Tag: Business


Business Tax Services By Sanjiv Gupta CPA

Sanjiv Gupta CPA - 4 months ago
I provide a wide range of services to individuals and businesses in a variety of industries. I strive to meet each client’s specific needs in planning for the future and achieving their goals in an ever-changing financial and regulatory environment. My professional services includes:Tax Planning ServicesOur firm guide clients through a full range of tax planning and preparation decisions with strategies that minimize your tax liabilities. Our expertise, experience, analysis and thorough research allow us to optimize financial opportunities to be found in existing as well as recently altered tax laws.Accounting ServicesFrom start-ups to established enterprises, businesses rely on accurate and insightful financial information in order to maintain profitability and capitalize on new opportunities. My accounting services steer you closer to these goals with accurate record-keeping and reporting as well as support on financial issues such as initial accounting system setup, cost-containment, tax planning, investments, employee benefit and profit-sharing plans.These services include but are not limited to:General ledger and financial statement preparationBookkeeping (Monthly, Quarterly, or AnnualAccounting system setup and SupportPayroll processingCash flow budgeting and ForecastingPersonal financial statementsEmployee benefit and Profit-sharing plansCorporate tax planning and Return preparationEstate and Trust Tax Planning and Tax PreparationEffective estate and trust planning can ensure financial security for loved ones. For businesses, it can maintain a smooth succession of ownership. My role is to help you navigate the complex and shifting tax laws to facilitate the transfer of assets and minimize the tax liability of your beneficiaries which is done through our network.Financial and Retirement PlanningMy goal is to help you reach your financial goals and maintain financial independence through a comfortable retirement by evaluating current investments and making sure that your portfolio does take into account tax implications for an advantageous after-tax return.IRS RepresentationProfessional representation can be vital during an audit, and our experience with tax authorities enables us to guide clients in their dealings with federal and state agencies.Bookkeeping/Write-upAccurate record-keeping is essential to a successful business yet can also be complicated and time consuming. We can help you with the organization and day-to-day tasks of bookkeeping so that you can focus on your core business.Entity Selection and RestructuringYour business entity has a large impact on your taxes and other liabilities. From your company’s inception through its growth and development, I can advise you on choosing an entity type and later restructuring if advantageous.Accounting Software Selection, Implementation, and SupportChoosing and implementing a new accounting software system can be a challenging undertaking. Our experience with various packages currently on the market as well as awareness of new products allow us to aid you in choosing and implementing a system that will suit your company’s needs. Training and support will ensure minimal disruption of your everyday business processes.Payroll ServicesOur payroll services can help you reduce the time spent on administration through developing and implementing a computerized payroll system that will facilitate processing, timely payment and preparation of tax returns.Employee Benefits, Pension, and Profit-Sharing PlansChoosing and administering benefit plans for your employees is often a complex process. We can help you to decide which plan will help in maximizing tax advantages.Cash Flow and Budgeting AnalysisGood cash management can improve a company’s liquidity, reduce costs, and increase profitability. We can help you maintain optimal cash flow levels by tracking sources and uses, forecasting, and budgeting accordingly.Financial Projections and ForecastsNo one can predict the future perfectly, but we can all benefit from planning for it. Our firm combines expertise and experience with a gained understanding of your business to produce financial projections that can help you manage your business plan and spending. Depending on your needs, our work can range from top-level reports to detailed financial models.Mergers, Acquisitions, and SalesBusiness transactions and transitions are complicated affairs and whether you’re buying, selling, or considering a potential merger, we can provide professional know-how to help you successfully structure and negotiate the deal. We employ careful analysis and due diligence to determine a fair asking price, pinpoint the most favorable tax structures, evaluate financial and cash flow impact, and assess compatible business functions and tactics.Debt and Finance AdvisingWhether your needs are corporate or personal, our professionals can assist you in sorting out the different options available for debt management and financing that will result in optimal tax implications.International TaxationWhether you’re a corporation with overseas operations or a business or individual needing to work out taxation of U.S. residents working abroad or foreign citizens working in the U.S., we can help you plot a course through cross-border taxation issues

17 Small Business Tax Credits

Sanjiv Gupta CPA - 8 years ago
President Barack Obama is all set to boost the country’s economic pillar; How? Well, surprising but yes he lent a patient hearing to the grudges and grievances of over a thousand small business entrepreneurs through the columns of Advise the Advisor and Winning the Future Small Business Forum this week. Several questions poured in. Some directly questioned Obama’s administrative policy regarding cuts on tax frills. Twitter found one Lindsmith asking Whitehouse about the 17 tax policies that Obama passed as law. This article contains a pertinent explanatory, direct from the mouths of the government’s official financial consultants. In this article, we explain the tax laws of President Obama pertaining to small business and what effect the change has had on it. Ever since Obama joined the government’s prestigious office in 2009 he put into effect 17 tax laws that promised tax-incise and increase of credits for all small business entrepreneurs.  The three key legislative acts that pronounce tax-cut terms are the American Recovery and Reinvestment Act, the HIRE Act and the Affordable care Act.Each of the Acts covers as many as eight small business tax-cut variations that have had a significant impact on the small business sector. To name a few are:Exempting 75% on capital gains (small business establishments)Health insurance tax-credit for employees (small business establishments)Tax-credit for newly recruited employees (Those that were unemployed for over 2 months) Again in September 2010 the President signed and passed the Small Business Jobs Act which contained another eight laws on tax-slash and tax-credit. The benefits of the Small Business Jobs Act are as follows: Extending small business expense limit to $500,000 (so far this is the highest amount granted)Simplification of rules when applying for business phone usage deductionTax-exempt on medical costs for the self-employedGreater tax-exempt for start-up businessmenExpelling tax imposition on capital gains (small business establishments) In the same year winter, a tax bill was passed under the Obama Administration which furthered the benefits and stated that all businessmen, large and small, could use 100% of capital gains to propel new business investment plans. This plan was however limited to the next seasonal winter of 2011. Also, the period of tax-exempt on capital gains for all small business investments was extended until the end of 2012 and well the good news is that the president suggests that he is trying to turn this policy into a permanent one. This would mean to be a special incentive for the small business sector and could function as the much-required boost for the economy that is struggling under the current recessionary scenario. In fact, experts opinion that the attention paid to small business entrepreneurs is just one of the many ways that will help the government strengthen its position by securing the economic backbone of the country- small business establishments. Obama is, therefore, all keen to win the future with the flourish of small business centers and thus he is introducing these measures in the tax rules pertaining to the small business sector. Well, his actions are heartily acknowledged and supported as long as he keeps the government running with the conscience that the government is of the people by the people and for the people. In the list given below we enumerate Obama’s 17 small business tax-cuts: Tax-laws as granted by, HIRE Acts, the Affordable Care Act and the Recovery Act:1. A New Small Business Health Care Tax Credit2. A New Tax Credit for Hiring Unemployed Workers3. Bonus Depreciation Tax Incentives to Support New Investment4. 75% Exclusion of Small Business Capital Gains5. Expansion of Limits on Small Business Expensing6. Five-Year Carryback of Net Operating Losses7. Reduction of the Built-In Gains Holding Period for Small Businesses from 10 to 7 Years to Allow Small Business Greater Flexibility in Their Investments   8. Temporary Small Business Estimated Tax Payment Relief to Allow Small Businesses to Keep Needed Cash on Hand  Tax-Laws as granted by the Small Business Jobs Act:9. Zero Capital Gains Taxes on Key Investments in Small Businesses10. The Highest Small Business Expensing Limit Ever– Up to $500,00011. An Extension of 50% Bonus Depreciation12. A New Deduction for Health Care Expenses for the Self-Employed13. Tax Relief and Simplification for Cell Phone Deductions14. An Increase in The Deduction for Entrepreneurs’ Start-Up Expenses15. A Five-Year Carryback Of General Business Credits16. Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small BusinessAnd Tax-law as under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act:17. 100 Percent ExpensingHow much tax can you save with so many tax credits? Well, you need to contact your CPA to find this answer.

IRS Getting Tough on Small Business Owners

Sanjiv Gupta CPA - 8 years ago
Internal Revenue Service will not compromise while inspecting on pay-roll taxes, tax- advocates confirmed. Many will suffer consequences on having to deter tax payments,Payroll taxes are federal or central taxes that an employer is entitled to pay or withhold on behalf of his employees. Under its fold, the employing organization has to take the liability of paying social security and Medicare taxes also. There have been a large number of cases where small business entities or small companies have been found deterring central payroll tax payments. The tax lawyers express that following this the IRS has started acting stricter about exercising penalties and fine on accountants, executives, and business individuals for the tax-delays or evasion.Paying business payroll taxes must be considered a priority. The different tactics available at the hands of the IRS to treat these cases are freezing a company’s business accounts, grabbing assets, imposing garnishment on wages of a debtor. Other than tough methods it can assess substantial penalties and impose tax liens on the property of the defaulters.In the opinion of Sanjiv Gupta CPA, the payroll tax debt can be very dangerous so much so that they can completely bring down the company. To support his argument he described the instance of an equipment company that had to bite the dust for not paying the federal payroll taxes. Similar things happened to a medical care center and a group of licensed schools.According to the report of government agency findings every year $54Billion as employment dues goes unchecked. To curb this serious loss to the government exchequer the IRS sees it necessary to amend payroll-tax parameters by approximately 6600 employers for the upcoming tax years. Robert E. Mc Kenzie a tax-layer based at Chicago opposes the IRS actions and expresses that the tactics adopted by the IRS by individualizing tax-payers to penalize for defaulting are particularly harsh and cannot treat the actual cause accountable for the tax-debts.The tax laws allow certain freedom which causes an unnecessary payroll tax debt by laying the sole responsibility of tax evasion on the officers, bookkeepers, business owners, and anyone who prevents the company from clearing employment tax by taking sole control of business accounts and governing the debt payment process.When the IRS charges penalties the payroll tax debt stands double the actual amount. The three grounds that IRS can exercise its right to penalize are in the case of nonpayment of the debt, failure to state/ itemize the debt and finally for late payment. Fines that are charged for payment delay shot up to 25% tax debt.  A person who has previously failed to report tax should not make the mistake of deterring from filing tax in the future. Adverse to this there will be more penalties.The best way to avoid mounting debts with the addition of penalties is by clearing it off before the deadline and also to pay the taxes to the IRS before it imposes a personal liability.

Tax Tips That Offer Better Results for Small Businesses

Sanjiv Gupta CPA - 8 years ago
Come the month of January/February and the nation prepares itself for tax sessions. It is time to check that all your financial records are in perfect order. The Certified Public Accountant who will start corporate accounting can call you any time and ask for your spontaneous cooperation if certain papers to prepare the actual audit results are missing. Are you ready? Still, worrying if 2012 will be an expensive Tax-year? Follow the below-stated tips to prepare yourself better for the tax-return file. Establish your business as an entity with the state:This is a great tactic as it allows you to enjoy tax benefits by protecting your personal assets and possessions from your business’ sponsors or financers. This you can simply do by listing your business as an entity with the state. Being an entity of the State increases your brand value and authenticates you as a trustworthy and reliable entity to both the clients and the IRS. In order to enjoy this kind of tax benefit or tax break, you need to undergo paperwork proceedings with the Secretary of State. This process is completely different and is in no way similar to the process of filing with the country records office for an assumed-name certificate. Anyone with such a paper gets permission to conduct business under an assumed or imaginary name. If the firm is recognized as a legal entity then it attracts some amount of costs which is normally capitalized for tax purposes and considerable amortization is done for a period of 15 years. The first tax tip states that for the current year if the total start-up expense for a firm does not exceed $50000 annually then up to $5000 can be deducted from the expenses. Business owners need to keep track of their expensesThe domain of tracking expenses covers home, office, auto, and client development expenses. All these expenses are integral to the development of the business and as such is considered to be an integral part of it. The costs incurred on these heads are liable to be deducted from tax but to get the benefits there are certain rules to be followed. The IRS will ask you for the mileage bills in cases of business automobile usage. It is very well known that small businesses overstate automobile expenses and so bills must be kept for the actual information. If you fail to keep a record of your transport cost then the IRS can decline a small or major part of your deduction from auto expenses. Just like auto and home-office expenses, client development costs are also subjected to some specific rules. In matters of deductible client development costs, there must be a clear mention of time, date and place – these include details such as when you went to meet the client, the business contact’s name and the business you thought of generating as a direct effect of your expenditure. Unreasonable client development expenditures are not considered and only 50% of the business meal prices and other client entertainment expenses are deductible. Small business owners need to invest in equipmentThere is a provision of a total tax cut of $139000 on total business equipment expenses ranging between $560000 and less. This is calculated annually. If in any case repair extends the life of equipment or the equipment is used for a different cause other than the requirement of the company, then the cost will be regarded as an improvement that is entitled to be capitalized and depreciated for the purpose of tax deduction. Need to collect past due accountsIf you are running a proper business you must be well aware that for some obvious reasons there may be a few clients who will refuse to pay you the due money. The work will become easier for you if you have some valid documents to prove your claims such as a receipt, contract, or written slip which documents the fact that these people owe you money. This will place you in a position to exercise your right to collect past-dues. For speeding up the collection process write a note to your client requesting him to clear off their payment and if they express their inability or refusal to pay then you can place your claim on this amount as a “bad business debt loss” for tax purposes. But the debt has to be appropriate and on business grounds. Only then will it be granted for a tax deduction by the IRS. The need to protect payroll taxesBeware of using the payroll taxes for financing any kinds of business operations or proceedings such as clearing the dues of the creditors and suppliers. This is one common mistake that small businesses commit. Payroll taxes are strictly inspected by the IRS and in cases of tax-default or evasion, the IRS can also freeze your personal assets. Even though you have established yourself as an organized business firm the IRS will not entertain any reason while calculating payroll taxes.

