BMW says third-quarter cash flow in auto segment was above expectations

BMW says third-quarter cash flow in auto segment was above expectations

BMW BMWG.DE on Monday said rebounding markets helped the German carmaker to deliver higher-than-expected free cash flow in the automotive segment during the third quarter.

Read the entire news article here.

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Disneyland unions tell California governor resort can be reopened safely

Disneyland unions tell California governor resort can be reopened safely

Unions representing over 10,000 Disney theme park workers have told California Governor Gavin Newsom that the Disneyland Resort in Anaheim, California, can safely reopen when its location moves into the state’s “orange tier” of COVID-19 test positivity and adjusted case rate.

Read the entire news article here.

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7 Actions for End-of-Year Business Tax Savings

7 Actions for End-of-Year Business Tax Savings

With the end of the year approaching, small businesses should look at their current tax situation and possibly take action to minimize tax liability in this or next year. There is no need to send money to the government if you can make a few changes or change when you take income or pay expenses and reduce your tax liability. Here are seven things to consider in your end of year tax planning.

Tip #1: Give to Charity

If you have a tax liability, it is a great time to accomplish several good things. Save some on your taxes of course. Build good will in your market area with charitable contributions, especially going into the holiday season. Lastly, support worthy causes, especially those that help the less fortunate in your area.

Tip #2: Accelerate Expenses & Defer Income

This is a strategy for the business that wishes to reduce taxable income for the current year. When possible, pre-pay some expenses. Perhaps you can accelerate orders for materials or office supplies that you would be buying early in the next year anyway. If you have plans for a business trip or conference early next year, you may want to pay registration fees or other expenses early.

When it comes to income, perhaps you can defer some invoicing or billing of customers into the next year if it is not a problem for current cash flow. Especially for good repeat customers paying on terms, you may offer an end of year special deferral into next tax year of money owed. Another way to accomplish this is to delay the invoicing of good customers such that their normal payment terms would move payment into next year.

Tip #3: Accelerate Income & Defer Expenses

This is the flipside of tip number two. You are having a slower year, perhaps due to recent pandemic shutdowns or restrictions. You have low tax exposure, but things are beginning to improve. It looks like next year is going to be better.

Anticipating higher income next year, you may want to offer some early payment incentives to customers to accelerate their payments into this tax year. Moving that income into this year when your tax exposure is low will help with current cash flow while lowering taxable income next year.

Tip #4: Check Your Business Type and Tax Treatment

This is one that will require consulting with your tax professional. Notably, changing into or out of a pass-through business structure is one possibility. With special deductions, such as a possible deduction of 20% of qualified business income, changing to a pass-through business type may be a good decision.

On the other side of that, the Tax Cuts and Jobs Act cut the C Corporation tax rate to 21%. Owners in a pass-through structure may find that switching to a C Corporation, if possible, could save a lot in taxes as well as provide other benefits related to retained income.

Tip #5: Contribute to or Set Up a Retirement Plan

With the many options available for tax saving retirement plans, business owners often find that they have not contributed as much as they are allowed in the current year. Whether an IRA, 401(k), Roth, or other retirement account, the tax breaks can be quite generous, so ending the year short of your allowable maximum contribution could be a tax mistake. There may also be tax credits available, so consult your tax professional.

Tip #6: Take Advantage of Equipment Purchase Deductions

If you buy new or used equipment for your company and place it in service before the end of the year, you could be entitled to a federal tax deduction of up to $1.02 million. Businesses can also take a 100% depreciation deduction of the cost of qualifying new or used equipment. If you have been considering the purchase of new equipment, it may be a good decision to do it before the end of the year.

Tip#7: Create or Check Your Plan for Paying Taxes

The end of the year is a good time to consider those quarterly tax payments, look at how you plan to put away the money to make tax payments on time, and how you’ll work that into your cash flow planning.

Though just seven tips, these can result in some amazing tax savings and more cash you get to keep. Give them a run-through to see where you stand.



Sources:

https://www.ml.com/articles/5-end-of-year-tax-tips-for-small-business-owners.html

and my own experience.

With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.

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Running a Small Business as a Sole Operator

Running a Small Business as a Sole Operator

Freelancing, working as a sole proprietor, and often working from home are becoming more common every day. Post COVID-19, major corporations are beginning to look at moving more employees offsite permanently, while others are moving to more outsourcing.

Microsoft just announced that they are going to expand their work from home policies. They are going to allow employees to request permanent home-work situations and expect to approve many of them. They are also going to allow moving and operating remotely across the country. The company may even cover many or all the expenses involved in a home office environment. There are tremendous opportunities developing for business startups by the sole operator.

If you are a freelancer, consultant, or other professional who is the sole owner and operator of your business, have you analyzed where and how you spend your time? Perhaps you are considering spinning off into your own remote freelancing business. An analysis of what activities produce revenue while others, though necessary, are not revenue-producing. They are part of doing business but are clearly “expenses” of time and effort.

