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So far Alley Rubadeau has created 13 blog entries.
11 11, 2020

End of the Year Accounting Prep

2020-11-11T15:53:58+00:00

We are nearing the end of the year (can you believe it?) and 2020 has tested us. Let’s not make it any harder on ourselves by procrastinating our accounting. Even the most organized business owner can sometimes feel the crunch when approaching tax deadlines. We are here to make your life a little easier in the upcoming months. No one likes to cut a powder day short because they have a few hours left to file their 1099s. What day is that again…? In this article, we’ll go over how to organize your accounting right now, to make your 2020 accounting go smoother. Let’s face it – anything to make 2020 easier is a win. 

Payroll

One of the most common mistakes that we see every Christmas are bonus checks to employees that aren’t run through payroll. When you pay employees ANY type of compensation, it absolutely must go through the normal payroll & tax process. ALL payments to employees must be run through your payroll app. 

If you use a service such as Gusto, or work with an Accountant, W-2s will be made available in January. Do not attempt doing payroll by hand, it’s not worth it. 80% of small businesses not using software end up with at least one IRS penalty each year. Penalties run over $400!

Woman hiking in Steamboat Springs

1099s

Things are a bit different this year. If you paid an unincorporated service vendor (or received money as an unincorporated service vendor) over $600 in 2020, you will be issuing (or will receive) a form 109-NEC,  which is new for this year. The 1099-NEC (non employee compensation) is a spin off from the old 1099-MISC. (Basically they took box 7 off the 1099-MISC and created a whole new form called the 1099-NEC). Landlords and Attorneys will still have their rent and legal fees/proceeds reported on the old 1099-MISC, but everyone else will have their non-employee payments reported on the new form. The January deadline to file these comes quickly after the holiday. Start collecting your service vendors information now by requesting w-9s before it’s too late. The worst thing you can do is wait until a few days before the deadline to ask for your vendors’ W-9 info and find out they’re on vacation in Mexico. That’s not on them, it’s on you.

Bookkeeping Reviews & Year End Tips

If you are wise enough to have an amazing bookkeeper, receiving end of the year reports will be a breeze. Make sure to collect each report by month or quarter to make them easier to review (and file them in a safe spot for future reference). Go over the reports to ensure all your income and expenses are accounted for. That random business lunch you put on your personal credit card a while back can be counted as a business expense. As long as you have the proof, you can turn that into another tax deduction.  Organization adds up! Keep receipts, make sure to let your accountant know if anything changes, and thoroughly look over your reports. Did I mention receipts already? A paper trail is important. Keep your receipts in a safe and accessible place in case the taxman comes knocking for an audit. 

Paddleboarding

Tidy Up

If you’re still with us, this one is important. While we are on the subject of keeping a good paper trail, the end of the year is a good time to do a business audit. Take a look at how your year has been going. What unneeded expenses can you cut? Have you used all your subscriptions? Do you still need premium plans for apps you use? Is your payroll in order? This will help you create financial goals for the upcoming quarter to set you up for success. Bonus tip: Similar to creating a New Year’s resolution for yourself, create one for your business as well.  

The best way to handle your accounting is to hire an accounting expert to advise you along the way. You need an accountant to review your end of year financials and any tax and audit preparation that you are required to complete. The end of the year headache should drastically decrease with an expert by your side. It is still your business and you will have important tasks to do, next year to plan, and the added stress of entering a new year but why make it harder on yourself? 

At Singletrack Accounting, we are with you every step of the way. We also will go over all your reports alongside you to make sure you are utilizing every resource. Our number one goal is to help you be successful while staying compliant. Reach out today for a free consultation. 

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Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

End of the Year Accounting Prep2020-11-11T15:53:58+00:00
6 10, 2020

Save Thousands on Taxes With an S-Corp Election

2020-10-06T16:56:04+00:00

Give yourself a pat on the back. Owning and operating a small business is no small feat. What if we told you you could be leaving hard earned money on the table and there was something you could easily do about it? 

An alarming amount of business owners are not taking advantage of a major federal tax saving filing status, s-corporation. I know you’re thinking – what’s the catch? In this article, we will go over the numerous benefits and some caveats of changing your filing status. If you are making over $20,000 in annual profit a year, listen up. You are probably overpaying your taxes. 

