Navigating Small Business Financial Forms

So the time has come for your small business to begin growing. While hiring new employees often means increased business, a reason for singing from the rooftops, the process can be confusing and downright scary to small business owners navigating the system for the first time. Federal and state penalties can be harsh, so the need to follow new-hire processes to the T is a must. At VAST, our motto is help small business owners do what they do best while we handle their financial and accounting duties. Here’s the lowdown on hiring new employees and the frightening small business financial forms associated with growing your small business team.

Apply for an Employee Identification Number

Your EIN allows your employees to file taxes. This is super simple, and can be done in a few minutes online or by phoning the IRS at 1-800-829-4933.

Create a Record System for Employee Taxes

The IRS requires quite a few different records to be held for all company tax information, the most common being a 4-year record for tax documents. Create a system now to avoid confusion and lost information in the future. The three main tax documents you’ll need to hold onto are for federal income, federal wage and tax and state taxes (depending on your state).

Verify Your New Hire’s Credentials

Employers are required to complete the I-9 form for employment eligibility. This form is needed to confirm that your new employee is indeed a citizen and available for work. While this form doesn’t need to be submitted to the government, employers are required to hold onto them for three years after the hire date or one year after termination, whichever comes later.

 Register with Your State’s New Hire Program

All employers must register new employees with their state government within 20 days of hiring new employees.

Worker’s Compensation Insurance

Companies are required to carry worker’s compensation insurance, and for good reason. This will protect you and your employees in case of an accident.

Spread the Word

As a new employer, you are required by law to post informational notices in the workplace that explain a worker’s rights on the job as a U.S. Citizen. Avoid a future fine and post that poster.

Tax Time

Filing taxes is never fun, but neither are the penalties associated with doing them incorrectly. Depending on your company, you’ll need to submit a few different tax forms.

Stay Organized

As employees continue to grow alongside your business, establishing a system to stay organized for all of your forms by year, employee or some other sorting system is key. Preare yourself when you first begin to grow for your own future benefit.

Small business financial forms can be confusing, but there is a plethora of information available online regarding all the different forms you might need as an employer. Visit the U.S. Small Business Administration, the IRS website or contact your local virtual accounting firm (that’s us!) with any questions you might have.

Mastering Small Business Financial Tips

Wearing all the hats it requires to keep your business operational is enough of a head-trip to have many entrepreneurs ripping at their hair. As if you didn’t already know, managing a small business is a vastly rewarding yet ridiculously tedious process. For those fighting the good fight and persevering through those day-to-day struggles, mastering small business financial tips will benefit you time and time again.

Therefore, it’s important to understand the basics of financial operations facing small businesses, which is the point of this post. While covering all of the necessary areas in small business financial literacy would take a multi-volume encyclopedia large enough to cover the first floors of the national library, Team VAST recommends filling up on the following couple of small business financial tips sooner than later.

Creating budgets may not be the most ideal way to spend your time as an exciting new entrepreneur, but it’s important. Reviewing past and present records to project future operating expenses may be tedious, but failing to forecast how much, where and when your cash is being spent creates all-out pandemonium as your company continues to grow. Don’t expect your budget to match actual spending; in fact, that nearly never happens. Yet, the knowledge of creating and comparing an expected vs. actual budget reaps copious financial benefits.

Keeping track of employee paperwork and financial paperwork (for taxes, loans, etc.) from the beginning is smart. Thoroughly understanding the documents you have on file is even smarter. Familiarizing yourself with these documents will not only build your wealth of financial legal workings but also reduce the stress associated with confusing documents. There is nothing worse than being asked for legal licensing and tax documents from the IRS and drawing a blank when it’s time to deliver.

Whether you choose to outsource your financial responsibilities or not, having a basic understanding of your small business finances and what your accountant is doing for your company is important in many more ways than one. The team at VAST has the financial knowledge and expertise to assist you throughout all stages of your entrepreneurial endeavors. Contact us today to start building your trustworthy bank of financial literacy.

