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A Quick Guide to What Paper You Need to Keep and What You can Toss

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If you’re like most people, you’ve got lots of paper. Some of it you need to keep, and some of it you don’t. Here’s a look at what to hang on to and the best place to store it.

It’s in the Box

A safe deposit box at your bank or a fireproof box in your home should hold birth ­certificates for you and other family members, marriage and divorce documents, naturalization papers, adoption papers, and death certificates. You may also want to keep property deeds and vehicle titles there as well. And you may want to include stock certificates and bonds that aren’t held by your broker.

Let Your Lawyer Hold It

Your will, power of attorney, health care proxy, trust documents, and other legal papers should be on file with your lawyer. You’ll probably want to keep copies of these documents in your home files and give copies to your personal representative or executor.

On Your Own

Keep records of stock purchases used for determining cost basis, income-tax returns and supporting documents, insurance policies, warranties, and receipts for home improvements in your home filing cabinet where they’re easy to access if you need them.

What To Toss

Credit card statements, receipts, and similar items can be tossed quarterly if you won’t need them for tax purposes. Consider shredding these and other sensitive records before putting them in the trash.

Whether you need individual or business tax advice, give us a call. We’ve got the answers you’re looking for, so don’t wait. Call us today.

Want to learn more about our small business accounting services? Schedule your free initial consultation now or give us a call at (336) 354-4352 today.

Family Loans — Tax Considerations

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Image of businessperson pointing at document in touchpad at meetingObtaining financing to start or expand small businesses and buy homes can sometimes be difficult. If your child or grandchild is having a hard time getting a loan from a commercial lender, you may be willing to help out by lending the money yourself.

Have a Written Agreement

Start by putting the loan agreement in writing. This may seem like an unnecessary formality, but without a written loan document, the IRS could argue that the transaction was a gift instead of a loan, potentially creating gift tax issues.

Having written documentation is also important in case the borrower fails to repay all or part of the loan. In that situation, you’d want to be able to show you’re entitled to write off the unpaid amount as a nonbusiness bad debt.

Charge Adequate Interest

The second step is setting an interest rate. While there’s no rule against interest-free loans or loans that have below-market interest rates, in a family context they can lead to tax complications. If you don’t charge sufficient interest, the difference between the amount of interest you actually receive (if any) and the amount you should have received — referred to as “imputed” interest — is taxable to you.

You can avoid the imputed interest rules by charging interest at the appropriate “applicable federal rate” (AFR). The IRS publishes AFRs monthly for loans of different maturities. These rates have been relatively low recently, reflecting the current market interest rate environment. For example, in November 2019, the annual AFR (using a monthly compounding assumption) was:

  • 1.68% for a short-term loan (three or fewer years)
  • 1.59% for a mid-term loan (more than three but no more than nine years)
  • 1.94% for a long-term loan (more than nine years)

These are the minimum rates for intra-family loans initiated in November 2019. For a term loan, the rate can remain fixed for the life of the loan. For a demand loan (one that gives you the right to demand full repayment at any time), you have to charge a floating AFR to avoid imputed interest issues.

Exceptions

When you lend your child or grandchild no more than $100,000, the amount that can be added to your taxable interest income under the below-market interest rate rules generally can’t exceed the borrower’s net investment income. Even better, you won’t have to report any imputed interest if the borrower’s net investment income amounts to $1,000 or less. You can also sidestep imputed interest on small loans of no more than $10,000 (all outstanding principal) provided the borrowed funds aren’t used to buy or carry income-producing assets.

 

We’ve helped many individuals and businesses reduce their overall tax liability through proper planning. To learn more about our tax planning services, request a free consultation online or give us a call at (336) 354-4352.

5 Resolutions QuickBooks Online Users Should Make for 2021

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meeting with accountantNew year, new challenges, and the potential for new successes. Here are five ways you can improve your financial management in 2021.

A painful year is drawing to a close. We’ll still be dealing with COVID-19 and a struggling economy in early 2021, but there’s hope on the horizon. There’s a lot you can’t control about the difficulties facing our country, but you can take control of your corner of it, especially in terms of how you manage your finances.