You Can Deduct Up To 55.5 Cents a Mile in 2012

Sanjiv Gupta CPA - 8 years ago
Now you can deduct up to 55.5 cents a mile for business driving expense.   You can use this rate for all kinds of vehicles including cars, vans, pick up and panel trucks.  The rate increase was recently announced by the IRS for the year of 2012.You can deduct the actual cost of vehicle operation by keeping track of expenses.  However, Standard Mileage deduction can be used by those who do not keep track of the actual costs.  The standard mileage rate is determined by authorities using the annual study of the fixed and variable cost of automobile operation.In addition to the mileage rate, you can claim a separate deduction for expenses like parking fees or tolls.  You can also deduct interest and state and local taxes relating to the purchase of the automobile.Please note when the standard business mileage rate is used, automobile depreciation will be considered to have been allowed at a rate of 23 cents a mile. This depreciation will reduce your cost basis in the vehicle.Where you cannot use the standard deduction?For the most part, standard deductions are a great place to start if you do not document each expense.  However, in some cases, the standard deduction is not your friend. For example, you cannot use standard mileage deduction for automobiles used for hire like taxicabs.  You cannot use the standard deduction of the vehicle that was previously depreciated by other than the straight-line method.We recommend you consult with your Tax Professional to ensure your deduction is calculated accurately.

Do You Have Unclaimed Property Waiting For You? Check Now.

Sanjiv Gupta CPA - 8 years ago
What happens to all the checks that are sent by companies but never deposited?  Can companies keep that money in their bank account and use it for something else.  The answer is No, they can’t.The good news is that there is a law to prevent holders of Unclaimed Property from using your money and taking it into their business income. This law gives the State an opportunity to return your money and provides California citizens with a single source, the State Controller’s Office, to check for Unclaimed Property that may be reported by holders from around the nation.According to the recent number I collected, The State of California is currently in possession of more than $6.1 billion in Unclaimed Property belonging to approximately 17.6 million individuals and organizations.  Yes, this is not a typo. It is $6.1 billion dollars.The State acquires unclaimed property through California’s Unclaimed Property Law, which requires “holders” such as corporations, business associations, financial institutions, and insurance companies to annually report and deliver the property to the State Controller’s Office after there has been no customer contact for three years. Often the owner forgets that the account exists, or moves and does not leave a forwarding address or the forwarding order expires. In some cases, the owner dies and the heirs have no knowledge of the property.The most common types of Unclaimed Property are:Bank accounts and safe deposit box contents;Stocks, mutual funds, bonds, and dividends;Uncashed cashier’s checks or money orders;Certificates of deposit;Matured or terminated insurance policies;Estates; andMineral interests and royalty payments, trust funds, and escrow accounts.The Unclaimed Property law was enacted Please visit the Unclaimed Property Database to see if the State Controller’s Office is holding Unclaimed Property for you. Learn more about the Unclaimed Property Program at State Controller John Chiang’s website.

Tax breaks by Obama delights small business owners

Sanjiv Gupta CPA - 8 years ago
It was early in 2011 that U.S.president Barack Obama promised to pass tax-break laws to facilitate small business investments and new entrepreneurs plan their expense judiciously. This plan will be an important part of his 2013 budget, officials from the White House report. At a recent cabinet meeting, President Obama focused on this area and emphasized it to be one of his agendas in the ensuing Presidential election this year. He expressed his desire that Congress should consider eliminating profit quotient from investment in the small businesses and must extend its wilful help by considering deductions in the purchase of essential equipment and business software. This will help small business owners develop their businesses and will also generate employment. At a press meet the President stated that he has come to know that the Democrats and Republicans on Capitol Hill had discussions about his ideas and plans that he has in store for helping small businesses get potential resources and capital. He particularly stressed on the necessity of the Republicans and Democrats working together to pass the tax bill as law. He wants to have it off his desk as early as it may be possible. Once it comes out he will enthusiastically sign the bill and would be happy if the bill is enforced right away.              Obama hopes that the Congress won’t oppose the bill as they did the previous year. His only concern, however, is the Congress’s opinion on partisan lines. He fears that it might affect agreement and that the issuance of the bill might be delayed. On the contrary, the White House hopes that whatever may be their general point of dissent, the business-friendly matters which are directed towards a common good will surely pull support of both parties.               The small business ideas that Obama wants to implement and make a part of his February 13 budget package includes a 10 % tax break that is to be enjoyed by all small businesses that will contribute in creating employment or raising wages. Alongside the proposed tax reduction on business start-up expenses. This will help launch small establishments in the commercial market with the least trouble.  He is also keen to remove country-specific restrictions for some immigrant visas so that the US can hire more highly skilled foreign workers and entrepreneurs. Obama said government departments like the energy, education, commerce, and homeland security have been strictly instructed to help the small businesses in the best possible way.

Business Tax Strategy That Will Save You Money

Sanjiv Gupta CPA - 8 years ago
The wise follow the simple path. If your wisdom has failed to save on your tax-cuts then here is what you must do. If you are a “cash basis” taxpayer then you have to pay considerable attention to “time” your income and your deductions.  Clear? Well, it simply means that you don’t have to pay taxes on incomes that you have not received. Also in the same manner if you make any expense on a tax-deductible commodity/product, then you can apply for a tax deduction and thereby cut down upon your taxable income.Common people are not all-knowledgeable about taxation policies. The obvious escapes them and in the stance to do something extra-ordinary they confuse things more often. Now, this is a bad and expensive habit.  You can save a considerable amount of tax by simply timing your purchases.For example, Taxpayers who fall into the same tax- cohort for two consecutive years can shrink their taxable income by postponing income to the following year while calculating all deductions into the current year.For those who fear to jump into the larger tax-slab is required to do the opposite. It’s risky to negate future possibilities.Tax- riddle: suppose you have fallen under a 28% tax-slab category this year and the next year your ranking will go as low as 15%, your company needs a business computer. How will you time your purchase?Yes perfect! The current tax-year. That’s right. The best way of taking full advantage of the tax-slabs is to generate income and delay or deter expenses.A cautionary word: if you are a “cash basis” taxpayer then make sure you know what constructive receipt means. For example, your mail inbox has a pending check invoiced on December 31, 2011, but cant deposit it before 1 Jan 2012 then how are you to time your income? Simple calculate it under the 2011 tax-year.If you know how to time your income then your tax-slabs will come down automatically. Keep the deductible expenses for the year when you fall into the higher tax bracket. This plan actually works.Still confused, don’t worry – the staff at our office can help you time your purchases.   Simply give us a call or send us an email.

IRS Declare No Reconcile of Reports Required On Credit Card

Sanjiv Gupta CPA - 8 years ago
IRS has pointed it out to a small business advocacy group that it was not a must for organizations to reconcile their tax reports with merchant card transactions on the latest 1099k information reporting form.The circular sent recently clearly brings out the fact that no reports would be required to be shown to the IRS on 2012 business tax forms or for forms in the coming year as well.  In a previous circular, it was mentioned that no tax forms would be required on 2011 income tax returns and now it seems this has been extended as a general rule.The elaboration on the rule was a response to the query raised by Susan Ackerly, senior vice president of public policy of who wanted to know whether forms 1120 and other business forms require a reconciliation of gross receipts and merchant card transactions. The IRS deputy commissioner Steven T. Miller wrote in response to this that the reporting on gross receipts and transactions on the 2012 tax forms will be actually based on 2010 income tax forms. NO other changes concerning the payment card need to be reported.A pair of lawmakers, Rep. Aaron Schock and Bobby Schilling has recently protested against the Housing and Economic Recovery Act of 2008. The Act states that IRS will begin collecting forms of 1099-K from the third party entities which will include credit card companies and for merchant card transactions it will be credit and debit card payments. This form will reveal all credit transactions of a merchant’s business for the year before if they have exceeded $20,000 or 200 transactions for a calendar year.The lawmakers passed legislation against this Act in the Congress to prevent Congress from implementing this new reporting technique as they strongly believe that the IRS is using the 1099-K to exert extra pressure on small businessmen by asking them to show the report with the merchant’s own internal numbers. They also pointed out that when this reconciliation occurs, customers who ask for cask back, returning merchandise bought on credit for cash or gathering deposits on rentals, all will ultimately lead to a huge difference in facts and claims.  This is so since small business is not properly equipped with advanced accounting software, bookkeeping technology, or time to conduct cross-reference or reconcile their internal numbers with the third party generated numbers. This entire process will actually lead to a huge accounting workload for small businesses.However, the IRS has responded to the concerns and claims of the lawmakers and also to those of NFIB. The bill also received huge backing from the US Chamber of Commerce as well. Thus, the NFIB and several other advocated achieved a huge victory last year when the Congress cancelled the extended requirements in 1099-K reporting. President Obama has signed the legislation supporting the concerns of the lawmakers.

Don’t Miss Out on the Small Business Health-Care Tax Credit

Sanjiv Gupta CPA - 8 years ago
I am sure you won’t mind taking some more business tax credits.   Here is another tax credit, if you are a small business employer with less than 25 employees who are earning an average wage of less than $50,000 a year and you pay at least 50% of the employee’s insurance premiums.This tax credit is targeted towards tax-exempt organizations and small businesses.  This credit allows small business owners to offer health insurance for the first time.Here is the scope of health insurance tax credit:You take this credit as part of the general business credit.  You can use the form 3800 and any unused general Business Credit would be included with the tax return.  This unused credit can be carried back one year and then forward for up to 20 years. You must have less than 25 full-time employees.  The number of employees is calculated by calculating total number of hours and the total number of employees.The average annual wage should also be less than $50,000.  Once again, this is calculated based upon FICA wages and the total number of full-time employees.The tax credit is for Small Business Owners or Tax-Exempt Organization.Businesses who can’t take credit for 2011 may be eligible to take advantage in future years.  Small employers can claim this credit between 2010 to 2015.Now the question you are waiting for, How much tax credit?The maximum credit for small business employers is 35% of premiums paid.  For tax-exempt employers, the maximum tax credit is 25% of premium paid.Want more good news?Beginning in the year 2014, the tax credit will go up to 50% of premiums paid and 35% for tax-exempt organizations.Please note tax credit is on the amount you pay for health care premiums.  Credit is not on employee-paid premiums.   With up to 50% tax credit, I am sure you would love to offer healthcare for your employees.Want to take credit this year? Call our office for an appointment.