Let’s dive into how an s-corporation (s-corp for short) works. The key feature that makes an s-corp different is the tax advantages it offers. S-corps are a tax structure or a tax filing status, that allows pass-through taxation for small businesses and exempts their dividends from self-employment tax. We’ll unpack this for you.

An s-corp is not an entity – that is your LLC or your corporation. An s-corp is a tax filing status with the IRS. 

Understanding the difference between a business entity and a tax filing status. 

Before moving on, it’s important that you understand the difference. You set up your business entity by registering it with the secretary of state. You can then choose which tax filing status you want. Your entity could be an LLC, while your filing status could be an s-corp. Therefore in this example; you would have an LLC taxed as an s-corp. 

What’s the benefit?

S-corp status exempts business owners from getting taxed on their profits from self-employment tax…thats the elimination of 15.3% tax on your business profits! 

But how? 

Rather than paying 15.3% self employment tax on S-Corp profits, business owners pay themselves a “reasonable salary” by issuing themselves a W-2. Yes, you will need to pay social security & medicare taxes on your W-2 income, but by running some of your profits through Owner payroll, the entire remainder of your net income is saved from paying ANY self employment tax. Even better, the business can write off your salary and it’s portion of your payroll taxes. Say goodbye to 15.3% self-employment tax on your profit! If you file your taxes as a single member LLC you WILL pay 15.3% self employment tax on your entire profit…that is one of the highest tax rates paid by any American.

Confused? We prefer visuals. Take a look at the example graphic below. For simplicity, this person is single with no other income. We compare the different business structures and how much taxes this business owner will pay based on filing status.  

S-corp tax savings example

If you’re still with us, you can see that this business saved between $5000-$13000 in taxes for electing to become an s-corp. That is a BIG difference. Think of all the things you could do with that extra cash. Put it back into the business, save it for a rainy day, take a trip to Europe (Yolo!). 

But seriously, what’s the catch?

Fly fishing

Like all great things, this one is going to take a little effort and a proficient accountant. Changing the tax filing status of your company is complex and requires a professional. However; once the leg work is done, the tax savings and simplicity is worth every penny. Keep in mind, you must agree to meet accounting and tax related compliance tasks. 

This is our specialty at Singletrack Accounting. We offer affordable accounting for small businesses to take advantage of these tax savings. The amount you will save, even after the costs of accounting services is typically thousands of dollars. We make sure all the accounting compliance requirements are done with low cost done-for-you packages. 

There are a few steps to conversion.

Steps to s-corp conversion 

1- Ensure eligibility

2- Financial & Service Ramifications

3- Create a Business Entity

4- Apply for an EIN and file Form 2553 with the IRS

5- Changes to Bookkeeping

6- Changes to Tax Filing

Top compliance requirements

1- Owner W-2

2- Separate personal and business bank accounts

3- Separate corporate tax returns

4- Updated operating agreement

This may sound like a lot, but not to worry. We work with you every step of the way. 

Late to the party?

Camping

You may be wondering if it’s too late to take advantage of the tax savings in this fiscal year. Let’s talk about late s-corp elections. Many s-corps miss the deadline, but fortunately for you it’s not too late. Filing for an s-corp is tricky enough, filing for a late s-corp election is even trickier but still possible. At Singletrack Accounting, we do the heavy lifting ensuring we follow all compliance measures to get you on track to change your filing status and in return save you thousands. 

Takeaway

Running a small business is hard enough! Make it easier on yourself by taking advantage of this no brainer tax savings strategy. Professionals are here to make the process run smoothly. We take the heavy lifting off of you so you can do what you do best – run your business. 

Reach out today to our team of experts to set up a free consultation. We have saved business owners multiple thousands of dollars over the years. Our bread and butter is s-corp election for small businesses and we are ready to help you. 

  • Mountain bikers

Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

Save Thousands on Taxes With an S-Corp Election2020-10-06T16:56:04+00:00
4 09, 2020

Leaping Into the Unknown

2020-09-04T18:38:36+00:00

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive amid transition and variability. Owning a small business can be uncertain, even in the best of times and 2020 has been no exception. This year could include a major pivot in your business as the current situation has drastically changed the landscape in several different ways. You can either sit back and see your goals get further away or you can lean into the turn and create positive change. Things are changing in a big way and with big change comes big opportunity. If you know where to look for it.