When it comes to small business accounting, the virtual accounting experts at VAST have your back.

Filing a Tax Extension: Your Saving Grace on Tax Day

"The 15th of April": Just saying the date out loud can be reason to cringe.

It’s tax day, and while those over achievers who filed their returns moments after receiving their W-2’s near the end of January have long-since passed off Tax Day, procrastinators the nation ‘round are suffering the blow that comes with realizing that today is … today.

Lucky for you who specialize in procrastination, the end is not as near as you may think. Saving graces exist in many forms, and for you: the tax extension. Filing a tax extension can help you avoid IRS penalties even though your taxes are not 100% complete. Here’s why.

You would be surprised at just how many people have an inaccurate understanding of what exactly a tax extension is. Perhaps, that person is you. A tax extension is essentially exactly what it sounds like: a 6-month extension for submitting your tax paperwork to avoid penalties from the IRS. However, tax extensions only apply to the paperwork portion of your income taxes, not the monetary value that you must pay in the event that you owe money for your personal or company 2014 taxes.

Therefore, estimating the amount you owe on your income taxes is vital to navigating the tax extension slope because although your tax paperwork isn’t due until October 15, 2014, however much you owe for your taxes is due on April 15 (otherwise known as today). The team at VAST gladly assists clients in need of tax estimates when filing extensions, but there are a variety of online tools you may use as well.

Assuming that either you don’t owe anything on your taxes or you have estimated the amount you owe and paid it by April 15, there are several benefits to filing a tax extension. Filing a tax extension not only offers you more time to gather the information and necessary paperwork to file, it also offers your accountant more time to thoroughly file your taxes, which can oftentimes decrease potential for error (not that VAST makes errors, how absurd).

Additionally, filing a tax extension has little to no direct correlation in warranting an audit. While nobody really knows exactly what triggers audits, there is no significant reason to worry that filing a tax extension will doom you to an audit.

Filing a tax extension is a useful, practical way to give yourself more time to file those pesky tax forms. While you still have to pay the amount you owe on your 2014 income taxes by April 15, you can find all of the information to file a tax extension online at the IRS website.

Happy Tax Day! (OK, maybe not happy).

Small Business Tax Preparation in Reno (and Well Beyond)

For most small business owners, tax season stinks. As a fellow small business, we understand the blow that comes with being sideswiped by the unpredictable laundry list of requirements necessary to file small business taxes. Mix in the already overwhelming everyday duties of a small business owner and tax season is a recipe for disaster (AKA an impending mental breakdown, a lash out at unsuspecting victims or a series of holes in your office walls).

Fortunately, we know exactly what it takes to make tax season that much easier on you and your business. How? By putting VAST in charge of your small business tax preparation. Whether you use VAST services for your accounting needs year-round or you’re simply looking for a professional hand to assist in filing for 2013, let us give you the ultimate peace of mind. Our expertise handling small business tax preparation in Reno (and beyond) is extensive, mind-boggling really.

As a virtual accounting firm in Reno, the systems we have established to ensure convenience and ease-of-access are unbeatable. We specialize in bringing quality, efficiency and accuracy directly to you and your small business. Let us do what we do best: crunch your numbers and keep your hard earned cash in your pockets where it belongs.

As a small business owner, it’s easy to feel overwhelmed. At VAST, we make accounting so easy that you’ll swear you just discovered the small business accounting “easy button.” April 15th is racing toward us, so help us help you by contacting VAST today.

Whether your small business is based in Reno or elsewhere, VAST has the resources, experience and know-how to competently prepare your small business taxes.

 

Now That it's Tax Season, Has Your Accountant Gone MIA?

Did you outsource your accounting to a firm that promised they specialize in "cloud" accounting or virtual accounting only to find that now that it's tax season, they've run back to their true love (and breadwinner): preparing taxes? There are bushelfuls of accounting firms that moonlight as outsourced accounting firms, generating revenues to fill in those "slow" months when tax returns aren't pouring in. This can often leave their clients scratching their heads during the busy tax season months of February, March and April. Unable to connect via email, phone, in-person visits, telegram or any other means of communication, clients are left asking themselves "where, oh where did my accountant go?"

