Scam Alert: Fake Phone Calls To Return IRS Refunds

March 23, 2018

The Internal Revenue Service is warning taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. The IRS also offered a step-by-step explanation for how to return the funds and avoid being scammed.

These criminals have a new twist on an old scam. After stealing taxpayer data and filing fraudulent tax returns, these criminals use the taxpayers’ real bank accounts for the deposit. Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.

Versions of the Scam:
1. In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.

2. In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.

Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return will be rejected because a return bearing their Social Security number is already on file. If that’s the case, the taxpayer may be the victim of identity theft.

Taxpayers who receive erroneous refunds should follow the steps outlined by IRS Tax Topic Number 161 – Returning an Erroneous Refund. The tax topic contains full details, including mailing addresses should there be a need to return paper checks. By law, interest may accrue on erroneous refunds.

If the erroneous refund was a direct deposit:
1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
2. Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn’t been cashed:
1. Write “Void” in the endorsement section on the back of the check.
2. Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
3. Don’t staple, bend, or paper clip the check.
4. Include a note stating, “Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).”

If the erroneous refund was a paper check and you have cashed it:
1. Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
2. If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.
3. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
4. Include a brief explanation of the reason for returning the refund.
5. Repaying an erroneous refund in this manner may result in interest due the IRS.

Source: http://www.getnetset.com March, 2018

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, Certified Business Profit Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

Why Hire An Accounting Professional For Your Business?

September 1, 2017

Running your own business is a complicated affair with a wide range of different “moving parts” to concern yourself with, but many people don’t realize how many of them ultimately lead back to your finances until it’s far too late.

A large part of your ability to be successful in the long-term will ultimately come down to the rate at which you expand. Grow your business too quickly and you might spread yourself too thin. Grow too slowly and you’ll be passing up opportunities that are rightfully yours, leaving a lot of money on the table at the same time. Your control over your finances will dictate whether you’re able to strike that perfect balance the way you need to.

Marketing, paying vendors, paying employees, managing client relationships – all of it depends on the quality of your bookkeeping. A large part of your success will ultimately come down to your ability to identify when the time is right to stop doing things yourself and bring a professional accounting on board. To do this, there are a few things to keep in mind.

The Warning Signs You Need to Know

Intuit recently released a survey outlining the state of small business accounting in the United States. The results are very telling in terms of when people should bring an accounting professional on board – and what the consequences are of inaction.

Asset tracking, for example, is something that you may not immediately think impacts your bookkeeping, but it does in a fairly significant way. Ghost assets are fixed assets that have either been rendered unusable or are physically missing. However, “out of sight, out of mind” does not apply in this case – they still count toward a business’s tax and insurance liability, thus making it difficult to properly reconcile their books every year.

Of the business owners who responded to Intuit’s survey, 74% indicated that they didn’t understand this, and 49% said that they didn’t even know what ghost assets were in the first place. If you are among those numbers, congratulations on arriving at one of the biggest indicators that you need to bring a financial professional into your business (and also that you’ll likely want to conduct inventory on a regular schedule moving forward).

Other signs that the time is right to bring a accounting professional on board ultimately come down to the most pressing financial issues that most businesses face. 51% of people who responded to Intuit’s survey said that accounts receivable and collections were their most significant business challenge. 44% said that cash flow was always something they were concerned about, and getting a better handle on “money in vs. money out” was always a top priority.

Cash flow troubles are the number one reason why most small businesses fail within the first four years of existence.

Other pressing issues included properly managing paperwork on a regular basis, accurately closing the books each month, and managing payroll. The major thing to understand is that an accounting professional will be able to help with ALL of these things, taking the stress off your plate so that you can focus simply on running your business like you should be. If ANY of these things are ones that keep you awake every night, or you feel these issues are significantly affecting your ability to grow and evolve, guess what? It’s time to contact an accounting professional to get help.

Never Underestimate the Power of Trust

Recently, small business owners responded to a survey outlining all of their most pressing accounting issues. When asked to rank the professionals that they worked with on a regular basis in the order of importance, these business leaders overwhelmingly agreed that accounting experts were one of the single most valuable assets they had. They outranked attorneys, insurance agents, technology firms and even staffing services.

Business leaders know that much of what they’re trying to do each day, along with what they hope to be able to accomplish in the future, would be impossible without the stable foundation that only an accounting professional can provide.

When It Comes to Accounting, Knowledge Is Power

It’s important to remember what may be the single most important piece of advice for small business owners when it comes to accounting: It is far, far cheaper to hire an accounting professional today before things get out of hand tomorrow.

