Posted on Jul 11, 2016

SB Blog Cover 1200pxNumerous tax breaks have been retroactively expanded for 2015 and beyond — or, in some cases, been made permanent — under the Protecting Americans from Tax Hikes (PATH) Act of 2015. Now that the dust from the new law has settled, small business owners can plan ahead with these 5 mid-year tax strategies inspired by the recent legislation.

5 Tax Breaks for Small Businesses

1. Buy equipment. The PATH Act preserves both the generous limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks generally apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2016, the maximum Sec. 179 deduction is $500,000, subject to a $2,010,000 phaseout threshold. Without the PATH Act, the 2016 limits would have been $25,000 and $200,000, respectively. The higher amounts are now permanent and subject to inflation indexing.

Additionally, for 2016 and 2017, your business may be able to claim 50% bonus depreciation for qualified costs in excess of what you expense under Sec. 179. Bonus depreciation is scheduled to be reduced to 40% in 2018 and 30% in 2019 before it expires on December 31, 2019.

2. Improve your premises. Traditionally, businesses must recover the cost of building improvements straight-line over 39 years. But the recovery period has been reduced to 15 years for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements. This tax break was reinstated and made permanent by the PATH Act.

If you qualify and your premises need remodeling, you can recoup the costs much faster than you could without this special provision. Keep in mind that some of these expenses might be eligible for bonus depreciation.

3. Ramp up research activities. After years of uncertainty, the research credit has been made permanent under the PATH Act. For qualified research expenses, the credit is generally equal to 20% of expenses over a base amount that’s essentially determined using a historical average of research expenses as a percentage of revenues. There’s also an alternative computation for companies that haven’t increased their research expenses substantially over their historical base amounts.

Research activities must meet these criteria to be considered “qualified”:

  • The purpose must be to create new (or improve existing) functionality, performance, reliability or quality of a product, process, technique, invention, formula or computer software that will be sold or used in your trade or business.
  • There must be an intention to eliminate uncertainty.
  • There must be a process of experimentation. In other words, there must be a trial and error process.
  • The process of experimentation must fundamentally rely on principles of physical or biological science, engineering or computer science.

Effective starting in 2016, a small business with $50 million or less in gross receipts may claim the credit against its alternative minimum tax (AMT) liability. In addition, a start-up company with less than $5 million in gross receipts may claim the credit against up to $250,000 in employer Federal Insurance Contributions Act (FICA) taxes.

4. Issue more stock. Does your business need an influx of capital? If so, consider issuing qualified small business stock (QSBS). As long as certain requirements are met (for example, at least 80% of your corporate assets must be actively used for business purposes) and the investor holds the stock for at least five years, 100% of the gain from a subsequent sale of QSBS will be tax-free to the investor — making such stock an attractive investment opportunity. The PATH Act lifted the QSBS acquisition deadline (December 31, 2014) for this tax break, essentially making the break permanent.

5. Hire workers from certain “target groups.” Your business may claim the Work Opportunity credit for hiring a worker from one of several “target groups,” such as food stamp recipients and certain veterans. The PATH Act revives the credit and extends it through 2019. It also adds a new category: long-term unemployment recipients.

Generally, the maximum Work Opportunity credit is $2,400 per worker, but it’s higher for workers from certain target groups. In addition, an employer may qualify for a special credit, with a maximum of up to $1,200 per worker for 2016, for employing disadvantaged youths from Empowerment Zones or Enterprise Communities in the summer.

New transitional rules give an employer until June 30, 2016, to claim the Work Opportunity credit for applicable wages paid in 2015.

Midyear Small Business Tax Planning Meeting

We’re almost half way through the tax year. Summer is a great time for small businesses to get a jump start on tax planning. Contact your Cornwell Jackson tax adviser to estimate your expected tax liability based on year-to-date taxable income and devise ways to reduce your tax bill in 2016 and beyond.

