operations. Management accounting allows for forecasting the market and trends.
The main difference in financial account and management accounting is financial accounting is important for future investors and management accounting helps executives make important decisions that impact the company and business’s future.
Management accounting can also serve as a motivator for other employees. Not only does it help the company solve problems but it can also motivate employees to reach specific goals that this form of accounting has set.
While this form of accounting encourages executives make decisions, the main purpose is to analyze information. They find problem areas within the company and suggest ways to correct these things. This in turn, leads to the recommendations for company leader’s decisions.
Management accounting comes in many different forms. These forms include forensic accounting, business check-ups, turnaround management, receivership, crisis management and more. No matter the size of your company or business, management accounting is crucial. It can help set future business goals as well as find any potential risks and stop them before they happen.
Our team at here at BIG offers a wide variety of management accounting services. To learn more contact us at http://www.bizimprove.com/contact/.
November 15, 2017
Company fraud or theft can happen without you even realizing. Fraud can mean a number of things including embezzlement, employee diversion of cash, improper use of cash from the company, etc. Even though you know you’re not guilty of committing fraud, hiring a forensic accountant could make or break your company down the road.
What is forensic accounting?
Forensic accountants analyze and interpret complex financial situations. These accountants are often hired in legal situations to aid in the lawsuit.
Fraud can happen when you least expect it. Whether you’re a thriving company or ending a partnership, fraud exists. It could be a shareholder that was responsible for managing accounts and started to spend company money for personal use. When you and your partner split and dissolve the company, you’re going to need to know where all money went to.
Even with your current business, fraud can be present. It’s smart to hire a forensic accountant to be another set of eyes on all money going out as well as coming in. You don’t want to be punished for something that could have been avoided had you had someone looking at all transactions.
The problem with most businesses is that they don’t want to admit there could be a problem such as fraud or theft occurring inside their own walls. Simple forensic accounting begins by auditing financial records and risk areas are presented then.
Even if fraud or theft isn’t occurring quite yet, forensic accountants can find potential risks that could lead to a problem later on. Even if you don’t think your company needs forensic accounting, you do.
Here at BIG, we specialize in auditing financial records, company methods and employee structures to prevent potentially dangerous activity.
October 30, 2017
Being a young adult is hard. Transitioning to being financially independent is even more difficult. Here are some financial tips that young adults need to follow in order to be financially set for years to come.
Credit cards are great for emergency purposes and those “must have” items. But the bill that comes at the end of the month isn’t so great. Even though impulsively buying those clothes or furniture seems like a good idea, waiting to spend that kind of money once you can pay off the bill right away is an even better idea.
Take control of your financial future
As a young adult, it’s easy to take other’s advice on your personal finances. However, they often don’t truly know your financial situation. Take some time to read a financial planning book or meet with a financial planner. This way you will be ready for anything that is thrown at you.
Know where your money goes
Whether you are right out of college or in your mid to late 20s, it is crucial to not outspend your income. Making a monthly budget is the easiest way to know exactly where every dollar is going.
Most young adults have moved out on their own and start their career. With that being said, emergencies happen and you have to be able to take care of those financially. Once you have your bills sorted out, create a savings account that is only for emergencies. Not only will you be able to access this money in case of emergency, but you will gain interest.
Save for retirement
It is never too early to start saving for your future. The earlier you begin saving, the more money you will have to live off of when it comes time to retire. Whether you take advantage of your company’s retirement benefit program or save on your own, it’s important to start saving early.
Fully understanding income taxes can be difficult especially as a young adult. When you’re offered a salary at your job, being able to calculate how much of that will go to taxes and how much you will actually receive is important.
October 15, 2017
Starting a new business can be hard. From setting up business bank accounts to managing your cash flow, it can be tough to get a new business up and running. Follow these five tips when starting your next business.
Many startups fail because they run out of money. It’s important to know where every single dollar is coming from and going to.
Hiring a full time accountant isn’t ideal for a new business. Use accounting software to track your spending in the early stages to ensure you have a steady cash flow as well as accurately fill out your tax documents.
Limit fixed expenses early on
Keep your business expense low especially in the early stages. Refrain from spending money on high rent and meals. Instead, use the money to help your business grow.