If you’re already using QuickBooks Online, you know how it’s solved the paperwork confusion of the past. But are you taking advantage of all of its capabilities? As you turn your digital calendar to January, consider expanding your use of the website to set yourself up for success in the new year. Here are five features to explore if you haven’t already.

Practice Proactive Reconciliation

QuickBooks Online’s Banking screen display registers for the bank and credit card transactions that have been posted by your banks. Do you review these frequently? It’s easy, and it’s important. It will save time when you do your monthly reconciliations with your bank statements. Hover over Transactions in the toolbar and select Banking. You can see some of your transaction management options in the image below.

When your statement comes and you’re ready to reconcile, you can use QuickBooks Online’s tools that take you step by step through the process. Hover over Accounting in the toolbar and select Reconcile. Let us know if you need help with reconciliation or with managing downloaded transactions.

Start Accepting Online Payments

This is probably the #1 way to encourage customers to pay you faster. When you set up a merchant account through QuickBooks Payments, you’re be able to accept credit cards, debit cards, and ACH bank transfers. Your invoices will include a Pay Now button and will contain the information your customers need to pay electronically. Their funds will go into your bank account.

There are other ways they can pay you directly. You can take their card numbers over the phone. You can also get a free card reader from Intuit and swipe their cards on your mobile device. And you can set up recurring payments that will occur automatically. There are no base fees – you just pay per transaction.

Set Weekly and Monthly Report Schedules

You may just run reports in QuickBooks Online as you need them. Some reports, though, should be created every week at a minimum, like Accounts receivable aging (detail or summary), Accounts Payable Aging, Open invoices, and Unpaid Bills. There are many others, but you need to keep a close watch on what you owe and who owes you.

It’s important to run some other reports on a monthly (or, sometimes, quarterly) basis, including Balance Sheet, Profit and Loss, and Statement of Cash Flows. Rather than just providing snapshots of where you stand with money coming in and going out, they give you a more comprehensive view of your finances that can help you make better business decisions. They’re complex and often difficult to analyze, though, which is why QuickBooks Online categorizes them as For my accountant. We can create and interpret these for you.

Expand QuickBooks Online’s Features by Using Apps

QuickBooks Online is generic enough that it can be used by a wide variety of small businesses. But that flexibility may mean that it’s not quite robust enough in one area or another, like inventory management or time tracking. There are hundreds of apps that you can integrate with QuickBooks Online to fill in the gaps. Some are free. Click on Apps in the toolbar. Again, we’re available to help if you need assistance.

Evaluate the Cost-effectiveness of Your Vendors

It’s easy to stick with the same old suppliers because it’s a hassle to change. But so many companies are hurting because of the pandemic that you may find you can get what you need for less. To go over your whole list, hover over Expenses in the toolbar and click on Vendors. You might clean up your list while you’re at it. Click the down arrow at the end of each row and select Make inactive if you haven’t ordered from specific suppliers over the last year.

As we said earlier, we’re available to meet with you and explain any of the concepts discussed here in more depth. It’s still a hard time for so many small businesses, and we want to be of help wherever we can.

SOCIAL MEDIA POSTS

Don’t have a budget set for your business? QuickBooks Online has tools that can simplify the process of creating one.

When you’re creating a budget, it’s helpful to distinguish between essential and non-essential expenses. QuickBooks Online has tools that can help you, including budgeting for necessities first.

When was the last time you shopped for new suppliers? Now is a good time to see if you could save some money and help with your budget. QuickBooks Online has many tools that can help both you and your business budget.

Did you know QuickBooks Online allows you to use existing income and expense data to create a budget? Here is how this is done.

Want to learn more about our small business accounting services? Schedule your free initial consultation now or give us a call at (336) 354-4352 today.

Find and Keep the Best Talent for Your Business

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Businesswoman at deskFinding the best candidate to hire is often costly and time-consuming. But, if your new hire turns into a loyal, hardworking, long-term employee, your investment may be worth every cent and minute.

Locate Candidates

How do you find good people? In the past, people who were job hunting would look in the “help wanted” section of the newspaper or go from store to store filling out applications. Today, most people use a computer and a mouse and search the Internet for jobs. So if you’re not posting your openings on online job boards and industry blogs and websites, you may be missing talented candidates. Note: Running classified ads may still be a good way to reach out (especially to fill jobs requiring local candidates) since many local newspapers also have an online job board for posting classifieds.

