Employers are required to withhold the additional tax from wages exceeding $200,000, regardless of the individual’s marital or filing status. They are not required to inform employees when they begin the additional withholding, nor are they required to match the additional withholding. Employers who fail to do the required withholding may be subject to penalties, in addition to the tax.

For example, say you’ve been including expenses such as break room coffee and snacks in your “meals and entertainment” general ledger account. The practice could be costing you at year-end. Why?

Generally, only 50% of the cost of meals and entertainment expenses are deductible on your federal income tax return. However, office snacks provided to workers on your business premises qualify for 100% deductibility. Separating the expenses makes it easy to determine the proper tax treatment.

Health insurance premiums may also require separate accounting. For example, when you own more than 2% of the stock of an S corporation, premiums you pay for your policy must be reported on your Form W-2 at year-end as part of your wages.

The health insurance premiums you pay for your employees are generally not included in wages, though they may be reported on Form W-2.

Fringe benefits can be a valuable tax break for your business. To be deductible, they must be an ordinary and necessary business expense and meet certain other requirements.

Give us a call. We’ll help you untangle the rules.

These facts lead to one conclusion: Most individuals should consider disability insurance in their financial planning. To get the right coverage for you, take the following steps:

• Scrutinize key policy terms. First, ask how “disability” is defined. Some policies use “any occupation” to determine if you are fit for work following an illness or accident. A better definition is “own occupation,” whereby you receive benefits when you cannot perform the job you held at the time you became disabled.
• Check the benefit period. Ideally, your policy should cover disabilities until you’ll be eligible for Medicare and social security.
• Determine how much coverage you need. Tally the after-tax income you would have from all sources during a period of disability and subtract this sum from your minimum needs.
• Decide what you can afford. Disability insurance is not inexpensive. Plan to forgo riders and options which boost premiums significantly. If your budget won’t support the ideal benefit payment, consider lengthening the elimination period (but be sure that accumulated sick leave, savings, etc., will carry you until the benefits kick in).

Ask your insurance agent about the options available to you.

“Business to business” marketing? How is that different from marketing that is directed at the consumer? Isn’t it ultimately about generating leads and closing sales?

Well, sort of. Business to business marketing (B2B) is a little different than business to consumer marketing (B2C) and it is important for small business owners to know the difference.

The major differences:

• B2B is directed at a smaller number of customers, most likely local.

• B2B products and how they are used are often more complex than their consumer-geared counterparts.

• The more personal the relationship, the better, when it comes to B2B marketing.

B2B targets another business rather than an individual; therefore the marketing strategies are more complex, as you may be targeting a number of departments in different ways, in order to complete the sale.

Decisions in this sector are very rarely made on impulse – businesses are made up of several layers of decision-makers and purchases are made on more objective grounds.

While consumers may be driven by aesthetic appeal or brand reputation, a business buyer will require a more informative proposal.

“B2B marketing is less flashy, more analytical.”

A limited number of clients, with complicated decision-making networks and inquiring and informed minds demand a personal relationship built on trust and understanding.

In B2B marketing, segmenting clientele is based on what is

referred to as ‘firmographics’- defining factors about the business itself. These can include:

• Location

• Spending patterns and limits

• Their needs (price, quality, support, etc.)

• Niche, or position in the market

• Trade associations or group affiliations

• Use of the product/service

• Annual revenue

• Preferred method of placing orders

• Loyalty to your brand

Appreciating the difference in B2B and B2C marketing can be the defining factor when it comes to small-business success.

Should you hire him?

Before taking the bait, consider that remodeling scams often rise to the top of fraud listings published by the Better Business Bureau, especially in the aftermath of natural disasters such as floods or hurricanes. So it pays to be skeptical. Before hiring a remodeling contractor, watch for these warning signs:

• High-pressure sales. If a contractor claims that a “special price” is available today only, or pressures you to pay for a project before you’re ready, beware. Honest contractors will give you plenty of time to do your homework.

• Cash right now. Never pay more than ten percent of the project’s cost upfront, and don’t part with the final payment until you’re satisfied that the work has been completed properly. Watch out, too, for contractors who demand cash instead of checks or credit cards.

• References — don’t bother asking. If the contractor hesitates when you ask for references, take note. And don’t forget to follow up. Call previous clients whose projects were finished a few months ago; then go back four or five years. Ask how those projects are holding up and how the contractor treated former customers.

• License and insurance — who needs ‘em? A reputable contractor will be licensed and bonded. Get the contractor’s insurance and business license numbers and verify all information. With a little effort, much of this research can be done online. Check the Better Business Bureau for complaints lodged against the firm, and type the contractor’s name into your favorite search engine. The results might surprise you.

In most areas, reputable contractors are available to complete your project — on time and on budget. So ask lots of questions, and don’t be satisfied with vague or unresponsive answers. When you’ve selected a contractor and are ready to start your project, be sure to reduce verbal promises to writing. Once again, don’t pay in advance.

That said, the IRS generally audits tax returns based on perceived risk. In other words, if your return contains certain “red flags” or risk indicators, your return is more likely to be audited. For example, the IRS may receive 1099 (miscellaneous income) forms showing that you were paid for freelance or temporary work. If that income isn’t reported on your individual tax return, the IRS’s numbers and yours won’t agree. Or maybe you’re self-employed and claim substantial expenses for business travel, meals, and entertainment. Based on long years of experience, the IRS knows that business owners often fudge these numbers.

