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Health Insurance Tax Credit For Small Business

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Tax Tips  are not a substitute for legal, accounting, tax, investment or other professional advice.  Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Health Insurance Tax Credit for Small Business
Small businesses have traditionally been unable to offer health insurance benefits to employees. The primary culprit preventing small businesses from offering this particular benefit was the high costs involved in doing so. The Affordable Care Act, however, has made a few changes that make offering insurance to employees a more affordable option — even for the smallest of businesses. Health Insurance CO-OPs, the Small Business Health Options Program (SHOP), are health insurance tax credits are just some of the changes which are opening the health insurance doors that have been closed to small business owners in the past. What’s So Powerful About the Combination?
Health Care CO-OPs and tax credits, by themselves, would still not be enough to make offering employer insurance feasible for many small businesses. The combination, however, of affordable insurance alternatives such as CO-OPs with tax credits, makes the situation more tenable for small businesses that operate at marginal profits in order to stay afloat as it is. What Businesses are Eligible for Health Insurance Tax Credits?
There are several requirements that must be met in order for employers to be eligible to receive tax credits for offering health insurance. According to Aetna, these conditions include:

  • Cannot employ more than 25 full-time equivalent employees in a taxable year
  • Employer must cover a minimum of 50 percent of the coverage cost for employees
  • Average annual wages cannot exceed $50,000
  • Qualifying agreement must be maintained

In 2010, the maximum tax credit was 35 percent. That number will change to a maximum of 50 percent in 2014. However, extremely small businesses with 10 or fewer full-time employees and average annual wages lower than $25,000 stand to benefit most from the small business tax credit says the Small Business Administration. The goal, of course, is to provide the greatest support and assistance to low and moderate income workers.
The IRS also points out that if you did not owe taxes during the year, you are eligible to carry the credit forward or back to other tax years. Information Worthy of Note
The National Federation of Independent Business, NFIB, points out that there are several limitations business owners need to be aware of with the health care tax credit. First of all, business must pay at least fifty percent of the health insurance premiums for their employees in order to qualify for the tax credit.
Second, most businesses that do receive the tax credit will not be awarded the maximum amount. Not only are small business owners excluded from the tax credit (and exclusion in the calculations of wages), but also the owners’ family members including children, foster children, siblings, step siblings, spouses, certain cousins, and in-laws.
Because figuring tax credits and understanding benefits such as these is so complex, the NFIB also highly recommends that business owners consult with their accountants before determining their best courses of action.

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

USE A DIVERSIFIED APPROACH TO MARKET YOUR BUSINESS!

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Tax Tips  are not a substitute for legal, accounting, tax, investment or other professional advice.  Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Use a Diversified Approach to Market Your Business.
Before the rise of social media, most businesses used the same marketing techniques to promote their products and services. However, now that consumers have so many different outlets for entertainment, a one-size-fits-all approach to marketing is no longer as effective as it once was. In today’s world, consumers can find entertainment on television, online, on their smartphones and through alternative networks, such as Netflix and Hulu. For this reason, it’s very important for businesses to diversify their marketing efforts so that they can reach consumers through multiple mediums.
About Diversified Marketing
Diversified marketing involves using various marketing outlets to promote your company and build relationships with as many consumers as possible. With this marketing technique, you will not only increase the number of consumers you reach, but you will also increase the amount of communication each consumer receives from your company. For example, if a consumer’s primary entertainment outlets are the internet, Hulu and television, you can remind the consumer of your business’s existence through all three outlets. Implementing a Diversified Approach
Although diversified marketing requires more time and attention than a traditional, television or radio- only marketing approach, it isn’t much more expensive. Incorporating online and mobile marketing into your campaigns doesn’t require much investment, and most of the platforms are user-friendly and easy to understand.
To get the most out of diversified marketing, businesses should include as many outlets as possible in every marketing campaign. Acceptable outlets include television, radio, social media, text and multimedia messages, email, blogs and review websites. However, it’s important to remember that most marketing campaigns will need to be optimized for each of the outlets you choose. For example, if you create an advertisement for Facebook, it won’t typically work on Twitter, since Twitter limits the amount of content you can post at one time.
Marketing Tips
When your business implements diversified marketing, you must be careful not to oversell to consumers. Today’s consumers don’t want to be bombarded with overt advertisements, especially from multiple sources. In fact, using a campaign that overwhelms consumers in this way can actually be harmful to your business. Instead, you should try to offer consumers content that is useful and informative. For example, if your business focuses on the food industry, you can remind consumers of your existence by offering cooking tips. You can also encourage customers to make purchases by offering coupons, give-aways and other promotions.
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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