At VAST, we are dedicated to virtual accounting and outsourced CFO services for our clients and this means that our clients have dedicated accountants on their team (year-round).  These specialized accountants love VAST and work full-time for VAST--so they won't get pulled away when it's busy, regardless of the time of year. We dovetail our virtual accounting services into our tax team so that we can provide more intuitive and calculated tax advice to our valued clients. This way our valued clients receive consistent virtual accounting throughout all 12 months of the year and also the value-add of a tax team that is familiar with their finances.

Connect with us today to learn how VAST can empower you with financial information.

VAST is a virtual accounting service based in Reno, and with the cloud capability to work with clients all over the world. When it comes to tax preparation in Reno and beyond, we aim to take a comprehensive look at our small-business and individual clients in order to prepare and file their taxes professionally, intuitively, and on-time. 

3 Big Tax Tips for the Busy Entrepreneur

No need to burden you with every little tax code in the book on this one. While there are dozens of tips that could potentially help your business, there is no need to overcomplicate the issue. The last hassle a business owner needs is a cumbersome list of tax tips to try and keep in mind throughout the year or to waste their day digging through complicated tax lingo. Here are three big tax tips that will help you drive through each tax year safely.

1.     Personal and business expenses are friendly but not intimate. Too many entrepreneurs allow their expenses to comingle in their accounting. While it may seem like they are hitting it off, in reality they are making your tax preparation far more complicated. Just like in a relationship, when things get complicated someone always ends up getting hurt. In this case, the only person who can get hurt is you, so keep those hands above the waist and visible distance between your business and personal expenses.

2.     Procrastinators, check your bags at the door. Don’t wait for the last minute, keep up to date on your estimated quarterly payments. Procrastination gets the best of us all at times. While it may be warranted to put off a trip to the DMV, and those ever-so-cheerful clerks, taking your time about getting around to your taxes is no bueno. Get those quarterly payments in on time, every time. When January rolls around and you are going through your reporting, you will be glad you did.

3.     Tax preparation is a team sport. Don’t wade off into the deep end alone. By hiring a knowledgeable and dedicated virtual accounting service your information will always be accurate and well organized. Come tax season you can call on your team to be there for the assist. Plus, we will maximize your potential for deductions, ensuring that you don’t pay more than you owe.

The IRS may be big and bad, but you don’t have to be the one who gets caught alone in the woods unprepared. These three tips can help you get safely through tax season without any surprises laying in wait at the end of the journey.

Virtual Accounting Service

VAST is a Reno-based virtual accounting service offering Virtual Bookkeeping, Outsourced Accounts Payable and Receivable and much more.

Small Business Owners’ Tax Rates Top 62% … Wait, What?

Taxes: The albatross of you, me and every business owner on the planet. Most business owners are tasked with paying taxes quarterly, paying payroll taxes, paying people to prepare taxes and defending ourselves when audited for taxes—it never ends. But what most people don’t realize is how big that effective tax rate gets for an entrepreneur trying to make a living, and that’s something I aim to clear up here. Take your average small business owner. Let’s call him Joe. Now, Joe has a company he started himself and he makes a decent living. Let’s assume Joe makes $150,000 per year that he takes as salary and that this amount was basically all his company net during the year.

