How to Save More in 2019

Many people in their retirement years have regrets about not saving more during their earning years, but you don’t have to be one of them. All you need to do is be realistic and proactive about saving. It’s all about paying your future self.    

Circumstances can arise that can erode savings you hoped would be there for retirement. Some of those events include not being able to work due to poor health or a bad job market, unanticipated hospital bills, a divorce, overestimating Social Security benefits, bad investments, procrastination, and simply not realizing how much you need to live on. 

The good news is you can prevent future regrets by making a strong savings plan now. As a small business owner, you may not have a retirement plan, so it’s essential that you create one for yourself. You earn an income today. Put some of that income toward paying your future self, and pay that “bill” first each month or each paycheck. 

To be proactive and build as much savings as possible, take these steps:

  1. Increase your financial skills by learning how to fund your retirement, including all that traveling you’d like to do.
  2. Take care to manage your investment risk and be realistic about investment returns. In good markets, purchase rather than rent or lease so you are building an asset.
  3. Put as much aside as you can, and try living just below your means.
  4. If you do have periods where you are out of work, try living frugally until your income is back to normal.
  5. Optimize your business profits and apply some of them to your savings plan.
  6. Minimize taxes where possible so you can keep more of what you make.
  7. Make everything work twice as hard for you:
    1. Get credit cards with loyalty programs.
    2. Sign up for frequent customer programs to earn points.
    3. Make sure your bank is giving you the best deal on interest.
  8. Sell unused belongings on eBay and put the money in savings.
  9. Cancel used subscriptions and memberships for both your personal and business needs and move the saved money to savings.
  10. Periodically reach out to vendors to get a better deal on the expenses you incur. This could be for phone plans, utilities, and any other routine expense. Put the difference saved in savings.
  11. Select cars and trucks with good gas mileage and also high resale value. Consider that using Lyft or Uber may be cheaper than maintaining a car, depending on how much you drive.  Put the difference in savings.

There are hundreds more ways to save more, and these will get you started in the right direction for 2019.

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Sales Tax Checkup

Collecting sales tax is one of those things that most businesses need to do on a regular basis.  It’s also a chore that is somewhat done by machines and administrative personnel. If the rules change and the procedures go out of date, business owners who are not watching for these changes could be taking risks they don’t realize they have. 

In 2018, the world of sales tax was turned upside down by one court case: South Dakota vs. Wayfair, Inc. Wayfair is a mid-sized furniture retailer based in Boston, MA that the State of South Dakota sued to collect sales tax from. Wayfair has no physical store or presence in South Dakota but was selling to residents in South Dakota.  The Supreme Court held that Wayfair needed to collect tax from the South Dakota residents they were selling goods to. 

From Physical Nexus to Economic Nexus

The court case, which was decided June 21, 2018, changed the rules of online interstate sales. Previously, most states required businesses to collect sales tax if they had a physical presence or nexus in the state, meaning they had an office, building, warehouse, or even employees in the state.

Now, many states are rewriting their rules to follow economic nexus, which is when a company has (enough) customers in a state. Alabama, Arkansas, Colorado, Connecticut, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, Nevada, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, Wisconsin, and Wyoming all have economic nexus laws that are effective now or will become effective on January 1, 2019. And this list is ever-changing.

Many of the states have a threshold of $100,000 of sales in one year in the state before a business needs to collect and file sales tax. 

Changes in What’s Taxable

Businesses also need to review changes in items that have become taxable that were not previously taxable. Retail goods that are physical are pretty straightforward, but services are not. All states tax services differently, and states change what’s taxable over time.

This means you should periodically review all of the products and services you sell to determine if you are collecting tax on the proper sales. Better yet, have a professional do it so you don’t have to wade through legal laws.

Rate Changes

Periodically, sales tax rates will change.  This is the easiest change to keep up with as your sales tax authority will usually notify you of these changes. 

Deadlines for Paying and Reporting

The frequency with which you pay and report sales tax will vary based on the volume of sales and tax you collect. When a limit is reached, you may need to pay more often. 

Sales Tax Apps to Make Your Job Easier

There are many great sales tax software add-ons that can help you collect and report the correct sales tax amounts. At the large firm level, there is Vertex and Avalara. At the small firm level, TaxJar is popular. We can help you integrate these apps with your accounting software.

Your 5-Item Checklist

The five items above are the things you should be monitoring with regard to sales tax liability, reporting, automation, and risk. States have strong penalties but also have amnesty programs on a regular basis.

