Monthly Archives: June 2023

5 Ways QuickBooks Online Can Make You More Profitable

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QuickBooks Online is really good at a lot of things. It helps you create and manage contact records and sales forms. It can keep you apprised of your online account transactions and balances and help you pay your bills. It simplifies customer payments and provides easy-to-use templates for reports.
But it’s much more than just an online bookkeeper. It can get the numbers right, but it can also help get them headed in the right direction by providing tools in several areas. When you take advantage of them, you’ll see the positive impact they can have on your company’s financial health.
Preparing for Positive Change
Maybe you already know about some or all of these tools but just haven’t incorporated them into your regular workflow. Most of them are actions you can take on your own, though you may want our help on at least one of them. Set a goal to try these for three months, and you’ll see whether they help your company experience:
Improved Cash Flow
You know you should be doing what you can to maximize income and minimize expenses. But do you know you can achieve at least modest improvements in these areas without a great deal of effort? To do so, you just have to be very aware of what you’re bringing in and purchasing.
Click Get paid & pay, then Customers. The colored bars at the top show you unfinished business: unresolved estimates, unbilled activity, and overdue and open invoices. Related transactions appear when you click on one. You’ll probably discover that you have some money just sitting there, waiting to be processed by, for example, sending reminders and statements.

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The Customers page displays transactions that need additional attention to bring in the money you’re owed.

Next, go to Bookkeeping | Transactions | Expenses. Filter your account register so you only see Expenses, then do the same for Bills. Assign a Category to any that are blank. Now when you run reports, you’ll be able to see where your spending needs to be reined in. Taxes and reports will be more accurate – and more useful.
Smart Inventory Levels
Does your business sell products? If so, you know what a balancing act it is to maintain a stable level of inventory. You may have seen what happens when you run out of a particular product unexpectedly. Not only did you lose the sale, but you might have lost the customer completely. And if you carry too much stock that isn’t selling, you’re tying up money unnecessarily.
QuickBooks Online allows you to create detailed inventory records that include the number of items you have on hand initially and your self-imposed reorder point. When you look at an item record, you’ll see how many are currently in your possession and when you need to reorder based on how sales have reduced inventory. Reports that might be helpful here include Physical Inventory Worksheet and Sales by Product/Service Detail.
Faster Customer Payments
In addition to the action described above, there are a number of reports you can run to see whether customers are late with invoice payments. These include Open Invoices, Unbilled Time, and Accounts Receivable Aging Detail. You’ll find these under Who owes you. If you learn that some customers are paying late, consider setting up a merchant account through QuickBooks Payments so you can accept credit and debit cards and ACH payments. You may find that customers pay faster when it’s more convenient to do so.

Your customers will be likely to pay faster if you make it easier for them to do so.

Better Customer Relationships
Your customers are the lifeblood of your company. Are you going beyond simply filling their orders? Unless you have hundreds of them, you might want to keep an eye on their buying habits and initiate some contact between purchases – especially if there’s a lengthy gap between orders.
QuickBooks Online’s Customer pages provide what you need to know, including a real-time status update on their estimates, invoices and sales receipts, and payments. You might want to be in touch if they haven’t ordered for a while and offer them a one-time discount. Or notify them of new products or services they might like. Frequent customers deserve special attention, too. Sales by Customer Summary can be a helpful report here.
A Clearer Path Forward
QuickBooks Online is very good at providing reports that help you make short-term decisions. But to truly understand the current state of your company’s financial health and make longer-term plans, you really need to see and understand your financial statements, like Balance Sheet, Profit and Loss, and Statement of Cash Flows. You’ll find these under For my accountant. They’re easy to create, but it really takes a trained processional to analyze and interpret them for you.
We’d be happy to take this on this critical task, at least on an annual basis, if not quarterly or monthly. In the meantime, let us know if you have questions about QuickBooks Online’s operations or concerns about your use of it. Hope you’re enjoying the summer!

July 2023 Individual Due Dates

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July 3 – Time for a Mid-Year Tax Check UpTime to review your 2023 year-to-date income and expenses to ensure estimated tax payments and withholding are adequate to avoid underpayment penalties.July 10 – Report Tips to EmployerIf you are an employee who works for tips and received more than $20 in tips during June, you are required to report them to your employer on IRS Form 4070 no later than July 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.
Weekends & Holidays:
If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday.
Disaster Area Extensions:Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:
FEMA: https://www.fema.gov/disaster/declarationsIRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situationsFor example, disaster-area taxpayers in most of California and parts of Alabama and Georgia now have until Oct. 16, 2023, to file various federal individual and business tax returns and make tax payments.