Joe, like many homeowners in America right now, is unfortunately doing a short sale on his house. So, back in early 2011, he stopped paying his mortgage payment and therefore he can no longer take itemized deductions. Joe is single and has no kids. Joe is going to pay about $40,000 in income taxes. And it gets much, much worse…

Joe is also going to pay over $4,000 in Medicare and about $13,000 in Social Security because he is self-employed. Joe lives in a $300,000 house that is now worth $150,000, but he will pay about $9,000 in property taxes on the old value. He is going to pay about $800 in “luxury tax” on his vehicle. He eats out a lot, and so he is going to pay about $2,000 in sales tax on meals. He buys some clothes and other household items now and again, which will take him for another $3,000 in sales tax. Joe is also going to pay excise tax on his cell and house phone, fuel tax on the gas he buys for his vehicle and unemployment tax on his salary. These miscellaneous taxes together will cost him up to another $2,000

None of what we’ve itemized thus far takes into consideration that his salary would have been higher in the first place if his company didn’t have to pay business license fees (tax), capital gains tax, industry specific tax (like gaming or entertainment tax), personal property tax, and on and on to the tune of several more thousand dollars.

But, in one area Joe is lucky. He lives in Reno, Nevada and doesn’t pay state income taxes. If Joe lived in California, he’d be facing another $12,000 for state income taxes.

If you include the state income tax, all of these add up to about $92,000 leaving Joe a net paycheck of $58,000 for the year. That’s right folks—that is an effective tax rate of 62%! Now, can Joe change his behavior—drive less, eat at home more? Maybe. But really, 62%? The reality is that all business owners pay an exorbitant combined amount of tax, and we can all end up in this spot if we’re not careful.

Our country’s tax structure will not be fixed overnight. It is unfortunate the burden that this myriad structure places on a business owner. By not educating ourselves on the large tax liability that business owners are expected to shoulder, we can set ourselves up for failure and devastating tax consequences. However, by being proactive and learning how these affect us, we can lessen this burden—at least enough to make it a little more palatable.

Here are four myths about taxes that are a good place to start in facing your own tax situation:

An audit is not the end of the world and it will most likely not kill you.

Is an audit unpleasant? Most definitely. But, just because you are facing an audit, do not just assume that you will ultimately be facing a big tax bill. If your tax return is reasonable and you are taking legitimate deductions, then the audit will most likely not result in changes to your return. You can even be aggressive and still not have additional tax bills. The key to an audit is ensuring that you are documenting your stance on tax positions, taking deductions that are truly deductible and allowed under the tax laws and that you are claiming your taxable income.

All of my deductions should fall within a range that the IRS says is reasonable.

Balderdash. Deductions are reasonable if they are truly business deductions. Not because they fall within a common percentage of your income. Your business is different than any other business. Your deductions will also be different. Here are some examples of deductions being relative to a business. First, say you own a restaurant and you are thinking about adding Eggs Benedict to the menu. You go to other restaurants to try their Eggs Benedict and that is a legitimate business expense. In many cases, I would even venture so far as to say this is marketing expense rather than meals expense. Another example would be a model or spokesperson. These are two of the rare positions that can deduct things like drycleaning and getting your hair done. Not a common deduction for the rest of us!

My Itemized Deductions (for example, mortgage interest and charitable deductions) will always be deductible.

Wrong again. Starting in 2013, the phaseout of itemized deductions is coming back to rear its ugly head. That means that when you make more than a certain amount (depending on your filing status) then your itemized deductions start to vanish. So at higher income levels, you can pay your mortgage and make donations and not get to claim any of it as a deduction on your tax return. Now, this doesn’t necessarily mean that these payments aren’t still a good idea, but if you are planning on the tax benefit, make sure you know what that is.

If I run it through my business or if my business loses money, then it must be deductible.

Wrong again. A typical business structure for a small business is either an S corporation or an LLC. Just because you take your kids to Disneyland and have your business pay for it, does not make it a business expense. Business expenses differ for every business. Yours should include items that are related to your business. But, that said, you can include expenses that maybe you didn’t deduct before you started your business like your cell phone and home office internet.

On the flipside, business losses come in many shapes and forms. In many cases, if your business shows a loss, your tax preparer could add insult to injury by telling you that you can’t deduct it on your taxes. There is a term called basis that determines if a loss can be deducted. Think of basis as your skin in the game. Basis can be very complex, but be sure to check with your tax preparer to ensure you have enough basis to deduct losses before counting on it.