Nurture Your Credit Score

In today's credit crunch, lenders are revising their criteria for borrowers. These changes could cause an Excellent rating to now be Average; a credit score of 750 today is equivalent to a score of 700 two years ago. Here are some tips to make sure your credit score is as good as it can be.

*Get your credit report and score from one of the three major credit bureaus (Experian, Equifax and TransUnion).

*Check your credit report for mistakes. If you find an error, request a correction.

*Make all your payments on time (or early). 35% of your credit score is determined by the timeliness of your payments

*Be aware of your ratio of how much you owe vs. how much credit you have available. Ideally, you should only utilize 20% of your available credit. This accounts for 30% of your credit score.

*Keep your oldest cards active. 15% of your credit score is based on the longevity of your credit history.

The remaining 20% of your credit score is based on new credit you've acquired (10%) and what mix of credit (mortgage, auto loans & credit cards) you have (10%).

To get your credit report and score, visit www.TransUnion.com, www.Experian.com or www.Equifax.com

How Long Should I Keep This?

The following are the IRS guidelines for keeping tax-related records. Ask your tax preparer if you have any special situations not covered by the IRS guidelines.


Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

* Bills
* Credit card and other receipts
* Invoices
* Mileage logs
* Canceled, imaged or substitute checks or any other proof of payment
* Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

* A home purchase or improvement
* Stocks and other investments
* Individual Retirement Arrangement transactions
* Rental property records


If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

* Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
* Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
* Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
* Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks


For more information, see IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available by calling 800-TAX-FORM (800-829-3676).

How Long Does it Take?

For this month's "green living" post, I decided to look into how long it takes items to decompose. While there is some disparity among the time frames, I'm listing the most common lengths of time for the following items.

Paper towel: 2 - 4 weeks
Paper coffee cups: 2 - 4 weeks
Newspaper: 2 - 6 weeks
Paper bag: 1 month
Cardboard: 2 months
Plywood: 1 - 3 years
Cigarette filter: 5 years
Paper plate: 5 years
Plastic bag: 10 - 20 years
Aluminum can: 200 years
Plastic water & soda bottles: 450 years
Disposable diaper: 500 years

The following items are not biodegradable:
Glass
Styrofoam
Plastic utensils
Rubber tires

By planning our purchases, we can live greener. Together, we CAN make a difference!

Employee or Independent Contractor?

If you need additional hands to help run your business, here are several things to consider before you hire.

*The IRS uses three characteristics to determine the relationship between businesses and workers: Behavioral Control (whether the business has a right to direct or control how the work is done through instructions, training or other means); Financial Control (whether the business has a right to direct or control the financial and business aspects of the worker's job); and Type of Relationship (how the workers and the business owner perceive their relationship).

*If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

*If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.

*Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

*Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.

You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? You may also request these forms and publications by calling the IRS at 800-829-3676 (800-TAX-FORM).

Green Equivalents

For this month's "green living" post, I found some interesting tidbits that show how effective green living can be.

*Every house in the US that changes all their light bulbs to CFLs = taking 1 car off the roads

*Turning off you computer at night (rather than using Sleep mode) = about $0.04 a day (about $15.00 a year)

*Showers use about 1/2 the amount of water as baths. Every 1 minute you shorten your shower = about 5 gallons of water saved

*Every house in the US paying their bills online = 18 million trees saved every year

*Thermostat adjustment: Every 1 degree lower in the winter or higher in the summer = about 10% annual savings on your energy bill

If you keep your car tires properly inflated, your car will travel more miles on less gas.

Going to a car wash uses less water than washing your car at home (and it takes less time & personal energy!!)

Together, we CAN make a difference!

Customer Loyalty

In this day of internet shopping and new businesses spawning from corporate lay-offs, how can you keep your customers happy and loyal to YOU? Here are some tips to help your customers remain YOUR customers.

*Delivering great service once is not enough. It's the "every time" great service that keeps clients loyal. Customers have a choice as to whom they will do business with. Find out what service you offer that sets you apart from your competitors and consistently provide that service.

* Focus on your customers' needs and then deliver what they want. Ask questions or conduct surveys, then incorporate the results into your product or service. Pay special attention to any negative comments and turn those negative experiences into positive ones.