How To Your Reduce AGI By $49,500

Sanjiv Gupta CPA - 8 years ago
Tax differed Retirement savings plans are huge tax shelters for individuals and small business owners.  You may find it quite obvious nonetheless it is often overlooked.  If you are looking into lowering your 2011 tax bill than here are a couple of options to consider.Profit-Sharing Contribution into 401(k) plan:  Maximum Annual contribution limit for 2011 in the 401(k) plan is $49,500.  However, as you may already know, the maximum amount an individual can contribute to their 401(k) plan is $16,500.  Then what is a maximum of $49,500?  This is an additional contribution that can be made on your behalf by your company into your 401(k) plan.  For example, you contribute $16,500 and your employer may match 100% of what you contribute making the total 401(k) contribution of $33,000.  For small business owners, this is a great tax shelter because they can contribute a maximum of $49,500 by using an individual $16,500 limit and matching $33,000 as profit share or bonus.    This will directly reduce your AGI by $49,500.  How is that for a tax discount?  Moreover, a business can also deduct the additional contribution made to employee 401(k) as a business expense and reduce its own business tax liability. I would also like you to note that the deadline for C-Corp and S-Corp tax filing has already passed.  Making any contributions to your employees 401(k) plan for the year 2011 will require you to file an amended tax return. What to do if you don’t have 401(k)?  You can contribute up to $5000 in IRA.  For individuals with no 401(k), IRA is the best option.  You can contribute up to $5000 in IRA or $6000 if you are age 50 or older. Setting up an IRA is also very easy.  You can simply contact any online brokerage to open up a new IRA account.I found a couple of very good examples of 401(k) plan options on the IRS Website.There are separate, smaller limits for SIMPLE 401(k) plans.Example 1: Greg, 46, is employed by an employer with a 401(k) plan and he also works as an independent contractor for an unrelated business. Greg sets up a solo 401(k) plan for his independent contracting business. Greg contributes the maximum amount to his employer’s 401(k) plan for 2011, $16,500. Greg would also like to contribute the maximum amount to his solo 401(k) plan. He is not able to make further elective deferrals to his solo 401(k) plan because he has already contributed his personal maximum, $16,500. He has enough earned income from his business to contribute the overall maximum for the year, $49,000. Greg can make a nonelective contribution of $49,000 to his solo 401(k) plan. This limit is not reduced by the elective deferrals under his employer’s plan because the limit on annual additions applies to each plan separately.Example 2:  In Example 1, if Greg were 52 years old and eligible to make catch-up contributions, he could contribute an additional $5,500 of elective deferrals for 2011. His catch-up contribution could be split between the plans in any proportion he chooses. His maximum nonelective contribution to his solo 401(k) plan would remain $49,000 even if he contributed the full $5,500 catch-up contribution to this plan.In addition, the amount of compensation that can be taken into account when determining employer and employee contributions is limited. In 2011, this limit is $245,000; it’s $250,000 in 2012. Want one more reason to consider setting up  401(k)  for your company?You can get up to $1500 in tax credit over the next three years ($500 credit each year for 3 years) for setting up a new 401(k) plan.  This tax credit is offered to offset set up and administrative expenses into the plan.   Your business must have less than 100 employees to take advantage of this plan.

Discounted Kaiser Insurance for Small Business Owners

Sanjiv Gupta CPA - 8 years ago
Our public accounting firm is focused on Small Business Owners and Individuals and many times new business owners ask us about health insurance.   Most of us live in the Bay Area and prefer  “Kaiser” as a  health care provider and therefore I gathered some basic information about Kaiser health care plans for small business owners.Kaiser offers many health care plans but one that suits the need of small business owners is called “GROUP POLICY”.  You can buy this group policy in two flavors.  One with the annual deductible and one with no annual deductible.Plan with annual deductibles cost about $250-$300 less than the non-deductible plans. Both policies cover doctor's visits and other services offered by Kaiser.  Both plans have minimum out of pocket doctor’s visit cost but the key difference is that with an annual deductible plan you have to pay the minimum deductible ($1500) before your major benefits kick in.   For example, a daily rate for the hospital room maybe $500/night and you will have to pay for 3 nights before your insurance pays.  However, with non-deductible plans you won’t be required to pay for these three days.So, if you and your employees are fairly healthy and won’t be needing any major services than you can opt for deductible plan and save a significant amount on a monthly basis.How about Spouse and kids?Yes, of course, your employees along with officers/owners of the company can also enroll their dependents including kids and spouses.  Most policies don’t allow you to include your parents.What are the requirements for this kind of policy?You must have a business in good standing.You must have two or more people enrolling in the policy.More than 50% of all eligible persons should have insurance.Can I get a tax deduction for the health policy?You can read my post about health care policy deduction for more details.How much does the policy cost?I found the group policy of very good value. Rate varies by age but here is a simple example. Females less than 30 years old can get this kind of policy for about $300.  Not Bad?How can I enroll in group policy?Simply call Kaiser and ask for enrolling in group policy.

Legal Zoom Alternative In San Francisco Bay Area

Sanjiv Gupta CPA - 8 years ago
Sanjiv Gupta CPA firm is a great alternative to legal zoom business and corporation set up offerings.  We serve clients from Fremont, San Jose, Cupertino, Palo Alto, and the entire San Francisco Bay Area. Our firm set up Corporations, LLC, S-Corporation, Partnerships, and Sole-Proprietorships. If you are thinking about starting a new business than Sanjiv Gupta CPA firm can be a great choice over the Legal Zoom online website.Why Should You Do Business With Sanjiv Gupta Instead of Legal Zoom?Starting a new business requires proper planning both from a tax perspective and long term survival of the company.   What kind of corporate structure you set up should depend upon how your business will operate and how you plan to exit your business.  This kind of advice is hard to get from Legal Zoom or other online corporation set up practices.  When you sit down with Sanjiv, you will understand why you should choose one kind of business structure over the other.  You will learn how one structure can save you thousands of dollars in taxes.  You will learn how you can exit out of the business when you are ready to sell or retire.Online practices like legal zoom do not focus on customized and individual service but firms like Sanjiv Gupta can deliver exceptional value to new business owners in this arena.   In addition to setting up your company, you can also learn about tax saving strategies and how you should handle payroll and other taxes.Is Legal Zoom Cheep?Legal Zoom is only doing paper processing.  You decide how much paper processing should be worth.  You should still consider consulting with your CPA or attorney even if you started your business using Legal Zoom.Can you do this yourself?Of course, you can do the paperwork yourself.   But the key is to identify what makes a long term success.  Saving money on important tasks as setting your company may not be a wise move. You may end up paying extra taxes just because you picked a wrong structure or timing of setting up your company was wrong.Is it as easy to set up a company with Sanjiv Gupta CPA firm as with Legal Zoom?This one is a tricky question.  Sanjiv Gupta CPA firm specializes in a customized solution that can be a good fit for the long term.  Therefore, you must set up an appointment with Sanjiv Gupta before we can set up your corporation or LLC.  You may consider it an extra step but this can very useful and save thousands of dollars in taxes.Ready to set up your business. Give us a call at 510-825-7563 or visit us online at sanjivcpa.com

Tax Deductions for Independent Contractor or 1099

Sanjiv Gupta CPA - 8 years ago
Starting out a consulting business can be very lucrative. However, it can also result in a heavy tax bill you do not organize your income and expense properly.   So, how do you organize your income and expenses?You can start by opening a different bank account.  Do not mix your business bank account with your personal bank account. All business-related income should come to this account and all expenses should be paid from this account.   Your client will send you to form 1099-misc at the end of the year.  IRS will also reactive a copy of this 1099.  That being said your total business income should be greater or equal to the amount listed in 1099.  You may get an automated customer-generated audit if you report a total income less than the amount listed on your 1099.  Keeping a separate bank account will help in calculating total business income and you act as proof in case of an audit.Now you need to deal with your business expenses.   The easiest way to do this is to categories your business expenses.   We recommend you use the same or similar categories listed on schedule C.  This will help during tax time.  Now, every time you pay a bill, you simply need to enter that transaction in the correct category.  You can use a simple spreadsheet, financial software or you can use a shoe-box.  Most CPA firms also provide bookkeeping services. For example, you can simply send us your bank statement at the end of the month and we can do the complete bookkeeping. We will assign each expense into appropriate categories based upon its tax implication.What are some of the most popular business expense categories?Advertising – All expenses paid for online marketing or print marketing including business cards or flyers.Consultation Fees – Fee paid to professionals like attorney, CPA, or marketing professionals.Insurance Cost –  Business Insurance Expenses including life, property & casualty, or business insuranceInterest Cost – Interest cost of your business loans. You can include fees and other related cost.Office expense – Any supply or equipment you purchase for your business operation.Rent or lease other business property – Cost of operating your business office.Repairs and maintenance – Include all cost related to your business only.Travel – the cost of traveling to a business-related event like convention, meeting, or business tripMeals and entertainment – You can include meals and entertainment expenses related to your business.Utilities –electricity, gas, telephone, internetOther expenses – such as Dues & Subscriptions, Web development, and Business telephone expenses. Health Insurance expenses:  Premiums paid for your health insurance are tax-deductible.   You can deduct the full cost of health insurance premiums on form 1040 but you must have an Income from your business.   You can deduct the health insurance cost event if you run into losses but it has to be reported differently.  Consult with your CPA to ensure you are reporting the deduction properly.Still have a question about your business expense?  Leave us a comment or call our office at 510-825-7563

Why Your Small Business Need A Website ?

Sanjiv Gupta CPA - 8 years ago
This is a very simple question that I often ask my clients and end with various answers.  This one simple question allows me to open conversations with my clients and find out the real purpose of their site.  Clients often know what they really want but have a hard time nailing down the reason why do they actually want a website.  Here are some of the most common answers:Provide information about our companyProvide our contact informationMake it easy for customers to find usWell – my competition has oneWant to improve my sales.Want to capture sales leadsWant a web presenceAll of these are great reasons but before you can answer this question you need to define three things. Who are you?Who are you?Who are your customers?Who you want to be?Let’s say you are a Business Attorney and your customers are small businesses who seek advice on small business legal issues and you want to become a leader in your local community when it comes down to small business legal issues.  You want to be known as a “go-to’ person for all small business legal issues.Now all of you small business owners have a pool of referrals you get from your past clients.   This pool is often mistaken for market leadership.  Market leadership means that when average Joe thinks about a small business legal issues, he thinks of you.Truth – this is the key reason why you need a website.  Your website will tell your potential clients who are you and who you want to be.   Moreover, your site will relate directly to your audience and also tell them who they are.Little confused? Let me explain.Small Business Attorney website should clearly explain what is it that he or she does.  Most small business owners get this section right but this is only 20% of the puzzle.    The next piece of pie is to explain who your customers are.  This can be done using a “vertical” section on your website.  For example, Attorney should identify 5 or 6 major industries he or she serves.   An attorney may include Real Estate, Medical, Finance, Manufacturing as verticals on the website.  Each vertical should include a direct reference to common problems attorney solves on a regular basis.  This will help potential customers relate to this site.   The use of descriptive images, titles, and other materials can be very helpful.Now comes the hard part.  Most small businesses totally ignore the fact that you also need to clearly explain your vision on your website.  Moreover, the website should also show how this business is moving towards achieving this goal.Does this attorney go to local business events?Does this attorney know about the local business problems?Do other people talk about this attorney's involvement in the community ?Website can use tools likes video, blog, audio, PowerPoint, press release, and newsletter to inform visitors about your engagement with the community.   Your customers are your business lifeline and they deserve to know how you are moving towards your vision.Now you know the theory behind the existence of your website.   But if you would like some help planning, implementing your online and print marketing than you can contact me directly at 510-709-4030.   My name is Deepak Sharma and I am in charge of help small business grow their business.  I work with Fixtro as IT Manager and available to consult for any IT and Marketing projects.  You can also visit us online at http://www.fixtro.com

How To Start A Start Up ?

