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5 Tax Write Offs Every Solopreneur Needs to Know

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by Anita Forrest

Tax write-offs are one of the best parts of being self-employed but it’s also one of the most confusing areas with many missing out on valuable deductions.

So, if you’re freaking out every time you get a tax bill or just not claiming expenses because you can’t decide whether you are entitled to claim them, then read on. I’ll show you 5 tax write-offs that you may be entitled to:

 

Mobile Phone

If you are using your mobile phone for work reasons like checking emails, getting social for your business and marketing apps then you can claim back a percentage of your line rental against your taxes.

There’s no hard and fast rule here, the percentage you can claim will depend on the amount of time you use your phone for work.

Top tip – don’t write off 100% unless you use it exclusively for business.

 

Work trips

Some of the money you spend on business travel can be claimed against your taxes. But this largely depends on where you travel to and why.

Travel outside of your normal routine will generally be deductible in full. But regular travel, like between your home and office cannot be claimed, that’s because HMRC defines travel between your home and your regular, permanent place of work as a non-work journey.

 

Meals

If you are out and about you can claim for meals that you pay for when you meet other people like clients or colleagues.

You can claim for meals when you are travelling for work reasons (known as subsistence), but not your everyday lunches. Just keep the cost of anything you claim ‘reasonable’, like a sandwich, drink and the odd glass of wine.

 

Training and courses

Staying on top of your game is essential when you work for yourself, but it can be pricey. You’ll be able to write off the cost of training and courses that keep your existing skills and expertise. HMRC recognises that you need to undertake training as part of carrying out your trade to keep your knowledge up to date. But if you attend training to learn new skills these costs would not be tax-deductible.

These rules also apply to books, eBooks, workshops and magazines.

 

Home Office

If you’re working from home, then it’s costing you money in the form of extra utilities, cleaning and more. Now, don’t get too excited! HMRC has a lot of rules around what you can claim and how.

There are two ways you can choose to make your home office claim: the flat rate method (most popular) or the actual method.

The flat rate method – If you are working from home for at least 25 hours per month, then you can claim a flat rate allowance on your taxes. The 2020/21 tax year allowances are:

  • £10 per month if you work between 25 and 50 hours per month;
  • £18 per month if you work between 51 and 100 hours per month;
  • £26 per month if you work 101 or more hours per month.

You don’t need to keep any receipts, which makes this easy to claim when you fill out your tax return. But the downside is that it isn’t the most generous tax deduction.

The actual method – depending on your situation it may work out more tax efficient to claim a percentage of your actual household bills (like heating, electricity, rent and cleaning) as a business expense. You’ll need to add up the number of rooms in your home and the time you spend working in each, then claim a portion of your bills. And don’t forget to keep receipts to back up your claim!

 

Claiming business expenses is by far the easiest way for you to reduce your tax bill, just make sure you keep hold of all your receipts as evidence of what you are claiming. If you are ever unclear about what expenses you can and can’t claim, keep track of it, save the receipt and speak to a professional.

 

 

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co – a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.

 

 

 

 

Solo-Entrepreneur? 5 things you should know about your taxes by Paul Koullick of @keepertax

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Solo-Entrepreneur? 5 things you should know about your taxes

by Paul Koullick

Whether you’re earning money in a side hustle, or have your own small business, it comes with some serious tax burdens. Many first-time self-employed don’t realize this and wait until the end of the year only to discover that they owe thousands of dollars to the IRS and forgot to keep expense receipts. In this guide, we’ll cover the basics of what you need to know to avoid getting slammed by taxes as a freelancer.

#1 No, taxes aren’t being withheld from your paychecks

If you’ve previously only worked as an employee (W2), it may come as a shock that the money you earn on a 1099 contract or invoice does NOT have taxes already withheld. That means you’ll need to consciously remember to set money aside throughout the year to avoid needing to take a loan out at the end of the year.

#2 Keep track of work expenses throughout the year

Everything you buy and then use for work, whether it’s a new phone or gas for your car you drive for work errands, is at least partially deductible. Trying to remember expenses from nine months ago at tax time is really difficult, so it’s best to track these expenses throughout the year.