* Go the extra mile. What can you do to "WOW" your customers? Give an unexpected token gift that is not attached to a promotion. Send a note or email that provides information on a hobby to a client. Send a birthday card or postcard offering a percentage off a future service that is good several months past the person's birthday.

* Never underestimate the power of the words "Thank You". Remember to continuously thank your customers. It can be simply adding words of appreciation on an invoice or sending a note of appreciation which includes a gift card for a successful referral.

Customer loyalty should be a constant focus for your business. If you are ever-present in your client’s minds, you will be their first choice when they are ready for the product or service you offer.

Tax Tips for New Businesses

Are you starting a new business this summer? The IRS has many resources available for new businesses. Here are six tax tips the IRS wants new business owners to know.

*Decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

*The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

*Obtain an Employer Identification Number to identify your business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online.

*Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

*Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.

*Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. Visit the Business section of IRS.gov for additional resources to assist you with starting and operating your new business.

Self-Employment Guide

As workers continue to get laid off and downsized, Bloomberg Businessweek has A Guide to Self-Employment offering information on starting your own business. Eight categories detail the necessary steps to venturing out on your own.

"From Laid-Off to Self-Employed" offers advice for making the transition from employed to self-employed. "Beyond Eureka" has business ideas and how to get your product to market. How the new 'Health Care Tax' impacts small businesses and other Tax Strategies are also covered topics. Finally, there are three slide shows detailing the steps from unemployed to self-employed, part-time business ideas, and self-employed business success stories.

Being self-employed isn't for everyone, but this guide can help you determine if self-employment is an option for your future.

5 Things to Know About Energy Rebates

This month's "green living" focuses on energy rebates and incentives. See the July 2010 issue of Money magazine for more information.

Federal appliance rebates are going fast - The Cash for Appliances program is still available in DE, MD, NJ and PA. To check other states' availability, visit http://www.energysavers.gov/financial/70022.html. Rebates are issued on a first-come, first-served basis.

Most states offer their own programs - If you don't qualify for a federal rebate, check dsireusa.org for any incentives your state is offering for boosting your home's energy efficiency.

Two more chances for federal funds - For 2010 tax returns, you can claim a $1500 federal tax credit for up to 30% of the cost of many energy-related home improvements. If the Cash for Caulkers bill becomes law, homeowners would get large rebates on various energy-saving projects.

Do the math before deciding on a rebate - Some projects will give you greater savings than other projects. Have a comprehensive home energy audit performed to determine how to best maximize your budget and your rebate. Some utility companies will perform a basic audit or reimburse you for some of the cost of an independent audit.

Small projects can still pay big - Not all energy saving improvements require a large cash outlay. Every degree up or down on your thermostat saves approximately 2% on your annual heating and cooling costs. Replacing just five frequently used light bulbs with compact fluorescent bulbs can reduce your energy bill by about $70 each year.

Together, we CAN make a difference!

Fees, Fees, Fees!!

Fees can quickly get out of hand, causing you to "spend" more money than you initially anticipated. Here are some common fees, and ways to avoid them.

Overdraft fees - Sign up for alerts from your bank when your balance falls below a certain level. Make a transfer or a deposit and avoid the overdraft fee.

Annual credit card fees - Switch to a credit card that doesn't charge an annual fee. Use this strategy if your card charges you a non-usage or low-usage fee. Credit unions are a good source for cards with lower finance charge rates.

Checking account fees - Regular checking accounts have lower fees than interest-bearing checking accounts. Again, credit unions and local banks are less likely to charge monthly fees for checking accounts.

ATM fees - If your bank doesn't reimburse you for foreign ATM fees, switch to a bank that does or has more local branches. Another alternative is to download an app (independent or from your bank) that will locate a nearby ATM when you are out of town.

Eventually, banks may get the idea that we're not into paying additional fees, and make life easier for all of us. Until then, every little bit we can do to save money is a step in the right direction.

Procrastination

Procrastinate: To put off until another day or time; defer; delay.

Sometimes delaying a task can't be avoided, but if you seem to delay more and more tasks, here are some tips to help you get back on track.