Another way to attract candidates is to add a recruiting page to your website. In addition to posting job openings, you can use the page to attract qualified candidates by highlighting the benefits of working for your company.

And last, but certainly not least, you can use social media to announce openings and solicit job applicants. There’s no better way to reach a large number of people almost instantaneously.

Make an Attractive Offer

If you’re hoping to hire top talent, you’ll want to make sure the benefits you offer are competitive — or better. Many full-time workers have access to employer-provided medical care and/or access to a retirement plan.

Keep Employees on Board

Once you’ve assembled a group of valuable employees, an attractive and competitive benefit package will help ensure they stay. Your financial professional can provide insights and help you review your firm’s benefit package for cost efficiency and competitiveness.

For more tips on how to keep business best practices front and center for your company, give us a call today. Call us at (336) 354-4352 to schedule a free initial consultation and learn more about how our Winston-Salem CPA Firm can help you get your new business off the ground.

10 Tips for Better Budgeting…

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Image of businessperson pointing at document in touchpad at meeting…and how QuickBooks Online can help you with the mechanics.

If you already have a budget, it’s probably been difficult for you to stick with it for the last several months. Unless you provide products and/or services that have been in great demand since the COVID-19 pandemic took hold, you’ve had to adjust your budget significantly.

Better days are ahead, though, and now is a good time to start doing some planning for 2021. While there are still likely to be uncertainties next year, creating a budget will give you a starting point. A budget increases your awareness of all of your projected income and expenses, which may make it less likely that you’ll find yourself constantly running short on funds.

Here are some ways you can make your budgeting process more effective and realistic.

Use what you already know. Unless you’re starting a brand-new business, you already have the best resource possible: a record of your past income and expenses. Use this as the basis for your projections.

Be aware of your sales cycle. Even if you’re not a seasonal business, you’ve probably learned that some months or quarters are better than others. Budget conservatively for the slower months.

Distinguish between essential and non-essential expenses. Enter your budget items for the bills and other expenses that must be covered before you add optional categories.

QuickBooks tips

You can use data from a previous year to create a new budget in QuickBooks Online.

Keep it simple. Don’t budget down to the last paper clip. You risk budget burnout, and your reports will be unwieldy.

Build in some backup funding. Just as you’re supposed to have an emergency fund in your personal life, try to create one for your business.

Make your employees part of the process. You shouldn’t be secretive about the expense element of your budget. Try to get input from staff in areas where they have knowledge.

Overestimate your expenses, a little. This can help prevent “borrowing” from one budget category to make up for a shortfall in another.

Consider using excess funds to pay down debt. Debt costs you money. The sooner you pay it off, the sooner you can use those payments for some non-essential items.

Look for areas where you can change vendors. As you’re creating your budget think carefully about each supplier of products and services. Can you find less costly alternatives?

Revisit your budget frequently. You should evaluate your progress at least once a month. In fact, you could even start by budgeting for only a couple of months at a time. You’ll learn a lot about your spending and sales patterns that you can use for future periods.

How QuickBooks Online Can Help

QuickBooks Online offers built-in tools to help you create a budget. Click the gear icon in the upper right corner and select Budgeting under Tools. Click Add budget. At the top of the screen, give your budget a Name and select the Fiscal Year it should cover from the drop-down list by that field. Choose an Interval (monthly, quarterly, or yearly) and indicate whether you want to Pre-fill data from an existing year.

QuickBooks tips

QuickBooks Online supplies a budget template that already contains commonly used small business items.

The final field is labeled Subdivide by, which is optional. You can set up budgets that only include selected Customers or Classes, for example. Select the desired divider in that field, then choose who or what you want included in the next. Click Next or Create Budget in the lower right corner (depending on whether you used pre-filled data) to open your budget template. If you subdivided the budget, you’ll see a field marked View budget for. Click the down arrow and select from the options listed there.

