Five Ways Your Accountant Can Help Your Start-Up Company
Your New Company
When people start a business, one of the first things they tend to think about is whether they need to hire an accountant. While there are many who believe that hiring an accountant isn’t necessary until you start making a certain amount of money, hiring an accountant right when you open your business can be a desirable thing.
Here are five reasons that hiring an accountant during the start-up phase of your company may be a good decision:
Open a Bank Account
Whether you know it or not, it is never a good idea to merge your business and personal bank accounts into a single account. Having a separate business account can keep you from using personal funds to pay for business expenses. Your accountant can help manage your business account and ensure that you don’t need to use your personal finances.
Track Your Expenses
If you’re working on growing your business, you probably don’t have time to track every single expense that you have. As a consequence, it may be best to simply hire an accountant to track your expenses for you. The only thing you have to do is give them access to your mobile banking for your business or hand them physical records of any spending you do (including receipts and invoices).
Determine Payment Arrangements
Will you pay your employees on the 1st and the 15th? Will you pay them via a paper check or through direct deposit? While you may not have all the answers yet, your accountant can help you determine the best route to take. While these may seem like minor details, determining payment arrangements will not only help your company save time but it can also help your company track expenses.
Establish Tax Procedures
Establishing tax procedures is probably not a high priority on your “to do list” when you first start your business. But though it may not seem like a pressing matter to you, it is still an important box which needs to be checked off, and your accountant can help you do this right away. Establishing tax procedures will ensure that you are well prepared when tax season rolls around.
Determine How You Will Be Paid
As you complete jobs for your clients, you will want to be paid in the same manner every time. Determining how you as a business owner will get paid will not only save you from a headache in the future but it will establish clear boundaries between you and your clients.
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Four Ways You Can Make Your Accountant’s Job Easier
Accountants & CPAs
If an accountant has a natural ability with numbers and mathematics, it may be tempting to assume that his work is relatively stress-free. And while it may be simple to assume that an accountant’s job is already “easy” in such cases, there are still a few ways that you can make your accountant’s job even easier. Remember, the better your accountant’s situation, the better off you will be.
Be Transparent About Your Business Finances
Whether you tell your accountant about all of your business transactions or just certain of them, they will find out the full truth eventually, and instead of making their job harder by giving them sudden surprises you should be as transparent as possible. Your accountant is literally on your team to help you save and better manage your money, but he or she cannot help solve what they don’t know.
Coming to Business Meetings Prepared
Many accountants charge by the hour, and if you come into a meeting unprepared you’re going to end up spending money just to be ready to speak with them. Do you have all of your financial documents? Bring them. Do you have new receipts? Bring them. Thinking about making another big purchase? Know and share the price. Never underestimate the power of being prepared.
Take Your Accountant’s Advice Seriously
If your accountant gives you advice you can be willing to bet that the advice he or she gives you is not just for the sake of giving advice. Your accountant may not know every detail of your business, but they were hired specifically to help you and your finances. Taking the advice of your accountant seriously could not only save your business money but it could also save you from having to clean up messes in the future.
Consult Your Accountant on Financial Matters
No financial matter should be kept secret from your accountant. Every financial issue should be disclosed, including large purchases, alimony and child support, business lunches, charitable donations, employee bonuses, new hires, etc. While it may seem overbearing to always have to check in with your accountant, it’s important that you share these things with your accountant freely and completely because he or she can tell you what you can or cannot afford to do in the moment.
What successful ways have you found that make your accountant’s job easier? Leave your comments below.
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Top Ten Reasons to Hire a Professional Tax Preparer
Hiring a Professional Tax Preparer
When your business is growing, hiring a professional tax preparer may seem like a no brainer; however, some business owners choose to be cynical and refuse to hire a professional tax preparer, regardless of how beneficial hiring such a tax preparer may be. Even though hiring a professional may seem like an easy decision, perhaps you haven’t hired a tax preparer because you can’t really pin down the precise benefits a preparer can offer.
Here are the top ten reasons why you need to hire a professional tax preparer:
- Tax preparer’s eliminate the hassle of doing taxes yourself.
- You don’t have to keep up with changes in tax law
- Making mistakes can cost you a lot of money.
- Your time is valuable and the hours you spend preparing taxes yourself could be spent elsewhere
- If you do your own taxes and do it wrong you’ll have to represent yourself in an audit
- A tax professional can help you answer your tax saving questions
- A tax professional can help you plan all year
- A tax professional can offer solutions on how to save money on taxes
- Tax professionals give you peace of mind that your tax needs are met
- Hiring a tax professional can save you money.