RETIREMENT INCOME A CHALLENGE? THE BASICS

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Retirement Income a Challenge: The Basics

Thinking of offering a retirement plan to your employees? Here’s some of what you need to know.
If you were employed during the 1980s, you probably remember what a benefits bonanza that period was. Inexpensive health and life insurance. Short and long-term disability. And pensions.
The defined benefit pension was beginning to fade as the defined contribution pension – created when Congress established 401(k)s – took hold. The onus of retirement income began its slow shift from the employer to the employee, though many employers continue to contribute.
Today’s retirement accounts have tax advantages for both employer and employee, but there are many IRS regulations you’ll need to follow. Here’s a basic overview of what’s available. We’ll work closely with you when you decide to get started.
A Trio of Options
Most retirement plans fall into one of three categories:
1. Simplified Employee Pension (SEP). This is the simplest method; you contribute on an ongoing basis to a retirement plan for yourself and your employees. Your contributions are deposited directly into a traditional individual retirement account or individual retirement annuity (SEP-IRA).
The maximum contribution is $49,000 or 25 percent of employee’s salary, whichever is smaller. Maximum deduction is 25 percent of all participants’ compensation (a cap of $245,000 in compensation was – “generally” – in place for the 2011 tax years).
2. Savings Incentive Match Plan for Employees of Small Employers (SIMPLE). These can be either IRAs or 401(k)s. To be eligible, you must have 100 or fewer employees who earned at least $5,000 during the last year. Employees can opt to have a portion of their paychecks deducted regularly for this purpose, and you would contribute matching or nonelective contributions.
Employees can defer up to $11,500 ($14,000 if age 50 or older), and there are two options for the employer contribution:
Dollar-for-dollar matching contributions, up to 3 percent of employee salary (up to $245,000 in 2011)
Fixed, non-elective contributions of 2 percent of compensation (same salary limit)
The maximum deduction here is the same as the maximum contribution.
3. Qualified Plans. These are more complicated than SEPs and SIMPLEs. Still, they offer advantages like more flexibility in creating plans and – sometimes – higher contribution and deduction limits. The contribution and deduction limits vary greatly.
Numerous Tax Implications Keep in mind, too, that you may be able to claim a tax credit for, “…part of the ordinary and necessary costs of starting a SEP, SIMPLE or Qualified Plan.”
Obviously, your taxes are about to get a whole lot more complicated. We’d like to work with you early in the process, before you’ve even determined what kind of plan to offer. We applaud you for your efforts to help your employees build income for their retirement.
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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

Does a Small Business Need a Tax ID Number?

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Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

A tax ID number, also called an employer identification number (EIN), is a federal number assigned to companies by the IRS. The federal tax ID number is different for each business, letting the IRS differentiate between businesses. It’s also used by the IRS for for verification purposes. Regardless of the size of your business, there are many reasons to have a tax ID number or EIN,, which should be carefully examined.
 
What is a small business tax ID number?
 
The tax ID number for a small business is a federal number given to a business for verification, regulation, and tax purposes. In order to pay taxes, your business needs to have a tax ID number that was specifically assigned to your company. As a US citizen, your tax ID number is your social security number, but when filing as a business, in most cases, you need a separately assigned number from the IRS.
 
Does my small business need a tax ID number?
 
There are some stipulations that require small businesses to obtain a tax ID number, but in general, all businesses should have one. If your business sells products that are taxed, you need a federal tax ID number. You will also need one if you have employees, sell services, are a partnership or corporation, or sell alcohol, tobacco, or firearms. Additionally, if your business is involved with a farmers’ cooperative, non-profit organization, estate, trusts, or real estate mortgage conduits, you will also need a tax ID number.
 
However, a sole proprietor who doesn’t file pension plan or excise tax returns and is without employees doesn’t need an employer identification number. In this case, the sole proprietor’s social security number may be used as the taxpayer identification number.
 
Even if you don’t fit these specifications, it is still advised that you apply now to get a tax ID number. You may require one in the future, and you can save yourself delays in paying taxes or receiving refunds if you apply for it now.
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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.
 