Time is money
There are only 24 hours in a day. As a new business, any time during the workday spent not working, is time and money wasted. Plan out your day and make sure to allocate enough time to get certain things done. This way, you spend your workday focusing on making money rather than wasting it.
Create financial goals
Creating realistic and measureable goals are key to startup success. Create daily, weekly and even monthly revenue goals will allow you to track your growth and make changes accordingly to ensure continued growth.
No matter the business, following these basic financial tips will help your startup stay afloat.
September 29, 2017
Retirement planning is more than just participating in your company’s retirement plan. You have to take an active role to achieve your goal. Here are five retirement planning mistakes you could be making and how to fix them.
Turning Down Money
About 1 in 4 participants don’t take advantage of their employer's maximum match. It’s can be due to confusing policy choices, but be sure you are pocketing the maximum match from your employer. Also, a typical plan should include a 6 percent contribution from your salary. Most auto-enrollment programs default employee’s contribution to 3 percent.
The fix: Even with auto-enrollment, it’s important to check that you are contributing enough of your salary to achieve the maximum match.
2. Contributing Too Little
Studies have shown that you should save around 15 percent of your earnings to have the income you will need upon retiring. Most people are only saving up to 6 percent and even with a matching program from employers, it is still not enough.
The fix: Increase your contribution rate by at least one percent every year if not more. Contributing up to 15 percent is key to a steady retirement fund.
3. Turning down the Roth 401(k)
Half of employers now offer a Roth 401(k) but less than 10 percent of people take advantage of it.
The fix: Focus on the payoff of a Roth 401(k) even though your contributions are made with after-tax dollars.
4. Poor Allocation Strategy
Most people are either too conservative or gamble with no awareness of the downside.
The fix: Most retirement plans offer tools to help you sort through allocation decisions. Try to create an age-appropriate mix of stocks and bonds as well. With all of these allocation decisions, be sure to benchmark it using your expected retirement date.
5. Staying in an Expensive Plan
When you leave a company, you have the option to move your money out of that retirement fund. A good test to see if you should find another option is whether or not the plan’s investment options charge an above-average annual expense ratios which could easily be found online.
The fix: If the fees on your current 401(k) are high, it’s time to figure out your next move. Before transferring money into a new plan, check to be sure that the options are low cost. Another option is to move your money directly into an IRA account.
These are very common 401(k) mistakes but following these tips will jumpstart your retirement planning success.
September 15, 2017
Retirement planning is extremely important, but some people lose all of their money from scammers. The monetary cost of financial elder abuse has been estimated to be from $3 to $36 billion. While that’s a large range, the numbers tell a frightening story. What are the scams, big and small, that seniors need to be wary of?
1. Pump and Dump Investment – telemarketers often call seniors to sell them shares of a new company which sound too good to be true (trust us, it is). Once the share prices shoot up, the marketers dump their shares and collect their “hard earned” money, leaving seniors with a boat load of worthless stock.
The best way to avoid this scam is to either do independent research on the Internet from trusted sources like Yahoo Finance or work with a licensed professional.
2. Medicare Open-Enrollment – Every fall, right before Medicare Open Enrollment begins, scammers who claim to represent the Centers for Medicare and Medicaid Services call unsuspecting seniors about new Medicare identification cards. The ploy works by having the seniors give their bank account info and their social security numbers.
This is why it’s important to never respond to phone calls asking for sensitive personal information! In addition, Medicare does not call, e-mail, or visit anyone asking for that kind of information.
3. Anti-Aging – perhaps not as potentially disastrous as the above two scams, bogus anti-aging products can still put a serious dent in senior financials. "Anti-aging quackery and hucksterism are pervasive on the Internet and in clinics advertising anti-aging treatments," writes Thomas Perls, MD, MPH, of the New England Centenarian Study, Boston Medical Center.
You can typically spot a bogus anti-aging product by the excessive use of testimonials and “scientific” evidence, and absurd claims that they have helped thousands of people, even though you’ve never heard of them.
Remember, don’t believe everything you read. Now more than ever, false information is floating around, and people will use it to take your money! We help seniors find legitimate means of growing their savings and do the often difficult task of sorting the bad from the good.