Sanjiv Gupta CPA - 8 years ago
We are almost at the end of May and weather is starting to get hotter by the day. This weekend, in particular, felt hotter than previous weekends.   Temperature is almost the same as last weekend but I am feeling it a bit hotter.   Maybe  its because of Facebook.   The company has created hundreds of millionaires in the bay area and things are really starting to get hot around here.When we hear stories like Facebook, an entrepreneurial sitting in us may ask “how to start a start-up like Facebook ?”A startup like Facebook means a very successful start-up.  How do you do it?Ingredients for a good start-up and well known.  You need good people with great skill sets, make something that customers actually want and do it with the least amount of money possible.   You don’t need to invent something new or come up with a super cool idea.  You just need something that is much better than what’s currently available.If the formula is well known than how come we do see IPO’s like Facebook every day?I recently met with the CEO of one of the leading franchises in the United States who invited me to consult on their marketing strategies.  After carefully listening to my ideas he commented that ‘I also have lots of ideas but we often fail to implement those.”  This reminded me of a phone call a couple days with the CEO of a leading restaurant owner in Fremont.   He made a similar comment.   I meet with many business owners and CEOs of small and medium-sized companies and all of them have great ideas but they either fail to implement their ideas or invest in wrong ideas.The truth is the failure is usually due to a lack of implementation.  Some fail to put the right people in right place, some spend time, money and energy on the wrong product and some spend so much money doing it that they go brook long before they can become profitable.Recently example of such failure in  Silicon Valley was Solyndra.  They picked the wrong product and spent millions of dollars in taxpayer money only to lose it all within months of initial government back funding.How do you get the right people in the right place?This one is probably the most tricky part.    People involved within your company can be your relatives, friends and they may or may not be the right fit for the job.   Do you keep running the show with them or do you find the right person for the job?A common solution is to keep a friend or relative until the company becomes profitable.   This strategy may work if you only have a couple people in the wrong place and they are not providing a substantial amount of support.   However, most companies will fail if they continue on this path.You need to find the right place for the right people.Building something people will like?This is what we call market research.  Find the answer before you spend thousands of dollars.   We are living in a computer age and you can research almost anything.   You can hire professionals like Fixtro to do market research for you.Gather all the information you need before you start.  Some people even call this a feasibility study.Doing it for as little as possible?Should you open office in Stockton CA or San Jose CA? Should you travel or do video conferencing? Should you hire employees or consultants?  There are probably hundreds of decisions you need to take to cut the cost on a daily basis.   Good CPA or in house financial consultant can help you cut costs.Some new business owners cut corners instead of cutting costs.  Having a good CPA can help you avoid such mistakes.   Good CPA can also help you keep most of your earnings in your pocket instead of paying it in taxes.Ready to start a startup?You can contact the office of Sanjiv Gupta CPA for tax and company advice and you can talk me to for business research and marketing.

How Small Business Can Use LinkedIn?

Sanjiv Gupta CPA - 8 years ago
Linkedin is one of the most successful professional networks which has already roped in over 120 million users across the globe. This social media network has become a significant marketing tool-at-hand for business organizations and entrepreneurs.  But how? As the name suggests, “Linkedin” is all about strengthening online communication. It is like a display shelf: you put up your profile and people get to know about you. Linkedin helps you share business strategies, helps circulate innovative ideas, helps exchange work knowledge and above all keeps you connected with the world.   Is Linkedin for small enterprises? The virtual space, being a cost-effective medium of communication, is always helpful for promoting small business enterprises. Digital presence saves establishment cost, which means that even if you do not have a physical retail store you can jolly well sell your products through online marketing carts. In order to understand the usefulness of Linkedin, it is necessary that you understand the opportunities that Linkedin offers. Helps Create Customer BankWhether a manufacturer or a customer, you will get authentic views of news and reviews from Linkedin. It is a trusted portal and is least infiltrated by fake account holders. Also, Linkedin’s automated mail generation service will keep you updated with the latest events and news. Want to create a customer bank? Then start with Linkedin. Helps Build Brand ImageLinkedin serves as a perfect marketing tool. It helps build brand reputation through its intensive competitive domain. You can find all the famous brands around the world on Linkedin. So while the competition is tough its worth to have an account on Linkedin. Helps to locate the right vendorsLinkedin serves to be a useful network that helps in circulating your needs to your friends and peers who can help you out with their suggestions and recommendations. When you are in need of a web designer or web content developer for your company the Linkedin contacts help you identify the right vendors for your company. In addition to this small business, people can also extend their business with vendor connections on Linkedin. Helps Generate Positive ReviewsSmall business organizations can extend their customer base and network and in this sphere, Linkedin proves to be a great benefit. The company owner can approach customers who are hugely satisfied with the services of his company and request them to furnish recommendations and good remarks about his company on the Linkedin profile. The recommendations are then forwarded automatically to the customer’s profile. This helps bring new clients. Helps to raise fundsLinkedin is an excellent network, which helps in connecting small business owners to big investors and with those who are willing to finance start-up business plans. If you have active participation in this professional networking site then you can actually work up good strategies and allure investors to finance your business projects. 

Know How To Distinguish Independent Contractors

Sanjiv Gupta CPA - 8 years ago
Independent contractors are those people or businesses who provide freelance services to other companies. As they are not qualified as employees of a company, the independent contractors are not liable to enjoy any employment taxes or benefits. As employers can save a lot of employee’s taxes and other benefits with independent contractors, they classify many employees as independent contractors to save money on payroll taxes. To stop this practice there are certain factors that can distinguish an independent contractor from an employee.Understanding The Concept Of Independent Contractors Having a clear understanding of the concept of independent contractors is the first element to distinguish between them and an employee. An independent contractor can be a person or a company that offers its services to another company. What makes them different is that these contractors follow their own schedule and work as per their own free will. So the employer company has a limited hold on these independent contractors. The employer companies cannot regulate which jobs the contractors accept or how much pay they will demand and when they will work on a certain project. Another point of difference between independent contractors and employees is that the independent contractors will usually bring in their own supplies, or have some kind of investment in equipment. The employer company also is not liable to provide any insurance or any compensation to them. Determining Ways To Identify Independent ContractorAs hiring independent contractors relieve the employer of giving payroll taxes and other liabilities, many companies list a portion of their employees as independent contractors to save taxes. Some companies also outsource their work to independent contractors to achieve the same goal.  Therefore, the IRS has the knowledge of a few factors with which they can identify a contractor from an employee. The first thing that IRS notices is the way the employers exert their authority on the worker. If it is an independent contractor the employer will only give details about the work but if it is an employee, the employer can exercise more control over the way he works, how it is ultimately carried out and his performance. So if the employer is giving out a more defined and whole set of instructions the worker is considered as an employee. Whereas if the instructions are limited and the worker has the freedom to execute a project on his own terms then he is considered an independent contractor. IRS will consider any worker to be an employee if the employer can regulate the way the worker gets paid or if it is the employer who provides all the tools and supplies. Whereas if the worker is paid in accordance with the job done, can offer his services to other companies at the same time or has a considerable amount of investment in the supplies used for the job then the worker is considered as an independent contractor. In addition, if the worker faces profits or losses in a certain work then he is an independent contractor.If the worker and the employer have a written contract and if the employer is liable to pay insurance, casual leave and sick leave then the worker is considered to be an employee. Another way to identify an independent worker is to check if the worker expects to work for the employer only for a specific period of time then the worker can be classified as an independent contractor. These are the factors through which the IRS distinguishes an employee from an independent contractor. It is crucial for the employer to classify his workforce properly as a miscalculation can make one liable for penalty and payment of all possible dues. 

Picking a Good Business Bookkeeping Services in San Francisco Bay Area

Sanjiv Gupta CPA - 8 years ago
In a recent Bookkeeping services review on Yelp, reviewer name Girlie commented that “If you are ever audited, hire an accountant who is organized, respectful, a good communicator, and a good listener, someone who respects the IRS and treats them seriously.”Girlie summed up the qualification for a good accountant but more importantly of a good bookkeeper.   A good bookkeeper can make an IRS audit as easy as eating a pie.  Having a bookkeeper who works under the direct supervision of a certified public accountant or one with the number of years experience can be very helpful.   Apparently, Girlie didn’t do enough research and further explained the frustration “First of all, he is not a CPA. This is a personable guy who opens up a chic office in Noe instead of working at HRBlock.”So, how do you pick a good Bookkeeping service in the San Francisco Bay Area?  Not required but strongly recommended that you stick with a CPA firm that also provides bookkeeping services.    Check their reviews on Google, Yelp, Yahoo or other online sites.   Ask for reference letters from their past client or current clients.  You may even ask for a client phone number and speak with other business owners to get an understanding of the CPA firm and their process.You don’t have to be super picky but you want to do business with a firm you can depend upon.  You want to know the truth before you end up in an Audit or some other serious tax trouble.   You can take advice from Girlie, ” the CPA I finally hired to take over my tax situation had 30 years experience, advanced degrees in accounting and tax law, and charged 30% less than Mark. His financial advice is golden. So if you want to pay for a real accountant, you can find one.”Before picking your next bookkeeping service provider, make sure to:Check the reviewsCheck the degreeCheck the references andCheck the feesWhat are some of the red signals you can look out for?Picking a new bookkeeping services provider can be challenging.  After all, you will depend upon this person to be a safe keeper of your financial documents and ensure complete compliance with current tax laws.   There are some things you can look out for that can help you avoid trouble.Inexpensive or Cheap:   Sure, you want the best deal in town.  But you get what you pay for.   Is it worth paying hundreds of thousand dollars in taxes to save a couple hundred dollars of bookkeeping fees?Office and Staff:  We live in a society where companies like Google and Facebook came to life from a garage.  But those are just a couple of examples.  Truth is that hundreds of companies are born and die in a similar garage.   If the office and staff of your CPA or Bookkeeper look unorganized than you are surely heading for trouble.   Look around the office to see if paperwork is properly filed. How is the desk of accountants?Pay attention to phone calls. How is staff answering the client's phone calls?   If possible, ask to see the profile of the office staff.  Good CPA or bookkeeper will happily share the work experience of their staff.Office Hours:  Odd office hours or office that is only open during weekends can be troubling.  Make sure that your CPA or bookkeeper will be available when you need them.We hope that your next bookkeeper is better than your expectations.  Please share your experience regarding bookkeeper or CPA services.

Turning Over Your Business? 5 Steps To Know

- 11 months ago
Whenever we start a business we hope to make it big, earn profits and expand a lot. But doing these is not easy. While we all expect the maximum return from our businesses turning over your business requires the implementation of some essential steps. So if you, like many are trying to know and understand the steps that will help you to turn over your business, this article will surely be of much help.Increasing your turn overIncreasing your turn over is what all businessmen try to do but to actually be successful in doing this requires some steps. Here are a few of them:Lowering costs: Lowering costs of the company will inevitably result in a higher turnover. You can lower the expenditure of the company by getting your products at a lower cost from the supplier and by evaluating the business processes and systems to reduce any wastage. Reducing these costs will ensure an increased turn over. You can also try to reduce overheads and introduce a functional method that will help your employees to properly utilize time. The less time they spend on unnecessary activities the more time they will spend on productive works thereby increasing your turnover. Asses your employees: Assessing your employees’ performance can also help you increase your turn over.  Motivate your employees to work better to increase profitability, appoint the seniors to hand over easy tasks to the juniors so that they can have more time to work on important projects and reward employees when they have done something good. Creating a proper work schedule and keeping yourself updated with how the work is being carried out, who is responsible for a certain project and the end result will bring out better quality work and increase your turn over.Plan well: Proper planning and execution help a lot with increasing your turn over. Having a proper plan will ensure that the work will get done quickly and you will also be able to adapt to changes. You should set a short time, well-thought plans and see if you can implement them properly. You can also modify your plans as they are implemented to suit your needs. Developing a customer base: Increased customer base will automatically mean an increased turn over. You can increase your customer base by developing your service and product quality. You should have a market survey to understand the recent trends and offer your products or services according to those trends. Pricing your commodities perfectly so they give good value for money is a great way to expand your client base. Providing after-sale services such as training and installations creates a good feeling about your company to the customer and this can help attract more customers. You should also develop your customer care services so that they can solve their problems quickly. The number of satisfied customers the more turnover you will have.Check your profit margins: Periodical checking of the profit margins of the company will help you identify the pattern of sales and profit from which you can take proper steps to either maintain or to bring the necessary changes to increase turnover. If you find high sales with high profits you should definitely continue implementing the action plan and reward those employees who have made your product successful. However, if you find that your profit margins are low but sales are high you can increase your pricing of the product. Many times there is a considerable profit but the sales are low. In such a scenario you can think of plans that will help you increase sales and bring more profit to the company. But if you are faced with low sales and low profits you then need to stop the present action plan and incorporate something new that will help you to hike up the sales and in turn more profits. Hopefully, these steps have helped you understand how you can increase your business turn over. It is very important that you remain updated about the strategies being used to generate more sales for a product or service. Since a large customer base can expedite your company turnover you must design your products and services to suit their demand. Since employees are also a big part of the company you should motivate them and have a reward program to encourage them to increases the profit margin of the company.