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July 2023 Business Due Dates

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July 1 – Self-Employed Individuals with Pension Plans If you have a pension or profit-sharing plan, you may need to file a Form 5500 or 5500-EZ for the calendar year 2022. Even though the forms do not need to be filed until July 31, you should contact this office now to see if you have a filing requirement, and if you do, allow time to prepare the return. July 17 – Non-Payroll Withholding If the monthly deposit rule applies, deposit the tax for payments in June. July 17 – Social Security, Medicare and Withheld Income TaxIf the monthly deposit rule applies, deposit the tax for payments in June.July 31 –  Self-Employed Individuals with Pension Plans If you have a pension or profit-sharing plan, this is the final due date for filing Form 5500 or 5500-EZ for calendar year 2022.
July 31 – Social Security, Medicare and Withheld Income Tax File Form 941 for the second quarter of 2023. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.July 31 – Certain Small Employers Deposit any undeposited tax if your tax liability is $2,500 or more for 2023 but less than $2,500 for the second quarter.July 31 – Federal Unemployment Tax Deposit the tax owed through June if more than $500.July 31 – All Employers If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2022. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
Weekends & Holidays:
If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday.
Disaster Area Extensions:Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:
FEMA: https://www.fema.gov/disaster/declarationsIRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situationsFor example, disaster-area taxpayers in most of California and parts of Alabama and Georgia now have until Oct. 16, 2023, to file various federal individual and business tax returns and make tax payments.

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Have You Gotten Bad Tax Advice?

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Article Highlights:

Divorce or Separation Agreements Can Specify Who Claims a Child.
If You Pay Child Support, You Claim the Child as a Dependent.
Avoiding Payroll Taxes by Treating an Employee’s Compensation as a Gift.
Only Medical Expenses for Taxpayer, Spouse, and Dependents Are Deductible.
Donation of the Use of a Time-Share Week Is a Charitable Deduction.
Pay Household Help in Cash and Avoid Paying Payroll Taxes.
Health Savings Account Funds Are Only for Medical Expenses.
Only Must Report and Pay Tax on Income Over $600.
You Don’t Have to Report Interest Income if You Haven’t Received a Form 1099-INT.
You Can Help Friends and Family with Interest Free Loans.
Older People Should Change the Title on Their Home to Their Child.
Cost of Attending a Medical Conference Is Deductible.
Claim a Medical Deduction for Repainting Home If Lead-Based Paint Is Discovered.
You Can Sell Your Used Electric Vehicle to an Individual and Get a Tax Credit.
Investments In Foreign Countries Are Not Subject to U.S. Taxes.
·Only Homeowners Can Claim the Solar Credit.
A U.S. Citizen Married to A Non-Resident Alien Cannot File a Joint Return.

The U.S. Tax Code is used for more than just collecting taxes. It is used by the Government as a means of providing lower-income individuals with social benefits such as the earned income tax credit, child tax credit and health care subsidies. It also is used to promote government-sponsored programs such as combatting climate change through tax credits for electric vehicles, home solar installations, and home energy-saving improvements. As a result, the tax code has become quite complex and changes frequently. That is why getting tax advice from friends and relatives or off the internet can be risky and lead to misinformation and trouble with the IRS, or missing out on tax benefits. Here are examples of bad tax advice.