Posted on Apr 18, 2015

Every small business owner knows the feeling… when morale is low around the office and it seems that everyone is complaining about processes and working amongst chaos just to keep their heads above water.  At the same time, everyone is fighting the adoption of the new software that has promised to make things run more smoothly in the office.  Even after multiple training sessions and trying different management styles to make the company more efficient, the back office still has frequent process issues. How hard can it really be to have an efficiently operating bookkeeping and administrative department? 

Improving processes and leveraging the technology investments that have already been made is a good place to start. But, let’s be honest, it can be difficult to find time and resources to make improvements while simultaneously running the business. So, what is the right way to delegate the proper execution of running your business?

Has there ever been an employee that made both you and your business look good constantly? If so, chances are you wanted to ensure that they stay with the company forever. Keeping the right employees and helping the negative, non-effective employees move on to other ventures are one of the two most difficult things about running a small business.

Let’s start by discussing the harder and more critical of the two: Removing negative employees from the company. This is important because if an employee is a bad fit for a number of reasons, for example: they can lose customers and even run good employees away.  Although it is easy enough to calculate the cost of a bad hire from lost revenue, inefficient use of resources, and recruiting fees to replace a bad hire, it is important to also consider the indirect costs that are compounded due to the current business environment.

For example, the pace of today’s work environment caused by technology and streamlined processes has eliminated most routine positions and therefore requires employees to work more effectively with less supervision. This may be most evident in employees with plenty of experience but who have trouble keeping pace in today’s environment. Technology and streamlined processes are making it difficult for some employees to see how they add value to the company. These employees are motivated by the fear of losing their jobs and wreak havoc on the growth and success of the company to ensure their job security.

If experienced employees are unable to adapt to streamlined processes, there will be a decline in knowledge translation to the younger generation that thrives in today’s environment. These types of indirect costs are extremely difficult to measure but wreak havoc on the success of the business.

Let’s revisit the question – what is the right way to delegate the proper execution of running your business?Hiring and retaining the right people could be much easier than once thought. Consider Outsourcing: no recruiting fees, job ads, technology investments, or other chaos.  Go and Grow can develop a solution tailor made for your business. The first step is to begin automating  your accounting processes. Next, develop processes to make the business smarter and more efficient to reduce costs and increase productivity.

Here are some examples:

  • Eliminate cumbersome and time-consuming manual tasks such as data entry, envelope stuffing, filing and check runs
  • Pay bills online at a fraction of the time it takes to process and sign checks
  • Automate customer collections
  • Stop opening mail by having the vendor emails sent directly into the accounting software
  • Reduce human error and increase accuracy with automated software
  • Improve internal controls to reduce the risk of fraud
  • Improve timely reporting of financial results
  • Improve collaboration of limited resources

Let us help put these processes in place and become the back office for your business at a much lower cost with better controls. Call us to get started today.

Posted on Apr 1, 2015

Betty Sue Desk

Who’s the Boss? Her name is Betty Sue. She doesn’t have a title and if she did it wouldn’t matter anyway because she wears so many hats. She gets, opens, and distributes the mail, she represents your HR function, does payroll, and sometimes answers the phone and moon lights as your accountant just to name a few things. She is unappreciated, busy and spread thin. Not only does she go unappreciated the only feedback she gets is when she does something wrong. She started out with so much hope because nothing could be worse than the last place she worked. You were so glad she was hired because nobody could be as bad as your last office lady.

You look up one day and you realize she is the boss. She turns Burger King on you and has it her way, which you know little about what and how she is doing things because – let’s face it, you haven’t kept a close eye on the back office since Betty Sue took over. So the story goes, your role becomes break fix; you turn into the helicopter owner and when things go wrong you helicopter in and fix the issue at hand.   Your relationship works because they need a job and you need accountability. To ensure the success of the relationship Betty Sue becomes the boss!