Sometimes, what counts as a tax write off isn’t entirely intuitive but you can use online guides like this one to learn more about what expenses you should be keeping track of during the year.

#3 If you work from home, you can likely claim the home office deduction

Even if you don’t have a separate room dedicated for work, you may be eligible to claim this valuable deduction. As long as you have a workstation located somewhere in your house or apartment where you tend to do work (rather than entertaining guests or watching TV), you get to write off of rent, utilities, wifi and so on.

#4 All of this matters even if you’re only self-employed part-time

Even if The standard deduction does not trade off with itemizing 1099 work expenses. It’s additive – meaning that you can claim both! That means even if you have a full-time W2 job and only do limited part-time 1099 contracting work, neglecting to claim work expense tax deductions is like donating money to the IRS!

#5 If you earn more than $1,000 per year, file quarterly (estimated) taxes

If you earn above the $1,000 threshold from self employment work, you’ll need to file quarterly taxes. Also known as estimated tax payments, this is the IRS’s way of simulating a salary tax withholding so that you aren’t caught off guard with a huge tax bill at the end of the year.

The good news? It takes just 15 minutes. You can use free online tools like Keeper’s quarterly tax calculator to quickly estimate how much you’ll need to pay, and file online. It takes just 15 minutes, and allows you to avoid a nasty penalty from the IRS.

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Paul is the founder and CEO of Keeper, an app that helps freelancers and 1099 contractors save money on taxes. In his free time, he loves jogging, chess, and spending time with his family in San Francisco.

So You Started a Business… Now What? by @LisaMarieAccoun

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So You Started a Business… Now What?

by Lisa Robinson

So You Started a Business… Now What?

Time to Take Charge of Your Business Finances!

You love Freedom! That is why you started your business. Your business is your passion, your baby. And even though your fortunate to work doing something you love, you still need to contend with that little pesky back-office tasks and financial bookkeeping.

Everything from sending out invoices to keeping up with those pesky taxes, maintaining smart financial practices can be very overwhelming and such an exhausting process. Yet keeping the finances in order is one of the most important things you can do for your business. So it is so important. Once you have developed a system, it will be easy to maintain and you’ll be well on your way to success.

Here are eight tips to get you well on your way:

1. Shelter your personal finances
No I don’t mean go and open an account in the Cayman Islands or anything like that. But you do need to shelter your personal assets and finances from any liabilities and risks of running a business. So if you haven’t done so already, form a LLC or incorporate your business in order to help protect your personal assets like your savings account, house, etc. should anything happen in your business.

2. Make sure you have separate business accounts
I do not know how much I can stress this. If you are still mixing your personal and business finances, stop! Fix it as soon as possible! Open a separate checking/savings/credit card account for your business. When you get a separate monthly statement for your business expenses and revenue each month, it will so much easier to understand how your business is doing and how well it is staying within budget and you meeting your financial goals.

3. Don’t get pinched at tax time
I see it time and time again, business owners, especially new ones, often get a nasty surprise come tax time, when they realize they’ve significantly underpaid on taxes for the year. When an employer isn’t automatically withholding federal and state taxes with each paycheck, it’s up to you to make sure you have it covered. One effective strategy is to put approximately 25% (or determine the appropriate percentage with your accountant) of each payment you receive into a separate account. Then you can draw from this account to make your estimated quarterly payments as needed.

4. Get an accounting system
A good accounting system will save you time and money in the long run. Work with an accountant, they can help you get into a system that works specifically for you and your business. If you don’t want to work with an accountant yet, then an app like Quickbooks Online, Zoho, or Xero Accounting can help or if you are just starting out and need to stay within budget a good app to start with is Wave Accounting (which is a free app). One of these softwares can help you keep everything organized.

No matter what software or system you use, make sure you know how much your business has taken in and how much your business spent on a monthly basis. By staying up to date on your revenue and expenses, you’ll have an easier time come tax season and will be able to make better financial tax planning decisions for the future.

5. Track your expenses!
This is so very important! When you don’t keep tabs on every business expense, you forfeit tax write-offs and pay more in taxes than you should. Keeping a credit card that’s used solely for business is a good starting point to ensuring that your office supplies and other business purchases are accounted for. Be sure to tie any service expenses – like web/email hosting – to the card (or whatever system you use). In addition, jot down business trips, mileage, lunches with clients, coffee dates, and other entertainment/travel expenses in an electronic or paper planner. Make an appointment with an accountant or a CPA if you’re unsure about what you can and can’t write off.

