2011 Smart Business TipsTax and Account Planning for Small Businesses and

Independent Sales Reps- How to Protect Yourself and Maximize Tax Breaks -

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Accounting Tips

Your Accountant Should

• Do more than count numbers and fill out forms

• Interpret financial statements for management

• Be able and willing to educate you as to the state of your business affairs

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Accounting Tips

While working with an Accountant or Tax Professional

• You should be able to ask questions and receive answers to your satisfaction.

• It’s a proactive, cost-saving investment.

• Think of her as a member of your management team that is there to help you achieve your goals.

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Accounting Tips

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Proactive Tax Planning is KEY

Because many of us have other sources of income that end up on our personal 1040 returns outside of our businesses, it is important to look at both sides of the equation and identify areas of opportunity to reduce any liabilities that may exist on either side and take steps now to lessen or eliminate them.

Business Tax Tips

Understand your business’ entity structure and the tax compliance issues and tax planning opportunities related to it.

Sole Proprietors & Single Member LLCs – Schedule C (Form 1040)•Owners do not pay themselves W-2 wages, rather they may take draws from the company and pay their income taxes via estimated taxes quarterly.

Partnerships & Multi Member LLCs – Form 1065•Make sure there is a valid operating agreement in effect •Partners get paid from the partnership via guaranteed payments, not W-2 wages

S-Corporation – Form 1120S•Officers MUST pay themselves a reasonable wage•You cannot solely pay yourself in distributions

C-Corporation – Form 1120•The C-Corporation itself pays tax then the shareholders pay tax on their share of the profits of the corporation on their personal tax returns

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Business Tax Tips

Make sure your business has a profit motive to ensure hobby-loss rules do not affect you.

The IRS’ hobby loss rules limit the deductions that can be claimed for an activity/business it determines does not have a profit motive and as a result is considered a hobby. However, the IRS HAS NOT determined exactly what distinguishes a hobby from a business. Rather they employ a series of nine factors to determine the profit motive, called profit motive factors. The burden of proof lies with the IRS in to determine whether or not you are a business or hobby. All you need to do is show a clear intent to make money in your endeavor and you will be considered a business.

Track ALL business expenses.

Business expenses are those that are ordinary and necessary for you to conduct your business. Use this question “Did I incur this expense in an effort to generate revenue for my business?”

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Make sure your QuickBooks company file is in good order.Increased scrutiny of QuickBooks files warrants a periodic file review by a qualified accounting professional.

Business Tax Tips

Self-Employment Tax is REQUIRED. Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.

It is required if either of the following apply:

•Your net earnings from self-employment (excluding church employee income) were $400 or more. •You had church employee income of $108.28 or more.

Estimated Taxes Federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. If you are a self-employed individual and do not have income tax withheld, you must make estimated tax payments.

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