Accounting & Taxes For Small Business Presentation

ACCOUNTING & TAXES FOR SMALL BUSINESS

Strategies to Improve Productivity and Profits

Sean Williams, MBA - Owner

West Palm Accounting Services

2660 Okeechobee Blvd

West Palm Beach, FL 33409

(561) 689-8303

[email protected]

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PRINCIPLES OF BUSINESS… AND LIFE

“In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.” Charles Darwin

“Those who do not learn from the past are doomed to repeat it.” George Santayana

“You have to know accounting. It’s the language of practical business life.” Charles Munger

West Palm Accounting Services, Oct 2, 2009

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THRIVING OR SURVIVING?

• Do you review your financial statements other than beginning of the following quarter or year to prepare taxes?

• Do you seek to improve productivity of your internal operations?

• A response of NO to both means you are a survivor. What are your competitors doing?


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ACT LIKE A BIG COMPANY

• Big corporations use financial statements to improve company performance throughout the year.

• Wall Street firms use financial statements to help determine company stock value throughout the year.

• Does being a small company exempt you from same analysis?


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IS THE GAME OVER?

• Asking your accountant to minimize your tax liability as he/she prepares your tax return is like asking your favorite coach to make adjustments the day after the game.

• Minimizing tax liability can best be done DURING the year, not afterwards.


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TRUE PERFORMANCE… AND HIDDEN SAVINGS

• Many small business owners are aware of larger, frequent expenses (utilities, telephone, wages, rent).

• But can be unaware of amounts recorded on less frequent expenses (supplies, travel, advertising, repairs).

• This failure of periodic review could lead to expenses that are high(need to reduce) or low (not recording all expenditures).


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IS THIS YOU?

• You spend a week or so gathering all receipts, bank statements, and handwritten notes.

• Wreck your brain trying to remember all the stuff you did or spent on that you cannot find the receipt.

• Hand deliver these records to your accountant or tax preparer.

• Accountant ask you follow up questions on missing information that you must gather and deliver to him.


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DISADVANTAGES

• Lost productivity• Missing receipts• Underestimated

expenditures• Possible bank

charges (older statements, check reprints)

• Possible vendor charges (reprint of archive receipts)

• Less accurate financial statements

• Higher tax liability (due to conservative estimates)

• Higher tax preparation fee (more accountant time utilized)


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HOW CAN I DO BETTER?

The 3 R’s• RECORDKEEPING throughout the year• REVIEW at least monthly• RESPOND after review by implementing

needed changes


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RECORDKEEPING STRATEGIES

• 20th Century accountants update client files monthly with client hand delivering receipts and statements.

• 21st Century accountants update client files daily with client faxing or emailing receipts and allowing online viewing access to statements and accounting software like QuickBooks or Peachtree.


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Item 20th Century 21st Century

Availability of interim financial statements Approx. 20th of following month Approx. 24 hours

Delivery from client to accountant Hand deliver or Postal mail at start of following month

Email or fax at end of business day

Amount of activity to be delivered 30 days of activity 1 day of activity

Bank reconciliation Paper - month end Online – real time

Time of client for preparation 1 – 4 hours 5 – 10 minutes

Time of accountant for preparation 10 – 20 days Up to 24 hours

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Daily Activity Report


Na me Company

Mileage Log – From To Miles Driven Details Tolls & Parking

Client/Vendor Cash/Check/Credit Last 4 Digits of Acct

Check # Details Amount

Signature Date

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REVIEW STRATEGIES

• Meet or conference call with accountant at least quarterly to review interim financial statements.

• If possible, compare interim financial statements to budget and prior year statements.


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COMMON TAX DEDUCTIONS

• Business use of home• Business use of car • Business and entertainment expenses• Depreciation• Section 179 deduction• Health insurance deductions• Owners’ compensation


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HOME OFFICE DEDUCTION

You must meet the Regular & Exclusive Use Test:• The home office must be used exclusively for

business and on a regular basis. • It can be a regular storage place, only for a

business inventory.

You must meet the Principal Place of Business Test:• A portion of your home is the principal place for

meeting with your clients in the running of your business, or;

• It is a separate structure NOT attached to your home.