If you plan to sell your business, the owner will most likely conduct a sales tax audit. If it’s determined that you owe sales tax, it will greatly reduce the value of your business. 

If you need help from us to measure your exposure in this area, please feel free to reach out. We can either handle the engagement ourselves or refer you to a sales tax expert.

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Business Planning Made Easy for 2019

2019 is right around the corner, which makes today the perfect time to think about your business goals and where you want to be one year from now. As year-end wraps up, you’ll soon know your financial numbers for 2018. You’ll then be able to evaluate how you did and map out a new plan for 2019. 

If you’re like many small business owners, you may have started your business without a business plan. Most businesses don’t need a long 20-page document that will just gather dust on a shelf. But you might want to consider putting together a short, 1- to 2-page concise document that includes the basic components of a typical business plan: mission, vision, strategies, and objectives. 

A mission statement describes what the company is in business to do. And while you could simply state a mission similar to “Our mission is to sell our products and services,” you may want to think bigger than that in terms of how you want to be known or to impact more than your customers. 

A vision statement describes your company’s future position.  It’s what you aspire to be.  It could again be, “Our vision is to sell more products and services than any other business.” Or it could be more inspiring and uplifting. 

Your business strategies support how you’ll get from where you are to what is stated in your mission and vision statements. While there may be many ways to accomplish your mission and vision, strategies are the approaches you’ll take to get there. 

Goals are measurable destinations with a timeline that are created from your strategies. Objectives finally get down to the nitty gritty and state the tactics and action plans you need to execute to put all of this work into play. 

Each of these items can be written out on a few lines, taking up all together no more than a few pages. The benefits of having a concise business plan are many: if you think of an idea you want to do, you can check the plan to make sure your idea falls under your vision, mission, and strategies that you’ve laid out for the year.  If it doesn’t, then you’ll know that your idea would take you off track from your plan, and you know how easy that can happen these days with all of the distractions and options available to us.      

You may want to add additional sections to your plan depending on your strategies. If you plan to launch a new product or execute new marketing strategies, you might want to add a Market Summary section. If you seek new funding, you might want to have a section on funding options. With business planning, it makes sense to do what’s relevant, and nothing more or less. 

We wish you the very best in 2019, and if we can help you with the financial portion of your business planning, please reach out.

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Is the New 1040 “Postcard” Tax Return Form as Easy as It Claims to Be?

The IRS unveiled a draft of the new 2018 Form 1040 over the summer which consolidates Form 1040, 1040A, and 1040EZ into one supposedly simpler postcard-sized form. The only problem is there are now 2 pages of the postcard 1040 and six new schedules. Here’s a link to the draft 1040 form for 2018 and a run-through of how things were re-arranged. 

The front page is informational—filing status, taxpayer name(s), address, SSN(s), and dependent information.  Since health care coverage reporting is still required in 2018, a checkbox is present to indicate whether you had full year health care coverage or an exemption.

Page two – or postcard two — is a condensed version of the “old” Form 1040 and moves many items that previously appeared on the front of the 1040 to newly created schedules:

  • Schedule 1, titled “Additional Income and Adjustments to Income,” reports amounts that had previously been listed on lines 10-37 of the prior 1040 version and incorporates total income/losses from Schedules C, D, E, and F, as well as adjustments to income such as educator expenses, self-employment tax deduction, and student loan interest paid.
  • Schedule 2, “Tax,” combines lines 44-47 (tax, alternative minimum tax, APTC — Advance Premium Tax Credit — repayment) of the old 1040 and condenses it to a single amount that is reported on line 11 of the new 1040.
  • Schedule 3, “Non-Refundable Credits,” combines lines 48-55 (foreign tax, dependent care, education, retirement savings, child tax credit, residential energy, other credits) of the old 1040 and condenses it to a single amount that is reported on line 12 of the new 1040.
  • Schedule 4, “Other Taxes,” combines lines 57-63 (SE tax, unreported Social Security/Medicare tax, additional tax on retirement plans, household employment taxes, homebuyer credit repayment, health care responsibility, additional Medicare tax, net investment income tax) of the old 1040 and condenses it to a single amount that is reported on line 14 of the new 1040.
  • Schedule 5, “Other Payments and Refundable Credits,” combines lines 65-74 (income tax withholding, estimated tax payments, EIC, additional child tax credit, AOC, net premium tax credit, amount paid with extension, excess Social Security) of the old 1040 and condenses it to a single amount that is reported on line 17 of the new 1040.
  • Schedule 6, “Foreign Address and Third Party Designee,” is a new informational form which allows taxpayers, who live in a foreign country, to list their country, province, and postal code.  This form also gives taxpayers the ability to list a third person allowed to discuss with the IRS any issues the taxpayer may have.