If your divorce or separation agreement says so, you can claim your child as your dependent.
Not true! The IRS will not accept a state court’s allocation of dependents because IRC Sections 151 and 152, not state law or a judge’s ruling, determine who may claim a child as a dependent for federal income tax purposes.
If you pay child support you are entitled to claim the child as a dependent.
Untrue! A child is the dependent of the custodial parent unless the custodial parent releases the dependency to the non-custodial parent.The IRS defines ‘custodial parent’ to be the parent with whom the child resides for the greater number of nights during the year.
An employer can avoid payroll taxes by treating an employee’s compensation as a gift.
Not true! Although gifts are generally excluded from the recipient’s gross income, transfer by or for an employer to or for the benefit of an employee can’t be excluded as a gift (Code Sec. 102(c)(1)).
However, de minimis fringe benefits are not treated as a gift and are excluded from the recipient’s gross income (Code Sec. 132(a)(4)). A de minimis fringe is any property or service whose value is so small that accounting for it is unreasonable or administratively impracticable.
You can only deduct medical expenses for the taxpayer, spouse, and dependents.
That is generally true, but for purposes of deducting medical expenses for a dependent relative, the individual does not need to meet the gross income test (IRC Sec 152(d)(1)(B)) to be a medical dependent. In addition, for qualifying children of divorced or separated parents, each parent can deduct the expenses they pay, as long the child is a dependent of one of them.
You get a charitable contribution if you donate the use of your time-share week to a charity auction.
Not true! Unfortunately although that might seem to be good advice, the ‘use’ of an item does not constitute a gift of property. It is merely the granting of a privilege for which no charge is made and therefore does not constitute a deductible charitable contribution. Rev Ruling 70-477, I.R.B. 1970-37.
If you pay your household help in cash you can avoid paying FICA.
Not true! The IRS consider household help to be employees and employees are subject to Social Security and Medicare taxes (FICA) once a specified threshold is exceeded. Household employees do not include repairmen, plumbers, contractors, and other business people who provide their services as independent contractors. IRS Publication 926.
Health savings account (HSA) funds can only be used for medical expenses.
Not true!Generally HSAs can only be established by eligible individuals who are only covered by high-deductible health plans. Eligible individuals may, subject to inflation adjusted limits, make contributions to HSAs. Even though the intent of HSAs is to provide a means for taxpayers with high deductible insurance to pay medical expenses, there is no requirement that HSA distributions must be used to pay medical expenses. However, such distributions are subject to income tax and a 20% penalty tax., except that an individual aged 65 or older can withdraw the funds penalty free but still must pay tax on the nonqualified distribution.
You only must report and pay tax on income more than $600.
A misconception! Income greater than $600 is the threshold amount where those in a trade or business must file an information return with the IRS reporting payments of income to an independent contractor or service providers, generally using a form in the 1099 series. Many misinterpret that to mean that income of $600 or less is non-taxable, which is not true.
You don’t have to report interest income if your bank hasn’t sent you a Form 1099-INT.
Not true! Although financial institutions are not required to issue account holders a Form 1099-INT if the interest amount is under $10 for the year, account owners still must include in income the interest they received if the amount is $0.50 or more.
You can help friends and family with interest free loans with no tax consequences.
Not true! The tax code (Sec 7872) considers the lack of interest on a loan of more than $10,000 to be a gift. The amount of the gift is the amount of interest based upon an applicable federal rate (AFR), or where the loan interest rate is below the AFR, the difference between the AFR interest and the interest charged. Thus the borrower is treated as paying the imputed interest, which is tax deductible if it otherwise qualifies, and the lender must treat the interest as investment interest income.
Older people should change the title on their home to their child.
Not a good idea! Since that would be treated as a gift and a gift tax return would be required. Worse yet, as a gift the child’s basis (the amount from where taxable gain is measured) would be the same as the parent’s basis. Thus when the child sells the home the child would have the same gain as the parent would have had, except the child would not qualify for the $250,000 home sale gain exclusion. Of course, if the child lived in the home for 2 of the 5 years preceding the sale, the child could also qualify for the home sale exclusion.
On the other hand, if the parent continued to own the home and the child later inherits the home when the parent dies, the child’s basis becomes the fair market value at the date of the parent’s death, and if the home is sold right away there would be no taxable gain, and possibly even a deductible loss.
You can deduct the cost of attending a medical conference related to a dependent’s disease.
That is only partially true! A taxpayer is allowed to deduct the cost of the conference registration fee and travel to the conference, because those costs are primarily for a dependent’s medical care and the taxpayer’s attendance was essential for that care. However, the costs of meals and lodging are not deductible, because the dependent did not receive medical care at a licensed facility, a prerequisite for a medical deduction of meals and lodging. (Rev Ruling 2000-24, 2000-19 IRB)
If lead-based paint is discovered in your home you can claim a medical deduction for the cost of repainting your home.
An exaggeration, since just the cost of removing lead-based paints from surfaces in a taxpayer’s home to prevent a child who has or has had lead poisoning from eating the paint can be included in medical expenses. These surfaces must be in poor repair (peeling or cracking) or within the child’s reach. The cost of repainting the scraped area is not a medical expense. (IRS Publication 502, page 10)
You can sell your used electric vehicle to an individual and get a tax credit of $4,000.
Not true! A total misunderstanding of the new credit for previously owned electric vehicles. The buyer gets the credit not the seller, the credit is the lesser of $4,000 or 30% of the vehicle’s selling price, and finally the vehicle must be purchased from a dealer not a private party.
Investments in foreign countries are not subject to U.S. taxes.
Not true! U.S. Citizens and resident aliens are taxed on worldwide income.
Homeowners can claim a credit for purchasing and installing solar electric systems on their home.
That is true, but not the whole story. The taxpayer need not own the property to qualify for the credit; the taxpayer need only be a ‘resident’ of the home.
There is a ‘standard’ amount that can be claimed as a charitable contribution.
Not true! Only actual amounts donated to qualified charitable organizations are eligible charitable contributions, and stringent substantiation rules apply for both cash and non-cash donations.
A U.S. citizen married to a non-resident alien cannot file a joint return.
Not true! Since a person who is a nonresident alien at the end of their taxable year, and who is married to a U.S. citizen, or a U.S. resident, can be treated as a U.S. resident for income tax purposes if the spouses so elect (Code Sec. 6013(g)(1)). By making the election they can file using the married joint status. In so doing, both spouses must agree to subject their worldwide income to U.S. taxation for the taxable year, and future years unless the election is terminated. (Code Sec. 6013(g); Code Sec. 6013(h))