So how should you respond if that dreaded letter from the IRS shows up in your mailbox?

• Don’t panic. For one thing, an IRS audit may actually result in corrections to your tax return that reduce your tax liability. Such a scenario is not uncommon. Remember, the auditor’s goal is to make sure your tax return is correct and supported by appropriate documentation. That’s all.

• Understand how audits work. If your business is being audited, you can expect the auditor to interview employees, examine records, and observe your operations and inventory. Be sure to encourage your staff to cooperate fully and answer questions truthfully. If they’re asked for a document that isn’t readily available, it’s acceptable to ask for more time.

• Get organized. In the audit world, nothing beats good documentation. So it’s important to keep accurate records throughout the year. If certain supporting documents can’t be located, check online. Your mortgage company, for example, will likely maintain records of interest paid, and your employer should have duplicate copies of your W-2 forms.

• Treat the auditor with respect. Most auditors, contrary to Hollywood’s depictions, aren’t vindictive or dishonest. Like your local policeman or business owner, auditors have a job to do. Treat them as professionals, and they’ll likely treat you in kind.

As you explore the idea of crowdfunding, you may wonder about the tax treatment of the money you receive. Is it an investment in your business? A gift? Taxable income?

Here’s a broad overview.

• Investment. In general, under U.S. law, when you offer many “investors” stock or other equity in your business, you’re selling securities, and you have to comply with federal and state securities regulations.

  While the 2012 JOBS Act created a crowdfunding exemption to these regulations, the Securities and Exchange Commission has not yet finalized the rules. At present, calling the money you receive from crowdfunding an “investment” is not an option.

• Gift. Broadly defined, gifts are cash or other consideration you receive from someone who provides the gift freely, with no expectation of getting something from you in return. When you provide crowdfunders with a reward or other perk in exchange for financial support, the transaction typically will not meet the tax law definition of a gift.

• Income. Money you receive for your work — from whatever source — is income, and usually includable on your federal income tax return. Related expenses can be deductible.

Give us a call to discuss how crowdfunding receipts will impact your taxes. We’re here to help.

Here are four pointers to help you avoid serious pitfalls when leasing commercial property.

• Start early. At least six months before you plan to move in, begin the selection process. Scout out locations and narrow your choices. Waiting until you’re desperate for space may leave you with fewer options. Leasing should not be an impulse purchase. Starting early may also provide opportunities to observe walk-by or drive-by traffic, the location’s visibility, and the habits of neighboring tenants. It may also provide more time for tracking current spending, which will help you develop a better understanding of the level of lease payments your business can afford to pay.

• Compare properties. In addition to identifying a property that’s located near your client base, comparison shopping can provide negotiating leverage. By obtaining lease proposals from several landlords, you may be able to play one against another and carve out a deal that’s especially advantageous to your firm.

• Sweat the details. Read the lease; then read it again. Pay special attention to the length (term) of the lease, renewal options, and scheduled rent increases. You’ll also want to scrutinize clauses describing your responsibility for utilities, maintenance, and upkeep of common areas and systems. The agreement should spell out your options for subleasing and delineate default provisions. For example, the lease may specify that you’ll be locked out immediately for failure to pay the current month’s rent, or may specify a grace period during which you can get caught up. Termination options, security deposits, allowances for leasehold improvements — all should be specified in the contract.

• Seek professional help. Especially if you’re establishing a main office in a new space, it makes sense to hire a real estate attorney or other professional to review the lease terms before signing. An experienced broker may also provide assistance when negotiating lease terms. Careful evaluation and bargaining at the front end may save dollars and avert headaches later on.

Statistics show that approximately 35% of Fortune 500 companies are family-controlled. At some point, these were all small start-up enterprises who kept it in the family while getting things off the ground.

But at some point those mom-and-pop ventures must take on a more professional face, presenting themselves as competition for the big guys. This can be a tough balance to maintain.

There is a correlation between the continuing success of a family business and the extent to which the leaders enforce a high standard of professionalism.

It seems in a family business there are five areas in which these standards must shine through:

• Developing a vision and strategy for the business

• Defining the governance of the business

• Shareholder compensation and equity

• Organizing the management practices of the business

• Managing succession issues

Define firstly how decisions will be made. Is there a chain of command or will you create an advisory board? Who will sit on the board? How will outside advisors come into play?

Asking these tough questions from the start will dictate how crises are handled. Formalize the decisions in a document for easier referral.

Develop a clear strategy for compensation. Compensation should be based on market conditions in order to keep family and non-family members satisfied.

It isn’t a case of “doing it my way this time because we did it your way last time”

“Draw clear lines where family ends and business begins.”

Make sure that duties and responsibilities are delegated with clarity.

Consider the four D’s (death, divorce, disability and disillusionment) that may most affect a family-run company. Develop clear policies that apply to all team members regardless of whether or not they are kin.

Developing sound management practices is vital. The family nature of the business can affect the non-family members in a negative (or positive) way. Be sure to include dispute resolution strategies.

Incorporate sound performance appraisal systems to ensure morale remains high, the culture is balanced and that a sense of community is formed.

Be clear from the start: are you a FAMILY business or a family BUSINESS?