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Saver’s Tax Credit Explained

January 18, 2014 Leave a comment

Low and moderate-income workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return.

Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply and helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. Taxpayers have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013.

Most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Note: Elective deferrals (contributions) must have been made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.

The saver’s credit can be claimed by:

  • Married couples filing jointly with incomes up to $60,000 in 2014;
  • Heads of Household with incomes up to $45,000 in 2014; and
  • Married individuals filing separately and singles with incomes up to $30,000 in 2014.

The saver’s credit can increase a taxpayer’s refund or reduce the tax owed. The maximum saver’s credit is $1,000 for single filers and $2,000 for married couples and is based on filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.

Other special rules that apply to the saver’s credit include the following:

  • Eligible taxpayers must be at least 18 years of age.
  • Anyone claimed as a dependent on someone else’s return cannot take the credit.
  • A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.

Planning for Your Home-Based Business — Get Down to Business

August 14, 2013 Leave a comment

 

Money fuels all businesses. Or as I like to say, “cash is king.”  With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

 

 

Estimating Start-Up Costs

 

To estimate your start-up costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

 

Business experts say you should not expect a profit for the first eight to 10 months, so be sure to give yourself enough of a cushion if you need it.

 

Projecting Operating Expenses

 

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

 

Projecting Income

 

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points and cash-flow statements. Use your marketing research to estimate initial sales volume.

 

Determining Cash Flow

 

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

 

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

 

Strengthen your resolve to do things right and seek the wisdom you need to move toward success.

 

 See more at http://www.cashaccountingcpa.com

 

 

 

 

 

Avoid These Errors When Making a Budget

July 26, 2013 1 comment
English: Sample budget

English: Sample budget (Photo credit: Wikipedia)

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small businesses, and some tips for avoiding them.

  1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.
  2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
  3. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

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Is a Budget Worth the Effort?

October 8, 2011 Leave a comment
budget projet 2007-2013

Image via Wikipedia

Nonprofit or for-profit, the annual budgeting process rouses conflicting emotions among managers and staff members.  They don’t know whether to embrace it or to wish the process would hurry up and go away.  I wonder what the guy who wrote Blink would say.

If you find yourself asking questions about budgets, remember you are not the lone ranger.  Deloitte posted a debate on their website back in October about budgeting, a debate likely prompted by planning during times of volatility.  Some of the pros and cons include:

–       Budgeting is obsolete, throw it out.

–       Budgeting is a waste of time and resources.

–       Leaders need more flexibility than budgeting allows.

–       Budgeting keeps you aligned with corporate strategy.

–       Abandon what’s not working and keep the rest.

–       Budgeting needs to be customized to your organization.

–       Budgeting maintains accountability.

What do you think?  Ditch the process to provide flexibility?  Maintain strict adherence to the budget plan?  Build in ways to address volatility?

Read more at Deloitte’s website.

Changes in Private Company Financial Reporting on the Way?

July 20, 2011 Leave a comment
Pacioli wrote on accounting ethics in 1494

Image via Wikipedia

If you are a private business owner, are you aware that financial accounting changes may be on the way?

In 2010, the Blue Ribbon Panel on Private Company Financial Reporting explored changes that would best meet the needs of users of private company financial statements.  This panel was sponsored by several organizations including the AICPA, the Financial Accounting Foundation (FAF), and the National Association of State Boards of Accountancy.

Two significant recommendations from the Panel signal that changes are on the way.  First, they recommended a new, separate board with standard-setting authority under the oversight of the FAF.  Second, there will be changes and modifications to existing and future GAAP that reflects the unique needs of users of private company financial statements.

These recommendations arise from the long-standing criticism that what drives accounting standards is driven primarily by issues affecting public companies.  Lenders, investors, and business owners regularly question the relevance and usefulness of GAAP as it relates to private companies.

We hope these changes will provide some relief to private companies.  There will, however, be a transition period where private business owners, CFOs, and accountants will re-educate themselves on the changes.  Keep your ears open on changes that may affect you in the near future.

Circular 230 Disclosure

August 23, 2010 1 comment

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained herein.

Categories: Accounting Tags: ,

The Balance Sheet—Your Essential Business Tool

August 19, 2010 Leave a comment
Busy with these !