We assure you that there is light at the end of the tunnel. In this article we’ll showcase several business stories where founders have embraced change. These businesses we’ve highlighted have shifted the way they operate and have successfully adapted to the ever changing business landscape.

Two Birds Brewing

This female run brewing not only has delicious craft beers, but has a taste for innovation. When nonessential businesses were forced to close, owners Danielle Allen and Jayne Lewis, set up a drive up bottle shop, offered nationwide free beer delivery, and beefed up their e-commerce by selling online. Not only is their online and delivery services thriving, their brewery is back up and running successfully as quarantine measures were lifted.

Tacoma Shoutouts

Tacoma shoutouts

Photo Credit: @tacoma_shout_outs

A few months ago, we highlighted a clever entrepreneur, Matthew Fleming, who is a laid off chef at a restaurant. This entrepreneur had an idea to bike around neighborhoods yelling happy messages to friends and families of people who paid him a small amount. He found a way to turn his frustration into something constructive. Not only is he getting exercise but he has also teamed up with a charity, 2nd Cycle on Hilltop, to give back the proceeds.

McKay Books

Nashville business, McKay Books, sells books, albums, videos, and other odds and ends. When retail restrictions were taking place, McKay quickly had to pivot in order to stay in business since customers could no longer browse the warehouse. Knowing many people needed to stay entertained throughout sheltering in place, they developed a genius idea of curbside entertainment bags. Customers could fill a bag with entertainments of their choice such as fiction and nonfiction books, kids books, or choose from themed bags. They could order online and then come pick up their goodies curbside at their convenience.

Bauer

Bauer, a notable hockey gear company, switched from making gear only for the ice to creating medical gear. The Minnesota based company shifted to making protective masks for hospitals, first responders, and retail stores. Not only are they still making quality hockey gear but they used their resources to create adaptation and resilience.

Virtual Pasta-Making

Photo credit: AirBnb

This 84 year old Italian entrepreneur not only proves that you can follow your dreams at any age, but is a great example of creating a business that thrives during lockdown. Nonna Nerina usually runs a pasta making class near Rome, Italy but due to country wide isolation measures, she had to cancel her classes and rethink her business strategy. With the help of her granddaughter, she has taken all of her classes online. You can now book her 2 hour pasta-making lessons here. Buon Appetito!

In some cases, the most heroic thing an entrepreneur can do for their business is carry on and “not die.” In order to find out what lies around the next bend of the entrepreneurial journey you need to be agile and make quick corrections when things change. Be honest with yourself when things aren’t working, test new ideas, create short feedback cycles, and keep learning new ways to make your customers happy. Even though sometimes counter intuitive, it’s often a much better plan to try to make a small group of customers love you than a large group like you. We hope these business examples can provide hope and creative inspiration to stay afloat amidst uncertainty.

If you’re struggling (or even thriving) during these times, our private client business coaching is here to help you. Kim Hornsby is a small business expert who has succeeded (and failed) at businesses throughout her life. She will help to create action plans and modeling to stay in business and thrive. Book a free consultation here.

Remember – keep up with the trends, think digital, be creative, stay positive, and don’t be afraid to pivot!

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Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

Leaping Into the Unknown2020-09-04T18:38:36+00:00
7 07, 2020

Avoid the Pitfalls of DIY Accounting

2020-07-07T18:03:45+00:00

You are running your business and doing a great job at staying on top of your bookkeeping, not to mention you are saving money by not hiring help. Win, win right? Think again. Since you have been trying to save a buck by going the DIY (do it yourself) route, your books may be all over the place. You could spend several hours, perhaps days navigating PPP loans, running payroll, and filing taxes even if you were organized. As a busy business owner, this is the last thing you want to be spending your precious time doing. You could be doing anything else. Let’s brainstorm some alternatives. Mountain biking? Playing with your kids? Scrolling Instagram? Working on growing your business? Watching paint dry (It’s got to be less painful than bookkeeping, right?) The list is endless and you think to yourself, why didn’t I hire a professional? 

filing your own business taxes may be in your ‘zone of competence’ but it is an accountant’s ‘zone of genius’. Get back to spending time in your ‘zone of genius’ which is running your small business.

Let’s run through some clarity points on how hiring an accountant will save you time and money. 

