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Start-up with Financial Success Workshop

If you’ve started a business within the last year, you know how easy it is to get overwhelmed by the financial aspects. From choosing the right accounting software, to setting up your service agreements, to paying your quarterly tax estimates, there are so many big decisions that you make up-front that can affect the long-term health of your business. 

Unless you have a formal business or finance background, handling all the details can be rather intimidating. On the other hand, even if you do have business finance skills, should you be spending that time away from building your business? No!

Start-up business owners need straight answers from experts with the experience and knowledge that will lead to financial success. My upcoming Start-Up with Financial Success workshop is just what you need! This one-day, in-person workshop is presented by me and four other professionals to cover the basics of financial management for small businesses to set up healthy financial habits from the start. 

Unlike other trainings that only focus on one financial discipline, this workshop is led by five experts in different aspects of financial management: Legal, Bookkeeping, Taxes, Accounting and Business Operations. These experts bring decades of combined expertise to cut through the confusion and overwhelm and pave the way to financial success.

Register here – https://www.eventbrite.com/e/start-up-with-financial-success-tickets-72274235183

The Start-Up with Financial Success workshop will answer common questions, such as:

  • What type of legal business entity should I establish?
  • What’s the difference between a bookkeeper and an accountant, and how can they help my business? 
  • How do I choose the right accounting software?
  • How do I make sure the language in my services agreement or other contracts give me the legal protections I need?
  • How do I keep all my financial information organized?
  • What are quarterly tax estimates and how do I pay them? 

Can you tell that it’s going to be a jam-packed day? Interested?  Register now at this link – https://bit.ly/2m6UWP7 Look forward to seeing you there!

Is Your Price Right?

Have you ever watched the game show, The Price is Right? It’s been on TV for a long time. The winner is the contestant who guesses closest to the actual price of an appliance, car, vacation or other item (without going over). Over the years, winning contestants seem to have done their homework. People who guess without doing any homework generally don’t win.

Something similar happens with business. When launching a new business or a new service or product line, how do you know that your price is right? Too high, no one will buy from you. Too low, you’ll be out of money – and business – pretty quickly. You’ve got to do your homework or you could guess wrong.

Getting your price right boils down to three elements: Cost, Competition, and Value

  • Cost – Start by figuring out all the costs you need to cover, both direct and indirect. Direct costs are usually the most obvious, like materials and labor. Indirect costs, like rent and marketing, also need to be included in the total cost per service or product. Don’t forget to also recover the cost to replace equipment that wears out every five to ten years. 
  • Competition – Once you know your costs, check out the competition to get some perspective. Take care not to use competitor prices as your only guide. You don’t know enough about how their situation or profitability. Consider unmet market demand, competitive pricing and customer service when establishing your prices.
  • Value – Should your price reflect your superior quality, experience and qualifications? Absolutely! Don’t hesitate to charge more than the competition as long as you can distinguish your service or product from the others. Identify your value to your customers and reflect it in your price structure. 

Want to make sure that Your Price is Right? Consider Cost, Competition, and Value. It’s not as simple as covering your costs and checking out competitor’s prices. Reflect your value and what distinguishes you from your competitors in your price while covering your costs and you’ll win the game.

Is Your New Worker an Employee or a Contractor?

When your organization needs more help, worker classification — employee or contractor — takes a back seat to more immediate concerns, like the worker’s start date and assignments. In reality, how your workers are classified should be your first consideration because it impacts the worker relationship, the on-boarding process and your organization’s overall cost.

What does “Worker Classification” mean? 

Workers can be employees or independent contractors. The IRS spells out around 20 tests to determine worker classification. But they all boil down to the amount of control over the worker and the work itself in three ways:

  • Behavioral: Do you control what the worker does and how the job is done? For example, do you determine work hours and processes to perform work tasks? If you set work hours and procedures, your worker is an employee.
  • Financial: Do you provide the tools for the worker to perform the job, such as a work space and computer? Your worker is an employee.
  • Relationship: Is the work permanent or temporary? Are employee-type benefits provided? Permanent workers who receive employer-provided benefits are employees. Temporary worker? Depends on #1 and #2.

What is the Cost Impact of Worker Classification?

Costs can be higher when workers are classified as employees vs. contractors. Employee wages are subject to the employer portion of social security taxes and any federal and state unemployment taxes. Employees may also get employer-provided benefits, such as insurance. An independent contractor is responsible for paying all of her or his social security taxes and insurance. Do some cost projections based on worker classification to know how it impacts your bottom line.

What If a Worker is Misclassified?

Even if the costs are higher, workers whose job duties are controlled by the organization must be classified as employees. No choice. Organizations that misclassify employees as independent contractors to save on employment taxes may be held liable for unpaid employment taxes, plus interest and penalties. Making a worker classification error, accidentally or intentionally, can get pretty expensive. 

Worker classification is an important consideration to your organization’s overall cost and worker relationship, so it’s essential to get it right. The IRS has helpful to do just that at https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee. Still have questions? Consider consulting a qualified tax professional to help you figure it out.