*If you have a project you need to do, write the project on a legal pad and throw the pad on the floor. Having to constantly step over it will keep reminding you of what needs to get done.

*Make a list of what needs to be done and prioritize the tasks. Complete quick/simple tasks today and cross them off the list (what a great sense of accomplishment!!). Divide larger and more complex tasks into smaller pieces spread out over several days.

*Handle items only once -- choose to File, Act On or Toss. (Notice "I'll decide later" isn't one of the options).

*Start your day by completing the most difficult task on your list. Getting it "over and done with" will make the rest of your day (and your list) a breeze.

Crossing items off your "To Do" list will make you feel more productive. Reward yourself for completed tasks - take a walk, have a cookie break, or just get up and stretch. Take a few minutes at the end of each day to review today's completed tasks and tomorrow's tasks.

5 Things to Know About Getting Audited

Although we all hope to never be audited, the May 2010 issue of Money magazine offers the following tips in the event you receive a letter from the IRS.

Audits are on the rise - Tax returns (generally 1040s) selected for audit tend to be self-employed or have unusually large write-offs. Audit risk by income level: under $200,000: 1%; $200,000 - $1 million: 2%; more than $1 million: 6%. Audit letters are typically mailed 18 months after the filing date.

Don't delay your response - Take the required action within the given time frame -- usually 30 days. If you need more time to gather information for your response, ask the IRS for a postponement. Otherwise, the dispute becomes a final assessment and the collections process begins.

Have a pro on your side - A simple audit (request for receipt copies or additional information) can be handled by the taxpayer. However, if someone else prepared your return, have them handle the audit request.

Anything you say can be used against you - Even "small talk" might give the auditor reason to expand the scope of the investigation. If you hire representation or authorize your preparer to handle the audit, you don't have to attend a face-to-face meeting.

The auditor's boss may be able to negotiate - Ask to speak with a supervisor if you are unhappy with the auditor's findings, especially if the issue falls into a gray area. If you are still unhappy, file an appeal.

Honest taxpayers generally don't get singled out for audits. However, if anything on a tax return stands out as "unusual" compared to previous years, be prepared to provide necessary documentation for the "unusual" situation.

To read the full article, click here.

Composting

This month's "green" topic: Composting.

Composting is a great way to recycle and create mulch for your yard, providing rich organic matter that improves the quality of your garden soil. Whether you sprinkle compost on the surface of the soil or work it in, your garden plants and landscape will grow healthier and stronger thanks to the addition.

By incorporating organic matter to feed microorganisms and macroorganisms, a healthy soil food web is maintained. Composting enriches soil with nutrients for plant growth and releases nutrients slowly, unlike synthetic fertilizers, and inhibits soil erosion.

You need very little equipment to start composting: a pitchfork, a shovel and a hose .

Organic matter high in carbon ("browns") provides energy for decomposer organisms as they consume and break down the contents of your compost pile. Organic matter high in nitrogen ("greens") supplies the decomposers with protein. Maintain well-fed composting organisms with these varied ingredients.
"Browns" include dry leaves, woody plant trimmings, straw, pine needles, sawdust and paper products. "Greens" include kitchen scraps, coffee grounds and filters, leafy plant trimmings, grass clippings, manure and feathers.

The following items contain pathogens, attract pests and cause other problems, and should not be included in your compost: Ashes from barbecues and fireplaces, meat, bones, grease, fats, dairy products, weeds with seed heads, and animal waste.

Composting can be done in a bin or just a corner of your yard. Key points include sufficient moisture and rotation. Some bins have cranks for rotation or are ball-shaped for rolling the compost in the container. Lids deter animals & prevent rain from over-moisturizing the compost. Alternatives to bins include compost piles, pit composting (a 3' wide hole at least 18" deep), and sheet composting (spread a layer of raw materials on your garden and rake into the soil - best done in the fall to allow the materials to break down over the winter).

Together, we CAN make a difference!

IRS 2010 "Dirty Dozen" Tax Scams

The Internal Revenue Service has issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.

“Taxpayers should be wary of anyone peddling scams that seem too good to be true," according to IRS Commissioner Doug Shulman. Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.