Taking tax advice from novices can lead to tax problems and missed benefits. Recently there have been some false tax strategies purposely posted on social media by troublemakers and scammers. Don’t be misled; call this office with your questions.

Procrastinating on Filing Your Taxes?

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Article Highlights:

Late filing penalties
Interest
Three-year statute of limitations
Forfeited refunds

If you have been procrastinating about filing your 2023 tax return or have not filed other prior year returns, you should consider the consequences, including the penalties, interest, and aggressive enforcement actions. Plus, if you have a refund coming for a prior year you may end up forfeiting it.
If you haven’t filed your return and you owe taxes, you will be subject to both a late payment and a late filing penalty. You should file a return as soon as possible and pay as much as possible to reduce the penalties and interest.
The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. Should you put off filing, and if the IRS issues a notice of intent to put a levy on your property and any amount billed is not paid within 10 days, the interest rate will be increased to a full one percent per month.
There is also a penalty for not filing on time. The failure-to-file penalty is 4½% of the tax owed for each month or part of a month that your return is late. When combined with the failure to pay penalty the maximum will add up to 25% for the first five months, although the interest penalty will continue to accrue. If your return is over 60 days late, there’s also a minimum penalty for late filing; for returns filed in 2023 it’s the lesser of $450 or 100% of the tax owed on that late-filed return. The IRS periodically increases the amount so it may be different for other years.
In addition to interest and late filing penalties, interest accrues on the unpaid balance at the current federal short-term rate plus 3 percentage points compounded daily. Even if you have received an extension, the late payment penalty and interest will accrue on any balance due, so it’s best to file as soon as possible to minimize them.
Of course, there’s no penalty for filing a late return if a refund is due. Penalties and interest only accrue on the unfiled returns of taxpayers who have a balance due and don’t pay by the deadline.However, you can lose your refund and potentially forfeit any tax credits to which you are entitled by waiting too long to file. In order to receive a refund, the return must generally be filed within three years of the original April due date.
Taxpayers who continue to not file a required return and fail to respond to IRS requests to do so may be subject to a variety of enforcement actions, all of which can be unpleasant.
You are strongly encouraged to bring yourself into compliance with your federal—and state, if applicable—income tax return filings. Please call this office for help filing back returns and, if necessary, advice on ways to pay or mitigate any tax liability and, when necessary, assist in establishing a payment plan.

Posted in Tax

6 Common Tax Mistakes That Can Land You in Trouble with the IRS

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You’d be hard-pressed to find someone out there willing to argue against the idea that taxes are complicated. There’s a reason why most people dread it on some level every time April rolls around. Making mistakes is commonplace, yes – but it’s also critical to understand that not all issues are created equally.
In fact, some common tax mistakes are more than just a “small problem.” They could actually land you in trouble with the IRS if you’re not careful, which is why they should be avoided at all costs.

What is Tax Fraud? Breaking Things Down
As the term implies, tax fraud is a deception that is “deliberately practiced” when filing your state or federal income taxes. In other words, making a mistake that ends up saving you money or putting you in an otherwise beneficial situation is one thing. Withholding information or filling out forms incorrectly and knowingly to get those same benefits are something else entirely.
What happens if you commit tax fraud will vary depending on the severity of the situation. Generally, you could get assessed a penalty of up to 75% of the amount that you failed to pay due to the fraud in question. Likewise, you could get fined up to $100,000 and be subject to three years in federal prison.