Time to Think About Estimated Income Taxes — Again

Labor Day marks the unofficial end of summer. So does the September 15th deadline for individuals to pay their third quarterly estimated income tax payments for 2019.  That’s right; those tax payments are due before your sun tan fades. The sad news is, the IRS and state tax agencies want you to pay your taxes as income comes in.

Estimated tax payments are due April 15, June 15, September 15, and January 15, unless, those dates fall on a weekend or a holiday. Technology makes the process a little less painful, with various online payment options. Of course, the IRS and state tax agencies still take checks. Some options, like credit cards, add service fees.

Three things to know about estimated tax payments:

Who Needs to Pay Estimated Taxes?

If all of your income comes from wages, the taxes that your employer withholds and remits for you probably cover your income tax liability. (More on withholdings later.) If you are self-employed or receive investment or rental income, you should check whether you need to make estimated income tax payments. The IRS website explains how to see if estimated payments apply to you and how to estimate federal income tax at this link

How Much Do You Need to Pay?

Estimated tax payments are based on your estimated income and tax liability. To avoid underpayment penalties, pay estimated taxes if you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits. Total withholdings and estimated payments must equal or exceed the lesser of 90% of your current year tax liability, or 100% of your prior year tax liability. Figure your 2019 federal income tax bill with the IRS Withholding Estimator – https://www.irs.gov/individuals/tax-withholding-estimator.

What if You Don’t Pay Enough?

Interest is calculated on the unpaid balance due, accrued daily from the time the tax liability was created (aka when your income was earned or received) and when it is paid. Daily interest accruals can really add to your tax bill, so staying on top of your income tax payments is important. Annualized interest rates charged vary with market rates. At this writing, the IRS accrues 5% annual interest on unpaid individual income tax balances. Clearly, the IRS is serious about getting paid on time. 
If you paid a lot when you filed your 2018 income tax return or have income from which taxes are not withheld, use the links above to see if you need to make estimated tax payments for 2019. Don’t feel comfortable doing this yourself? The IRS can also help you find a qualified tax professional – here https://www.irs.gov/tax-professionals/choosing-a-tax-professional.

IRS Imposters Strike Again

Automation, including the magic of email, is a fantastic thing. That is, until criminals use that magical email to scam you out of your hard-earned money. Far too many email “phishing” scams exist. You’ve probably gotten at least one message luring you to click on a link to funds in a bank you’ve never banked with. That’s bad enough. To me, the most insidious phishing scams come from IRS imposters. Another one recently unleashed itself on U.S. taxpayers.

Last week, the IRS alerted taxpayers and the tax professional community to a new scam. They had received a high volume of taxpayer submissions to [email protected] about unsolicited emails from IRS imposters. Taxpayers reported various email subject lines, like “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.” That kind of subject line coming from what appears to be the IRS would scare anyone into opening and responding!

These taxpayer-reported emails include an IRS.gov-like link appearing to be about the taxpayer’s refund, electronic return or tax account. The emails contain a “temporary password” or “one-time password” to “access” the files and obtain the refund. But you can guess what happens next…when the taxpayer tries to access the file, it turns out to be malicious and infects her or his computer or device. Or, it asks for bank account and other personal information to access or transfer funds. Bad news, either way.

Protect yourself! Remember that the IRS does not send emails about your tax refund or sensitive financial information. Most IRS communication is still through the good old-fashioned USPS. Essentially, that means you should be suspicious of ANY email from the IRS. If you want to be absolutely sure, the easiest way to check for phishing is to place your cursor over the sender’s name, revealing the sender’s e-mail address. An address that doesn’t look legitimate is a scam. 

No matter what, do not reply to any unsolicited email, texts or social media from the IRS (or anyone else, for that matter) to request money or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts. 

Just in case you receive an email claiming to be from the IRS that contains a request for delinquent tax balances or financial information, immediately do the following:

  1. Don’t reply, open any attachments or click on any links. 
  2. If it’s too late and you did something from #1, visit the IRS’ identity protection page.
  3. Forward the email as-is to the IRS at [email protected]
  4. Delete the original email.

Tax scams are a year-round business, so taxpayers need to be on-guard at all times for IRS imposters. Need to report an IRS imposter? See Report Phishing and Online Scams for more details.

Got an IRS Notice – Now What?

Open Manilla folder with a calculator, check book and pen on one side, and a stack of paper that says "Tax Withholding and Estimated Tax" on the other. A cup of coffee is placed above the folder on a dark background.
Photo by Kelly Sikkema on Unsplash

You’re flipping through the mail when you see it. An envelope with an IRS return address. OMG! What’s this about? Whether you set it aside for a while or rip it open immediately, you eventually see it – a Notice from the IRS with news that you may not want to hear.

Now what? Your IRS Notice will explain the reason they are contacting you and give you instructions on how to handle the issue. Sure, you might have made a mistake on your return, but you might just need to clarify some information. Let’s break this down into a little Q&A to simplify things. You’re already nervous about this, right?

Why was I notified by the IRS?

