Tax Tips that Might Surprise You

Doing your taxes is one of the most important things that you can do in terms of finance throughout the year. AS a result, it pays to be careful when it comes to doing your filing and in terms of finding every way to reduce what you owe as possible. You may be able to find many extra tips in places like your favorite accounting blog, or with a accounting firm, but here are a few to get you started.

Pay Attention to Timing

It might seem strange, but looking carefully at the calendar will increase your chances of getting the best tax return. For example, you can pay the mortgage before the end of the year and the added interest will reduce your liability even more than what would happen otherwise. You can also schedule treatments and exams that are related to your health towards the end of the year so that you can get a much bigger deduction for medical expenses.

Check for Tax Credits

It turns out that 20 percent of eligible Americans don’t take tax credits that they could take, such as the Earned income tax credit. A lot of people might just think that they’re not eligible and disregard it. But even if you’re single and don’t have any children, as long as you worked this year you can be eligible for the credit. Your taxes go down on a straight one to one basis when it comes to credits, so this often makes them much better than deductions when it comes down to a dollar to dollar basis. As a result, you end up with a much lower amount of money that you owe.

Use Programs to Help

One great way to make sure that you don’t miss out on many possible deductions or credits is to try out a program like TurboTax. It’s usually not that expensive and it will make sure that you’re completely covered in terms of what you could possibly get off for a particular year. They will list all of the changes from year to year, and take you through each part of the filing step by step so that you don’t miss anything and so that everything is in order at the end of the day. This is a good way to be sure that you’re doing the best possible job.

2 Common Issues and Sense Solutions in Franchises

Franchising is considered as one of the most effective and efficient ways for business growth. By its very nature, however, both the franchisor and the franchisee must deal with issues unique to the arrangement, many of said issues requiring the professional expertise of reputable Rochester consulting firms like Rizzo, DiGiacco, Hern&Baniewicz (www.rizzodigiacco.com)

Fortunately, most of these issues can be resolved in many ways that will work for the mutual benefit of both parties in the business arrangement. Such ease in resolving conflicts and meeting challenges in franchise agreements is the main reason for the growth of the franchise industry in the United States and elsewhere in the world.

Here then are the top 2 common issues and their common sense solutions in franchise agreements, said solutions of which may also require the expertise of the best Rochester accountant in town.

1) Compliance Issues

Arguably, one of the major irritants on the part of the franchiser is the failure of the franchisee to comply with the agreed standards set on the franchise contract including related documents like the manual of operations. Such failure can also become the headache of any Rochester consulting firm hired for the purpose of troubleshooting compliance issues including their causes and effects.

For example, the franchisee will take the liberty of implementing its own food production system including the choice of suppliers for reasons like cutting costs. This leads to issues related to quality of the food itself, sanitation and hygiene, and overall profits, among others.
The solution: Refer to the contract and other related documents for the appropriate actions including sanctions such as penalties for non-compliance with the agreed terms. Keep in mind that unilateral changes to the contract cannot be made by either party lest it is rescinded.

2) Franchise Fee Issues

Yet another issue that the best Rochester consulting firm can provide expert assistance on is the payment of the fees. The issue can take several forms including habitual tardiness in the payment of the full franchise fees, partial payments made against the full franchise fees, and complete non-payment of the franchise fees agreed upon.

The reasons can range from low sales coupled with high expenses especially at the formative phase of the franchisee’s branch to the low value attached by the franchisee on the franchise itself.

The solution: Instead of issuing demand letters and withdrawing certain franchise privileges to the franchisee, the best Rochester consulting professionals will suggest amicable discussions between the franchiser and the franchisee. Letting both parties air their concerns and grievances can often shed light on problems that can be solved by their cooperation, thus, resolving many issues simultaneously.

The franchiser should also make it clear to the franchisee that the payment of the franchise fees is mainly designed to ensure that viable and valuable support systems provided by the former to the latter will continue. The fees are used for the maintenance of these systems instead of being used primarily to fatten the franchiser’s bank account. The franchiser, after all, gets his profits from his main operations, too.