Understanding Self Employment Tax

Sanjiv Gupta CPA - 8 years ago
The word tax never fails not to scare us right? No matter however much money we are paying to the government as a tax it seems that whenever it’s time to pay back to the government there is some shiver that goes down the spine. But much of the fear is allayed when the necessary taxes are deducted from the salary itself and you don’t have to bother much about paying them yourself. But when the case is otherwise and you have to yourself tell the government about your earnings and then pay the relevant taxes, it becomes a bit scary then. So definitely it not only sounds scary but quite draining as well.How Does One Go About Paying Self Employment Taxes?If you are self-employed and you do not draw monthly cheques under a company then you have to individually make arrangements for getting your taxes paid. This may sound tough but as you systematize and organize the important documents, the task of you paying your taxes is not that difficult anymore.  What is important is knowing when to pay themIf you are self-employed then such taxes may be paid throughout the year. If you are making a good living out of your self-employed incomes or earnings, which is again registered as your primary income then probably you have to pay the scary taxes. Also, you can only skip the quarterly taxes at the risk of paying heavy fines during the tax-paying time.As a self-employed individual one has to also pay social security and medicare to the government out of their incomes. The best thing to allay your self-paying tax fears is to stash away those essential bucks to be used only during tax time.Not all is bad for self-employed persons!Yes in such cases you may have to pay only half of the entire tax burden. Also, you are liable to face deductions if you are using your home office, other business expenses or purchasing your own health insurance schemes. The only thing that ought to be kept in mind here is keeping all the papers ready for audit time.If all the above is a little complicated for you then you better consult an attorney to secure legal advice.

Things to Consider Before Closing Down Business

Sanjiv Gupta CPA - 8 years ago
Well if you are closing your business it’s not bad news. You are sensible enough and you know that lately, your business has not been bringing you the money you thought it would and so you took the right decision or maybe that you have got a plush offer, etc. Once the decision has been made now the only thing to focus upon is how to close that small business most effectively.Well, the above words might have sounded crazy but nevertheless, they are facts. If you are quitting from your small business venture then do it properly. And to help you in that here are the few checklists that you should keep in mind while retiring.Things of importance while clearing that office Of course, as per the IRS norms for closing your business, you need to ensure that important forms regarding the company’s annual tax returns and deductions are filled out and kept in proper order for future requirements. Again documents related to business property disposal, reporting of exchange of similar type property and documents relevant to changing the form of the business. Also if you can check on internet sites and browse relevant pages that may guide you towards closing that business most successfully, then you can try “ Close your business: What you need to do “ FindLaw page. Here you will find in detail the necessary things you ought to do before closing down that business. Besides other important suggestions, it gives detail about the concepts of licensing, tax considerations, dissolution and many more. If you want personal opinions too then also you can go to the Hub pages site learn about how to close a small business.  “A Road Map to Closing Down Your Business (FindLaw)” this has step by step remedies of suggesting proper methods of closing down your business.So whatever may be the reason for your closing down of business do it properly and I wish you all the luck for your next venture. For more information visit the site 

Surviving Small Business Ordeals With A Friend!

Sanjiv Gupta CPA - 8 years ago
Wow never had you imagined that there will come a time when surviving that business venture with your friend has become so difficult. It has strangely put your friendship in jeopardy too. This was indeed uncalled for.While starting that business together there were high hopes running on both ends but then tightening of funds, lack of trust and other minor quarrels started to get the better of the two of you ad finally the business. It may be vice versa also. But whatever the case outcome is for the detriment of both. So why not take care of it and nip it right at the bud?Don’t know how? Well here’s what you should do.Important Ways To Keep That Venture Rocking!Talking is rocking for all business – it is extremely important that both the friendly partners engage in honest conversations. It’s absolutely crucial that they talk out their differences and share the solutions to the problems bothering them.• Have written proof/ agreements – the agreement of your business should be in writing. These come in handy at times of disputes and can effectively put things in order. So this is another aspect to keep the business partnership going.•Separate attorneys must be made to review the documents separately – in order to gain full knowledge about how the agreement affects you, you must get a separate attorney for yourself ad so does your partner. Whatever may be the case, there should be an attorney’s involvement in the understanding of the signed document.•Draw the line between friendly and business communication-Be vocal about any important issues at the workplace. Any issue, major or minor must be approached immediately to stop them from going out of proportion. No matter what leaves the business in the office.•Bond outside the office – discuss issues other than business when not in the office – This goes a long way towards saving both the business and the friendship. Mutual respect is enhanced, and tensions avoided.Whatever may be the case it is important to note that the two important aspects of life, that is, work and friendship must not be let go of easily.

Defending the “hobby loss” Rule with a Business Plan

Sanjiv Gupta CPA - 8 years ago
A business plan is very important where a business is concerned. As long as you have a business idea, you need to draft a business plan so that you can know how to set up the business. When a business is recurring losses, the IRS audits them. Also, the IRS reduces the inference or deductions claimed when a business is not set up to gain profit. The Internal Revenue Service has for many years defended ‘hobby loss” rule with a business plan. Listed below are some of the factors to consider like;Does the taxpayer rely on making an income from the current business?Has the taxpayer made some income from this business in previous years? If the answer is yes, how often has the business made this income and also how huge was the income?Has the taxpayer out aside reasonable time and also dedication to the business to show that he or she has plans of making some income from it?Has it been proven that the taxpayer has a tax plan of losing cash in the business to lessen its taxes from their main source of profit?Is this business used to employ family relations who are in lower tax groups?If the business in itself does not bring any income, does the taxpayer logically foresee generating income from the appreciation of equipment used in the business?Does the income reason for the business overshadow the fun parts of the business?If the business is generating losses, are these losses as a result of conditions out of the taxpayer’s power? Or, are those losses going at the start-up stage of the activity or business?Has the taxpayer made income from a comparable business in years gone?Does the taxpayer have the needed trade or activity understanding to go on with business success and also make the needed income? Or has the taxpayer seen or talked with other people who can provide the right routes and education to run the business very well?If the business is making any losses, has the taxpayer tried to modify its process to make better and enhance income?The secure harbor where the taxpayer is considered is if the business has generated some income in at least 3 years out of the last 5 years of its operation. When a business is not making profits like it should, there is a need for the IRS to come in and check if the reasons are beyond the control of the business. This helps to ensure that, the taxpayer is relieved of paying taxes.For every business, the survey will differ. This is because; every business will have a different issue from the other. So, not all the investigations come with the same results. Due to the fact that there are different companies and also businesses, there is a strategy for every trade or business type to get the best results. If you need a business plan, you may contact me at 510-709-4030.

IRS Wins Foreign Account Case Over Former Mobil Senior Executive

Sanjiv Gupta CPA - 8 years ago
IRS (Internal Revenue Service) has achieved a great victory over the former Mobil senior executive Bryan Williams. He was alleged in a case of offshore tax evasion. He concealed foreign bank accounts of him holding millions from IRS.Between 1993 and 2000 this former executive opened two Swiss offshore in order to hush up his financial activities. He was also accused of purposely failing to fill out documents like foreign bank and financial account forms aka FBAR.In recent years IRS has become more stringent about the regulations. Different cases like this have prompted them to take such an action.  The authority has been petitioning for the more financial resource so that they can expand the tax evasion programs effectively. Their focus is now to catch and prosecute lawbreakers.Initially, the judgment was in favor of Williams. But in the year of 2003, Williams was convicted in a separate case. His case involved fraud and conspiracy. He pleaded guilty for this case. This year finally the fourth circuit court of appeals in Richmond, Virginia ruled in favor of the IRS (Internal Revenue Service). According to the court documents, he has committed fraud.Now IRS will impose heavy penalties on Williams for committing such a crime. He will have to pay a huge amount for each year of evasion.This is a great lesson for taxpayers. This is the high time everyone should be concerned about the consequences of such fraud. So it’s better to avoid the ways to take the help of abusive tax shelter. Going with a legal tax shelter is a quite beneficial way to reduce the taxable amount. A charitable donation is a perfect way of legal tax shelter. Apart from this, you can go for investments. Investments in real estate or health insurance are also considered as a better way of tax shelter.If you are holding an illegal foreign account, then you should stop such financial activity. Any day and any time IRS authority can accuse of doing such frauds. And the rest you know.

Your Tax Credits and Deductions Are Expiring Soon

Sanjiv Gupta CPA - 8 years ago
The US congress and senate have a way of waiting until the last moment before making the many needed changes in legislation. In the year 2012, the country was just coming out of a deep international recession that affected the economy deeply. At that time, the congress and senate fell over themselves as they scrambled to try and save the normal Americans from feeling the effects of expiry on the tax breaks that they had gotten used to. This was then; however, the same situation seems to be in the offing at the end of this year. Most of the extensions that had been given earlier in 2012 are nearing their end with the collapse of this year, and as yet, few safety nets have been put in place to protect the common folk for when that time comes. Pundits point out that the delay in enacting changes in these laws or determining the direction that any fiscal interference from the government will take largely depends on the result of the presidential election. Well, the elections have come and passed, and the democrats had their way with regard to the presidency. As such, it is expected that such bills such as the Family and Business Tax Cut Certainty Act of 2012, which was approved by the Senate are going to sail through to the implementation stage.This is only half the solution; while the bill covers most of the extensions, there are some and albeit crucial parts of the bill that have not been looked at. This to some extent indicates the direction that congress may be leaning in relation to the tax breaks that have been the norm for a while now. The result will be a reaction that is part in full to what the market is used to. If this is the result, then it is expected that people are bound to tighten their belts, so to speak in the recent future.Initially, the bill took care of the tax provisions that affected individuals including restoring the alternative minimum tax (AMT) patch. The bill also took care of the deduction for state and local sales tax as well as the parity for employer-provided mass transit and parking benefits. Such provisions for these businesses include the extension of research and development credit in addition to the work opportunity credit. On the other hand, some of the things that this bill overlooked include the impending changes that are expected to happen on income, estate and capital gains tax rates.Recently, estimations by the Joint Committee on Taxation held that the renewal of this smaller list of provisions would have a net effect of costing more than $192 billion in loss of revenue from the fiscal year 2013 all the way to the fiscal year 2017. This is by no means a small number; however, the main question is “can the US economy handle such a loss at the moment?” If so, just what is the net return if such a move is undertaken?

Important Year-End Tax Implications For Ranchers

Sanjiv Gupta CPA - 8 years ago
The thing about taxes is that you always have to pay them at one point in your life. In fact, at some point, it is said that the only thing human beings are sure about is death and taxes. Ranchers make up a fairly large percentage of the human population in the USA. So what are the implications of end of year tax implications to the ranchers in the USA?The answer to this particular question is somewhat complicated in itself owing to the multifaceted way in which it can be tackled. This is because the implications can be economical, social and fiscal in nature. The magnitude of these implications is also something that needs to be looked at, especially considering that a larger part of the population is just picking itself up from the throes of financial recession. However, in this article, we are going to look at the major financial implications of the end of year tax changes to the average rancher.The baseline of this article is simple; if congress does not act this year to shield the local folk by enacting safety nets with regard to ranching, then the result is that the New Year will not be too good to the ranchers. This is because such a move will have the net effect of raising the rates on virtually all the taxes that taxpayers pay, and in this case, ranchers. Such taxes include, but are not limited to income taxes, capital gains, dividends, wages, gifts, and estates. Looking at the wholesome situation, most of the tax provisions that expire at the end of the year actually have a direct bearing on the tax amount that is paid by the ranchers and farmers in much of the USA. Most of the farmers and ranchers in the USA are owners of a large estate through which they carry out their businesses. Estate taxes are some of those taxes that are bound to increase if changes are not made. As such, a person paying a 35% tax on his estate may be slapped with a top rate tax of up to 55%. Such increases are bound to increase the cost of business and of the products sourced from these ranches. This is one of the reasons that experts advise businessmen to take care of their estates before the year-end. If not, then the net result may be something that is not entirely good.It is for this particular reason that the end of year tax implications should be put into account not only by the accountants as they crunch the numbers but also by the government and the legislators as they continue to debate the taxation issue. Initially, there were exemptions to the extent of 10 million dollars; however, with the expiry of the tax breaks, the situation is bound to get a little tighter. This is because only exemptions of up to 1 million will be entertained by the taxman. 