Improper Child Tax Credit Claims
The Child Tax Credit is a tax break that is meant to go with families with qualifying children. That money can be essential for food, clothes, housing, and other essential items. “Qualifying” is certainly the operative word in that sentence – if your family situation doesn’t meet the criteria, you cannot claim the Child Tax Credit and if you have done so it is in error. End of story.
Failing to Report All of Your Income
This is an issue that has become increasingly common over the last few years as the “gig economy” began to grow in popularity. Someone might fully report all the income they bring in from their traditional 9-to-5 job… but may not have been as forthcoming about all that money they were making ride-sharing on the weekends. Or, they might set up an eBay store that generates a substantial amount of income that they think they don’t have to report because no formal 1099 had been issued in the past.
Improperly Claiming Tax Deductions
One common example of improperly claiming tax deductions would take the form of the home office deduction. Some people might measure their home office incorrectly on accident, arriving at a larger surface area in a way that ultimately makes the room seem bigger than it is. This would make the deductions you’re entitled to larger as well.
But if you say that you have an office that is used exclusively for business in your home and you just flat out don’t, that’s intentional deception and it would fall under the description of tax fraud.
Incorrectly Claiming the Earned Income Tax Credit
Similar in concept to the Child Tax Credit, the Earned Income Tax Credit is designed to help provide people with the extra income they need for essential purchases. In 2023 (meaning for the taxes that you will file in 2024), the credit will vary between $600 and $7,430 depending on the filing status you select and the number of children that you have.
This is another one of those tax credits where the IRS is very, very clear about who qualifies, who doesn’t, and what amounts people are entitled to. If you have one qualifying child, for example, the maximum amount of the credit is $3,995. This is with a maximum adjusted gross income (both for single and head-of-household filers) of $46,560. If you don’t fall into the rigidly defined brackets regarding who can claim the credit and who can’t, you shouldn’t do so or you run the risk of tax fraud.
Failing to Report Crypto Income
Especially over the last few years, people who fail to report cryptocurrency income on their taxes has become a major issue. There has been a lot of talk about whether this “virtual currency” qualifies as income at all. The IRS has decided that it does, which means that it is – whether you like it or not.
If you don’t report transactions on your income taxes and you get hit with an IRS audit, not only will you have to pay interest on the money you owe. You will probably have to deal with penalties and potentially even criminal charges in some extreme cases.
Cryptocurrency can be very volatile, yes – which is why if you want to make sure that everything is being filed correctly with the IRS, you should not hesitate to enlist the help of a professional to do so. Getting help from a pro with your taxes can help you avoid all of these situations moving forward.

To find out more information about all the common tax mistakes that can get you in trouble with the IRS, or to speak to someone about your own needs in a bit more detail, please don’t delay – contact us today.

Posted in Tax

7 Helpful Bookkeeping Tips for E-Commerce Companies

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By far, one of the biggest (and most unique) challenges facing e-commerce companies today has to do with the uncertain nature of the entire enterprise.
Nobody could have predicted the onset of the COVID-19 pandemic in 2020. One side effect of this was that e-commerce ordering across all verticals shot up overnight as in-person shopping became impossible in many areas. This led to inventory issues and other supply shortages. Now that things are opening back up again, everything is slowing back down. Because of factors beyond your control like this, not to mention the potential of a recession, it is essential to have control of your business processes whenever possible.
Therefore, if you want to make sure that your bookkeeping is in order to help empower your e-commerce business as much as possible, there are a few key elements that you should keep a watchful eye over moving forward.
Merchant Fees
If your e-commerce store is hosted on one of the major industry platforms like Shopify, you’re already no doubt familiar with the “necessary evil” of merchant fees. But you shouldn’t neglect them when it comes to your bookkeeping efforts.
Remember that merchant fees are a part of your net sales, not your gross sales. You can show this in your books by making a note of the gross sale, then labeling the difference between that and the final deposit amount as the fee.

Shipping Costs and Your Shipping Options
If your shipping costs are not already integrated with your e-commerce platform (as they are with some of the bigger options), you must not neglect things when it comes to the records you keep. The amount you actually charge a customer for shipping won’t line up 100% with the amount you pay to ship the item. You need to be able to make sense of those discrepancies so that there are no errors in your records that only get worse over time.
Budgeting and Forecasting Returns
Budgeting is important for a host of reasons in the world of e-commerce, especially when it comes to managing cash flow. But budgeting and forecasting help you come up with the types of strategies you need to have in place to better prepare yourself for the future. Even if you’re entering into a period of economic uncertainty, you can still make sure that your finances are aligned with your organization’s goals as much as possible.