For example, you have no idea she is booking eighty journal entries to close the books each month when she only needs to record five journal entries to produce quality financials. You begin to sense that things aren’t exactly right when your CPA and banker points out obvious problems, so you hire your CPA to fix the books. But when your CPA tells you he can’t help you because Betty Sue is behind, you blow it off because you think your CPA is too expensive and promise your banker you will get it fixed. Then the nightmare truly begins when you get audited by the IRS and realize you expensed something you shouldn’t have. You’re charged outrageous fines and get on the IRS watch list. Since you don’t have the cash you reach out to your banker to get money to pay the IRS but you’re not approved because you don’t have timely and reliable financial statements. All this is out of pocket costs to you!

How do you get started fixing things? How do you get control of your business? How do you get a peaceful team that works for you with a smile? Fortunately, Go and Grow has a solution for you. The first step is to begin automating your processes. You also need to develop ways to make your business smarter and more efficient to reduce costs and increase productivity. Here are some examples:

  • Eliminate cumbersome and time-consuming manual tasks such as: data entry, envelope stuffing, filing and check runs
  • Pay bills online at a fraction of the time it takes to process and sign checks
  • Automate customer collections
  • Stop opening mail by having the vendor email the bill directly into the accounting software
  • Reduce human error and increase accuracy with automated software
  • Improve internal controls to reduce the risk of fraud
  • Improve timely reporting of financial results
  • Improve collaboration of your limited resources

Let Betty Sue help your employees and customers which will ultimately help you grow the company and have the peace of mind that your company is operating in a smarter and more profitable way. We can help you put the processes in place and become your back office at a much lower cost than you are paying today.

Call us at 972-202-8000 or email scott.bates@cornwelljackson.com.

Posted on Mar 11, 2015

How to Get away with Fraud HeaderIn today’s entertainment culture, the hot topic is how to get away with something. Plot lines in shows like How to Get Away with Murder, Scandal, Revenge, and many others are surrounded by this idea. But have you ever tossed around the thought of someone committing fraud in your business? It happens all too often, and most of the time it can be easily prevented. I’ve written a short blurb called How to Commit Fraud and Get Away with It to prove just how easy it would be for employees to pull a fast one if your business does not have a checks and balances system in place to prevent it.

How to Commit Accounting Fraud and Get Away with It

What if I could tell you there is a way to commit fraud and steal from your employer and not get caught?  I’m serious; I can teach you. Think about it, you could have new cars, expensive clothes, and all those things you have always dreamed about. Companies large and small experience fraud everywhere, every day and most people don’t get caught.

So, let’s get started. Because larger companies have more corporate governance, its best to find a position with a smaller company. These work better because the owner will be so busy with building the business, the last thing he wants to do is manage a back office.

It’s really important to impress early because that gives you the pinstripes which help you shine and give the owner reassurance he does not need to get involved. He’ll hand you the checkbook, some keys, and give you instructions to get the mail every day. They key to get started is make sure he does not open the bank statements. Chances are that he probably doesn’t look at them on-line either. In order to make sure, you need to start small by forging a check for $200 to yourself out of sequence. Don’t be worried about the bank verifying signatures because they typically don’t do it, and with the handy new technologies you can just use an electronic signature.  If the owner notices you can just say it was for petty cash. If he does not, then you know you are in the clear to pillage the company’s bank account and line your pocket book!

Cornwell Jackson’s recommendations to prevent fraud from happening in your business:

  1. Be diligent in checking references.  If checking references would jeopardize the candidate’s current position, insist on checking with a previous employer.
  2. Keep a close eye on company bank records. The key for owners to catch forgery is to open their bank statements and review for unusual signatures, checks out of sequence, and investigate any vendors that appear improper.
  3. Secure check stock and financial information in a safe place. Always keep company checks locked away to reduce the opportunity for temptation.
  4. Maintain an active role in payment authorization. Working with an online software platform, like Bill.com, that requires authorization from the manager greatly reduces the probability for things to slip by unnoticed.
  5. Include a Trusted Advisor in all Financial Activity. Hiring an outside consultant, like Go and Grow, to close the books monthly and handle financial reporting is a great way to set up a system of quality controls to prevent against fraud in your business.

Talk to one of our Business Services Specialists to discover any fraud risks in your company. We’ll help you learn how to protect your business from fraud.