Income and Expense Record-Keeping

The reality is that the burdens of government and taxation on small business, and particularly the sole operator, can be quite demanding. Every receipt, invoice, piece of paper, check, credit card receipt, and other documents must be saved, organized, and retrievable for tax filings and possible audits. Just pulling them together for your tax professional is a major time-consuming hassle. Business activities that create expenses and generate income are usually daily activities, and you may be spending far more time and effort than necessary to get the job done.

The busy freelancer or sole business operator should spend whatever time necessary to determine how to automate these activities as much as possible while maintaining accuracy, legality, and reliability. Every minute spent in dealing with these activities is a minute not spent in generating revenue and dealing with customers.

The Growth and Customer Side of the Business

The income side of the business involves marketing, invoicing/billing, collections, payment processing, customer relations, and more. Every one of these activities involves records, receipts, planning notes, communications, and other activities.

An analysis of the time spent in creating, maintaining, and monitoring the information involved in building a revenue stream that funds your lifestyle and grows the business is critical. It is important activity for business health, but it should not take so much of your time that you are sacrificing revenue generating activity or customer relations.

A System for Information Processes for Efficiency and Profits

Today’s business world is technology dominated, and that is a good thing when it comes to cutting the time involved in these management and oversight activities. Many business owners, especially sole operators, who use tools that are readily available to them in the digital world, find that they can save huge amounts of time and even improve their record-keeping.

Though there others, the two major players in capturing, organizing, and retrieving information on demand are Microsoft OneNote and Evernote. They have a great many features in common, a few pros for one and cons for the other, but both are extremely popular. Check here for a comparison review that may help you in deciding. Generally, the features that make them valuable, and check each for which are available with each, include:

  • Fast and easy capture of information into the system, including:

    • Images with smartphone sent directly with app.

    • Text in images indexed for later search and retrieval.

    • Forward emails into the system.

    • Web clipper to capture information from websites.

    • Audio notes from smartphone.

    • Handwriting notes for phones with a stylus, and recognition of handwriting for conversion to text.

    • Capture of hand drawings from smartphone.

    • Entry of notes on desktop, Android, iPhone, and tablets.

  • Organization and retrieval of information.

    • Notebooks or folders with the ability to organize data as it is captured by choosing notebook/folder for storage.

    • Tagging system to further organize information for fast search retrieval.

    • Search parameters to narrow searches for better results.

    • Merging of notebooks/folders.

    • Sharing of notes or whole notebooks/folders with assigned permissions.

  • Integration with other apps or systems for greater functionality.

    • Integration with third party email like Google and Outlook

    • Integrates with some sales applications like Salesforce

    • Using IFTTT or Zapier to move information from almost any other popular online system.

The key here is that there is a way to very quickly, and from anywhere, get information into one of these systems and file it in a way that works for your business. All your business receipts tagged by business use can be in a notebook and shared with your accountant with a couple of clicks. You can pull up any receipt, expense item, or income item with a fast and simple search.

The sharing feature is powerful when working with customers, clients, and vendors. Specific notes or folders can be set up with the information you want them to have and then shared for either viewing/download only or for editing for team input.

Whatever your small business, check these systems out to see how much of your time you can free up to grow your business while still getting the accuracy and reliability you need.



SOURCE(S)

https://www.geekwire.com/2020/microsofts-new-hybrid-workplace-policy-will-make-working-home-permanent-part-mix/

https://www.microsoft.com/en-us/microsoft-365/onenote/digital-note-taking-app?ms.url=onenotecom&rtc=1

https://usefyi.com/evernote-vs-onenote/

With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.

Get more out of your money, contact Tax Hive today at 1-833-919-19921-833-919-1992!

As Stimulus Talks Stall, Tips to Get Help for Your Small Business Now

As Stimulus Talks Stall, Tips to Get Help for Your Small Business Now

Getting an infusion of funding from another federal stimulus package could be one option — someday. Yet rather than wait and see what happens with new federal help, experts say small-business owners in need of financial relief should take these steps now.

Read the entire news article here.

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The $700 billion Hispanic business market in the U.S. is now at the tipping point

The $700 billion Hispanic business market in the U.S. is now at the tipping point

As gridlock over another round of stimulus for small business in Washington continues, 5 million Latinos are at risk of bankruptcy, a new study reveals on Sunday. Pre-pandemic they were the fastest-growing cohort on Main Street and contributed 4% to U.S. GDP.

Read the entire news article here.

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Does Audit Protection Matter?

Does Audit Protection Matter?

Before figuring out if audit protection matters, just what is it? If you search on “tax audit protection” in Google, you will see hundreds of .com sites offering it as a service, and your tax preparer probably does as well. It can be included in their services or added for an extra fee.