Ultimately, the franchiser and franchisee should iron out their differences for their mutual business benefit while the role of the Rochester consulting professionals remains just that – as expert consultants on matters related to franchising arrangements.

Even in Gifts and Deaths, Taxes Apply

If you live in the United States, you already know the truth behind the modern-day adage that the only certain things in life are debts, taxes and death. It’s a fact of life that the best Rochester accounting firm - Rizzo, DiGiacco, Hern&Baniewicz are well aware of because of their dealings with clients involved in these things.

One of the trickier matters that accountants must deal with as part of their job is combining taxes and death. Combining two of the inevitabilities of life results in debts that the concerned individual must pay in full lest the taxman cometh and enforces the law’s long arm into your affairs.

Here then are a few must-know things in relation to death and taxes as well as the debts that arise from their combination. Ask for the professional opinion of a reliable Rochester accounting professional in case a few things require clarifications.

One Combo Tax

The good news for would-be heirs and gift-givers: Most estates will not be required to pay for federal estate or gift tax. Why? Because you can leave or give away considerable amounts of property on a tax-free basis!

Under the present laws covering the unified gift and estate tax, individuals can give away to their recipients or leave to their heirs up to $5.25 million in cash and non-cash assets before paying for applicable taxes.

The bottom line: You can stop worrying about the unified gift and estate tax when you fall under the non-wealthy (i.e., multimillionaire and billionaire) set. You are, nonetheless, well-advised to ask for the professional advice of a reliable Rochester accountant to maximize your generosity to your heirs and recipients while minimizing your taxes.

Personal Exemption

Since gift and estate taxes change from one year to the next, you are well-advised to always seek the expert guidance of an experienced Rochester accounting and tax professional on these matters. This includes the issue of personal exemption, which permits for non-taxable transfer of assets as gifts or inheritances within set dollar amounts.

Keep in mind that the set amounts are indexed for inflation so increases in future years are always a possibility; ask your Rochester accountant for any possible changes. For deaths in the following years, the personal exemptions are:

• 2011 - $5 million
• 2012 - $5.10 million
• 2013 - $5.25 million

If your estate is worth less than the above amounts at the time of your death, then you and your heirs will not owe federal taxes. If you have made taxable gifts while you were alive, on the other hand, the amount of your individual exemption will be reduced by the amount of taxable gifts made.

If you belong to the non-super wealthy set, as are 99% of the population in the United States, then you can leave your estate to your heirs without the IRS dipping their hands into it. Well, at least at first but by then you have become wiser about the ways of the taxman, thanks to the expert assistance of the best Rochester accounting and tax professionals.

But as always there are exemptions to the rule so ask us for further information. This is especially true in the State of New York where the state government collects on estate taxes even when the federal government cannot.

Cash Flow: Sometimes It Takes an Expert to Advise on It

Cash flow woes can be a major problem for a business as any Rochester accounting firm will note. Without a decent level of cash flow, a business will end up suffering from quite a bit up upheaval. Working with CFO outsourcing services may be able to curtail problems associated with cash flow woes. This is a must because a business does need to have enough cash coming in so as to effectively remain in operation and not suffer from resulting financial limitations. There could also be issues with Rochester taxes that might arise when not enough cash flow is generated to cover them.

Understanding why cash flow is so important begins with defining what exactly cash flow is. First, it is critical to point out that cash flow is NOT the same thing as profits. There may be profits found in monthly cash flow, but the cash flow itself is not solely profitable. Similarly, a business doing $35,000 a month in cash flow could be operating at a major loss. A Rochester CPA could point out numerous examples such as these.