Think about it this way: A large part of the reason why you got where you are today is because you took the initiative and started to do things for yourself. You have a “can do” attitude that just won’t quit, and you’ve built something incredibly successful from the ground up as a result. But there are certain situations where you cannot let pride get in the way of making the right decision, and accounting is absolutely one of them.

You already have a full-time job: running your business. You don’t have the time to take on another one, let alone the expertise to guarantee that you’re making the best decisions at all times. Yet this is exactly what business accounting is – a heavily specialized, full-time job that requires a careful hand and attention to detail that is second to none.

Bringing in an accounting professional will not only help make sure that your business has cleaner books and other records, but it will also significantly reduce the chance that you’ll get hit with penalties for things like late taxes and allow you to be more successful. These types of benefits, to say nothing of the peace of mind that only comes with knowing your accounting is taken care of, are things that you literally cannot put a price on.

If you have any questions about hiring an accountant for your small business, contact our office today.

Source: ClientWhys, August, 2017

Thinking of Exiting Your Business?

July 2, 2017September 1, 2017

Image: Bigstock

Have you thought about how you are going to exit your business? You may have a dream of going public, selling to the highest bidder, or retiring and handing over your business legacy to your family.

The truth is that many small business owners have no exit strategy for their businesses in the event of their disability, retirement, or death. Given the current economy, it isn’t surprising small business owners focus their energies on business survival, future growth, and even remaining active in business after retirement. However, a business exit strategy not only means having a plan for the unexpected – including financial hardship, injury, disability and even death – it also means having a plan for the succession or transfer of ownership of your business when it comes time to hang up your hat and retire.

Here are a few things to consider as you plan your business exit strategy:

1. Develop a Succession Plan
There is no “one plan fits all” when it comes to developing a succession plan for your business. But having a succession plan (including choosing and training a successor) can help provide some practical direction and deliver the peace of mind that comes from knowing that your life’s achievement is in good hands.

2. Invest in a Retirement Plan and Insure your Worth
As with career employees, you will want to ensure that you invest in a retirement plan, life insurance and even personal disability insurance – all of which will protect you and your family when it’s time, forcibly or not, to step away from your business.

It’s relatively easy to address retirement planning, because we all hope to get there and, more importantly, want to enjoy it. But life and disability insurance are equally important for the small business owners, because they protect you and your family, should the worst happen. H

Here are some tips for finding the right plans for you and your business:

• Finding the Right Retirement Plan – If you are a sole proprietor then you may want to talk to your bank about a setting up an IRA or other retirement solution. If you have employees, on the other hand, setting up a small business retirement plan for both you and your employees needn’t be that difficult – and also offers a nice tax deduction.

• Disability and Life Insurance Options – While some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury, most businesses opt to provide both disability and life insurance as part of an overall compensation or benefits plan.

The Process of Exiting Your Business
Whether you are selling your business, transferring ownership, seeking retirement, or facing a “forced-exit” such as bankruptcy or liquidation – planning your exit is a big undertaking that has implications on employees, your business structure, its assets, and your tax obligation. Before you embark on your exit strategy, be sure to contact your attorney and even a business valuation expert. That way, you will be sure that you have explored all the options available to you.

If you have any questions about an exit strategy for your small business, contact our office today.

Source: Small Business Administration http://www.sba.gov

IRS Website Provides Tools To Help Small Business Owners Understand Employment Taxes

June 22, 2017

The Internal Revenue Service reminds small businesses of the many free products available to help them understand and comply with the law. Products ranging from online calculators, printable calendars, step-by-step guides and a series of educational webinars are all available on IRS.gov.

Federal law requires most employers to withhold Federal taxes from their employees’ wages. IRS tools can help small businesses understand some of the requirements for withholding, reporting, and paying employment taxes. The IRS website, IRS.gov, provides easily accessible information and guides on what forms employers should use as well as how and when to deposit and report employment taxes.

Federal Income Tax– Small businesses first need to figure out how much tax to withhold. Small business employers can better understand the process by starting with an employee’s Form W-4 and the withholding tables described in IRS Publication 15, Employer’s Tax Guide.

Social Security and Medicare Taxes– Most employers also withhold social security and Medicare taxes from employees’ wages and deposit them along with the employers’ matching share. In 2013, employers became responsible for withholding the Additional Medicare Tax on wages that exceed a threshold amount. There is no employer match for the Additional Medicare Tax and certain types of wages and compensation are not subject to withholding.