Inventory Management Timing
Naturally, you don’t want to have so much product on hand that you’re paying to house items in a warehouse or other facility indefinitely. But at the same time, you don’t want to get caught in a situation where a sudden surge in interest depletes your reserves, preventing you from making sales that are rightfully yours. Work on the timing of your inventory management processes and make sure that, based on historical data, you have the inventory you need, when you need it, as often as possible.
Sales Tax Regulations
Equally important is your ability to keep track of ever-changing regulations regarding sales tax. Never allow yourself to believe that tax money somehow equals revenue. Most e-commerce platforms that you use just collect the sales tax and deposit it into your account. At that point, it becomes a liability that you owe the government come tax time. Stay up-to-date on any regulations and changes that you need to be aware of that impact the amount of money that needs to be collected and what payments you need to make (and when) to stay compliant.
Keep Separate Personal and Business Finances
For small business owners in particular, the importance of keeping separate personal and business finances simply cannot be overstated.
Yes, you may have used your own money to fund your efforts in those early days. However, you shouldn’t mix the two worlds together, especially when it comes to record keeping. Keep a separate business bank account and use that for all e-commerce business-related cash flow purposes.
Why Budget Forecasting Matters
To condense the idea down to its bare essentials, a budget forecast is essentially a model that you use to try to determine what your budget will actually achieve. In other words, you’re using historical information to predict what you can realistically do during a similar period in the future. Again, this gives you more than just gut instinct to use when making decisions – it’s actionable information that you can utilize to make the mostinformeddecisions possible given the circumstances.
The Bottom Line
In the end, both entrepreneurs and consumers alike love e-commerce because of the newfound freedom and flexibility it brings with it. However, that comes with a number of potential costs and the uncertainty of the last few years (and potentially the next few) is at the top of that list. That’s why you need to take steps to make sure that the bookkeeping is in order for your e-commerce business today – it may mean the difference between success and failure tomorrow.

To find out more about the financial elements you should be carefully monitoring to help empower your e-commerce company or to speak to someone about your situation in a bit more detail, please contact one of our e-commerce savvy industry experts today.

How To Protect Your Business Cash During Banking Uncertainty

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While bank failures are rare in the grand scheme of things, they can and do happen – as recent events like the closure of Silicon Valley Bank go a long way towards proving. When these types of bank failures do occur, they can be catastrophic. They happen quickly and often without warning, leaving business owners in particular in one of the most distressing situations imaginable.
Thankfully, all hope is not lost. If you do want to be proactive and take steps to protect your business cash during a period of banking uncertainty, there are a few key things you’ll want to keep in mind.

What is Treasury Management?
“Treasury management” is a term used to describe how you manage not only your business’ daily cash flow but also other large-scale financial decisions that are taking place.
In essence, it’s a way to maintain oversight and visibility into your organization’s liquidity. It also brings with it the added benefit of helping you establish and maintain credit lines, it gives you the insight you need to optimize the returns that your various investments are yielding, and more. Many also use it to help put together long-term strategies pertaining to the best ways to use (and grow) the amount of cash they have on hand.
Is Treasury Management the Same as Cash Management?
Treasury management and cash management are not the same things, but they are certainly related concepts. Cash management, as the name suggests, is the process you use to oversee your daily cash flow to ensure you always have access to the money you need when you need it. Think of it as a subset of the larger idea of treasury management.
If you’re operating in an industry that puts you at particular risk of cash depletion, a forward-thinking approach to cash management can help you more effectively balance cash flow. It can then make it easier to replenish those funds so that even in times of uncertainty, you can still capitalize on opportunities instead of being forced to watch them pass you by.
Evaluate Your Current Exposure
More than anything, it’s important to understand exactly how exposed you might be should any one particular bank fail. Obviously, if all of your business cash is housed exclusively in one bank right now, the chances of you getting cut off from it should the bank fail are essentially 100%.
Make a list of all your accounts including where they are located, what types of accounts they are, how much money is in them, and more. Know what your risk surface profile is so that you can make the most actionable decisions possible moving forward.

How to Protect Your Business Against a Bank Failure
To protect your business against a total bank failure, the first thing you should do is be mindful of the $250,000 cap. Remember that the FDIC insures up to $250,000 per depositor, per financial institution, per ownership category. If the total amount of money you’re worried about potentially losing is more than $250,000, you might want to consider an alternative like a bank that is part of the IntraFi network.
These banks offer what is known as an Insured Cash sweep and a Certificate of Deposit Account Registry service. Essentially, your money is spread across multiple banks in the IntraFi network so that no more than $250,000 is in any one place at one time. That way, even if a bank does fail, you’re not cut off from all of your financial assets. The chances that multiple banks would unexpectedly fail at the same time are far lower than even that of a single failure.
Along the same lines, you should use multiple business bank accounts whenever possible. As a rule of thumb, always keep your emergency fund in a separate account at a separate bank from the account you use for daily operations. Again, this will protect you against any single point of failure.