How is this so? Basically, cash flow can be defined as the amount of money that comes into the business through revenues. A commercial gym, for example, may gain its cash flow through memberships combined with the sale of food and beverages along with merchandise. When all of the revenue is added up, the end result would be the figure for cash flow. Cash flow can be broken down into daily, weekly, monthly, quarterly, and annual amounts. Upon doing so, steps must be taken to determine whether or not the cash flow is contributing to profits or losses. A good Rochester accountant will tell you where you stand in this regard.

Obviously, the goal of the examination of the cash flow would be to maximize profits while also trying to cut down on any losses. This might all seem very basic, but there are complexities involved with the process. Many business owners can be good with the product or service they offer, but when it comes to actually managing their finances, they can only do so when they make enough profits to cover their expenses. And even this can actually be done from the wrong perspective.

What that means is the cash flow might be low due to not properly managing the expenses of the business. Money could end up being wasted because it is being overspent on areas that could easily be cut. Outsourcing CFO services could lead to recognizing what areas could benefit from budget reductions. It could also contribute to better tax planning.

And then there may be more complicated steps to take such as increasing funding to a particular area so that it might contribute to boosting revenues and cash flows as a result. An experienced eye may be able to locate such things, make suggestions, and then follow through on any affirmative decisions made from those running the company. Often, management will be quick to agree to what the CFO or a Rochester consulting firm is is suggesting. All they needed was the proper insights to be pointed out to them to make the necessary changes.

Tax Planning: A Way You Can Reduce Your Burden

Costs can drain the life out of a company. For those who live on a month to month basis with their business, not a lot of effort goes into such things as tax planning. Either those in charge of the business are not well aware of what is required to effectively engage in tax planning or they simply do not prioritize it. The former is somewhat understandable, but the latter is really nothing more than a path to getting into serious fiscal woes. Businesses do need liquidity in order to survive if not thrive. Cash flow and cash in reserve accounts allow a business to immediately access funds. Yes, it is true that a line of credit can do so as well. However, borrowing from a line of credit is exactly that: borrowing. When money is saved in reserve, it contributes to the overall net assets of the business. Also, the funds can be placed in a conservative investment where it can draw interest. Interest, of course, increases the value of the money saved in it.

This is where effective tax planning comes into play. There can be quite a number of misunderstandings about what tax planning entails. On the simplest of levels, tax planning refers to putting the proper effort through the year to be sure the lowest amount of taxes is paid. This is not as easy as some assume. Most do realize that taking deductions will greatly cut down on the amount of taxable income a business presents. A good accountant can definitely maximize the amount of deductions that a business can employ. Being able to do so would be the sign of a truly excellent and helpful accountant. However, there is far more to tax planning which can be done here.

One other effective component of tax planning would be to take advantage of tax credits. Tax credits are simply bonus deductions offered as incentives. One example of a tax credit could be taking a certain percentage of the costs to purchase alternative, green energy systems in an business. In some instances, a business might already have invested in making such purchases but does not take the tax credit because management simply does not know the credits are available. Professional who work in tax planning can invest a huge amount of time in research so they can locate the tax credits which could prove hugely helpful to a business.

There is also a strategy of replanning which a tax consultant can put effort into. For example, a business may be interested in starting down path A, but scores of tax credits could be gained by traveling down path B. Qualified tax planners and accountants just might be able to help devise more logical and business friendly paths for those interested in saving money and doing better with the operation of their business.

The Affordable Care Act: You May Need to Work with a Rochester Accounting Firm

The Affordable Care Act has been a topic in the news for well over three years. As the law begins its implementation, there are rules and requirements that must be adhered to in order to remain in compliance with the act. While some business owners may wish to try and figure things out on their own, they likely would be making a huge mistake. Granted, the employer mandate has been recently waived buying businesses more time to learn how to comply with the law, there is only so much a novice will be able to figure out. As such, it is absolutely necessary than anyone running a small business speak with a tax professional discuss matters with an qualified Rochester accounting tax specialist who is able to offer the proper guidance and advice. Anything less runs the risk of turning into a major problem for a business owner.