While there are a host of other reasons why you should hire a professional tax preparer, the above are the most important and most obvious reasons why you need to do so in order to plan for the sound financial future you so eagerly want to achieve.
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How Much Should You Pay Your CPA
Paying Your CPA
When hiring any new person on your team, one of the first things you’re likely to think about is whether you will be able to afford the person you are attempting to hire. While there is no perfect way to determine how much you should pay your CPA, here is a list of criteria which should help you through the decision-making process.
Hourly
Hourly rates can vary dramatically based on your location, the services you can provide and your experience. While lower hourly rates are great, they don’t necessarily indicate better value. A more experienced accountant may charge more money, but then complete the task in half the time. Remember, you will always get what you pay for.
Proposal Basis
Before beginning work, most CPAs offer their clients an estimate of what their total cost will be for the entire project. Once an estimate has been given, the accountant will prepare a proposal that will estimate how long the tasks will take and then multiply the number of hours required by the hourly rate so that the client will know exactly how much money they will be paying up front. Instead of waiting to see what the invoice says, you’ll know what to expect right away.
Fixed Fee Structure
There will be several tasks which will require ongoing assistance from your CPA, such as: balancing books, payroll and posting transactions. Most of these tasks have a structured fee, meaning there’s one set cost each time these tasks are completed.
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Three Qualities No CPA Should Have
Bad CPA Qualities
We all know the qualities that every good CPA should have and we work hard to make sure that we hire CPAs who possess the qualities required to make our businesses both profitable and respectable in the business world.
While we may spend a lot of time working on trying to identify the good qualities CPAs should have, it is also important to be aware of the various traits which CPAs should not possess.
Here are a few qualities you should be sure your CPA does not possess:
Bad Money Management Skills
If your CPA is unable to manage money well they shouldn’t be your CPA. Most people hire CPAs because they struggled to successfully manage their own finances and hiring someone who struggles with this same issue is not a healthy decision for your business.
Yes Man Syndrome
A yes man is someone who always says yes to everything that the boss says no matter if it’s wrong or not. You don’t want your CPA to have “yes man syndrome” because they’ll lie to you about your finances and may cause you to fall deeper into a financial hole.
Negativity
When you hire a CPA you probably already know that your finances are not in the place they should be in; however, the last thing you need to hear is someone else being negative about your business. Hiring a negative CPA could not only destroy the culture of your company, it could also negatively impact the company’s financial future.
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How to Know Whether You Need an Accountant to Help with Your Taxes
Personal Finance
According to the IRS, over 50 percent of taxpayers hire someone to prepare their taxes. While many Americans do so in fear of making a mistake when filing, there are quite a few people who don’t need a pro at all. The IRS suggests that the only people who need an accountant to help with filing taxes are individuals who have complicated financial lives.
Here are just a few ways to know if you need to hire an accountant to do your taxes:
Self-Employed
If you are self-employed, you may want to hire someone who is familiar with Schedule C. You may also want someone who can help advise you on when you should file a 1099 form or when you should report payments you’ve made to others.
Investors
Those who have several investments in different areas should consider hiring a CPA. Many investment activities can benefit greatly from having a little guidance from a CPA
Identity Theft Victims
Have you been a victim of identity theft recently? You may want to hire a professional. This could be because you want to make sure that you’ve done everything that is required of you as a victim in order to protect yourself.
Alternative Minimum Tax
If you are one of millions of Americans who may be subject to the Alternative Minimum tax, an accountant may be able to help you avoid taking such a huge hit during tax season.
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Tech Deductions You Should Know for Your Freelance or Small Business
Tech Deductions
Both freelancing and operating your own small business can be incredibly rewarding. These things can also be a lot of work, and it’s important to track every expense and claim every deduction for which you qualify. Nearly every type of business has become reliant upon technology, and therefore it’s important to know what tech-related deductions you can claim. While we’ve noted before that a good CPA can help you maximize your tax return, we also wanted to share a few deductions you should always plan for each year.
Home office deduction
Although not specifically tech, odds are your home office takes advantage of a computer, fax, printer, and the internet. We’ve mentioned this elsewhere before, but it’s worth repeating since many freelancers and small business owners work from home, if not primarily then at least infrequently. Remember that the space you intend to claim must be used primarily and first and foremost for business (i.e., even if you work from your dining table on occasion, you cannot claim your dining room as part of the deduction). Deductions can also be extended to certain home costs, such as utilities.
Internet and phone costs
Internet and phone bill costs directly related to your business can be deducted from your tax liability. For example, if you have one phone that you use for work and personal use, you cannot deduct your entire bill. But if you have a second phone line that you use exclusively for business, you can deduct that entire bill.