Your Bank Failed. Now What?
If your bank should fail, the first thing you need to do is gather the facts. Find out what happened, why it happened, and when you will have access to those funds per the FDIC. Communicate this information to all key stakeholders and immediately set up a new business bank account with a different financial institution. At that point, you can also embrace some of the best practices outlined above to mitigate risk from this type of thing happening to you in the future.
In the event that you find that your bank has suddenly closed, don’t worry – there are still steps you can take. One of those involves contacting one of our passionate and professional team members who can help you mitigate the risks associated with these uncertain times. To find out more, or to get answers to any other specific questions about protecting your business cash that you may have, please don’t delay – contact us today.

Tips for Students Planning to Work During the Summer

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Article Highlights:

Form W-4
Watch Out for Payroll Surprises
Tips
Odd Jobs
Self-Employment Tax
Working for Parents
ROTC Students
Newspaper Delivery
Retirement Contributions

As the summer break from school approaches, many students are looking for part-time summer employment. Both parents and students should be aware of the tax issues that need to be considered when working a summer job. Here is a rundown of some of the more common issues:

Completing Form W-4 – The W-4 form is used by employers to determine the amount of tax that will be withheld from an employee’s paycheck. Students with multiple summer jobs will want to make sure that all of their employers are withholding an adequate amount of taxes to cover their total income tax liability. Generally, a student with income only from summer and part-time employment, and who is claimed as a dependent of someone else, can earn as much as $13,850 (the standard deduction amount for 2023) without being liable for income tax. However, if the student has investment income, the tax determination becomes more complicated because, as he or she is a dependent of another, special rules apply.
Watch Out for Payroll Surprises – Some employers may attempt to avoid their payroll tax liabilities by paying the student in cash and incorrectly treating them as an independent contractor, thus leaving the student with the responsibility of paying both the employee’s and employer’s payroll tax liability (see ‘Self-Employment Tax’ below). If a potential employer intends to do that, they will generally ask the student to complete a Form W-9 rather than a W-4 or simply ask for their Social Security Number (SSN) without requesting a W-4.
Tips – If the student works as a waiter, a camp counselor or in another service industry, he or she may receive tips as part of his or her summer income. All tip income received is taxable income and is therefore subject to federal income tax.Employees are required to report tips of $20 or more received while working with any one employer in any given month. This reporting should be made in writing to the employer by the tenth day of the month following the receipt of tips. The employer withholds FICA (Social Security and Medicare taxes) and income taxes on these reported tips, then includes the tips and wages on the employee’s W-2.

Employees may keep records of their tips on Form 4070A and submit Form 4070 to the employer. Both forms are in the IRS Publication 1244. This online version allows the employee to enter the information on Forms 4070A and 4070 and print out the completed forms.
Tips split with others are not subject to the reporting requirement by the employee who initially receives them. That employee should report to the employer only the net tips received.

Odd Jobs – Many students do odd jobs over the summer, are paid in cash and often are incorrectly not treated as an employee by the payer. Just because the payment is in cash does not mean that it is tax-free. Unfortunately, the income is taxable and may be subject to self-employment taxes (see next).These earnings include income from temporary or occasional jobs like dog walking, babysitting, and lawn mowing.
Self-Employment Tax – When a student works for an employer, the employer withholds Social Security tax and Medicare tax from his or her pay, matches the amount dollar for dollar, and remits the combined amount to the government. When a student is self-employed, he or she is required to pay the combined employee and employer amounts on their own (referred to as self-employment tax) if the net earnings are $400 or more.This tax pays for the individual’s future benefits under the Social Security system and Medicare Part A. Even if he or she is not liable for income tax, this 15.3% tax may apply to a student’s odd jobs.
Working for Parents – A child under the age of 18 working in a business solely owned by his or her parents is not subject to payroll taxes. This saves the child from having to pay the 7.65% payroll taxes and provides the parent with relief from payroll taxes. The payroll tax exception won’t apply if the parent’s business is set up as a corporation.
ROTC Students – Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp –­ is taxable.
Newspaper Carrier or Distributor – Special rules apply to services performed as a newspaper carrier or distributor. An individual is a direct seller and treated as self-employed for federal tax purposes if he or she meets the following conditions:o They are in the business of delivering newspapers;o All of their pay for these services directly relates to sales rather than to the number of hours worked; ando They perform the delivery services under a written contract which states that they will not be treated as an employee for federal tax purposes.
Newspaper Carriers or Distributors Under Age 18 – Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.
Retirement Plan Savings – Additional income tax savings are possible if the child is paid more (or works part-time past the summer) and deposits the extra earnings into a traditional IRA. For 2023, the child can make a tax-deductible contribution of up to $6,500 to their own IRA. The business where the child works also may be able to provide the child with retirement plan benefits, depending on the type of plan it uses and its terms, the child’s age, and the number of hours worked. By combining the standard deduction ($13,850) and the maximum deductible IRA contribution ($6,500 ) for 2023, a child could earn $20,350 of wages and pay no income tax.