While the 1040 form may have been simplified, it requires multiple new supporting schedules to be filed along with it.  All prior schedules remain, with the possible exception of Schedule B (Interest and Ordinary Dividends), whose fate is uncertain in 2018.

There are more changes in the tax laws and procedures than there have been in more than 30 years. But don’t worry, we’re on top of it for you, and if you have questions, feel free to reach out any time.

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Being Grateful

With holidays approaching, this is the perfect time of year to take a moment and reflect on all of the things we are grateful for.  Being grateful may sound a bit trite, but it’s also the number one, hands down, fastest way to bring more positivity and less negativity into your work and life.

Acts of gratitude are selfless and done unconditionally. You can use gratitude as a private exercise of reflection or you can express your gratefulness to show people that they are appreciated.

You don’t have to wait to feel gratitude; you can invoke it proactively. 

If you don’t have a gratitude practice, consider starting one. Science has gotten involved in studying gratitude, especially in the field of positive psychology, and the benefits to health and well-being are enormous. It can benefit your business, too, when you show appreciation for business partners, employees, customers, and vendors. 

Here are five easy ways to bring more gratitude into your work and life:

  1. Think of five clients you can send thank you notes to. You can write them by hand or send a greeting card with a thank you message. 
  1. On your customer service email templates, add a line before the closing that says, “We appreciate your business.” It does make a difference. 
  1. Quick, right now, think of five things you are grateful for and list them off the top of your head. After you’re done, you should feel a little bit happier than you did a few minutes ago.  Use this tool after you feel a negative emotion to move you back into positivity faster. 
  1. ________________
  2. ________________
  3. ________________
  4. ________________
  5. ________________
  1. Find part of your day that you don’t love, such as your commute to work. Change it to your gratitude commute, finding things along the way to be grateful for. You might be surprised how great you feel when you arrive at work. 
  1. Let one of your employees know that you’re grateful for the work they do for you. You can do this verbally, with a note, or with a gift.  

When you practice gratitude, you can’t help but feel happy for the things you have in your life.  Try these five things on a regular basis to bring more gratitude and positivity into your work and life.

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Tax Planning is Key This Year

If there ever was a year for tax planning, now is the time!  Some people and businesses will be in for a big surprise this year because of all of the changes in the tax law for the 2018 year.  Many people will be underwithheld on their federal and state taxes, meaning they will owe big; others could be overwithheld, meaning the IRS is tying up money that’s theirs now!

Wouldn’t it be nice to know in advance how your situation will be impacted by the hundreds of changes in the tax laws this year?  When you know your situation, you can make decisions before the year ends to change the outcome.  You can take advantage of every strategy, deduction, and credit you are entitled to.

Planning gives you peace of mind, whether you get an affirmation that you will receive a refund from the IRS or if you owe money…if you know in advance, it will make a difference.

When working with your tax professional, they will:

  • Project your income (W-2 earnings or business earnings) through the end of December
  • Maximize your deductions
  • Make recommendations of things you can legitimately do to change the result before the year ends
  • Educate you on any changes in tax law or limitations 

Here are a few things your tax pro may require:

  1. Year to date paystub
  2. Current income/expenses, if self employed
  3. Current income/expenses of rental properties owned, if any
  4. Stock sale data, including basis information
  5. Information on any major changes from the prior year, such as a solar purchase, house sale/purchase, etc.

Tax planning can achieve the greatest benefit for your unique situation.  Don’t rely on (mis)information from your neighbor or colleague for strategies to implement!  Seek professional tax advice and get educated on the laws and consequences relating to your unique situation.  Your tax professional can warn you of something you might not have known or give you different scenarios for you to consider.  The key is knowing your options, so that you can make decisions that will provide the greatest benefit for you and your family!

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Your Perfect Work Day

How well do you love the way you spend your typical workday?  What would a typical workday look like if you had absolutely no constraints?  Here’s a fun exercise to get you thinking about your future and how you can make small changes in your current day to move it toward your ideal day. 

Get comfortable and begin jotting out what your ideal day looks like.  Start with what you do before you get to work.  How do you start your day?  With a workout or breakfast or something else?  What does breakfast consist of?  Where are you eating?  What do your surroundings look like?

How do you get to work? What is your commute like? List the sights, sounds, smells.  Once you get to work, what do you do first? Will you spend time on the phone?  With whom?  At the computer?  Do you go somewhere?