Want Funding For Your Business ? Look at Crowdfunding

Sanjiv Gupta CPA - 8 years ago
For a beginner, the term crowdfunding may be new. However, it is quite easy to understand. It simply means the collective drawing of resources or investing the collective money drawn from various resources to some activities as investments etc.Crowdfunding implies collective drawing of money from disparate resources, usually through the internet in order to support the earning initiatives by other people and organizations. Crowdfunding can be used in the wide spectrum of activities like disaster management, political propaganda, movie promotion, research, and development, etc, the term crowdfunding is more in use now than it was ever.Legality – How legal is crowdfunding?Once you understand the meaning of crowdfunding, the natural question that follows is how legal is crowdfunding? Is it safe for any business house to go about crowdfunding? If so then how shall one go about it? Questions likewise follow and to get full knowledge about all of the above, here’s a bit of discussion about it all.Though Jobs Act regulations favor crowdfunding, there are of course more significant ways companies should deal with them. For starters, owners of small businesses should state the requirements to investors and only move forward once all the rules defined.Again the rules are not without their risks and the biggest and most grievous of them is getting involved in a scam. Often the brokers, introducing themselves as know – all of the crowdfunding are treacherous and so the warning, that unless with proper documentation such people cannot and should not be trusted. Offers that promise smart deals in a short time can never be good offers.Crowdfunding will be available next year for small business owners. However, businesses should watch out for companies looking to make a quick buck. As per NASAA reports, such owners are already after investors.

Buy Sell Agreements

Sanjiv Gupta CPA - 8 years ago
Understanding the Buy-Sell AgreementBusiness owners with partners can protect themself by having a buyout agreement (aka buy-sell agreement) in place. This agreement allows stockholders to purchase partners' interest in the company under certain triggering events such as retirement, or death. The agreement can also be structured so that company partners have the first right to purchase the interest in the company.The common type of buy-sell agreement are:1.) Stock-repurchase agreement2.) Cross-purchase agreementThe first one is commonly used in small businesses. It allows the company to buy out the departing owner's interest. For example, if one of the partners decides to leave the company, his or her stocks can be purchased by the company thereby increasing the share of other partners in the company.A cross-purchase agreement is a bit different. Instead of the company purchasing the stock of the departing partner, remaining owners are allowed to purchase the departing owner’s stock.Who needs a buy-sell agreement?Any business with partners should have a buy-sell agreement in place. This agreement should be drafted and signed as soon as the company is formed. The agreement will protect the owner leaving the company along with partners remaining in the business. A buy-sell agreement can help businesses avoid costly conflicts when the buyout time comes.What methods are used to set the price?Pricing should be based on the evaluation of your business. This is where your CPA will come in. IRS section 2703 prevents a business owner from picking a random low value for the evaluation purpose due to estate planning laws. However, your CPA or lawyer should be able to help you come up with a fixed price agreement.The better way to evaluate your business is to use the valuation process agreement. It is a good idea to engage an independent valuation analyst to determine the fair market value of the business. There is a good chance that a fixed value agreement may undervalue or overvalue your business. However, an independent valuation will get you much closer to the correct number.You can engage an independent valuation analyst on a yearly basis to determine the correct value of your business and update your buy-sell agreement accordingly.Do you have a buy-sell agreement for your business?

Why You Should Not Respond To Online Comments

Sanjiv Gupta CPA - 8 years ago
We are living in the Internet Age where one can write about product, business or service using blogs, forums and/or on review sites. Some people call it freedom of speech. Your comments are your individual opinion and they are protected by the constitution. However, it is very easy to cross the fine line of individual opinion.In a recent case, an anonymous client of New York lawyer, Robert Feldman, went to popular online forum Ripoffreport and wrote about the attorney. New York lawyer found the comments unfair and allegedly responded to these comments publicly by making reference to ex -client’s criminal case history and calling him” emotionally disturbed”.This instance didn’t end there. A former client of Mr. Feldman reacted by filing a defamation lawsuit against him. The plaintiff denied making the online remarks. You would think New York Attorney will respond to this case by bringing all a bunch of proof to the court. On the contrary, Feldman failed to appear at the hearing on a motion, and this promoted Manhattan Supreme Court Justice Cynthia Kern to order Feldman to take down some of the comments that caused the issue.Plaintiff, a law student, also asked the court to order Feldman not to make such comments in the future. However, the Judge declined this request by explaining that such prior restraint on speech could not be justified.Mr. Feldman told the news agency that he was not notified of Tuesday’s hearing. The plaintiff is now pursuing a malpractice suit against Feldman.This story is a good example of the love-hate relationship of freedom of speech. If you are a business owner responding to your customer online comments than make sure your comments are backed by proof. Personal attacks even in an online forum can result in an in-law suite.

Who Should Pick C Corporation?

Sanjiv Gupta CPA - 8 years ago
This is a very common question asked by our readers.Who should use a C Corporation as a business entity?You should pick a C Corporation if you:Have noncitizen or green card shareholders.We might look for additional funding from venture capital firms.Want a flexible way of splitting profit among business owners.Want to reduce medicare and social security taxes by setting up salaries for employees and/or owners.Want to provide fringe benefits to owners. E.g. life insurance, education, and transportation costs.Want to provide health benefits (through your corporation) to your employees and owners.Want to reduce your taxes by splitting your earnings between your shareholders and the corporation.Want your business earning to stay within your business so that it can grow.Want to transfer your share among other business partners/shareholders.Want to provide stock options to employees as a benefit.Want to make it easier for someone else to purchase your business.Want to provide a travel and entertainment benefit to your employees.These are some of the key reasons why you should pick a C Corporation as your business entity. However, you should consult with a professional before setting up your business structure.A good consultant can advise you to ensure your business structures provides good asset protection and reduce your tax liabilities.Make sure to understand the requirements of the business structure.  For example, C Corporation requires a business owner to hold the annual meeting and keep the meeting minutes.  You can lose your protected corporation status if you fail to follow the requirements.

IRS Makes Foreigners To Conduct Businesses In USA

Sanjiv Gupta CPA - 1 year ago
Over the past year, the IRS has been clamping down on tax fraud cases, making it very hard for people with ill intentions to actually conduct their businesses. To start with, the pace with which tax refunds are being submitted has been increased to allow for time to handle tax fraud cases. This, in essence, means that the IRS is looking at the avenues through which identity thieves can get to defraud the government. The IRS not only made it difficult for the identity theft victims and fraudsters to get their refunds but it also made it much more difficult for Americans who live abroad and foreigners to mail in their fraudulent refunds. The IRS seems to have something else in mind; to them, they seem to be moving towards decentralization of the whole system. It is moving towards the creation of a specialized identity theft unit, which is set to operate within 21 separate functional areas.For a while now, some of the laws that have been passed by congress have had the net effect of making the process of doing business abroad for Americans much more strenuous than it was. As if this was not enough, the congress and the IRS are back at it again. This time, they are in the process of making it much harder for foreigners to conduct business in the USA. Whether this is a good thing or a bad thing remains to be seen over time. However, as the IRS and congress harden their stance on taxation issues and fraud, the pinch is being felt by the normal American who has the small and medium-sized business. With the new laws, the process of acquiring a tax certificate has become much longer and more of a hassle. In most cases, the law requires that the applicant sends his or her passport to the IRS for extended periods, during which period the IRS processes the paperwork. However, this does not mean that the new laws do not have their advantages. One such advantage is the fact that the process of application has been blown wide open giving applicants more avenues to apply. On the other hand, these laws have also made ITINs (International Tax Identification Numbers) expire after five years. This means that every five years, businessmen across the country will be required to go through the whole process over again if they are to remain tax compliant. This requirement does not only affect foreigners investing in the USA, but it also affects those Americans who are willing to invest out of the country.  Just another little effort by the IRS does to make staying legal as difficult as possible.Even then, the average American and the business community should be happy with the new requirements since it means that the government will be able to net previously excluded tax avenues. The result is that the government will be better able to handle its financial commitments and provide the relevant services to the populace.

Tax Rules for Hobbies and Businesses

Sanjiv Gupta CPA - 7 years ago
If you are a regular taxpayer probably you would beware of the fact that taxpayers treat hobbies and businesses in a different way. For starters, this article tries to explain how both of them are different from the perspective of tax payments.Let us consider two examples to understand this case better.Example 1: Assume that a particular individual is an Assistant track coach at a University, athletic coach for Nike and is associated with a lot of other coaching events related to tracking and field events. The individual is also into private coaching activities that help the individual earn money. Over the past decade, the individual has incurred huge losses. So according to Section 183 of the IRC, if the individual’s income is more than the deductibles, then it is taxable. Else the activity is considered a hobby and is exempt from tax though it is considered a ‘for profit’ activity. Some of the factors that weighed in favor of the individual were that his income was less than the deductibles and also the individual had devoted a large portion of his personal time to the activity which affected the individual’s marriage and life.Example 2: In this case, let us assume that the individual has been a very successful salesperson professionally and operated a sprint car racing activity as a hobby. The individual had a passion for racing activities and was actively involved in racing for various groups in the early days of his career. Finally, after racing for a few years, the individual purchased his own racing equipment which included a fleet of cars, a full-sized semi-trailer and a shop that was taken on lease. Recently when an audit was conducted, the individual claimed that he had incurred continuous losses for over a decade and hence could not pay taxes. The tax court, taking into account the maturity level of the activity and the sustained losses incurred by the individual ruled in favor of the individual. The court placed particular emphasis on the fact that that taxpayer indulged in the racing as a hobby and did not have an honest objective or goal to make profits through the activity. This is a classic ruling wherein the tax court clearly differentiated between a business and a hobby based on the intent and the profit motive of the individual.For taxpayers, it is essential to know the difference between a business and a hobby as the tax implications may vary depending on the context. Anything to do with a profit motive and where the income is more than the deductibles, the case gets slotted under a business rather than a hobby because there is money incurred as profit by the individual. A hobby is something that is purely pursued out of passion with no regard to profit and loss.If you are still confused, you could take the help of qualified CPAs to understand the context and the tax liability owed to IRS. It is always better to get things sorted out earlier than to struggle through after an audit by the IRS.

Employers (Dental Practices) Engaging Independent Contractors are Prone to Scrutiny

Sanjiv Gupta CPA - 7 years ago
The government acts strictly with employers who make attempts at evading taxes by resorting to unscrupulous means.  Many employers project their permanent employees as being independent contractors in order to avoid employment tax.Hiring independent contractors are legal in certain businesses and professions, provided the conditions allowing for the same are adequately satisfied.  Dentistry also falls under the same purview. The government is liable to identify and arrest any practice by an employer wherein he manipulates or misuses this provision of law with the intention of avoiding employment tax.To be considered as an independent contractor, one needs to fulfill certain conditions, so that status as an independent contractor can be defended in the court of law if the need arises.  The conditions which validate a person as a contractor require to include the ability of the person to work freely in the premises of the owner is liable to be paid by the owner for the project based on any frequency other than on an hourly basis, the person uses his own appurtenances, recruits and pays for his own employees, and has a control on the final product of the service he is giving.The person who doesn’t fulfill the stated criteria cannot be validated as an independent contractor.  Let’s consider the case of a dental specialist. He doesn’t practice on his own as an individual practitioner but works in the facility owned by some other practitioner. He is compensated for his services separately from the regular employees of the facility owner, He comes with his own team – which does not fall under the owner’s supervision – and is totally responsible for the quality of the services he provides.The owner cannot supervise his work and operates as a business entity; thus his company has signed a contract with the owner’s entity for delivering a certain service for a particular period.  The way the workers connect to the owner’s facility in terms of financial and business relations is what decides the exact status of the worker.The owner who wrongly classifies an employee as an independent contractor can be assessed for social security and medicare tax attributed to the employer. The owner can also be held responsible for the employee portion of Medicare and social security taxes.The owner can also be additionally penalized for not covering the wrongly classified employee under any benefit plans like health and retirement. An independent contractor is a self-employed individual and has certain tax obligations to be met, which are listed on the IRS website’s Self Employed Tax Centre page.Any worker that does not fulfill the criteria required of an independent contractor will be deemed as being wrongly classified by the employer. Even an associate uses the employer’s resources and his work is dirigible by the employer, keeping him out of the purview of being an independent contractor.In case of any discrepancies are proved related to the same, the onus of taking the beating would fall on the owner. There have been cases where larger firms have been penalized for classifying an employee as an independent contractor due to the inconsistencies being discovered in their terms of employment by the IRS. Such owners had been forced to pay the payroll taxes and related penalties.

President Obama Has Been A Boon For Entrepreneurs And Small Businesses.