Of course, some children will not be thinking about retirement at their young age and may object to contributing to an IRA. If that is the case, perhaps you as the parent, or even the grandparents, can make a gift of the IRA contribution, which can grow to big bucks by the time the child reaches retirement age.
If you are a student or the parent of a student with questions about these or other issues associated with student employment, please call this office for assistance.

Is an SBA (7) Loan Right for Your Business?

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It’s safe to say that the millions upon millions of small and mid-sized businesses operating right now are the true foundation of the United States economy. But whether you’re a seasoned veteran or are a new entrepreneur looking to journey out on your own for the first time, it’s important to understand the options that are available for you in terms of funding and how to take advantage of them.
One of those is called the SBA (7) loan, which is a flexible form of business funding that is worth a closer look.

What is an SBA (7) Loan?
The SBA (7) loan program was designed to offer small businesses access to low-interest loans that can be used for a number of different things. They are fully backed by the United States Small Business Administration, hence the name.
That money can be used as working capital, it can help purchase new equipment that you need to continue to manufacture your products, or it can even go towards real estate. Under the SBA (7) loan program, funds are available up to $5 million to qualifying businesses.
How Do I Qualify?
To qualify for an SBA (7) loan, an organization must meet all the following requirements:

The person applying for the loan (meaning the business owner) must have “reasonable invested equity” in the business itself.
They must also have attempted to find alternative financial sources prior to applying, with the use of personal assets being a chief example.
They need to be able to demonstrate a legitimate need for the loan funds. This can’t be a loan that you take out because you want it – it needs to be a true requirement to continue your operations.
You need to play to use the loan for a sound business purpose.

If you have any existing debt to the United States government, you cannot be late on those obligations in any way.

As you begin this process, you should first contact your preferred bank to see if it is qualified to give out SBA (7) loans. If it isn’t, don’t worry – the Small Business Administration has a helpful Lender Match tool that you can use to find one that meets your needs.

Additional Considerations About the SBA (7) Loan
Another common question that people have when it comes to an SBA (7) loan has to do with the total amount of time they have to pay back any money that is borrowed. Generally speaking, this will be based almost entirely on how you plan on using the money.
If you’re planning on using it to purchase real estate (like if you want to expand your business to include a new location), for example, the maximum term is up to 25 years. If that money is going to purchase equipment or towards inventory-related purposes, on the other hand, the maximum loan term is 10 years.
Finally, it’s important to understand what an SBA (7) loan is and how it functions from the point of view of a lender. Loans are partially guaranteed by the Small Business Administration up to 90%, although this will vary significantly depending on the type of loan you take out.

A standard SBA (7) loan comes with a maximum loan amount of $5 million. Here, the SBA will guarantee 85% of the loan if the amount you’re borrowing is up to $150,000. For loans that are more than $150,000, the SBA will guarantee 75% of that amount.
An SBA (7) “small loan,” on the other hand, has a maximum amount of $350,000. Here, the SBA will guarantee 50% regardless of the amount of money you’re taking out.
If you take out an SBA (7) “express loan,” you get access to a maximum loan amount of $500,000. The SBA will guarantee 90% for loans up to $350,000 in value and 75% for all loans between $350,000 and a maximum of $500,000.

The major benefit of the program is that interest rates are capped by the SBA and the program also offers longer loan terms than a lot of alternative options. The application process can be time-consuming, and approval times are also long, however, so depending on how much you need and how quickly you need access to it, you may want to explore other options first if possible.
In the end, the SBA (7) loan can be an invaluable resource for small-to-medium-sized businesses everywhere. Having said that, it may not be right for everyone. Just because that may be true doesn’t mean that there aren’t still options available for you to peruse. So if you’d like to find out more information about the ins and outs of an SBA (7) loan, or if you’d like to discuss other financing options with a professional in a bit more detail, please don’t delay – contact us today.