To create your budget, you simply enter numbers in the small boxes supplied. Columns are divided by months or quarters, depending on what you specified, and rows are labeled with budget items (Advertising, Gross Receipts, Legal & Professional Fees, etc.). You simply enter numbers in the boxes that apply. When you click in a box, a small arrow appears pointing right. Click on this, and your number will automatically appear in the rest of that row’s boxes. When you’re done, click Save in the lower right. You can edit your budget at any time.

QuickBooks Online provides two related reports. Budget Overview displays all of the data in your budget(s). Budget vs. Actuals shows you how you’re adhering to your budget.

We know creating a budget can be challenging, but it’s so important – especially right now. We’d be happy to look at your company’s financial situation and see how QuickBooks’ budgeting tools—and its other accounting features—can help you get a better understanding of your finances.

SOCIAL MEDIA POSTS

Don’t have a budget set for your business? QuickBooks Online has tools that can simplify the process of creating one.

When you’re creating a budget, it’s helpful to distinguish between essential and non-essential expenses. QuickBooks Online has tools that can help you, including budgeting for necessities first.

When was the last time you shopped for new suppliers? Now is a good time to see if you could save some money and help with your budget. QuickBooks Online has many tools that can help both you and your business budget.

Did you know QuickBooks Online allows you to use existing income and expense data to create a budget? Here is how this is done.

Want to learn more about our small business accounting services? Schedule your free initial consultation now or give us a call at (336) 354-4352 today.

5 Ways to Lower Your SUTA Tax Rate

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Business colleagues in meetingAn employer’s SUTA tax rate is susceptible to fluctuation. If yours is escalating, contrary to popular belief, you actually might be able to reduce it! Check out these five strategies to curb your SUTA tax rate.

Because the State Unemployment Tax Act – or SUTA – tax is mandatory, you may think you have no control over your SUTA rate. But to some extent, you do. The first thing to remember is that each state sets its own criteria for state unemployment tax, and rates vary by employer.

Typically, new employers are assigned a standard “new employer” rate. Over time, they receive an “experience rating,” which can be higher or lower than the new employer rate. The experience rating mainly depends on how many former employees have drawn unemployment benefits on the employer’s account. The more benefits claimed on an employer’s account, the higher its SUTA tax rate. Other determinants may include whether the employer is in the construction industry and the employer’s payroll size.

You may be powerless against some of these influencers – such as your business’s age and industry — but there are other ways to lower your SUTA rate. Here are five tactics.

1. Hire only when needed

Letting employees go because you don’t need them anymore likely renders them eligible for unemployment benefits. If they file for unemployment benefits, your SUTA rate is likely to increase. So, make sure you truly need an employee before hiring him or her.

2. Help your employees succeed

Employees terminated for gross misconduct typically do not qualify for unemployment benefits. However, employees fired for poor performance – such as due to lack of skills – may be eligible. To reduce the likelihood of terminating employees for poor performance, give them the resources they need to succeed, including proper tools and training.

3. Use independent contractors

You can avoid unemployment claims by legally hiring independent contractors instead of employees. If you decide to take this route, ensure all mandatory requirements for independent contractor status are met, including the Internal Revenue Service’s “right-to-control” test and applicable state tests.

4. Contest dubious unemployment claims

Dubious unemployment claims may involve former employees providing the state workforce agency with false information to obtain benefits or filing a claim even though they were rightfully terminated for gross misconduct. Before you fight an unemployment claim, consult with an unemployment benefits expert to gauge the strength of your case. Also, make sure you have supporting documents to back up your version of events.

5. Make voluntary contributions

Many states allow employers with an experience rating to voluntarily make a “buydown” payment, which cancels all or part of the benefits charged to their account, thereby reducing their SUTA tax rate.

More tips

Consider alternatives to layoffs, such as reducing employees’ work hours via your state’s work-sharing program.

Offer departing employees a solid severance package as well as outplacement services to help them quickly find a job. This way, they will be less inclined to rely on unemployment benefits.

Keep an eye on your SUTA tax rate. If it’s spiking for unknown reasons, contact your state’s workforce agency for an explanation.

Let’s talk about the future of your new business. Call us at (336) 354-4352 to schedule a free initial consultation and learn more about how our Winston-Salem CPA Firm can help you get your new business off the ground.