The 2010 list:
Return Preparer Fraud - Dishonest return preparers derive financial gain by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true.

Hiding Income Offshore - Taxpayers who try to avoid or evade U.S. income tax by hiding income in offshore banks or brokerage accounts will be aggressively pursued by the IRS.

Phishing - Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. The IRS does not contact taxpayers via e-mail or phone.

Filing False or Misleading Forms - The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds to which they are not entitled.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit - Taxpayers reporting nontaxable Social Security Benefits with excessive withholding on their return may receive a $5,000 penalty for the false filing.

Abuse of Charitable Organizations and Deductions - The IRS continues to observe the misuse of tax-exempt organizations, including arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property, overvalued donations, and organizations promising that the donor can repurchase the items later at a price set by the donor.

Frivolous Arguments - Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is.

Abusive Retirement Plans - The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions.

Disguised Corporate Ownership - Corporations and other entities formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.

Zero Wages - Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Taxpayers participating in any of the variations of this scheme may result in a $5,000 penalty.

Misuse of Trusts - While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.

Fuel Tax Credit Scams - The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers may be eligible for the fuel tax credit, but other individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit potentially subjects those who improperly claim the credit to a $5,000 penalty.


Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

SBA - Google Partnership

The U.S. Small Business Administration (SBA) and Google have partnered to provide "Tools for Online Success," a collection of online resources and training to help small business owners use technology to grow their businesses. The site features tutorials, video testimonials, and tips from savvy small business people who have leveraged the web to become more efficient, more cost-effective, and more successful.

The videos are brief and packed with good information for giving your business a better online presence. Visit their website to view the videos.

QuickBooks Sunsetting 2007 Versions

As of May 31, 2010, Intuit will discontinue services and direct support for QuickBooks version 2007, Enterprise version 7.0 and Point of Sale version 6.0. The current Intuit policy is to support the current year version (2010) and the two prior year versions (2009, 2008).

If you are using any 2007 version of QuickBooks, you will no longer be able to call Intuit for support issues. Some features will no longer work, such as emailing invoices, payroll and downloading banking and credit card transactions.


Please visit our website or your local office supply store to purchase an upgraded version of any of the sunsetting QuickBooks versions.

6 Ways to Save by Going Green

Keeping with my theme of Green Living for 2010, the following suggestions are from an article published in the March 2010 issue of U.S. News & World Report.


Transportation - You don't need a hybrid car for greener transportation. Getting regular tune-ups, keeping tires properly inflated and avoiding idling increases fuel efficiency and saves gas. Other options include public transportation, cycling and walking.

Home Heating & Cooling - When you're going out, turn your thermostat up a few degrees in warm weather and down a few degrees in cool weather to lower your energy usage.

Buy None, Get One Free - There are several websites that promote trading items you no longer want or use. Freecycle lists items by category; Zwaggle is specifically for parents; on Goozex, video gamers can swap games.

Get Paid to Recycle - Old phones, printers and monitors are used by companies that refurbish, resell and recycle them. Gazelle, EcoNew and BuyMyTronics are all sites that will buy or "responsibly recycle" your electronic items.

Cut Down on Trash - Most disposable goods - like tissues, napkins, plastic water bottles and plastic sandwich bags - have durable alternatives - like handkerchiefs, cloth napkins, reusable water bottles and reusable plastic containers.

Conserve Water - Installing a low-flow shower head and running your dishwasher and washer only when they are full will reduce your water consumption and save money.

Working together, we can make a difference :)


Click here for more information, or to read the full article.

8 Triggers for an IRS Audit

No one wants to go through an IRS audit. Here are eight areas that trigger an IRS audit and tips to help you avoid an audit.


Business use of your car - Don’t guess! Keep either a journal of your mileage or your actual vehicle expense receipts.

Home office deduction - Make sure the area of your home claimed for the deduction is used "exclusively and regularly" as business space; using the kitchen table on weekends to answer client emails doesn't count.

High itemized deductions for your income level - The IRS has ranges they consider "reasonable" for itemized deductions. If your income and deductions aren't "typical" (by IRS guidelines), your chances of an audit are higher.