Most are likely aware that the law requires businesses with 50 full-time employees to offer health coverage or pay a penalty. Those who have heard this might not have looked closer at the wording of the law or read any of its related statutes. There is likely a good reason why they would not think to do so. The owner of a business is not involved with accounting and does not follow such matters closely. Be that as it may, the law is the law and there will be requirements which must be followed.

For one, the 50 employees refers to the total amount of employees among all the businesses owned by someone. In other words, if you owned 5 businesses with 10 employees, providing healthcare is required. As skilled Rochester accounting professional will be able to advise you about matters such as these.

Also, the delineation of 50 full-time employees could mean the equivalent of the total of the hours worked by 50 full-time employees. If a host of part-time employees end up equating with the number of full-time hours, requirements to cover benefits or pay fines kicks in. Timelines also exist for a business to comply with the law. Has your business down what is required to stay on top of its timeline? If not, then there could be a number of troubles coming down the road.

Once again, since the law is new and business owners are not versed on how to deal with it, hiring a professional accountant is a much better plan than filing messed up tax returns. If you do that, the risk of an audit increases exponentially. Even if you do not get audited, the tax return will have to be changed. How could it not be? The figures on it were wrong. When a tax return has been adjusted, you will usually find a bill showing up in the mail not too long after you have filed it. Rather than deal with such unexpected and annoying financial woes, it would be much better to have a Rochester accounting tax professional handle your business' ability to implement the program the right way.

Dealing with Late Deposits on 401(k) Plans

As the plan sponsor for your employees’ retirement benefits plan known as the 401(k), you have the fiduciary responsibility of ensuring accurate and timely deposits of the contributions, loan repayments, and other withheld deductions related to the plan. But what happens when you have been remiss in your fiduciary responsibility? Here are tips from a trusted Rochester CPA in dealing with said late deposits.

Know the Requirements

The first step is to know the general requirements for 401(k) plans in terms of the timing of their deposits. The date of deposits depends on the number of participants such that:

• If you have fewer than 100 participants in the plan, the employees’ contributions and loan repayments should be deposited by the 7th business day after the pay period pertaining to the amounts withheld.
• If you have 100 or more participants in the plan, the deposit must be made either on these two dates, whichever is earlier - (a) the date when the withheld amounts can be segregated from the assets of the business; or (b) the 15th business day of the month after the pay period pertaining to the withheld amounts.

Ask your trusted Rochester CPA about possible exceptions but the above mentioned rules apply to most plan administrators. Keep in mind, too, that a few 401(k) plan vendors will send reminder about late plan deposits but said reminder are usually worded in such a way as to exclude all fiduciary responsibility on their part. You, as the plan administrator, must assume said responsibility.

Keep Records

In most instances of late deposits, you have the option of self-correcting the issue by making the deposits and then calculating the lost earnings caused by the late deposit not being invested in a 401(k) plan. You will not be required to file the necessary paperwork with the Department of Labor and/or with the Internal Revenue Service especially when the late deposits pertained to just one to two payroll cycles. You must, however, keep records of your actions as future reference for audit work by an independent Rochester accountant, for example.

Kick the Problem

As your trusted Rochester CPA will say, a late deposit should not be cause for concern but you should kick the problem, so to speak, as early as possible. Always remember that one or two late deposits are mostly inevitable considering human nature. But when such tardiness becomes chronic, remains unresolved for several payroll cycles, and/or becomes fraudulent in nature, you will have problems with government authorities on your hands.

Why? Late deposits can trigger audits by the DOL and/or IRS, which can lead to sanctions including penalties. The DOL will determine whether the 401(k) plan deposits were accurate and timely often by looking at the earliest possible date that you, the plan sponsor, could have made the deposits but did not. This is where your meticulous records come in as well as your valid explanation for the missed deposits.

Your best plan of action: Consult with your trusted Rochester CPA about the appropriate methods to kick the problem even before it becomes an audit trigger. Keep in mind that not only will your company be subjected to a DOL audit but you may be penalized by the IRS in the form of excise taxes.