Sanjiv Gupta CPA - 7 years ago
The health care plan issued by President Obama has been a boon for entrepreneurs and small businesses. This Affordable Care Act gives these small businesses a lot of support and helps for buying health insurance. Venture capitalists see this as a massive opportunity and they have been giving away lots of cash benefits for starting up health care centers across the US.The investments made in health care setups grew at a whopping 64% in the first quarter of 2013 which is way higher than investments last year.  Brad Weinberg, a partner at Blueprint Health and venture capitalists for new health care setups suggests that this is the best time for entrepreneurs for setting up health centers as all infrastructure is available like interest, support, and capital.  Blueprint has been helping around 30 companies with $20,000 each for setting up health care centers for a stake of 6% in equity.Health care was never the most sought after industry in the US as a technology was the booming sector. Even IT companies were more focused on social networking or game centers. However, the Affordable Care Act turned everybody’s focus on the health care industry, due to the huge financial incentives that it provided. There are more opportunities to set up newer units and speedily resolve many health problems.Attractive financial incentives accompany the Affordable Care act. These are offered to health care providers to upgrade their medical equipment to newer models and the patients are encouraged to stay healthy always. People who work with the new startups have stated out of their experience, that the hospitals and insurance companies always look up to entrepreneurs for their innovative technologies. New startups are given huge aids to come up with new and cheap techniques to make healthcare a booming industry.David Whitlinger, executive director of the New York eHealth Collaborative announced recently that the list of venture capitalists and health care providers that have registered with them is more than what they can deal with.  Whitlinger runs a digital health accelerator program that had graduated its initial set of startups recently.  This initiative selects a list of startups that have the potential to help New York’s medical program that finds dozens and dozens of venture capitals who are interested in investing in these setups.Insurance leaders, medical centers and medical shops have gone on record to offer huge discounts and financial assistance for health startups that solve their problems. This has encouraged these small businesses and entrepreneurs to come out with new models and help the people in reducing their hospital visits. These entrepreneurs have found the able support of venture capitalists, who offer them the much-needed capital and support to set up their establishment. This is a mutually beneficial plan of the Affordable Care Act where the venture capitalists get a stake of equity of the fresh startups and these new businesses get the backing of established venture capitalists and enough capital to start working.

Writing Off Your Summer Vacation

Sanjiv Gupta CPA - 7 years ago
Summer vacations can burn a big hole in one’s pocket; however, avoiding them is not the long term solution. Working without taking any vacations can kill a person’s work-life balance. One has to sneak away to small trips now and then and yet have a check on the travel expenses. Here are a few ways on how to travel yet claim deduction on some of the expenses.Combine business with pleasureIf a person travels to trips for a business meeting he can also combine the trip to do something for his personal interest. There is no hard and fast rule to identify if a trip is for business or personal purposes. If the time spent for official reasons is more on a trip, then it is a business trip. Airfares are deductible expenses. Driving to the venue of the meeting gives a whopping deduction of 56.5 cents per mile with the added benefits of parking and toll charges. The key to getting travel expenses deducted is excellent documentation.One must have very good control of his travel expenses and know all the rules of the IRS thoroughly so that he can answer any query regarding his claim for deductions.  Business trips help to write off the entire transportation and lodging expenses can be claimed for deductions. 50% of the meal expenses spent on working days are also deductible. Hence if one travels with his wife, only the meal expenses have to be taken care of. There should be some reasonable justification to be provided before claiming some expenses as deductions.Learn somethingEnrolling in some courses while traveling is another way to save travel expenses. As long as the course is to improvise on one’s skills at work, the education expenses and the travel expenses can be written off.  One has to regularly attend these classes while traveling and have good records about all the paperwork that might be needed while claiming deductions. These courses could be a business-related seminar or a professional course that would help the person climb his corporate ladder effectively.Lend a handVolunteering to do charity work while traveling can help in claiming tax deductions. This is one way to prove that the aim of travel is not for pleasure or personal purposes. One can choose to do charity work after office hours and get a deduction for all the out-of-pocket expenses one spends. Driving one’s car to the venue of the charity work also helps in deducting car expenses of 14 cents per mile. The parking and other toll expenses are also covered in these deductions.Get healthyIf a person is suffering from a severe obese condition, then he can get himself treated at a spa for weight reduction and improving his general health. These medical expenses are deductable provided there is a statement from the doctor that the treatment was purely medical and not for pleasure. Driving to the medical center can help to deduct up to 24 cents per mile with the combined benefits of parking and toll expenses.

How to claim the Small Business Tax Savings Credit

Sanjiv Gupta CPA - 7 years ago
The small business employers provide good health care plans to their employees and hence they are given tax credits to reduce the burden they suffer by providing the health insurance plans.What is the small business tax savings credit?According to the Affordable Care Act, small business employers, and small tax-exempt employers like non- profit organizations get a tax credit of 35% and 2% respectively for the years 2010 to 2013.  These credits are due to increase correspondingly to 50% 35% in the year 2014. The scheme of offering such attractive tax credits is called Small Business Health Options Programs (SHOP).These tax credits can be carried back or forward to other years also thus helping small business employers in a big way. The health insurance premiums that they pay to the employees are usually higher than the tax credits that they receive through the SHOP. In these cases, these employers can claim a business expense deduction for the premiums that they pay over and above the tax credit that they get. This is a double whammy for them, as they get both the credits and the deductions that they are due to get.What exactly is a small business?The explanation of the tax credits mentions small business employers on every page. However, there are certain rules to explain to who those small business employers. To qualify for the double whammy, one needs to fulfill the following conditions:  a) the employer needs to cover at least 50% of the health care coverage (single coverage and not family) for each of his employees. b) There must be lesser than 25 full-time employees in the business for it to be classified as a small business. Two half time workers can be considered as a 1 full-time employee and c) These employees must be paid less than $50,000 a year as wages.Claiming the creditThe small business employers can arrive at the tax credit that they are due, by using the IRS form 8941. This has to be then included along with the general business credit while filing the income tax return. The small business employers have a great advantage to carry their tax credits either backward or forward and use it as and when they require it the most. Using the help of a professional tax advisor can help in calculating the exact tax credits and maximizing the benefits of this option.All sufficient evidence supporting the facts should be submitted to the IRS to make it clear that the employer, who is qualifying for a tax credit, is indeed a small business employer. Once the IRS is fully convinced about the authenticity of the paperwork, then the tax credit gets approved and it reaches the employer at the time that they have opted. The additional deductions also help employers in a big way as they don’t feel the burden of huge healthcare expenses.

Small Business Tax Savings Credit Explained

Sanjiv Gupta CPA - 7 years ago
How to claim the Small Business Tax Savings Credit?The small business employers are given excellent benefits in the Affordable Care Act. These small business employers provide good health care plans to their employees and hence they are given tax credits to reduce the burden they suffer by providing the health insurance plans.What is the small business tax savings credit?According to the Affordable Care Act, small business employers, and small tax-exempt employers like non- profit organizations get a tax credit of 35% and 2% respectively for the years 2010 to 2013. These credits are due to increase correspondingly to 50% 35% in the year 2014. The scheme of offering such attractive tax credits is called Small Business Health Options Programs (SHOP).These tax credits can be carried back or forward to other years also thus helping small business employers in a big way. The health insurance premiums that they pay to employees are usually higher than the tax credits that they receive through the SHOP. In these cases, these employers can claim a business expense deduction for the premiums that they pay over and above the tax credit that they get. This is a double whammy for them, as they get both the credits and deductions that they are due to get.What exactly is a small business?The explanation of the tax credits mentions small business employers on every page. However, there are certain rules to explain to who this small business employer. To qualify for the double whammy, one needs to fulfill the following conditions: a) the employer needs to cover at least 50% of the health care coverage (single coverage and not family) for each of his employees. b) There must be lesser than 25 full-time employees in the business for it to be classified as a small business. Two half time workers can be considered as a 1 full-time employee and c) These employees must be paid less than $50,000 a year as wages.Claiming the creditThe small business employers can arrive at the tax credit that they are due, by using the IRS form 8941. This has to be then included along with the general business credit while filing the income tax return. The small business employers have a great advantage to carry their tax credits either backward or forward and use it as and when they require it the most. Using the help of a professional tax advisor can help in calculating the exact tax credits and maximizing the benefits of this option.All sufficient evidence supporting the facts should be submitted to the IRS to make it clear that the employer, who is qualifying for a tax credit, is indeed a small business employer. Once the IRS is fully convinced about the authenticity of the paperwork, then the tax credit gets approved and it reaches the employer at the time that they have opted. The additional deductions also help employers in a big way as they don’t feel the burden of huge healthcare expenses.

Essential Elements For All Business Partnership Agreements

Sanjiv Gupta CPA - 6 years ago
After you have chosen the perfect business partner, it is essential that you cover all your bases when you set up your partnership agreement. If you can afford an attorney, it is a good idea to have one draft of the agreement. At the very least, you should hire an attorney to review the partnership agreement before you sign it to ensure your interest is covered.What Is The Purpose Of A Partnership Agreement?This agreement has many purposes but the two most important purposes are dispute resolution and the business structure. Even the best relationship has disagreements especially when there are a lot of decisions that need to be made. When your partnership agreement is crafted carefully, it will outline exactly how disputes will be handled before they happen, instead of in the heat of the moment.In addition to providing dispute resolution, the partnership agreement forces the partners to think about how the business is going to run and be structured. This can minimize potential misunderstandings and get everyone on the same page from the beginning.Critical Elements That All Business Partnership Agreements Must HaveBusiness Name: The name that the company will be operating under.Purpose: A broad statement of the business’s purpose. Leaving the purpose broad will provide flexibility for the company to adapt over time.Workload Structure: The partnership agreement should include how the workload will be shared. The following questions will help you determine what should be included regarding the partners’ workload:Will the partners be expected to have set work hours?Will all of the partners be working the same amount of time? Or will one partner work less or more than the others?How much vacation time will be given to each partner, each year?Will each partner’s role be full-time or can the partner conduct another type of business outside the company?If yes, what another type of business that is allowed to be conducted?Partner Contributions: Determine exactly what each partner will be contributing to the business such as cash, physical property (office space, equipment, etc.), and intellectual or other property types (client lists, software codes, etc.). After you have all contributions listed, discuss with the other partners what restrictions there will be on those contributions, if any. The following are some examples of the types of things that should be discussed:Client Lists: Does all of the revenue from the clients that a partner brought to the business flow to the business? Or does a percentage of the revenue, from those clients, flow to the partner directly?Personal Property: If a partner brings the property into the business (such as a copy machine, computer or lawnmower) does the property become the business’ property?Intellectual Property: If a partner brings the intellectual property into the business (such as a software code), does the business own it? Are the other partners allowed to modify it?Partners’ Compensation: All partnership agreements should list the terms of each partner’s compensation. The following questions should be discussed to determine what should be included regarding compensation:Will each partner receive a salary? If yes, how much will they receive and when will it be disbursed?If a partner receives less salary, will the difference be made up for in the future?Will the profits be reinvested in the business?If yes, when will profits be taken out?How will profits be divided up between the partners?How will business losses be handled?Ownership: Now that you have determined the contributions, workload, responsibilities, and compensation, you need to agree on how exactly the ownership should be split. This is a difficult calculation and can cause problems between partners before you even finalize the partnership agreement. Things to consider:Money raisedRevenue generatedContributionsOriginal conceptFull-time commitmentReputationBusiness Authority: The partnership agreement should state the authority that each partner has. The following questions need to be answered:Does each of the partners have the authority to enter into contracts (sign) on the business’ behalfWill the business have a line of credit? Depending on the structure of the business that is chosen, all partners may be held personally liable for the business’ creditCan each partner make purchases for the business without first consulting the remaining partners? In general, there is a monetary limit set. The partners must first get the other partners’ permission if the purchase is above the set limit.Death Or Disability: The partnership agreement should state what happens to the partnership if one of the partners dies or if they become disabled and are unable to participate at the same level. To prevent heirs of the deceased partner inheriting a portion of the partnership, partnership agreements normally include a buy/sell agreement.Partner’s Exit: The agreement should state the terms of a voluntary and involuntary exit. The following questions need to be addressed:What will happen if a partner would like to leave the business to pursue other interests?What circumstances would a partner be able to be forced out of the partnership?Dispute Resolution: Even in the perfect partnership, there will be times where the partners are unable to agree about a topic. The partnership agreement should state how disagreements will be handled. That way, when an issue arises, you will know exactly what the determining factor will be. There are many ways disputes can be handled including:One of the partners has the final say on a portion of the business.The vote is based on the percentage of ownershipPartners use an external advisory board to resolve any disputesPartners use a mediator to resolve any disputesPartners agree to arbitration, mediation or litigation in extreme cases New Partners: The partnership agreement should include the process of bringing a new partner in. How will it be decided? Majority vote?Selling The Business: What are the exact circumstances that the business can be sold? This will probably be included in the Buy/Sell Agreement.