6. Make a weekly appointment with yourself
No matter how hectic things get, schedule a weekly appointment with yourself to focus on your business finances. You’ll want to make sure you’re caught up on any invoicing, have captured any new business expenses, paid any of your own outstanding invoices, and your books are up to date. When there’s room in your budget, you can always hire someone to take care of this for you.

7. Start accepting credit cards
A surefire way to increase your sales and get paid on time is to make it as easy as possible for your customers and clients to pay you. This is even true when you offer professional services. Look into a solution that caters to small businesses, like Square, PayPal Here, or Spark Pay. When choosing your provider, be sure to look closely at all the fees: swipe transaction, manual transaction, monthly, chargeback, and returns, so you are comparing apples with apples.

8. Get Strategic
Once you understand your business’ financials, it is time to put those numbers to work. Ask yourself the following questions: how sustainable is my business right now? Which clients or services bring in the most revenue? Which products have the best and worst margins? Then, you can determine if there are any changes needed to maximize profits and grow your business this year.

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Lisa RobinsonLisa Robinson is CEO/Founder of Li$a Marie Accounting and has over 15 years of Accounting experience. She is your down to earth Sassy Southern Accountant who specializes in taking the Chaos out of Numbers and helping entrepreneurs get rid of the accounting headache. All the while showing her clients that Numbers don’t have to be scary but instead can by very Sexy!

She invests the time understanding you and your business to create a plan that will help your business grow and she is there with you every step of the way.

To Mix or Not Mix Personal and Business Funds… by @LisaMarieAccoun

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To Mix or Not Mix Personal and Business Funds...

by Lisa Robinson

Why keeping your Business and Personal funds in the same account is NOT a good idea. There are many of you reading this right now that are thinking – it can’t be that important?!?! Keep reading!! You will see that it actually is very important. So why would you want to keep your business and personal funds in a different account?

It makes your bookkeeping more difficult. The reason why is because it takes time to figure out which deposits and which expenses are for the business and which are personal. And even if is easy for you to determine this – if you are doing your bookkeeping through a software – ALL of the transactions have to be entered in order for the account to be reconciled which if the “Tax Man” comes a knocking – can cause some problems.

You won’t have good financial reports. – If your business and personal expenses are all entered in the software to reconcile, then there are additional items included on the income statement and/or the balance sheet which is not related to the business. Therefore, if you are posting personal transactions to expense accounts (telephone, utilities, etc.) then the expenses are overstated.

It makes the tax return preparation more difficult. – Because your tax return is on business income and expenses, your accountant will have to figure out what is the true profit of the business by reviewing all the income and expenses and then removing the personal transactions from the equation. This is whether or not you are filing a personal or corporate return – correct figures need to be reported to properly calculate the tax or refund due.

It is an audit waiting to happen – Do you want to be audited? Do you want the “Tax Man” to find a reason to come knocking on your door? If not, then keep your business and personal transactions separate. I cannot stress this enough! If the :”Tax Man” looks at your bank statements or does an audit on your business and sees from there that you have been co-mingling your personal and business money – it Immediately opens you up to a personal audit as well and from there the IRS could also disallow expenses and include deposits as income because your business and personal items were mixed together.

You may think it is not a big deal to mix funds, or think it is a hassle to have multiple bank accounts. But here is the thing… it is not nearly as much of a hassle as having to figure out your true business figures, get the correct information on a tax return and prevent the “Tax Man” from knocking on your door and adjusting your tax return where you now owe money.

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Lisa RobinsonLisa Robinson is CEO/Founder of Li$a Marie Accounting and has over 15 years of Accounting experience. She helps entrepreneurs get rid of the accounting “headache” and helps them change their mindset towards accounting by making sure their accounting books are in order and in an accounting system that works for them so that they can work on growing their business.

Tax Deductions You Might be Missing Out On by @WhaleyBookkeep

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tax deductions

As the end of the year draws to a close, taxes may be the last thing on your mind.