Federal Unemployment (FUTA) Tax– Employers report and pay FUTA tax separately from other taxes. Employees do not pay this tax or have it withheld from their pay. Businesses pay FUTA taxes from their own funds.

Depositing Employment Taxes– Generally, employers pay employment taxes by making Federal tax deposits through the Electronic Federal Tax Payment System (EFTPS). The amount of taxes withheld during a prior one-year period determines when to make the deposits.

Failure to make a timely deposit can mean being subject to a failure-to-deposit penalty of up to 15 percent. But the penalty can be waived if an employer has a history of filing required returns and making tax payments on time.

Reporting Employment Taxes – Generally, employers report wages and compensation paid to an employee by filing the required forms with the IRS. E-filing Forms 940, 941, 943, 944 and 945 is an easy, secure and accurate way to file employment tax forms. Employers filing quarterly tax returns with an estimated total of $1,000 or less for the calendar year may now request to file Form 944 annually instead. At the end of the year, the employer must provide employees with Form W-2, Wage and Tax Statement, to report wages, tips and other compensation. Small businesses file Forms W-2 and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration and if required, state or local tax departments.

For more information on your responsibility as a small business employer to pay employment taxes, please call our office today.

Source: Internal Revenue Service – IR-2017-110, June 22, 2017

Top Ten Cybersecurity Tips

June 2, 2017

Protecting your business information is now more important than ever. Here are ten important cybersecurity tips from the Small Business Administration.

1. Protect against viruses, spyware, and other malicious code.
Make sure each of your business’s computers are equipped with antivirus software and antispyware and update regularly. Such software is readily available online from a variety of vendors. All software vendors regularly provide patches and updates to their products to correct security problems and improve functionality. Configure all software to install updates automatically.

2. Secure your networks. Safeguard your Internet connection by using a firewall and encrypting information. If you have a Wi-Fi network, make sure it is secure and hidden. To hide your Wi-Fi network, set up your wireless access point or router so it does not broadcast the network name, known as the Service Set Identifier (SSID). Password protect access to the router.

3. Establish security practices and policies to protect sensitive information. Establish policies on how employees should handle and protect personally identifiable information and other sensitive data. Clearly outline the consequences of violating your business’s cybersecurity policies.

4. Educate employees about cyberthreats and hold them accountable. Educate your employees about online threats and how to protect your business’s data, including safe use of social networking sites. Depending on the nature of your business, employees might be introducing competitors to sensitive details about your firm’s internal business. Employees should be informed about how to post online in a way that does not reveal any trade secrets to the public or competing businesses. Hold employees accountable to the business’s Internet security policies and procedures.

5. Require employees to use strong passwords and to change them often. Consider implementing multifactor authentication that requires additional information beyond a password to gain entry. Check with your vendors that handle sensitive data, especially financial institutions, to see if they offer multifactor authentication for your account.

6. Employ best practices on payment cards. Work with your banks or card processors to ensure the most trusted and validated tools and anti-fraud services are being used. You may also have additional security obligations related to agreements with your bank or processor. Isolate payment systems from other, less secure programs and do not use the same computer to process payments and surf the Internet.

7. Make backup copies of important business data and information. Regularly backup the data on all computers. Critical data includes word processing documents, electronic spreadsheets, databases, financial files, human resources files, and accounts receivable/payable files. Backup data automatically if possible, or at least weekly, and store the copies either offsite or on the cloud.

8. Control physical access to computers and network components. Prevent access or use of business computers by unauthorized individuals. Laptops can be particularly easy targets for theft or can be lost, so lock them up when unattended. Make sure a separate user account is created for each employee and require strong passwords. Administrative privileges should only be given to trusted IT staff and key personnel.

9. Create a mobile device action plan. Mobile devices can create significant security and management challenges, especially if they hold confidential information or can access the corporate network.. Require users to password protect their devices, encrypt their data, and install security apps to prevent criminals from stealing information while the phone is on public networks. Be sure to set reporting procedures for lost or stolen equipment.

10. Protect all pages on your public-facing websites. Don’t just protect the checkout and sign-up pages.

If you have additional questions about protecting your data from cybersecurity attacks, please contact our office today.