If you do the same search with “.gov tax audit protection,” you probably will not see any .gov pages in the top search results anywhere. So, you can safely assume that the IRS does not talk much about services that offer some or both of:

  • Professional assistance with preparation for an audit.

  • Legal and/or tax professional to work with you or on your behalf with the IRS during an audit.

The IRS does have a lot to say on their website about their procedures in an audit, such as requirements for you, documents they may require, and where and how they can conduct the audit. Basically, you are, from the moment you receive notice that you are “selected” for an audit, more of a “target” than a “selection.”

The IRS.gov website has thousands of pages of tax regulations, procedures, and audit information. To give you an idea of how an audit may impact your life, both business and personal, here are a few things for the site that show the complexities and how you may be required to respond.

  • Examples of records the IRS may request in an audit:

    • Receipts

    • Bills

    • Canceled checks

    • Legal papers (with four sub-categories)

    • Loan agreements (with nine sub-items)

    • Logs or diaries

    • Travel tickets

    • Medical and dental records (with five sub-items)

    • Theft or loss documents (five sub-items)

    • Employment documents

    • Schedule K-1

  • There is a section of the site that has different industries and business activities and the special audit procedures and requirements for each. An example would be the seemingly single-incident and not that complicated situation of a foreclosure and the forgiveness of the debt. There is a question of tax liability on the amount of debt forgiven and whether it should be declared as income on the tax return.

    The document is a .pdf on the site. It contains 70 pages and 31,000+ words. If the IRS can take a single incident of a foreclosure and whether the forgiven debt is taxable or not and need 31,000 words to explain how they’ll handle auditing the taxpayer, think of what they could require of you for your business.

All of this is to give you a snapshot of the hassles you will endure and the time, effort, and maybe money that will be involved in an audit. The question of this article is whether audit protection matters. It is a personal decision, though it could be a business decision as well if you have partners or shareholders.

However, if you are the ultimate “go-to” person for tax issues in the business, then it is you who may be sitting in front of a bureaucrat with nothing else on their plate than taking every minutia of your return and spending however long it takes to figure out if you did things right or if you owe taxes, penalties, and interest.

If you can sit there with a professional at your side, especially one who had a hand in preparing your return, you will probably feel a lot better and maybe for a much shorter and less painful period of time.



Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits#far-back

https://www.irs.gov/pub/irs-utl/real_estate_foreclosure_atg.pdf

https://www.irs.gov/businesses/small-businesses-self-employed/audits-records-request

With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.

Get more out of your money, contact Tax Hive today at 1-833-919-19921-833-919-1992!

Making the Most of Virtual Conferences

Making the Most of Virtual Conferences

In this article, a company in the cloud computing business has taken the virtual conference to a new level. With more work being done from home, there are some good pointers here on how to improve virtual meetings and make the attendees feel more connected.

Read the entire news article here.

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The IRS encourages business owners to take the home office deduction and explains it

The IRS encourages business owners to take the home office deduction and explains it

Also during Small Business Week, the IRS published information about the home office deduction, eligibility, requirements and limitations. The Internal Revenue Service wants individuals to consider taking the home office deduction if they qualify. The benefit may allow taxpayers working from home to deduct certain expenses on their tax return.

Read the entire news article here.

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Why the Tax Code was Written to Benefit Business Owners

Why the Tax Code was Written to Benefit Business Owners

To begin, a couple of presidential quotes about small business can set the stage for a discussion of the value of tax breaks for business:

To make our economy stronger and more competitive, America must reward, not punish, the efforts and dreams of entrepreneurs. Small business is the path of advancement, especially for women and minorities.” – George W. Bush, State of the Union Speech, February 2, 2005.

“The entrepreneurial spirit burns brightly as the creativity and productivity of America’s small businesses make our Nation’s business community the envy of the world.” – Bill Clinton, State of Small Business Report, May 5, 1998.

Impressive Small Business Statistics

Few would argue that the tax code is too complex, and some of the reasoning for that is the attempts by government to influence behavior. One behavior the government wants to encourage is the taking of risk in starting a business. There are many facts that support the importance of small business to the U.S. economy. These statistics come from Fundera.com:

Number of small businesses

There are approximately 30.2 small businesses in this country comprising over 99% of all businesses by count. This is according to the SBA Office of Advocacy, which defines a small business as a firm with fewer than 500 employees.

Number employed by small business

There are approximately 58.9 million people employed by small business in America. This comprises 47.5% of the entire U.S. workforce. These are tax paying employees, so it is clear that there is tax receipt leverage in giving tax breaks to help small business to create jobs.

6.04 million small businesses have employees, which means that 20% of all small businesses have at least one employee. Small businesses make up 99.7% of all firms with paid employees.