However, filing season is just around the corner in the US and I think you should know about some tax deductions you might be missing out on as a business owner.

  1. Home Office Deduction – In years past there has been a taboo about claiming a home office deduction. However, in 2013 the IRS introduced a new way of claiming this deduction called the “Safe Harbor” Office in Home deduction. This allows self-employed individuals to deduct $5 per square foot of space in your home use exclusively for business use. The key word here is exclusive, it cannot be your kitchen table or bedroom that you work out of. It can be a corner of a room that you only use for business purposes, but you need to be able to prove the exclusivity of the space.
  2. Business Mileage – Often if we are working from home,  we are also traveling to meetings, local events, or co-working spaces for business purpose. You can now use apps like MileIQ (https://www.mileiq.com/) to track these business miles and claim them on your tax return. The new standard mileage rate for 2016 will be 54cents a mile (that can add up quickly). To claim this deduction you need to record the starting and ending mileage for the year on your car, total miles for each business trip, reason for trip. Most apps do much of this for you. If you put a lot of miles on your car then you can purchase a product like Automatic (https://www.automatic.com) that actually plugs into your car and records all your driving data.
  3. Credit Card Processing Fees – If you accept Credit Cards or PayPal then you can deduct all the fees associated with their services. Just make sure that you actually are claiming the total income you received (how much was invoiced) and not the amount the company deposits into your account (usually after fees are taken out)
  4. Credit Card and Loan Interest – If you have a dedicated business credit card or took out a small business loan then you can deduct the amount in interest you paid over the calendar year. This doesn’t work if you bought a few business things with a personal credit card.
  5. Health Insurance Premiums – If you are Self-employed and paid health insurance premiums for yourself, spouse, or dependents; these are a deduction on your tax return.
As with any tax advice, these are general tips and may not apply to your specific tax situation. Please take the time to consult with a tax professional to review your own tax situation and see what deductions you might be missing out on.

Want some guidance on getting more organized for tax time? Download my Free Guide to Reducing Tax Time Stress.

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Melissa WhaelyHello there, I’m Melissa Whaley, owner of Whaley Bookkeeping.  I specialize in virtual bookkeeping and tax preparation for entrepreneurs. It excites me to help people understand and take control of their finances, especially in their businesses. I believe that anyone is capable of success if their passions are accompanied with the right tools. I love working with new business owners to help them set-up systems that will take the stress out their finances.

I am a licensed tax preparer in the state of California and have been helping small business owners since 2009. I am a Wave Accounting Pro, Quickbooks Online ProAdvisor, and Freshbooks Bookkeeper.

You will often find me drinking a cup of coffee while hanging out in  Facebook Groups, or on my YouTube channel making videos to help Etsy sellers with their bookkeeping. In my personal life I am married to a wonderful husband, have a 6 year old daughter and a 1 year old son.

Facebook | Twitter | Youtube

5 Mistakes Entrepreneurs Make that Lose Them Money by @LisaMarieAccoun

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5 Mistakes Entrepreneurs Make that Lose Them Money

by Lisa Robinson

Entrepreneurs want to succeed more than anything but what they don’t understand is that there are mistakes they are making which are actually causing them to lose money. The good news is that these mistakes are easily avoidable. I am going to discuss 5 mistakes that are made which cause Entrepreneurs to lose money in their business and what can be done to help ensure these mistakes are no longer made.

1. You do not have a support system for your business. What I mean by this is you are growing your business alone and do not have a coach, or any other type of support system to help you and offer advice to you. I know… I know… this has nothing to do with accounting and I am an accountant. However, this mistake is often made by many entrepreneurs, including me, and it makes you lose money big time. Think about it. All the hours and money wasted trying to do something on your own and not really getting anywhere. Money spent that you could have saved. Time lost that if you had a coach you would have been spending that time making money. Believe me, I know, I have been there. Take the time to think about what kind of coach you need and then talk to a few and find the right one for you. I promise, it will help you not only not lose money but make money.

2. Mixing Personal and Business Funds. I see a lot of entrepreneurs doing just this and it is one of the quickest ways for you to lose money and you not even realize it at first. How? Well for starters, there is no real way to know which money in your account is for your business and which is your personal if you have them all mixed into one account. For organizational and Tax purposes you should keep your business money separate from your personal money. On top of that, if the IRS finds that you are mixing the funds – it opens you up to not only a business audit but also a personal audit by the IRS which could in turn cost you a lot more money.