Do you get a nice break for lunch? Write it all down in detail, and continue until your post-workday routine.  Who are you with?  Where are you?  What do you do?

Here’s a partial sample:

“Lunch with my two friends at our favorite Mexican restaurant on the beach. We laugh a lot, share stories, and part with hugs and handshakes. After lunch, I work on my favorite work project, which challenges me to think about how to help my employees gain new skills. While I work, I listen to my favorite music CD.  In a few hours, I am ready for a stretch break and walk outside to water the plants. After break, I return calls, talking with my clients and catching up on how to best serve them.   …”

OK, now it’s your turn.  Here are some questions to consider while you do this exercise:

  • What’s important to you to spend time on?
  • What’s enjoyable that you would really like to have as part of your daily routine?
  • What activities will give you a nice balance of accomplishment, relaxation, and socialization, even during work?
  • What do you need to include in your ideal day to get your needs met?

Change One Thing

Getting to your ideal day can take time.  Don’t try to change your whole routine all at once.  What one or two things can you pull out of your ideal work day description that you could bring into your current work day to brighten it with happiness?  In the description above, this person might block out time to find employee training, go out for lunch instead of eating at her desk, make a new playlist, delegate tasks that are not part of her ideal day, or take more time when returning client calls.

Make gradual changes in your current day to improve it.  With each change, you’ll be moving toward the realization of your ideal day. And if your ideal day doesn’t include bookkeeping but your current day still does, we’re here for you.

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Is Your Business an SSTB? (And Why Do You Care?)

QBI, 199A, SSTB—these are just a few of the new acronyms being tossed around as part of the recent business tax reform changes (like we don’t already have enough of them to remember!). Out of all the terminology, “SSTB” (Specified Service Trade or Business) seems to be the vaguest and most misunderstood. If you have virtually any type of business entity (except for a C corporation), you need to know what this is and whether or not it applies to you. It could have huge implications come tax time!

The term “SSTB” came about as part of the new Section 199A business deduction (a tax deduction of up to 20% of business profit). SSTBs and non-SSTBs are subject to different limitations/calculations in determining the deduction. Most importantly, if your business is an SSTB and you have taxable income of:

Under $157,500 ($315,000 for joint filers): Your profit FULLY qualifies for the 20% deduction – EASY!

Between $157,500-$207,500 ($315,000-$415,000 for joint filers): Your profit PARTIALLY qualifies for the 20% business deduction (reduced – more complex calculation).

Above $207,500 ($415,000 for joint filers): NONE of your profit qualifies for the 20% business deduction (fully phased out).

So now the big question is: how do you determine if you are an SSTB? The first part is easy: if your business performs services in any of the following areas, you automatically fall into SSTB classification:

  • Health (not spas or health clubs)
  • Law
  • Accounting
  • Actuarial Science
  • Performing Arts
  • Consulting
  • Athletics
  • Financial Services
  • Brokerage Services

After this, the law becomes less clear. The IRS also says that any business “where the principal asset… is the reputation or skill of one or more of its employees or owners” is considered an SSTB.  Clearly, this is subject to a lot of varying interpretation – would a widget-maker automatically be an SSTB just because his or her widget-making skills are truly the backbone (“principal asset”) of the business?

Thankfully, IRS has limited the meaning of this “catch-all” clause in subsequent guidance, saying that it applies specifically to those engaged in the trade or business of:

1)      Receiving income for endorsing products/services

2)      Licensing or receiving income for using one’s image, likeness, name, signature, voice, trademark, or symbol associated with his/her identity

3)      Receiving fees/income for appearances

For that widget-maker, the business would likely be a non-SSTB, unless the sale of the widgets is directly associated with use of his or her identity. One way to think about it: if the success of your business depends more on you and not what you are selling, it is most likely an SSTB.

Understanding this classification and how it applies to you is important; it’s the first step in determining how to calculate QBI (Qualified Business Income) for purposes of the 20% deduction, and also a critical stepping stone in tax planning. Be sure to consult with your tax preparer for more information!

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Is Your Business Considered a Hobby by the IRS?

Very frequently tax preparers are asked to provide clarification on IRS rules that they heard from a friend, neighbor or colleague. Usually some part of the statement is true; however, there is always more to the story or it may not apply to that person’s specific situation. If you’ve heard the statement, “You can’t deduct a loss from business if it occurs more than three out of five years,” this is not the entire truth.

