I’ve gotten questions about the difference between the EA (Enrolled Agent) and the CPA (Certified Public Accountant) and I’d like to answer those now.
The short answer to this is no. However, it really depends what characteristics you’re looking at. continue reading this article »
Every year we have clients that need tax estimates so that they don’t have to pay an underpayment penalty when they file their taxes. It’s not a difficult thing to prepare, but if you’re self-employed and your income varies from year to year, the form can be a little confusing. There are a couple of options for figuring out how much to pay. continue reading this article »
I came across this list of items that the Tax Court has, in various rulings, declared as “not a business”:
There’s a great quote from a tax court case:
“We note that a business will not be turned into a hobby merely because the owner finds it pleasurable; suffering has never been a prerequisite to deductibility.” Krebs v. Commissioner, TC Memo 1992-154
I think this points out one major thing: you can enjoy what you do. As long as you carry on as a business, you’re safe. (More on carry on as a business later…)
No, seriously, I do. I want to total up my taxes one year and realize that hubby and I owe a mil. Why is that? Well, you need to earn about $5 mil in order to owe that much. That’s a pretty sweet year by most anyone’s standards. Of course, I’d also make estimated payments so I don’t get hit with a late-payment penalty.
It’s one thing to prep someone else’s taxes and tell them they owe a mil…it’s another to have it be your own.
The straight answer to this is: no, probably not. But the good news is: they’re not outsourcing it like you fear. (Although, some CPAs will outsource outside of the country. On occasion, it’s even being outsourced to the tax-prep chain down the street.) Who’s doing your taxes, then? I hate to say it, but it’s people in the same position that I was in when I was an intern: the backroom.
You see, there are different tiers of folks out there who prepare taxes. Usually, in a medium to large office, there is a person who meets with you (a CPA), they talk with you, take notes, and tell you when to expect your taxes to be completed. As soon as you leave, though, they go back to their offices, and drop your taxes off along the way at the desk of an assistant. That person has the job of preparing your taxes. At that point, they might go back to the CPA for review, or they may go to a supervisor, who is not a CPA, but is a more experienced preparer, for review. He or she will look over the work that the the preparer has done and if it needs fixing (review notes) then it’ll go back to the preparer. continue reading this article »
I could begin this post with the classic “So you think you want to work for yourself?” But let’s skip that. It’s overused and it’s lost meaning. Instead, let’s take a look at the questions you have to ask yourself before you start your business.
Sure, your family tells you that your product or service is good–but is it outstanding? Are you one of the more skilled people in your market? If you take a look at your work, determine what makes you stand out. Have a good portfolio, if it’s designs you’ve done, applications you’ve written, or accomplishments that you’ve achieved in the workplace. Make a list of the answers to these questions.
Who is your competition? Who are your clients? Why would your client choose you over the other options in the market? Is there a demand for your services or product? What are your weaknesses and how do you intend to turn these into positives in the market? (This, along with your answer to question 1 should be the basis of your marketing pitch or the information that you provide to potential clients.) When we considered moving to another town I looked at competition. Who was working in taxes and business consulting? How much of a market was in that town? If I could figure in the nearby towns as potential client base, what would have to be done to have folks from that town come over to my town to get business or tax advice? It was the same thing I did when I research “virtual accounting.” What services did I offer that were unique to others? Sure, I specialize in small businesses that were online, but what differentiated my services from the competitors?
Networking is all the rage today–as well it should be. A few well-connected contacts can make your business profitable. continue reading this article »
As an accountant, I would love to tell you that you always need a bookkeeper–it keeps my profession alive. However, it’s simply not true. Here are several things that you need to ask yourself to determine if you need one.
Can you balance your personal checkbook? Do you understand what is an asset compared to an expense? Do you feel comfortable with numbers? If the answer to all of these is no, there are a couple of options: you can take a class in accounting at your local community college or online. You can get advice from a bookkeeper and pay them to teach you how to prepare your own books. Or, the easiest, but not the cheapest option: you can hire a bookkeeping company.
All of us want to build a successful business. Why else would we be in business? Financial statements are important: banks will require them for you to get a loan, you’ll need them to prepare your business taxes, and most importantly, you need them to determine how well your business is doing. A lot of people get along just fine without them, but there might come a time when you really need to have some financials prepared. Having an accurate set of books is important–it opens up your options for financing, your flexibility on determining how to run your business, and allows you to determine quickly what you have available for cash and credit and what expenses are coming up. (And it’ll save on your tax preparation bill.)
Quickbooks is a wonderful product. My colleague and I use Quickbooks regularly for preparing financial statements. It’s very user-friendly and can answer basic accounting questions. If you feel that you can take on Quickbooks and have some understanding of accounting, go for it. However, if you answered “no” to all the questions listed above, then you might not want to take the leap. Not only that, but if you really don’t understand bookkeeping, go to a professional–you can really screw up Quickbooks and it will cost you more when you tax preparer has to figure them out.
This is probably the biggest question of all. continue reading this article »
In my office in New Hampshire we have a “paperless” office. Of course, that means that we have to scan everything and then place it in it’s respective folder, etc, just so we can get files put together. I’ve been asked about this a couple of times–so here are some pros and cons:
Drawbacks:
Benefits:
The firm I was with in Washington had an odd way of doing things at times. I’ve shared this with folks in New Hampshire and they just find it amusing. Likewise, I’ll do the same with the items in New Hampshire that were “odd” compared to Washington. Here’s a Washington oddity:
Odd item #1: Everything had to be portrait orientation
I mean EVERYTHING. So if you had a document, say a statement from a brokerage, which was normally a landscape orientation, it needed to be changed to portrait. Did this involve some trick with photocopying? No, they wanted us to staple the left side of landscape papers to a portrait-oriented blank sheet then fold the additional portion (which exceeded the 8.5″ portrait width) folded over neatly.
Why, might you ask?
The reviewers didn’t want to have to turn the file or their heads to look at the workpapers. *sigh*