3. Not Tracking All of Your Expenses. No only does the 13 page IRS guideline for business expenses have you perplexed but it gives you a headache so you have decide you are just not going to worry about it anymore. Boom! You have NOW lost money. I guarantee it. Not keeping track of your expenses throughout the year and then trying to gather everything at the end of the year just doesn’t work. For your business you are able to deduct all “ordinary and necessary” business expenses. However, you cannot deduct what you have not documented.

4. Not Claiming the Home Office Deduction. For many entrepreneurs, your office is in your home yet you don’t claim the deduction because in the past it was considered a red flag for getting audited. However, if you are legitimately entitled to the deduction, take it. You are losing money, when you don’t because there are deductions you are allowed when claiming a home office. To qualify, your office would need to be a room used solely for business purposes. And if you do qualify, you are able to write off a percentage of your home expenses including rent/mortgage payments, utilities and insurance costs. Don’t keep losing money by not taking a deduction that you are legitmately allowed.

5. Tax Avoidance. So many entrepreneurs are very often apprehensive to speak to an accountant because they just don’t want to deal with any of the taxes including the quarterly taxes, etc. But here is the thing – you really, really, need to meet with an accountant as it will save you money in the long run. An accountant can do everything from helping you avoid tax penalties (which just saved you money) to setting you up with the right salary to making sure you are on track with your quarterly tax payments (which again just saved you a ton more money). Yes, I know taxes means you pay money, but look at it this way… if you don’t pay the taxes then you will owe penalties and late fees and even could go to jail so yes in the long run talking with an accountant can save you a lot of money.

If you would like more information or other accounting and tax tips, visit my facebook page at www.facebook.com/LisaMarieAccounting.

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Lisa Marie AccountingLisa Robinson is owner of Li$a Marie Accounting and has over 15 years of Accounting experience. She helps entrepreneurs get rid of the accounting “headache” and helps them change their mindset towards accounting by making sure their accounting books are in order and in an accounting system that works for them so that they can work on growing their business.

Five Elements to A Killer Invoice by @WhaleyBookkeep

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Getting paid is a pretty important part of owning your a business, so you want to make sure that it is as easy as possible for your clients to pay your invoice.
 Five Elements To

If you are service based, or invoice for products, then these tips will get your invoices into tip top shape!

1.  Branding – Make sure your client knows exactly who this bill is from, and how to contact you if they have questions. This includes the basics of name, location, and contact info. But this also includes Logo and color coding to match your overall brand. The look and feel of your invoices does not have to be boring!

2.  Clear Definition of Charges – Make sure that your list of charges are clear so your client knows what they are paying for. This means itemizing stuff, if there are multiple elements to your charges. If you use more flat rate billing make sure you have good descriptions for what the product or service is so clients are not having to ask questions about their invoice and delaying payment while you go back and forth.

3. Terms/ Due Date – You want an invoice that clearly states when you expect payment. You’ll often hear terms like Net 10 or 30 thrown around describing terms, and those can be listed or you can simply put the date payment is due. Part of a good working relationship with anyone includes clear expectations and timeliness of payment should be a big part of that. There are accounting systems now that can send automatic reminders if payment is late. Use these tools to your advantage so payments aren’t delayed.

4. Payment Button – Make it easy to get paid! If you use a system like Wave, Freshbooks, or PayPal they are able to integrate credit card payments right onto the invoice. Features like this allow you to get paid much faster than waiting for a check in the mail.  If you aren’t using this type of system yet, then at minimum list out how clients can pay (Credit card, check, bank transfer, etc.) and if they need to go to some other place to do it, then make that as easy as possible.

5. Send It – This may sound silly, but you won’t get paid if your invoice isn’t sent. Most invoicing softwares let you send invoices via email so they get to your customer fast. However not all situations are right for emailing invoices.  Make sure you know how your client processes and pays their bills. Some services like FreshBooks will even send invoices via snail mail for you for a small fee.

Still not sure if your invoice is up to par?