Non-cash charitable contributions - Make sure you have an itemized listing of every item donated to charity (clothing, household items, books), along with a signed and dated receipt from the charity.

Investment income - Verify the information on any 1099 statements regarding your investments is accurate. A common error is listing an incorrect tax year.

Math errors - Check and double check all the math on your tax returns. An underpayment due to a math error is subject to penalties and interest - compounded daily!

Home buyer credit - To claim the first-time home buyers credit, form 5405 must be attached to your tax return, along with a copy of the settlement sheet. Current homeowners who sell their homes must attach proof that you lived in the house you sold for at least five consecutive years during the last eight years. Failure to include proper documentation may cause either credit to be disallowed.

New car sales tax - Make sure you meet the eligibility requirements and complete the worksheet to determine the credit.


Excerpts from an article on cbsmoneywatch.com

Save Money Being Green

"Going Green" brings up images of a costly outlay for installing solar panels on your roof. Yes, their return on equity is high, but what if you can't afford it? Here are some surprising ways to "go green" that will actually save you money!

Get there, greener. You don't have to own a Prius to drive green. Any driver can increase fuel efficiency and save on gas consumption by getting regular tune-ups, keeping tires properly inflated, and avoiding idling. But considering that transportation accounted for nearly 30 percent of carbon emissions in America in 2006, the cheapest and best thing you can do for the environment is to drive less. According to the American Public Transportation Association, public transit ridership is increasing and in 2009 reached its highest level in 52 years. Or you can join the growing renaissance of fuel-free and fit bicycle commuting.

Flip the switch. The sight of a monthly utility bill can make you shiver--or sweat. But there are simple ways to keep cool in the summer, stay toasty in the winter, and still cut your bill drastically. Catherine Potter, manager for consumer content at smart grid software company OPOWER, recommends this fundamental step: When you're not going to be at home, turn your thermostat up a few degrees in warm months and down a few degrees in cold months. "That will really give you the biggest bang for your buck because it's free to do, and heating and cooling comprise over half of the typical home's energy use."

Work from home. "There was a time when people might have looked askance at home-based businesses," says Christine Esposito, president of Terracom PR. "But now it's one way to walk your green talk." Esposito moved her green business into her home to save money and stay true to its brand. Employees at traditional workplaces can talk to their managers about working from home just a day or two a week to save on transportation.

Get paid to recycle. Sometimes, going green doesn't just save you money--it earns you money. Old phones, printers, monitors, iPods, and personal digital assistants are valuable to companies that refurbish, resell, and recycle them, and they'll reimburse you in cash. "From the lazy environmentalist's point of view, [recycling] is a pain in the neck," says Josh Dorfman, who recommends E-cycler Gazelle. Second Rotation, EcoNew, and BuyMyTronics will also buy your broken gadgets. "You're getting paid to sit on your couch."

Don't be trashy. Reducing your share of trash provides instant green gratification and can help you save on your grocery bill. Whether it's tissues, plastic sandwich bags, or cotton balls, most of our disposable goods have a durable alternative--like handkerchiefs or sponges--that will get the job done just as well and will pay for itself in savings. Even if you find it hard to do without your paper napkins, the easiest change is to replace bottled water with a reusable water bottle.

Conserve water. Your water bill is inextricably tied to your energy bill through your water heater, so reducing your use of hot water can mean extra savings. Dorfman endorses a low-flow showerhead, enabling him to take long showers guilt free. We installed a showerhead with a "shut-off" so the water doesn't run while we shampoo & lather up.

Together, we CAN make a difference!

Excerpts from an article in U.S. News & World Report

Neat Business Records = Avoidable Audit

The thought of an audit looms for many small business owners at tax time. The idea of an audit is frightening and even an audit with a favorable outcome is one that many of us can do without. The good news is that an audit where an entire return is examined is much rarer than in the past. When businesses do get audited, it's usually because something questionable on the return has caught the attention of the IRS. That's a situation that is often avoidable if you run your business cleanly and keep very good records.