Unclaimed Business Deductions

It’s time to stop leaving money on the table! There are numerous deductions out there for small businesses and it can be hard to recognize them if your job doesn’t have the job title “CPA” in it. These range from health insurance, IRAs, travel expenses, the way your business is formed, and more. These deduction rules are also constantly changing. For example, as an S-corporation business owner, you can now start an IRA to offset taxes. You can also plan a vacation around a work trip and write off part of your expenses. Who doesn’t want to sip margaritas on the beach knowing a portion of your trip is paid for? Your job is not to stay on top of the constant change in tax deductions, your job is to drink margaritas and run your business. 

Payroll Mistakes

Paying yourself and your employees is complicated especially if you have remote workers working in multiple states. Different states have different rules and once you start attracting talent across state lines, your payroll gets more difficult. There are also other details such as officer payroll recommendations, payroll schedules to stay compliant, and monthly premiums on monthly checks. This leaves a lot of room for error. The tax man thrives on error and running payroll smoothly is important in the case of the dreaded audit. 

Audit Anxiety

Entrepreneur relaxing outside

For some, nightmares may consist of being late for a flight, but for small business owners, that nightmare may be the IRS knocking on your door demanding thousands of dollars in taxes. As tight as you run your ship, mistakes happen and in the case of an audit, you want to be as prepared as possible. There are several details that arise while owning a small business and by hiring a professional you can rest easy that someone has your back on compliance. Turn those nightmares into peace of mind. 

Navigating PPP loans

There’s no denying that businesses with good accounting and tight payroll practices received PPP (payroll payment protection) loans with more ease than businesses that did not have a professional tax and payroll service. The PPP loan application process was a giant headache but with the combination of professional accounting and payroll, small business owners were able to get their applications submitted in time to receive the funds. The application was multiple pages, but the fields were easy to fill in if you had an accounting and payroll service, which leads us to the importance of having a smoother business process. 

Business Processes

Imagine getting a full, detailed vision of what you’re spending and earning every month into your inbox. Clarity! As much as you crunch numbers on your excel spreadsheet, keeping data up to date is a chore and takes up valuable time. Luckily, there are professionals for that. This will give you full transparency on how much your business profits and expenses are. Rest assured that the $30 filet you bought for your lunch meeting is going on your monthly report. But also rest assured that your accountant knows you can only write off 50% of that lunch. 

Dog in Halloween costume

DIY is great for your dog’s Halloween costume, presents for Grandma, and that amazing quarantine banana bread you made but may not be the best approach for your business’s accounting. You could be missing out on thousands of dollars, multiple hours of your time, and peace of mind knowing that a professional is handling the books of one of your most precious assets (your business). Filing your own business taxes may be in your ‘zone of competence’ but it is an accountant’s ‘zone of genius’. Get back to spending time in your ‘zone of genius’ which is running your small business. 

At Singletrack Accounting, we know how valuable your time and hard earned money is. We are here to help you. Reach out for a free consultation. 

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Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

Avoid the Pitfalls of DIY Accounting2020-07-07T18:03:45+00:00
11 06, 2020

Why You Should Hire A Business Coach

2020-06-11T19:14:38+00:00

As a business owner, you are most likely a pro at putting out fires, creating something out of nothing, and motivating yourself to continue through all circumstances. However, gaining a new perspective from an expert will teach you to identify what is important and in return accelerate your success. Enter your future business coach.

When is the right time to hire a coach?

There has never been a better time than now. With COVID-19 affecting pretty much every business, many have been forced to get creative. For example, restaurants have had to shift to takeout, numerous companies have had to support remote work, and the travel industry has been flipped upside down resorting to virtual experiences or promoting safe travel within driving distance.

With all the uncertainty, it’s never too early to seek coaching. Some entrepreneurs wait until they run into problems before hiring a coach. They could be hitting an income wall, feeling stuck or unmotivated, or their business is on a downhill slope – and not the fun skiing downhill slope. While it’s important to get help as soon as possible if you are experiencing any of these scenarios, our advice is to get on track with a coach right away to avoid getting into these scenarios or at least learn ways to handle the situation.

Yes, a business can be unpredictable especially during a world pandemic. The rollercoaster of highs and lows can feel draining at times. Having a business coach by your side riding the moguls with you directing you towards smoother terrain can even out these highs and lows so you can stay laser focused on what matters.