Source: Small Business Administration. http://www.sba.gov

Key Performance Indicators For Your Business

May 25, 2017

As a small business owner, the importance of making purpose-driven decisions is something that cannot be overstated enough. Every choice that you make must be one with a particular goal in mind – whether it’s to attract new customers, increase revenue, decrease expenditures, increase liquidity, etc. But simply making the decision itself is not enough – you also have to find a way to measure the result of your action against what you were trying to accomplish in the first place.

This, in essence, is what KPIs, or key performance indicators, are all about. These numbers represent the best kind of measurable value that reflect how well you’re doing in a particular context – the kind that is objectionable, black and white, and provides you with a clear indication of what you need to be doing moving forward. Thanks, in particular, to the evolution of cloud computing and the advent of real-time accounting, it’s easier than ever for business owners to monitor the health of their organization through financial KPIs.

When doing so, however, you need to keep a few key things in mind.

Financial KPI Considerations

Part of the reason why KPIs are so powerful in the first place is because they’re malleable – based on exactly what you’re trying to accomplish, you can take a micro look at a particular aspect of your finances to tell you how close or how far away you are from that goal.

With that in mind, it’s important to realize that there is no “one size fits all” approach to KPI selection. If you looked at the financials of your closest competitors, they might be tracking wildly different data than you are – even though you’re both operating in the same industry.

Because of this, you need to figure out the long-term goals that are most important to you first. Then, you can reverse engineer the KPIs that you should be watching to help guide you and your business in the right direction.

KPIs to Watch Out For

Now that you’ve got a deeper understanding of what KPIs measure in relation to your goals, it’s time to learn more about the specific KPIs that you should be paying attention to monitor those goals in real-time.

Operating Cash Flow. Also referred to as OCF, this points to the total amount of money your company is generating on a daily basis. This can be a great way to determine whether you’re able to maintain the positive cash flow needed for growth, or if you should start looking for external funding. OCF adjusts your net income for factors like depreciation, inventory fluctuations, accounts receivable changes and more.

Current Ratio. This KPI is an indication of whether or not your company can pay all of its financial obligations in one year. This takes into consideration all of your current assets and compares them with your current liabilities. A Current Ratio of less than one tells you that you will NOT be able to fulfill all financial obligations, thus requiring additional cash flow. For the best results, try to keep Current Ratio between 1.5 and 3.

Burn Rate. This clues you in on the rate at which your company is spending money on a weekly, monthly or annual basis. This is particularly helpful for companies that don’t necessarily go through extensive financial analysis, as it’s a quick look into whether or not your current operating costs are sustainable in the long-term.

Income. This, simply put, looks at how much money you’re generating. Based on how much money you’d like to be generating, you can then make a determination about how much you need to increase sales and, thus, set about trying to figure out how to do that.

Profit/Loss. This is a quick look into whether your company’s expenditures are MORE than your income.

Cash Flow Forecasting. Remember that improper cash flow is literally the number one reason why most businesses close prematurely. If you want to get better at cash flow management, you need to start taking a deeper look at what your cash flow is predicted to be both in the short and long-term. Diving deeper into this topic now can help you mitigate some fairly significant risks later on.

If you have any additional questions about KPIs, please contact our office today.

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, Certified Business Profit Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

Ideas For Growing Your Business

May 21, 2017

Courtesy: BigStock Images
If you have already successfully started a business and are ready to take the next step, you may be wondering what you can do to help your business grow. The Small Business Administration recommends ten ideas for growing your business. Choosing ideas for growing your business will depend on the type of business you own, your available resources, and how much money, time and resources you’re willing to invest all over again. If you’re ready to grow, review these ten tips.

1. Open Another Location. This is often the first way business owners approach growth. If you feel confident that your current business location is under control, consider expanding by opening a new location.

2. Offer Your Business As A Franchise Or Business Opportunity. Franchising your business will allow for growth without requiring you to manage the new location. This will help to maximize the time you spend improving your business in other ways, too.

3. License Your Product. This can be an effective, low-cost growth medium, particularly if you have a service product or branded product. Licensing also minimizes your risk and is low cost in comparison to the price of starting your own company to produce and sell your brand or product. To find a licensing partner, start by researching companies that provide products or services similar to yours.

4. Form An Alliance. Aligning yourself with a similar type of business can be a powerful way to expand quickly.

5. Diversify. Diversifying is an excellent strategy for growth, because it allows you to have multiple streams of income that can often fill seasonal voids and, of course, increase sales and profit margins. Here are a few of the most common ways to diversify:

o Sell complementary products or services
o Teach adult education or other types of classes
o Import or export yours or others’ products
o Become a paid speaker or columnist

6. Target Other Markets. Your current market is serving you well. Are there others? Probably. Use your imagination to determine what other markets could use your product.