Good records are critical for filing a return that's accurate, well-organized and not likely to raise red flags. Unfortunately, many small businesses are so busy taking care of customers that they simply lose track and don't keep good records. The IRS looks for unusual things and will look at the returns from prior years to determine a pattern. They look at your income and expenses in the context of what your company does or the particular industry, selecting specific categories looking for anything unreasonable for that type of business or large dollar amounts. Large amounts of entertainment expenses, bad debts or miscellaneous expenses send up those red flags.

A well organized return is important. Even a legitimate expense can trigger an unnecessary audit if it's not properly categorized. Unusual circumstances behind a particular entry on your return should include a letter of explanation.

It's not a matter of avoiding the audit - sometimes questions are inevitable. What's really important is to make sure your records and documentation are solid, your accounting practices are precise, and your payroll is being reported correctly.

Growing Your Business

Fortune Magazine recently published the following tips for growing your business. Regardless of the state of the economy or the size of your business, these ideas will work for you!

Get an edge - Find an underlying advantage over your competition and dominate your industry. Look at your industry's biggest cost and time constraints and challenge the conventional thinking in those areas of the business.

Own a phrase - Brand is about owning a word or two in the minds of your market. How do you know if you own the phrase? Google it and see if your company shows up.

Hyperfocus - Align the entire company around a single measurable priority each quarter. Not 75, not five, but one overarching focus for the next 90 days that removes a significant bottleneck or stumbling block in your business.

Control your cash - Growth sucks cash, so construct a business model that fuels your growth without the need for outside capital. Gift cards, advanced payments, tighter billing practices, and shorter sales and delivery cycles are just a few strategies.

Write! - Flood the digital market space with blogs, white papers, YouTube videos, and Twitter messages that align with the phrase you own. Published content is king in driving education-based marketing programs and in establishing you and your company as the authorities in your industry.

Pulse faster - If you want to move faster, pulse faster. The executive teams of the fastest-moving companies huddle daily, as if in constant crisis mode -- driving on priorities, metrics, and data gathered from the market.

To read more, click here.

Take A Break!

Are you guilty of working long hours when you have an important or complicated job to do? Are you always in "work" mode? You could be undermining your well-intentioned efforts to produce quality work. Consider this advice:

"Every now and then, go away, take a little relaxation, because when you come back to your work, your judgment will be surer. To remain constantly at work will cause you to lose power of judgment. Go some distance away, because then the work appears smaller and more of it fan be taken in at a glance, and a lack of harmony and proportion is more readily seen."

Now, do you still think that taking a break will slow you down, hinder your productivity? Well, the author of this advice was Leonardo da Vinci. No one could ever accuse him of being an underachiever!

Home Office Deduction

If you operate your business from your residence, you may be eligible for a tax deduction. The IRS' definition of a "residence" also includes a barn, greenhouse or an unattached garage.

The business use of your property must be exclusive, regular and for your business. Exclusive use means your work area is just that….your work area. A computer station in your living may qualify, but using your dining room table as a "conference room" will probably not qualify. Regular use means usage on a continuing basis. Even if your spare bedroom has been converted to office space, occasional business use won’t qualify for the deduction.

The part of your residence used for business must also serve as your principle place of business, or a place where you meet with clients or customers. If your business has several locations, you may qualify for the deduction if you can prove that your home is used regularly for administrative or management tasks that you are unable to perform at another fixed location. Meeting clients at your home must be necessary and integral to your business; occasional meetings or customer calls does not qualify for the deduction.

There are several myths concerning the home office deduction, so do some research before filing your taxes. IRS Publication 587 is devoted to business usage of a residence.

Visit these websites for more information on home office deductions and home-based tax avoidance schemes.

Where's My Refund?

If you have already filed your 2009 tax returns, the IRS and Delaware Revenue both offer online resources to obtain the status of your refund.

To check the status of your federal refund, you will need your social security number, filing status and the exact amount of your expected refund. Information will be available 72 hours after the IRS acknowledges receipt of your electronically filed tax return, or 3 - 4 weeks after mailing your return.

To check on your Delaware refund, you need your social security number and amount of your refund. Information is available shortly after filing your Delaware return online.

Refund status information can also be obtained by calling the IRS Refund Hotline at 800-829-1954 or the Delaware Division of Revenue at 800-292-7826.