Computer for business use
If you purchase a computer for business use, you can deduct the entire cost in a single year. In order to qualify, the computer must be for business use more than 50% of the time. However if you also use the computer for personal use, you can only deduct the percentage of time for which you use it for work. For example, if you use the computer for work 80% of the time, and use it to stream movies and play games 20% of the time, you can only claim 80% of the cost.
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Some Do’s and Don’ts of Business Expense Tracking
Do:
Business Expense Tracking
Track everything
If you want to maximize your tax return, there’s no such thing as having too many records. Keep receipts and invoices. Log mileage. Keep records of any and all business-related expenditures.
Backup everything
One record is not enough, and you should always backup for your backups. Many expense tracking apps provide backup options, or the ability to export data so you can back it up to your personal cloud or external hard drive.
Be honest about your expenditures
Don’t round up. Or Down. If you are unable to procure a record of an expense, ask your accountant for options if you had planned to claim a deduction.
Track as you go
Don’t rely on your memory to claim mileage or expenditures. In the event of an audit, any discrepancies or inaccuracies will only invite further scrutiny.
Don’t:
Fudge the numbers
As previously mentioned, don’t round or estimate your income or expenses. Doing so may come back to bite you during tax time.
Rely on one set of records
We’ve recommended software before, but we can’t stress enough how indispensable expense tracking software can be. More robust offerings will also allow you to export and backup your files, meaning you can keep backups of your backups in case of a disaster or cyber attack.
Mix business and pleasure
At least do not mix them when it comes to tracking expenses. While there are some potential workarounds to a family trip–for example if you have a legitimate business trip and decide to bring your family along, you can deduct your own transportation expenses but if you start trying to claim business trips for yourself, spouse, and kids, or claim a day spa as a business expense, you’re sure to draw the attention of the IRS at tax time.
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On the Road: Traveling and Taxes
Travel Expenses
Traveling can be exciting, but it can also be costly. The cost of traveling can be somewhat insulting if the travel is required for work and you don’t have an employer who reimburses your out-of-pocket expenses. But good news: many costs you incur can be deducted from your taxes. Here are a few well-known – and some less well-known – expenses that you can claim while on the road.
It’s worth noting that expenses you intend to claim must be business-related (e.g., if you call your mother long distance from a hotel while on a business trip, you cannot claim the phone call as a “business expense”). Further, your expenses must be necessary, reasonable, and ordinary expenses–in other words lavish expenditures or indulgences are not deductible.
Also, always remember to track your expenses!
- 50% of the cost of meals: why eat fast food, when you can eat reasonable food? This deduction not only makes traveling less expensive, but also makes healthier food choices less cost-prohibitive. Bon apétit!
- Airfare, bus fare, railway fares, and baggage fees: often the most expensive part of traveling, these expenditures are, in fact, deductible.
- Local transportation costs: taxi, Uber, and bus fares are all deductible.
- Expenses of operating and maintaining a car used for business commuting or travel: this includes the cost of gas, oil and fluids, parking fees, tools, even parts and repairs.
- Cleaning and laundry fees: look sharp for business!
- Computer and hardware rental fees: internet cafes are generally a thing of the past in the US, but if you need pay for wifi, or to rent a computer, projector, etc. for your business purposes it is deductible.
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How are Bitcoins Taxed?
Bitcoins are a popular form of digital currency which have been around for around a decade now. This form of currency is not operated or regulated by a central bank, but uses encryption techniques to help with regulating each of the currency units and verifying all the transfer of funds to and from accounts.
Bitcoins became extremely popular as the release of PayPal and similar companies offer a worldwide bitcoin to help with purchasing and selling goods across the globe without currency restrictions. What made it even better was the fact that Bitcoins couldn’t be controlled by current currency rules, making them tax-free. This led to the value of a single bitcoin to rise to $1,194 in late 2013.
The Internal Revenue Services (IRS) and other national revenue services sought to close this tax-loop, forcing new laws into effect that made bitcoins an asset rather than a currency. Therefore, anyone who purchases bitcoins needs to claim these on their taxes, after excluding fees associated with getting the assets. This includes electricity and internet usage during the time the bitcoin was acquired.
The IRS now finds it mandatory that all people file taxes on their bitcoins in either of these cases:
- Using bitcoins that are purchased from someone else to buy goods or services;
- Using any mined bitcoins to buy their services or goods;
- Selling personally-mined bitcoins to a third party service; or
- Selling bitcoins to a third party which were originally purchased from someone else.
Each of these will be subject to their own mandatory taxes. Hiring a company to help you with your bitcoin taxes is advised to avoid any errors with filing.
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