 
 
 
 
 

Fraud:It can happen to you

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Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Fraud: It can happen to you
Do you know how to detect it or protect yourself? Most of us want to believe the best of people and therefore we are naive and believe it will never happen to us. When in reality, small and mid-size businesses are impacted at a much higher percentage than large corporations. Why? Smaller businesses tend to take fewer precautionary measures to prevent fraudulent behavior.From my experience, it is usually done by a family member, long time employee, or friend that’s been given too much freedom with too few controls. For most of us, it is an innate belief that we trust people unless they give us a reason not to. However, you must not be naive. You need to know that it is very much a reality that could happen in your business and you need to be aware of why it happens, how to identify if it is happening, and what to do if it has happened.

Why does fraud happen? Usually it is a mixture of three aspects that sets the stage:

  1. Opportunity – an opportunity for fraudulent behavior is provided by the company unknowingly. Small businesses are more prone to these because of the lack of separation of duties.
  2. Pressure – personal pressures can put people over the edge and cause them to be irrational in their thinking. They may have medical issues, financial issues, or a variety of other personal situations that are influencing their judgment.
  3. Rationalization – the employee believes they can rationalize their behavior. They need the money more then the company, the company won’t ever notice, and a million other similar types of insidious thoughts.

To someone who commits fraud, they can rationalize their behavior in a variety of different ways and will go to extreme measures to cover their tracks. Small business owners believe it won’t happen to them as they often consider their employees like family. However, it is critical that you are able to keep a separation of thoughts between what happens at work and what happens outside the four walls of your business. No business is 100% safe.

What are five popular types of fraud?

  1. Claiming additional payroll hours or falsifying an employee.
  2. Stealing merchandise or cash.
  3. Giving unauthorized discounts to friends and family.
  4. Selling private business information to outsiders.
  5. Exaggerating on expense reports

The biggest way to identify if it is happening in your business is to implement a control process that includes separation of duties. Here are a few easy to implement activities that can help identify and/or prevent fraud:

  1. Payroll – hand deliver the paychecks. This will help identify if there are any “false” employees. A process for tracking hours will help to minimize extra hours appearing on anyone’s time card. This can be done by having a manager sign off on subordinate’s time sheets or by having a time
  2. Theft of cash or merchandise – have controls in place that ensure separation of duties. Those who receive the money should be different than those who have done the invoicing and depositing. Same goes for inventory. There should be a checks and balances for purchase orders, receiving and invoicing.
  3. Unauthorized discounts – have a sales system in place that tracks any time discounts are given. When you can retrieve a discount report, then you will be able to easily identify anything out of the ordinary variances.
  4. Selling private information – this is a difficult one to protect. You should have everyone sign an agreement at the time of hire to notify them that they are going to be exposed to confidential information and what their responsibilities are and consequences should they disclose to outsiders. Computer systems and paper work should also be protected with passwords, lock and key and whatever other measures may be warranted to minimize unnecessary access.
  5. Expense Reports – require receipts on ALL reports for reimbursement with no exceptions. Also establish guidelines so that if they fall outside those guidelines then they may risk not being reimbursed without prior approval.

Unfortunately all we can do is implement protective measures to the best of our ability. There is no 100% fool proof way to guarantee it won’t happen to us. However, you need to ensure you are assessing your risk and implementing separation of duties to try to minimize fraud in your company.

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.
 

Employee or Indepedant Contractor?

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Hire an Employee or Use an Independent Contractor?

Small business owners often need someone to help them with specific tasks. These tasks may range in scope from designing a brochure to writing product descriptions or answering telephones part-time. What is typically challenging for many small business owners is the additional burden of hiring someone on a full-time basis for part-time tasks. This is when it becomes necessary to make a decision between hring an employee and using an independent contractor.

 

Business hiring decisions

Small business owners often find that the cost of hiring a full-time or part-time employee is costly and often creates more paperwork than is warranted. This may be when it is time to consider an independent contractor. However, it is important to note the IRS rules that apply to independent contractors before you do so.

 

The IRS offers three basic rules that separate an employee from an independent contractor. They are: 

 

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

 

2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

 

3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?”

 

If the tasks that you need to have accomplished can be done by an outside worker and these questions can be answered in the negative when the tasks are accomplished, you can use the services of an independent contractor versus hiring an employee.

 

The impact on your taxes

When you hire an independent contractor, you deduct the expenses associated with paying them from your taxes by reporting the income to the IRS and the contractor on a Form 1099. As a small business owner, you have no obligation to withhold any type of taxes, the contractor is responsible for taxes on their own.

 

There are many instances where it is more beneficial for a small business owner to outsource work to an independent contractor. Overall it saves paperwork, you need not provide equipment or supplies and you do not have to withhold taxes. In many cases, the services of an independent contractor will be a more cost effective option. 

 

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.