Image by micamica via Flickr

Why is it that business owners don’t understand the importance of the balance sheet?  I will go a step further out on this limb and say that most small business owners could not produce a balance sheet if asked.  I know this to be true because I had a conversation with an accountant friend who said that I would not believe how many business owners set up as S corps come in with their basic Quickbooks income statement each year and want him to do their tax return.  He always asks, “Can you show me a balance sheet?”  The answer typically comes back “No.”  He then explains the need to show both a beginning and ending balance sheet if their revenues are greater than $250,000.  They give him the strangest look.

Just ask Warren Buffet how important the balance sheet is.  Your assets, liabilities, and equity say a lot about the strength of your business.  It helps in making financing decisions.  It helps your lenders assess your credit worthiness.  It illustrates how you are best able to pay your debts.  It shows your net worth.  It is a record of progress.  It yields useful ratios that help in running your business.  The balance sheet determines the company’s ability to survive and hopefully thrive during those inevitable macroeconomic downturns every three to five years.

As an auditor, I prefer the balance sheet approach to an audit.  Why?  If relevant management assertions are tested for all balance sheet accounts and verified, then the profit/loss reported for the accounting period will not be materially misstated.  Substantive procedures are carried out on balance sheet accounts while very limited procedures are carried out on income statement accounts.  Obviously, this approach illustrates the importance of the balance sheet.

So get your pencils sharpened.  I know it was the off-balance-sheet stuff that got Enron in trouble, so it is time to get your house in order.

The balance sheet is a business owner’s best friend.  Especially when you’re honest.

Give me a call, I need some clients.

Ideas for Improving Cash Position

July 28, 2010 Leave a comment

Here we are on this cash thing again.  Cash flow reigns as the number one issue during times like these.  So, do you really know how much cash your company needs?  And are you prepared to do the things to improve cash flow, even if they seem tough at the time?

One of the first comments I want to make here is that when your business runs short of cash don’t make the mistake of paying certain bills late, particularly your federal and state taxes.  Staying current should be an objective you seek, so start evaluating what needs to happen so that you can stay current.

If cash is tight, what can you do to create more cash?  We always say “spend less” but what specifically can you do here?  Here is a short list that would fall into this category:

  • See if you can get your merchant service fees reduced
  • Don’t buy equipment you don’t need to continue operating
  • Eliminate any discretionary spending
  • Evaluate all of your buying to see if money can be saved
  • Renegotiate a lease
  • Cut employee benefits
  • Cut your pay and other highly paid employees
  • Reduce the work week hours
  • Reduce travel

As you sift through this list maybe you can add some ideas of your own.  Controlling costs will free up some cash in a quick way if you act now.

Of course the other side of the picture is to generate more revenue.  Lots of ideas pop into mind and I will cover those in another post.

I need some clients, so give me a call at 706-319-8176 or e-mail cashaccountingcpa@gmail.com

Have a blessed day!

Cash is King, aka Strengthening Your Cash Position

July 27, 2010 Leave a comment

You were probably wondering when I was going to get around to saying it, but I have the perfect name for a CPA.  Some folks have nicknamed me “Petty” Cash or “Cold” Cash.

But the phrase that I like is “Cash is King.”  Now I have never been a king, but I think I could handle it in some of the smaller countries of the world.

The business world likes the phrase also.  Cash is king when it comes to maintaining a strong business presence, no matter if you are a local small business or if you are a large public corporation.  According to sources, one of the first things that Warren Buffet does is to look at a company’s cash and cash equivalents.  A strong cash position that is best is when the company generates lots of cash because of its competitive advantage.  This scenario might be seen from looking over the past few years of a company’s financials to see if there is a consistent strengthening of the cash position.  Typically you can tell if the opposite is taking place when you see a large flux in cash due to taking on more debt.

So, what should we do?  Evaluate your business for its competitive advantage in the market where you operate.  Can you strengthen your business by doing something unique from your competitors?  Is there a segment of your business that performs better than others that you can beef up?  Are you keeping an eye out for what others in your market are doing to make money?

Lots of things to think about, but it would be well worth your time.  After all, cash is king and you need to strengthen your cash position every chance you get.

I am looking for clients so give me a call at 706-319-8176 or shoot me an e-mail at cashaccountingcpa@gmail.com

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