Self Directed IRA – Caution

Sanjiv Gupta CPA - 7 years ago
Self-directed IRA schemes have a great chance of being involved in a prohibited transaction and hence the owner of these retirement benefits face the potential danger of their IRA account being disqualified. This was discussed and decided in the Peek V. Comr. Case. The details of this case are explained below.A fire safety business was considered a potential investment opportunity by two taxpayers. A broker, who was facilitating the sale, connected these taxpayers to a third party agent who managed the process further. This agent explained a technique to the taxpayers which involved them to set up a self-directed IRA, move funds from their existing IRA schemes to the self-directed schemes, set up a company, sell shares of the company and direct the funds into the self-directed IRA scheme and finally use these funds to buy a business interest.The paperwork for this scheme suggested that any prohibited transaction undertaken would prove harmful for the whole objective of this strategy. The paperwork was also accompanied by a letter from the firm’s accountant explaining the prohibited transaction rules clearly, though no personal guaranties were specified.The scheme went as per plan and the transferred funds were used to purchase the assets of the fire safety business. This transaction included a promissory note from the company to the sellers for one-fifth of the total sales price. A couple of years later, the taxpayers moved to Roth IRAs from their original IRAs and hence when the company was finally sold, the payments were finally transferred to Roth IRAs.The taxpayers’ income was fully adjusted to include the capital gains acquired from company stock sales by the IRS and the justification provided by them was that personal guaranties were equivalent to prohibited transactions. The assets from the IRA were deemed to have been distributed to these guaranties. The IRS reasoned that section 4975©(1) (B) disallows taxpayers from creating loans or loan guaranties indirectly to their IRAs. The Roth IRAs discontinue its existence if it is funded by company-owned stock.The taxpayers had to suffer an additional burden of 20% in penalties for not declaring the sales of the company. Their tax advisers could not be trusted upon, because they were the promoter of this sales strategy. The advisers were not given full information either because they were not transparent with the advisors and did not inform them about their decision to personally guarantee their loans.This is a good example for investors to understand the prohibition rules clearly and what transactions to proceed with and what transactions to avoid. It becomes doubly complicated when dealing with investment in retirement funds as the rules pertaining to the IRA accounts are more comprehensive than the other funds. This case also explains the need to be fully transparent with the tax advisers as they are the ones who represent a particular tax strategy and no transaction should be carried out without their knowledge.

The Tax Liabilities For Business Ventures in The USA

Sanjiv Gupta CPA - 6 years ago
Business ventures can thrive in the land of promise (USA) reasonably well provided they do not default on their obligation of tax towards the federal government. The business that employs people is responsible not only towards what they pay for their employees, in addition, they have to take responsibility for the society for its social welfare schemes, the healthcare of the elderly in the society and also the medical facilities for their own employees. By means of tax reduction at the source of the pay of the employees, the employers withhold a certain percentage in the pay-roll amount. This income is taxable and there are cases where proper reporting has not been there. To avoid having to face hassles in the form of the IRS (internal revenue service), stringent measures and punishment; employers are required to comply with the payroll taxes.Some employers instead of remitting the payroll taxes use that amount for funding their companies’ requirements or for rotation of funds as quick-fix measures to address the shortage of cash. This may be due to the high rent and business not up to the expectations. This willful noncompliance, in the long run, leads to heavy damage for non-disclosure and willful abetment of tax law. Criminal proceedings may also be instigated for such offenses.It is mandatory for employers to withhold a certain amount from the employees and submit the details to the IRS and based on this the pay-roll taxes are computed. They are obliged to submit the details of their employees and their pay-roll periodically. Employers are required to file the reports of the payroll on a quarterly basis in the states and annually to the federal government. Failure to remit the payroll tax will invite a penalty or 2 -10%. The IRS is a long-handed arm of the government that can punish both the employee and employer when they discover the default in payroll taxes.Just as the FBAR is the long-handed arm to check the proliferation of unaccounted money in foreign banks similarly the IRS is the arm working with the country.Any business whether small or big should work in tandem with the government authorities to iron out their differences and if in case of appeal they can always take it to the office of appeal for reversal. The ways in which tax evasion can happen areOmission and understatement of incomeImproper deduction and fictitious deductionsFalse information of employeesImproper allocation of incomeAny responsible business venture should approach a tax consultant and see to it that their business does not undergo stress with tax evasions and non-reporting. Know all the details of tax law! Become the master of your own business with the right input of running the business, with the proper input of managing the business- coupled with proper reporting to the tax authorities and be a good employer who inspires the employees to remain steadfast and innovate in their field.

Review Your Franchising Business Contract

Sanjiv Gupta CPA - 6 years ago
About ¾ of the world’s population deals in the field of business rather than seeking employment in the form of jobs. Businesses generate the type of income that holds the ability to elevate a person’s social status within a fortnight or render the person towards no option but bankruptcy if dealt in a careless way. The manner of a person and his or her attitude in dealing with a business strategy is very essential for the success or failure of a business.For example, an organized, well-mannered individual with a set of principles and wisdom would excel more and benefit from his abilities in the field of business rather than a person with a casual attitude. A casual attitude means that the person has no respect for the law, no knowledge regarding anything in the field of business, has no prior experience working on his own, does not realize the value of time and behaves selfishly whilst setting up a business. This type of behavior provides no benefits. Business is a field that requires sharp instincts at all stages, otherwise one can look at a life of bankruptcy after making a single wrong move.Since the field of business is generally preferred, several countries especially countries in the west have designed laws that control the different aspects of the business. This includes dealings in all forms of business contracts be it franchising or any form of setting up a brand name from scratch. There are fundamental rules that need to be followed. These rules are set by the respective governments of the countries. These laws have been designed to prevent any form of fraudulent behavior from any party involved in the commencement of a business deal.It has been announced repeatedly that people attempting to set up a business and especially, individuals involved in doing franchising businesses, should investigate the brand name, background information and financial history of the franchiser.   This unveils any problems related to the brand name or the franchiser. Many franchisers attempt to sweeten a business deal by sugarcoating the sales pitch but the contract that is drafted is very different from what they present.  This sort of fraud ends up harming the franchisee, which is why it is important to conduct a thorough background check before finalizing a business deal.There are a number of laws that have been devised to prevent this fraudulent behavior from bankrupting innocent people. The federal governments of different countries have made it compulsory for the franchiser to provide the franchisee with all the details and legal documents for the franchise business proposal before the franchisee is required to make a statement of agreement or decline. During the sales proposal, the franchiser is required to provide the franchisee with a ‘Detailed Disclosure Document’, which includes all the necessary financial and legal history of the brand that is up for the franchising business. The franchisee owns the right to ask the franchiser any questions that he or she may harbor during the pre-sale proposal presentation.The ‘Detailed Disclosure Document’ contains the following vital pieces of information from the franchiser:Financial statements which relate the accurate audited statements of the companyA complete profile portfolio, which contains the executive details of the companyCriteria of the required franchisee responsibilitiesThe information of the minimum ten purchasers of the product in the area of the franchiseeAccurate financial protocols for maintaining the franchise chain as well as the franchise business’s startup costValidate the earning packages stated in the ‘Detailed Disclosure Document’. A franchisee can accomplish this task by acquiring information from other franchisers who provide proposals in the area.Complete the ten days’ period before validating an answer to the respective franchiser. A franchisee should utilize this period to the best of his or her advantage without worrying about withdrawal.The appointment of an attorney and accountant can potentially help a franchisee investigate the legal and financial counterparts of the franchising business in question. These is the potential actions that can provide verification for the business proposal to be authentic in all its claims or not.Ask the franchiser for a detailed account in writing of all the successful purchasers of the franchising protocols.Compare the benefits of the offer with other franchise owners in the area as well as investigate what other potential brands have to offer.Read the contract once it has been drawn and sign the contract, which holds the criteria of your interest in writing, which were promised to you in the pre-sales pitch. These few basic rules of investigations hold the key to running a successful franchising business.

Thinking About A New Franchise Business

Sanjiv Gupta CPA - 6 years ago
Investing in a business is the fastest way of building a name for oneself in the market however, it is not easy to establish a credible name single-handedly. Almost everyone dreams of acquiring a reputable and successful business for themselves but nothing happens while one just sits and dreams. Every dream needs a proper outpour into constructive actions, which determine the conversion of that dream into reality. However, hard work is the catch in this story of success. People dream but their incentive to do hard work to acquire what they desire is weak and as a result, their dreams never get converted into real-life phenomena.You must always be aware that there is a definite downside of starting your own business. If your attempt at establishing proper business crashes, the loss experienced may be far greater than the initial investments. This may end up leaving the person in question in a state of critical bankruptcy. Therefore, the field of business is highlighted to be the best opportunity for people with a background in business or a mindset that comprehends the complexities that are associated with this field. The rest of the dreamers may not be blessed with the attributes that are required for the successful establishment of a business which can, in turn, lead them into an economic pitfall.Taking risks is a fundamental rule in the field of business. It is a sort of gambling where people fail and succeed every day. The odds may favor them one day or be against them the next. It is all a matter of destiny combined with experience and wisdom. There are several ways to kick-start a business.  The safest method to achieve a successful career in business and the concrete establishment of your name at the forefront of a business empire is to utilize opportunities offered by a franchise business, rather than attempting to build your own brand up from scratch.Franchise businesses provide you with a complete guidance protocol that is essential for beginners.  Through acquiring the chain of a particular brand name, you can work on establishing, as well as management skills while learning the perks of the whole system in the process. You will also be dealing with the experts and gaining valuable experience in the field.Franchise businesses are fundamentally businesses that have been handed over to entrepreneurs for marketing and management in a particular region or area. The owner passes over the legal temporary power to the entrepreneur that he chooses to make a deal with. The owner does this for a price and lets the entrepreneur use his brand name for establishing a business in the region. Of course, the owner is the one making more money than the entrepreneur in this case but as a starting practice for fresh entrepreneurs, this is the safest and wisest deal of all.There are two fundamental types of franchising businesses, one of which is product/trade name franchising, while the other one is business format franchising. In product/trade name franchising, as explained above, the owner passes the legal rights of the company to an entrepreneur. The entrepreneur then begins to establish a business in a region using the name of his brand for a price. In business format franchising the owner, also known as the franchiser, helps the franchisee (the entrepreneur) in acquiring the multiple, vital details that are required to set up a business.The franchising business comes with its share of risks as well. Numerous businesses have been announced as fraudulent after entrepreneurs took a risk and invested in a fake brand name without investigating the background of the possible franchiser. A complete and detailed investigation into the background and legal aspects of the franchiser is always necessary. The entrepreneur must also conduct a background check on his company setup, as well as the business assets that he boasts of having. Fraud is very common in this field and it manifests itself in a variety of ways, so if one is not careful he or she may end up on the wrong side of the bank which can potentially end up in lifelong bankruptcy.Identifying one’s strength is the key to success in a world of franchise businesses. The major factor one needs to focus on while contemplating an offer is how much is he or she willing to risk in investment. Next, the entrepreneur must be aware of his or her goals and aims which would lead the business to a destination and lastly, the entrepreneur must know what his or her strengths and weaknesses are.With the knowledge of one’s potential strengths, abilities, and drawbacks, it is easier to devise a strategy that would prove beneficial for a potential entrepreneur in the field of franchising businesses. Four ways to go about dealing with a potential offer before taking it, for a maximum success rate are:Utilize the professional help of an attorney and a CPA whose job is to provide you with the legal merits and aspects of a potential deal. Their professional expertise would enable you to visualize the smaller fine print, which would eventually grow to form potential problems for you in the business. With proper guidance and identification, those small obstacles can be obliterated.Identification of potential money and reputation deteriorating problems before making the deal is essential if one desires to avoid filing bankruptcy in the near future. A perfect and detailed investigation is the key to avoid such dilemmas.The knowledge of the history of the company as well as complete training in the art of franchising the particular product the franchiser entrusts you with is also essential, as well as beneficial.Acquiring the legal and financial history of the brand-name that one has been offered to the franchise is also one of the most important protocols one should follow up before signing a legal contract of acceptance. It is not easy to set up a business without a few smart moves but franchising is comparatively less risky than other businesses.
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