The IRS sends Notices to taxpayers who have a balance due, are due a larger or smaller refund than originally reported, their return has been changed or additional information is needed. Notices may also communicate the need to verify taxpayer identity or a delay in processing the return. Each Notice contains a lot of valuable information about the issue. Read it carefully.

How should I respond?

Typically, you only need to respond if you don’t agree with the information in the Notice, if the IRS requested additional information, or if you have a balance due. If the income or payment information the IRS has on file doesn’t match the information you reported on your tax return, check your return to see if you made a mistake. It happens. Just pay the amount due, or at least as much as you can.

What if I don’t agree?

Yes, sometimes the IRS makes a mistake or does not understand the information from your filed tax return. If that’s the case, make copies of any schedules or other documentation that clarifies your situation. Complete the Notice Response Form and include any explanation to help the IRS understand what you are sending. Don’t assume that the IRS will be able to interpret your documents without a brief explanation.

When should I respond?

IRS Notices generally require you to respond by a specific date. There are two main reasons you’ll want to meet that deadline – to minimize the accrual of additional interest and penalty charges, and to preserve your appeal rights if you don’t agree. Keep copies of all Notices and your response (with support documents) in your tax records, in case you need to refer to them later.

Getting an IRS Notice is nerve-wracking, but ignoring it will only make it worse. Read the Notice carefully and respond with an explanation by the due date if you don’t agree. Made a mistake? Pay the amount due, or as much as you can, to reduce additional interest and penalties. When you know what to do, getting an envelope with an IRS return address won’t make your heart skip a beat.

Cybersecurity Depends on Your People

In spite of investing tons of money on security, organizations still fall victim to data breaches. Why? Because security doesn’t work if people don’t use systems securely. Click on a link in the wrong e-mail and all of that security investment goes out the window. Recent news events and surveys of IT security professionals reveal that the biggest cybersecurity risk comes from people. Your systems are only as safe as the security knowledge of your least knowledgeable worker.

As a tax professional, I have a figurative Bull’s Eye on my back, especially when it comes to phishing e-mails and other hacking attempts. But I’m not “special”. Phishing e-mails are among the most popular mechanisms for hackers to lure you or your workers to unknowingly expose your systems to attack. Phishing attacks are used to obtain bank account information, wire instructions, system logon credentials and personal identifying information.

Systems can also be at risk from actions, or lack of action, on the part of systems users with administrative privileges. A prime example is when a System Administrator fails to change the manufacturer’s default password to a unique password. A door to that system is easy to open if a hacker knows or guesses the default password, leading to unauthorized access and vulnerable data. Make sure your business follows best practices to change default passwords upon installing or updating applications.

Training and periodic reminders are essential to enhance awareness and keep workers on their toes. Traditional training, like webinars and documentation, make people aware of cyber threats and vulnerabilities. Use real life examples from the news to illustrate risks that workers should look out for. A few scary, true stories about accessing and stealing sensitive data will open their eyes. It’s a great way to help your workers recognize when they are the target of phishing or another scam.

Organizations can be vulnerable to hackers in spite of large investments in security. Your systems are only as safe as the knowledge of your least knowledgeable worker. News events and industry surveys reveal that people present the greatest cybersecurity risk. Organizations can mitigate the people risk with training, periodic reminders and by following best practices to change manufacturers’ default passwords. 

Five Years in Business and Going Strong

Hard to believe that it’s been five years since I quit my job and expanded my side-hustle into a full-time business. The time has passed quickly. With some diligence and good luck, I’ve been able to achieve my goals so far. Anniversaries are cause for celebration and reflection — a good time to assess progress, revel in accomplishments and set new goals. Also time to reflect on what it took to get here. 

Businesses that want to celebrate many anniversaries and accomplishments have some common attributes. These include investing a lot of time and effort on these four important activities:

Making a Plan 

A business plan is a road map to get where you want to go and help to keep your “Eye on The Prize”. Unless you know what you’re reaching for, you can’t grab it. Set your overall objectives and describe the detailed steps to achieve them. Set interim milestones along the way to help measure your progress and see when adjustments are needed.

Executing Your Plan

Actively work through the detailed steps in your plan. It’s exhilarating to achieve goals and move forward. Executing your plans also gives you opportunities to get more information. Use new information to adapt your plan and make course corrections. Also listen to how your network receives your message and adjust your wording to get your message across better.

Outsourcing for Expertise

Be realistic about aspects of your business where you do not have the necessary expertise or it would take too much time away from your core business to do it yourself. Legal, accounting, and social media are some areas where finding vetted help is essential to get things done correctly and free up your time to work with your clients.

Giving to Your Network

Answering general questions in your area of expertise and presenting at workshops gives to your network and establishes your credibility. Sharing tips and perspective helps to establish your brand and draw people to you and your business. Being generous is often its own reward, over the long run.

The last five years of being in business full-time have been hard work, fun, and rewarding – all at the same time. It takes a lot more than investing in these four activities to be successful. But businesses that invest in planning, executing, outsourcing where appropriate, and giving back develop a strong foundation for many anniversaries and accomplishments to come.