What can a business coach offer me?

Fly fishing

“Give a man a fish and he will eat for a day. Teach a man how to fish and you feed him for a lifetime.”

A business coach is by your side to talk through your real-world problems and most importantly teach you how to come up with solutions. They might discuss topics such as creating a more efficient process, establishing goals, formulating strategy, budgeting, refining your niche, identifying your ideal customer, marketing and networking channels, creating action plans and how to stay healthy and inspired on this crazy entrepreneurial ride.

Business coaches won’t be able to solve all your problems. They will, however, try to get to the root of why these problems are occurring and teach you the proper tools to solve them and find out why it is challenging for you.

For example, you may go to a business coach to find out why your sales have been plateauing despite a strong market. A business coach won’t necessarily give you all the answers, however, they will give frameworks and ask the right questions to surface new insights because no one knows your business better than you. Sometimes it’s ‘hard to see the forest through the trees’. A coach can help you get some elevation on a hard issue so you can see it from a new perspective.. For example, you may be suffering from a bad case of imposter syndrome (we’ve all been there) and be totally unaware of it until you get a coach’s opinion.

How to choose the right business coach

While one business coach might be perfect for the person in your co-working space next to you, it may not be the right person for you. Here are some of our best tips to get you set off in the right direction.

-Choose someone with personal business experience. Hiring a coach who has walked the walk and built a successful business who is going to be a great asset. While a good coach will absolutely add value, a relevant industry coach is even better than a generalist.

-Building trust and a personal connection is important when finding a coach. If you don’t have a connection with the person, the process will be doomed from the beginning. Interview your coach first to make sure their approach and style match yours. If you don’t vibe, cut your losses early.

-Make sure this coach is an expert in their field. Are they working on their personal development? Are they putting out good content on running a business? Is the coach actively engaged in new industry happenings? Pro tip: follow this coach on social media to get a better understanding of the content they are putting out into the universe.

-We live in a world full of free information, which includes public reviews and testimonials. Read those reviews! Even better – reach out to a few former clients and have them give feedback on their experience.

Takeaway

While running your own business can be rewarding, it can also be demanding and stressful. Hiring a business coach means you will have someone in your corner who can assist you through the challenges and serve as a source of experience and business consulting that you can rely on. Coaching is a competitive advantage! It’s never too early to ski the windy entrepreneur slope with a coach by your side. What are you waiting for?

Kim Hornsby, CEO of Singletrack Accounting, knows small businesses. She is an industry expert and has helped businesses of all sizes scale through consulting. After leaving the corporate world over 20 years ago she has started, built, operated, and sold businesses across various industries. Not only is she a business expert, but she has traveled the world and built a lifestyle around mountain living in Steamboat Springs, Colorado. Reach out for a free consultation on how Kim can elevate your business.

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Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

Why You Should Hire A Business Coach2020-06-11T19:14:38+00:00
11 02, 2020

Did You Receive A 1099? You’re Probably Overpaying Your Taxes

2020-02-11T15:57:09+00:00

You are your own boss. You do contract work for whomever you choose, whenever you choose. Your customers’ businesses write you phat checks and you are feeling flush all year. All is good in the entrepreneur hood until the tax man comes around in April. Your 1099 arrives in January and that is where the problem begins. The problem is that no one told you that LLCs and Sole Proprietors pay a whopping 15.3% Self Employment tax on the entire amount on your 1099….on top of your regular income tax! Most self-employed people only find out about this nightmare situation after they file tax returns with 1099s and are then hit with the tax bill. YOU are paying the highest % of tax out there. Thankfully there is an easy way to to stop this gross overpayment of taxes — and it’s still available for 2019 if you have not filed your returns yet. For the sake of your bank account, read on. 

4 Crucial Things to Consider

Friends playing music

Business Formation

If your business is an LLC or Sole Proprietorship, you must pay Self Employment Tax. Why? Since you don’t receive paychecks and don’t pay into Social Security and Medicare, this is how the IRS makes sure that you still do. Self Employment tax is 15.3% on your total net business income. That number is in addition to your regular income taxes. 

EXAMPLE: You receive $100,000 in 1099s, and had $20,000 in expenses. Your net income is $80,000 and you will end up paying $12,240 in SE Tax.  ($80,000 * 15.3% = $12,240). If you fall into the 24% tax bracket for personal income tax, that means you are also going to pay an additional $19,200 ! ($80,000 * 24% = $19,200). That is a ghastly total of $31,440, nearly 40% of your income is now going to taxes. 