Improve Your Online Reputation

Reviews are very important to the success (or failure) of your business. Thanks to the internet, prospective clients can Google your company's name and access customer opinions of you and your business. Positive reviews are always the best, but what if perspective clients find a negative review? Here are some ways to make the most of your online reviews.

Be proactive by asking satisfied customers to share their experiences in a review or testimonial. Positive experiences will boost prospective clients' confidence in your company. Be sure to immediately contact any dissatisfied reviewers to address their issues. They may even re-write their review or remove it completely. A negative review also gives you the chance to learn about areas of your company that need improvement or attention….consider it a growth opportunity.

Utilize search engine optimization techniques in your website. The more pertinent keywords your site contains, the higher your company will appear in search engines. Periodically check Google, Yahoo and other search engines to see where your company appears and update your keywords as necessary. You can also utilize social networking sites, such as Facebook, LinkedIn and Twitter, to boost your search results.

By staying in touch with your clients and keeping your search engine ranking high, you can make the most of your online reputation.

Going Paperless

This month's "green" topic: Going Paperless.

There are several ways to "go" paperless. Online bill pay, paperless statements from banks & credit card companies, and receiving your monthly bills via email are just a few.

Online bill pay can be done through your bank or through the individual vendors. Using your bank's website offers "one-stop" convenience -- you can pay all your bills in one log-in. This also offers the benefit of seeing your actual account balance so you don't overdraw your account. Utilizing electronic payment methods saves you money for stamps and checks.

Paperless statements arrive in your email Inbox or you can download them from your bank's or credit card's website. Many times you can save them as PDF documents in case you need to refer to them in the future. One of the banks I use actually paid me $10.00 to switch to paperless statements!

Receiving your monthly bills (electric, telephone, cable, etc.) via email rather than postal mail eliminates the paper for the bill, the insert(s), the return envelope & the mailing envelope. Over the course of one year, that could be almost an entire ream of paper!

Another benefit of going paperless…less room required for storing documents :)

New Credit Card Law

The recently passed Credit CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) will benefit most personal credit card holders. The law goes into effect in this week but does not impact business credit cards.

You will have more time to pay your monthly bill; credit card companies will be required to mail monthly statements at least 21 days before the payment is due (some companies are currently mailing statements less than 21 days before the due date).

Payments will be due on the same day each month (not the 15th this month, the 12th next month, etc).

You will have the opportunity to "opt-in" allowing over-the-limit fees to be charged to your account. If you don't "opt-in" any charges you make that put you over your credit limit may be declined, but you CANNOT be charged a fee for exceeding your limit.

If you carry balances with different interest rates (purchases, cash advances & balance transfers), payments over the minimum amount will be applied toward the balances with the highest rates first (currently, payments are applied to the balance with the lowest rate first).

Companies will not be allowed to increase your interest rate during the first year. Penalty rates cannot be assessed unless you fail to make a required payment within 60 days of the due date. In the case of a penalty rate, you must be given 45 days notice that your rate is increasing; you'll still have the option to not accept the new terms and close your account at your existing rate.

Possibly the most beneficial new regulation will show consumers how long it will take to pay off the balance if you're only making minimum monthly payments, and will include options for paying balances off in 36 months.

Free Money?

Just like reviewing your credit report on a frequent basis, you should also check your state's website for any money owed to you, such as dividends, paychecks and dormant bank accounts. Companies that owe you money and are unable to locate you are required to turn that money over to the state escheat office.

The National Association of Unclaimed Property Administrators' website (unclaimed.org )offers the ability to search by state or name. The MissingMoney link allows you to search by your name.

You can also enter "unclaimed property" in your web browser's search box for additional websites. If you find your name on a list, follow the instructions on the website to file a claim.

Is This Taxable Income?

While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.

Common items that are not included in your income:

• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers' compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your income are:

• Life Insurance -- If you surrender a life insurance policy for cash, you must include any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
• Scholarship or Fellowship Grant -- If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
• Non-cash Income -- Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on both parties' tax returns.

All other items—including income such as wages, salaries and tips—must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).