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HOME OFFICE DEDUCTION

• The business percentage of the expenses listed below are generally deductible on Form 8829:

• Mortgage interest• Real estate taxes• Utilities• Repair/maintenance of your home• House insurance• Depreciation• Rent

• The expenses that benefit only the business part of your home are 100% deductible (e.g., painting, decorating, etc.).


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AUTOMOBILE EXPENSES

Actual Expenses• Depreciation/lease payments• Gas/oil• Insurance• Licenses & registration• Tires, Repairs• Interest on auto loan (non-lease)• Taxes (depending on use of vehicle)• Parking fees & highway tolls• Garage rental space (if applicable)• Always maintain a mileage log

Personal mileage is NOT deductible!


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AUTOMOBILE EXPENSES

Standard Mileage Rate• If you choose the standard mileage rate,

you must choose it the first year the car is placed in service.

• The standard business mileage rate is 55 cents per business mile driven in 2009.

• Parking fees, tolls, etc.• Always maintain a mileage log.


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BUSINESS MEALS AND ENTERTAINMENT EXPENSES

• You may deduct 50% of business-related meals and entertainment expenses: Traveling away from home on business. Entertaining customers at a restaurant or other

location. Attending a business convention or business

meeting.• Good recordkeeping is important to claim

these expenses.


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DEPRECIATION EXPENSES

• Business assets placed in service for the tax year 2009 are generally depreciable over three, five, or seven years.

• Examples of five-year property are:• Cars• Computers• Copiers• Calculators


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DEPRECIATION EXPENSES

Section 179 Deduction• For qualifying business property placed in service

in 2009, use the section 179 deduction to recover all or a greater part of the cost than depreciation allows.

Special 50% Bonus Depreciation• The American Recovery and Reinvestment Act of

2009 allows a business to deduct the special 50% bonus depreciation allowance for certain property first purchased for business and placed in service in 2009.


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HEALTH INSURANCE DEDUCTION

• The self-employment health insurance deduction is 100% of the amount paid for medical and qualified long-term care insurance for the self-employed person and family members.


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OWNERS’ COMPENSATION

• Shareholder of corporation or LLC that actively participates in business is considered an employee.

• Employees must be paid a salary or wage.• The salary or wage does NOT have to be

same amount every pay period.• A withdrawal from business account to

pay for personal expense can be treated as compensation.


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TAX FORMS FOR YEAR END FILING

• Sole proprietorship = Schedule C of Form 1040• Partnership = Form 1065• Corporation

– C Corp (default) = Form 1120 and Florida Form F-1120– S Corp (Filed IRS Form 2553) = Form 1120-S

• LLC (Limited Liability Company)– 1 owner = Schedule C of Form 1040– 2 or more owners = Form 1065– Filed IRS Form 8832 = Form 1120 and Florida Form F-

1120– Filed IRS Form 2553 = Form 1120S

• Federal Unemployment = Form 940


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TAX FORMS FOR QUARTERLY FILING

• Individual estimated tax = Form 1040-ES• Employer Tax Payment = Form 941• Florida Unemployment Tax = Form UCT-6• Florida Sales & Use Tax = Form DR-15EZ


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COMPANIES PROFILES

• Liberty Tax Service has 3,100 offices in U.S. and Canada. Fastest growing tax preparation franchise in the nation.

• Local franchisee that I work with co-owns 7 offices in Palm Beach County.

• West Palm Accounting Services is a full service non-CPA accounting firm offering bookkeeping, payroll, accounting, and business consulting services.


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SEAN WILLIAMS, MBA

• Sean has 17 years business experience. His early work experience includes stints in the Finance Department at General Electric, CIGNA Insurance, Kaplan University, Ocwen Financial Corporation, and Honeywell. Sean performed preparation and analysis of accounting reports for senior management. Leveraging this vast experience, he became self employed in 2001 providing business service and advice to business owners and high net worth individuals. Sean has sold financial products such as life, health, and disability insurance, individual and group IRAs, and college funding plans.

• Sean earned his Bachelor Degree in Accounting from

Purdue University and his MBA Degree in Management from Harvard Business School. Sean is married with 3 children. He resides in Boynton Beach.


Accounting & Taxes For Small Business Presentation

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