A person that conducts an activity for profit is allowed to deduct the expenses that are ordinary and necessary in that industry. If the expenses exceed the income, the amount can offset other income such as wages, interest, or dividends. However, if your activity is a hobby, you cannot reduce your other income by the losses.

When your losses exceed the three-year rule, the burden of proof now shifts to the taxpayer to prove the activity is a for-profit business. Here are some factors to consider:

• The manner that you carry on the activity
• The expertise of the taxpayer in this industry
• The time and effort spent in the activity
• The taxpayer’s history and success in this industry
• The elements of personal pleasure or recreation

Here are some ways to ensure your for-profit business is not considered as a hobby:

1. Keep thorough and professional books.

2. Use a separate business bank and credit card account(s).

3. Log any personal use on assets, such as a camera.

4. Research trends in similar businesses.

5. Obtain insurance, registrations, certifications, licenses needed for that type of industry.

6. Maintain a second phone listing for business.

7. Document evaluations of your operation to attempt to improve the business’s profitability.

8. Develop a written business plan and update it annually.

9. Keep a detailed calendar of your business activities.

Here’s an example: Joe had a business as a personal chef. This was not his primary way of earning income. He had a W-2 job with a local city. He did earn about $200 to 300 in income; however, his expenses were much more than that. Come to find out, he was hosting dinner parties at his home and wanting to write off the food, subscription to cooking magazines, and seeds for his home garden.

If you are in doubt, just imagine yourself in front of an auditor explaining your specific situation. If it “feels” like the story above, it may not fly with the auditor, but that does not mean it is not a true business. What you need to do is plan and strategize. What can you do today to prove that you are a for-profit business?

Know the rules and then step out in confidence. And, don’t get tax advice from a friend because it might not be the whole truth! Consult your tax preparer to confirm your specific situation qualifies.

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Do You Spend Too Much Time on Email?

If you feel like you spend too much time on email, you’re not alone. Almost everyone feels the same way. That’s why it’s so important to learn how to be as productive as possible when it comes to handling email. Here are five tips to help you do just that.

1- Automate your emails.

If you’re sending a lot of the same emails to clients, you may be able to add them to email list management software like Constant Contact or MailChimp. Then you can automate a series of emails using the autoresponder function.

Another way to automate your emails is to set up inbox rules so that certain emails are automatically filed into the folders you’ve set up. For example, if you get a monthly email for a recurring bill payment, you could send it straight to your bills folder if you don’t want to read it. This will save time in the morning when you sort through the pile of email that’s sent overnight.

2- Set a timer.

Make a habit of checking your email only once or twice in the day. Plan those times on your calendar and set a timer to stop if you need to. This employs time batching, one of the most productive ideas in time management. It’s unproductive to stop and read each email exactly as it comes into your box, so setting times restructures the way you work with email for the better.

3- Create draft email answers of your ten most frequently asked questions.

Do you get a lot of the same questions over and over again in your email? Don’t start from scratch each time you craft an answer. Start with a draft of a previous answer, make it generic, and save it in your drafts folder. When you get that question again, copy and paste the draft and customize it as necessary.

Repeat this for your top ten (or twenty) most-asked questions or emails that you send. You’ll shave minutes off each email reply from now on.

4- Learn the email software you’re using.

Sure, everyone pretty much knows how to send, reply to, and forward emails. Most even know how to add attachments. But what else do you know and use on a regular basis?

If you are tech-savvy, then simply spend some time reviewing your email settings and functions. There may be some you discover that will make your day.

If you don’t feel very comfortable with all things technical, then sign up for a formal course, preferably in person, where you have a real human teacher that can answer all your questions. It will be a day well spent.

5- Set up folders.

Folders, labels, or categories in your email software are all good ways to segment email so that it can be processed in a particular order. Your folders might be by priority, client, service type, or something else. In any case, it’s easier on your brain to answer all questions from one client or topic at a time than it is to ping-pong back and forth.

Use folders when you are complete with an email but want to save it for future reference. That way, your inbox will stay cleaner and emptier.

6- Use the search function.

Using the search function liberally in your email software when you need to find an old email will help you save tons of time.

7- Get a new email address if your current email address is too spammy.

You may be losing the spam battle with email addresses that have been used for more than a few years or that have been hacked. If so, the best solution might just be to switch to a new email.

Choose a good email address in the first place by staying away from email addresses that hackers can guess, like webmaster@yourdomain.com, sales@yourdomain.com, or info@yourdomain.com. Instead use service@yourdomain.com or a version of your first and last names.

Try these email productivity tips to help you spend less time on email while still getting the job done.

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