Lets say you only receive $20,000 in 1099s, and had $2000 in business expenses. Your $18,000 profit is going to cost you $2,754 in Self Employment taxes. If you are in the 12% tax bracket for personal income tax, that’s going to add $2,160 to your tax bill. That adds up to $4,914, nearly one third of your $18,000 profit is gone.. 

How To Stop Paying Self Employment Tax

First, if your accountant never explained Self Employment Tax to you, you have a problem with your accountant. Now that we’ve not only explained this tax to you, we’re going to tell you exactly how to stop paying it. Turn your business into an S-Corp. Yes, you’ve heard people talk about it but you didn’t really understand and weren’t sure it was right for you. Well chances are, if you are getting those phat 1099s, it’s exactly right for you. Here’s how this goes: when you are an S-Corp owner you’ll be required to pay yourself a portion of your net income through an actual paycheck. Now that you are paying yourself a modest salary based on your accountant’s advice (hopefully not from the bad one) you will also be paying Social Security and Medicare taxes through your paycheck. Now that the IRS is getting their piece of cheese from your paychecks, they no longer subject any of your net income to Self Employment tax!

Example: your S-Corp made $100,000. After expenses you have $80,000. You pay yourself a salary of $45,000 leaving a net income of $35,000. You pay Social Security & Medicare tax on your salary which amounts to $6,885. The $35,000 left as net income is no longer subject to any Self Employment Tax. In the 24% tax bracket, you are still going to pay $19,200 for personal income tax. But now your taxes total $26,085: a $5,355 savings from filing your taxes as an LLC or a sole proprietor. 

NOTE – these example scenarios are very simplistic, but the basic premise is there. The more your income increases, the more you save.

When Should I convert

We recommend that you elect s-corp status at the point that your tax savings more than covers the increase in accounting costs (i.e. the cost of adding payroll). Depending on the business and how expensive your accountant is, this could be as low as $20,000 in 1099-MISC income. There are many additional advantages of being an S-Corporation such as access to pre-tax retirement savings, added deductions for health insurance, a separate set of books providing clear and easily digestible financial information. Also consider this, being on payroll means that you will be “withholding” income taxes each year. Many contractors fall into the trap of not saving any of their money for tax time. With an S-Corp you will be paying yourself a monthly salary with taxes taken out offsetting some of that April tax bill.

Develop a Bulletproof Plan

Now that we’ve talked you into the no-brainer switch to an S-Corporation, it’s time to develop a bulletproof financial plan. ALL of this depends very much on your own personal scenario. This is not a one-size-fits-all situation, many factors are at play, and this is where a pro comes in handy. A professional accountant can ensure S-Corp status is right for you and get you set up on a plan to keep your S-Corp fully compliant with all the IRS rules and regulations. While switching to an s-corp is often the smartest tax move, the “paperwork” is tricky. It is best to hire a professional accountant to take care of the details.  

Takeaway

Man riding bicycle

The great news for you – it’s not too late to take advantage of these tax savings. A tax professional can change your business formation before you file your taxes on April 15, as long as you act quickly and check a few requirement boxes. Remember, your tax savings should keep more money in your pocket and still cover accounting costs.

Singletrack Accounting saved customers well over $100,000 in 2019. We can absolutely make you a part of that statistic! We live and breathe small businesses and nothing makes us more joyful than saving you money while providing expert accounting and excellent service. We are with you every step of the way. 

To learn about more tax saving strategies read 5 Tax Saving Strategies For Small Businesses

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Leaping Into the Unknown

September 4th, 2020|0 Comments

We have been recently reminded that it is crucial for entrepreneurs to stay up to date on emerging trends. Staying dynamic will allow you to successfully alter your course to fulfill client needs and thrive [...]

Did You Receive A 1099? You’re Probably Overpaying Your Taxes2020-02-11T15:57:09+00:00
7 02, 2020

5 Tax Saving Strategies for Small Businesses

2020-02-07T22:08:01+00:00

We are starting down the third year of the Tax Cuts and Jobs Act and tax savings are all around us. Every year the standard tax brackets increase with inflation. Here’s a breakdown of the 2020 tax brackets

2019 Tax Brackets

No matter which bracket you fall in, there are multiple ways to cut down your tax bill and take advantage of savings. Here are 5 tax saving strategies for small businesses. Let’s start planning. 