Number and percentage of new jobs from small business

At the end of the third quarter of 2016, there were 1.9 million new jobs created by small business in that quarter. New businesses account for nearly all new jobs created each year. New small businesses account for almost 20% of gross job creation.

These are impressive numbers, and they are why it has been the focus of Congress for generations to encourage small business startups and growth through tax advantages.

Congressional Research Service Report to Congress Titled Current Tax Law and Arguments for and Against Them

This is an exhaustive study of the economic value of small business balanced with the cost to the government for tax breaks given to business. In the report is this chart of the tax benefits for business and their cost to the government:

 

Small Business Tax Preference Federal Tax Code Section Nature of the Benefit Eligible Firms Current Status Revenue Cost in FY2018 Under Current Lawa ($ billions)
Limited Expensing Allowance 179 Allows firms to deduct as a current expense up to $1 million of their expenditures on qualified depreciable assets placed in service in 2018; begins to phase out when total amount exceeds $2.5 million No size limit Permanent $9.9
Nonagricultural Cash-Basis Accounting 446 Allows eligible partnerships and C corporations (including certain farms) to use the cash method of accounting C corporations and partnerships with average annual gross receipts of $25 million or less in the previous three tax years Permanent 5.0
Full Exclusion for Gains from the Sale of Qualified Small Business Stock 1202 Allows noncorporate investors to exclude between 50% and 100% of any gains on the disposition of qualified small business stock held for five or more years Stock must be issued by C corporations in a qualified business that have $50 million or less in gross assets when the stock is issued Permanent 1.3
Tax Credit for Employee Health Insurance Costs 45R Allows eligible small employers to take a nonrefundable tax credit for nonelective contributions that cover 50% or more of the cost of health plans for participating employees Employers with 25 or fewer employees whose average annual compensation does not exceed $50,000 Permanent 0.6
Simplified Dollar-Value LIFO Accounting Method 474 Allows qualified small firms to use a simpler LIFO method in estimating the base-year value of their inventories Business taxpayers with average annual gross receipts of $5 million or less in the three previous tax years Permanent 0.2
Deduction and Amortization of Eligible Business Start-Up Expenses 195 Allows start-up businesses to deduct up to $5,000 of eligible start-up expenses in the year they begin to operate, and to amortize the remaining expenses over 180 months; the deduction phases out, dollar for dollar, when total qualified expenses exceed $50,000 Firms in their first year of business Permanent 0.1
Tax Credit for Expenses Incurred in Improving the Accessibility of a Business for Disabled Individuals 44 Allows qualified small firms to claim a nonrefundable tax credit for qualified expenses they incur in making their facilities more accessible for disabled persons Employers with gross receipts of $1 million or less in the previous tax year, or with 30 or fewer full-time employees during that year Permanent Less than $50 million
Ordinary Income Treatment of Losses on Sales of Certain Small Business Stock 1244 Allows taxpayers to deduct any loss from the sale, exchange, or worthlessness of qualified small business stock as an ordinary loss and not a capital loss Individuals and partnerships Permanent NA
Treating Losses on the Sale of Small Business Investment Company (SBIC) Stock as Ordinary Losses 1242 Allows individual taxpayers who invest in SBICs to deduct from ordinary income all losses from the sale or exchange or worthlessness of SBIC stock Any individual investing in an operating SBIC Permanent NA
Exemption from the Uniform Capitalization Rule 263A Exempts qualified small firms from the requirement that firms acquiring real or tangible property for resale capitalize or include in the estimated value of their inventory the direct cost of the property included in it, as well as the indirect costs that can be allocated to the property Business taxpayers with average annual gross receipts of $25 million or less in the three previous tax years Permanent NA
Use of Section 41 research tax credit against payroll tax 41(h) and 3111(f) Allows qualified firms to claim a payroll tax credit of up to $250,000, using all or a portion of their unused research tax credit for the current tax year Business taxpayers that have less than $5 million in gross receipts in the current tax year and had no gross receipts in a tax year preceding the previous five years Permanent NA
Tax Credit for Pension Plan Start-Up Expenses 45E Allows qualified small firms to take a nonrefundable tax credit for a portion of the costs they incur in establishing new qualified pension plans for employees Employers with fewer than 100 employees, each of whom received $5,000 or more in compensation in the previous calendar year, and with one or more highly paid employee participating in the plan Permanent NA
Exemption for Qualified Small Firms from the Limitation on the Deduction for Business Interest Section 163(j) Allows eligible small firms to deduct business interest without the limits set by P.L. 115-97. C corporations and passthrough entities with $25 million or less in average annual gross receipts in the three previous tax years. Permanent NA

The report does not present a conclusion other than there are questions as to whether the costs are worth the benefits of small business tax breaks. If there are the large numbers of them and their employees voting, it is likely that Congress will not be killing these breaks in any large-scale way.

With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.

Get more out of your money, contact Tax Hive today at 1-833-919-19921-833-919-1992!