7. Bid On A Government Contract. One of the best ways to grow your business is to win business from the government. Work with your local SBA and Small Business Development Center to help you determine the types of contracts available to you.

8. Merge With Or Acquire Another Business. Two is always bigger than one. Investigate companies that are similar to yours, or that have offerings that are complementary to yours, and consider the benefits of combining forces or acquiring the company.

9. Expand Globally. To do this, you’ll need a foreign distributor who can carry your product and resell it in their domestic markets. You can locate foreign distributors by scouring your city or state for a foreign company with a U.S. representative.

10. Expand To The Internet. Very often, customers discover a business through an online search engine. Be sure that your business has an online presence in order to maximize your exposure.

Source: Ideas For Growing Your Business. Small Business Administration. https://www.sba.gov/managing-business/growing-your-business/ideas-growing-your-business

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, Certified Business Profit Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

Hobby or Business? IRS Offers Tips To Decide

May 5, 2017

Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.

Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies.

Here are five IRS tax tips to consider.

1. Is it a Business or a Hobby? A key feature of a business is that people do it to make a profit. People engage in a hobby for sport or recreation, not to make a profit. Consider nine factors when determining whether an activity is a hobby. Make sure to base the determination on all the facts and circumstances. For more about ‘not-for-profit’ rules, see IRS Publication 535, Business Expenses.

2. Allowable Hobby Deductions. Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3. Limits on Hobby Expenses. Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

4. How to Deduct Hobby Expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See IRS Publication 535 for the rules about how to claim these on Schedule A, Itemized Deductions.

Source: IRS Small Business Week Tax Tip 2017-04

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

IRS Tips For Cash Intensive Businesses In The Sharing Economy

May 4, 2017

Small business owners that offer goods and services through an online platform may be part of the sharing economy. Some participate part time while others operate full time. Activities such as ride sharing, freelancing, renting a spare bedroom and crowd funding are usually taxable.

Some sharing economy tips for small businesses to consider:

1. Taxes. Sharing economy activity is generally taxable. Payments received in the form of money, goods, property or services may require filing a tax return to report that income to the IRS.Tips. People often conduct sharing-economy activities electronically but tips in cash are still a common occurrence. Tips are generally subject to withholding. Small businesses or self-employed persons should report tips they receive as income on Schedule C.

2. Large Cash Amounts. Any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days after receiving payment.

3. Deductions. Expenses to carry on a trade or business are usually deductible. Examples include claiming the $.54 cents per mile rate for 2016 when using a car for a ride-sharing business. Or deducting the commission/fee charged by a freelancer marketplace service.

4. Estimated Payments. Small businesses in the sharing economy often need to make quarterly estimated tax payments to cover their tax obligation. Form 1040-ES, Estimated Tax for Individuals, will help to figure these payments. IRS Direct Pay is the fastest and easiest way to make these payments. The Treasury Department’s (EFTPS) system is also an option.

5. Records. Good records assist in monitoring a business’s progress, tracking deductible expenses and can substantiate items reported on tax returns. A good recordkeeping system includes a summary of all business transactions. Generally, it is best to record transactions on a daily basis to keep your records up-to-date.

For more information about taxes, cash receipts, deductions, estimated payments, and recordkeeping procedures for your small business, call our office today.

Source: Small Business Week Tax Tip 2017-03

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

Employee vs. Independent Contractor?

May 1, 2017

Here’s another tip for small business owners during Small Business Week. The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor.

An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors.

Here are two key points for small business owners to keep in mind when it comes to classifying workers:

1. Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes:

• The extent of the worker’s investment in the facilities or tools used in performing services.
• The extent to which the worker makes his or her services available to the relevant market.
• How the business pays the worker.
• The extent to which the worker can realize a profit or incur a loss.

2. Relationship. How the employer and worker perceive their relationship is also important for determining worker status. Key topics to think about include:

• Written contracts describing the relationship the parties intended to create
• Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay.
• The permanency of the relationship.
• The extent to which services performed by the worker are a key aspect of the regular business of the company.
• The extent to which the worker has unreimbursed business expenses.

For more information on deciding whether your worker should be classified as an employee or independent contractor, please call our office today.

Source: Small Business Week Tax Tip 2017-02

If you have questions about starting, growing, protecting, understanding business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis, business planning, and small business advisory services. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.

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