1099s

If you are one of the unlucky few contractors receiving 1099s, you will end up paying an enormous 15.3% self employment tax on the entire amount of every 1099. Let’s say you made $10,000 on a 1099. You would end up paying $1,530 in taxes. Example: Alley is a digital marketing contractor. She receives $100,000 per year in 1099s. Her tax bill would be ($100,000 * 15.3%) = $15,000. This is in addition to income tax. Luckily for Alley, there’s an easy way to reduce or eliminate this tax. Read #5 to find out how. 

Paddleboard yoga for health

Health

Carrying health insurance is still mandatory under the Affordable Care Act and most small business owners can deduct health insurance related expenses for themselves and their employees on their business tax return. The deduction doesn’t stop with insurance premiums. There are other healthcare related expenses you can deduct such as HSA (Health Savings Accounts). Let’s dive more into this. HSAs are contributions you and your employees make to an account. The monies must be used to pay health related expenses. In addition to paying for medical and dental expenses, some other exciting things you can use this account for include massages and yoga classes (with a doctor’s note), doctor ordered over the counter medicines , eyeglasses, teeth cleanings, health related home improvements, fertility treatment, and your kids’ health expenses even if they are not on your plan. Sounds like a win win to us. 

Here’s a list of HSA qualified medical expenses published by Optum Bank https://www.optum.com/content/dam/optum/consumer-activation/A13534/42994-hsa-qualified-expenses.pdf.pdf

IRA

Setting up a qualified IRA account is not only reduces your taxable income (and thus your tax bill) and allows you to keep that money in your pocket for retirement. Example: Alley, a small business owner, contributes $15,000 per year to her SEP IRA retirement account. On her business tax return, she can deduct the entire $15,000. Since she is in the 24% tax bracket, Alley saves $3,600 in income taxes and she also gets to keep that money for retirement; her $15,000 saved just became $18,600 saved! Alley’s smart and will be thankful for the extra retirement money when she’s drinking margaritas in Mexico. Cheers to that!

Digital nomad traveling in van

Travel expenses

Speaking of Mexico, have you ever wondered if you can write off that trip south of the border? While tempting, it’s important that you follow the rules on this deduction. The trip has to be an actual business trip the majority of the time but that doesn’t mean you can’t add in a few extra days at the beginning or end for extra traveling. The rules are different on domestic and international travel. For domestic travel, you must spend over 50% of the time on business and you are able to write off 50%. Any less than 50%, and you can’t write off zip. For international travel, the write off amount depends on how much time you spend doing business. For example, Alley is a social media manager. She has multiple clients she posts content for. She spends 40% of her time taking photos and videos for her clients. Alley can write off 40% of her travels. Keep in mind that you can only deduct your portion of expenses if you bring the family along. If you can follow the rules and record keeping requirements, you’ll get two thumbs up from the IRS. 

Form an S-Corporation

The money your clients pay you is subject to 15.3% self employment tax if it’s reported on a 1099. If your clients pay your s-corp instead, some of that money is required to be paid to you by your s-corp as an Employee and reported on a W-2. Your payroll is another deductible expense which lowers your net taxable income. That remaining net income is not subject to any self-employment tax …meaning you skip the 15.3% tax! The salary portion you paid yourself is of course subject to self-income tax, but not the remaining net income. Example: Alley pays herself a $60,000 salary and still has an additional $40,000 in net income. By switching to an s-corp, Alley saved 15.3% x $40,000…that is $6,120! Money in her pocket that she can spend on other things such as marketing, IRA contributions, or a Mexico vacation – all achieved merely by changing the way her income is reported. If her income had been reported on a 1099, she would be facing a self employment tax bill of $6,120 on April 15. While an s-corp seems like a no brainer, the formation can be tricky. Make sure you have a professional accountant set it up correctly. 

These tips are all great ways to reduce your tax bill. Every business and individual’s taxes are very different and the best advice we can give you is to seek professional help about your individual situation. Singletrack Accounting saved customers over $100,000 in taxes in 2019 and we can absolutely have you be a part of that statistic. Reach out to our team of professionals. 

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