Here is a sample from my own invoicing software, Wave Accounting:

WaveInvoice
When I send an invoice through my software this is what my clients see when they click the link.
I have my logo at the top left, a clear due date, A description to my item, and integrated payment. And of course if a client is looking at this, that means I hit sent.

What are you using to send invoices? Comment Below or Tweet Me!

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Melissa WhaelyHello there, I’m Melissa Whaley, owner of Whaley Bookkeeping.  I specialize in virtual bookkeeping and tax preparation for entrepreneurs. It excites me to help people understand and take control of their finances, especially in their businesses. I believe that anyone is capable of success if their passions are accompanied with the right tools. I love working with new business owners to help them set-up systems that will take the stress out their finances.

I am a licensed tax preparer in the state of California and have been helping small business owners since 2009. I am a Wave Accounting Pro, Quickbooks Online ProAdvisor, and Freshbooks Bookkeeper.

You will often find me drinking a cup of coffee while hanging out in  Facebook Groups, or on my YouTube channel making videos to help Etsy sellers with their bookkeeping. In my personal life I am married to a wonderful husband, have a 6 year old daughter and a 1 year old son.

Facebook|Twitter|Youtube

6 Tax Mistakes to Avoid! @MyOfficeBooks

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Six Tax Mistakes to Avoid

by Amanda Hoffmann | Featured Contributor

There are six common tax mistakes I see as a bookkeeper on a regular basis.

They are easy to implement and will have your finances in top shape for tax time!

1. Poor Record Keeping Practices

  • Ensure you have a clearly labelled filing system
  • Do not mix your personal expenses with your business
  • Save all of your receipts and invoices
  • Use online tools like Dropbox, Receipt-Bank or evernote to scan and save all your documents.

2. Pay for an Accountant you do not need

  • Can the tax help center in your country assist you for FREE?
  • Pick up the phone and call around for a quote
  • Ask a bookkeeper who  they use

3. Fail to use Cloud Accounting

  • Ditch the clunky desktop software that requires manual data entry
  • Use online software program options like Quickbooks, Xero or Freshbooks
  • Authorise your bank feeds to save data entry
  • Pay a qualified and registered bookkeepre to set it up for you
  • Pay for training so that you can do your own bookkeeping

4. Claim tax on all expenses

  • Depending on your country, these rules will be different so check their webpage for details
  • Be aware that foreign companies may not pay tax (Google & facebook advertising)
  • Car registration, utilities and other expenses may vary in tax amounts

5. Fail to claim ALL business expenses

  • Keep a diary of all business events / meetings
  • Photograph fuel, parking and other loose receipts
  • Ensure you file all business receipts in one spot
  • Use your phone and apps to save expenses

6. Forget to pay on time

  • Forward date your online payments
  • Keep a electronic or paper diary
  • Create a reminder on your phone when bills are due
  • Organize a filing system that you refer to at the start of each day
  • Find what works for you and do it every time!

There is no fixed rule on keeping your business records on hand and available.

However, the six points listed above will certainly put you on the right track and save you an incredible amount of stress, should you get a tax audit.

Six Tax Mistakes to Avoid
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Amanda Hoffmann – Sensational Entrepreneur, Bookkeeper Extraordinaire and loves Social Media

Amanda HoffmannHi, I’m Amanda Hoffmann and live in Brisbane, Australia. I am passionate about business and social media. I currently juggle being a mother of four school-aged children and run three businesses in completely different fields. While challenging, I believe they keep me thinking outside of the box. I have always loved being busy and I believe it is a mixture of my “can do” attitude and loving life that allows me to accomplish so much. Oh, not liking to sleep much certainly does help!

I started managing my first business over 18 years ago but sold it when I decided to start a family. I was unable to envision at the time how I could run a business and still be a dedicated mother. Since I now run three businesses and have a large family, I have found being organised and prioritising is the secret to success.

What are my businesses you might ask? My Office Books Virtual Bookkeeping, Kidd House Accommodation specialising in fully furnished accommodation for both students and professionals and Co-Founder of a new Social Media start-up called The Likeability Company helping SME’s get the most out of using social media and building communities.

I would like to share my experience in small business and answer any questions you might have regarding office organisation, cloud technology and share my experience in property investment.

I personally am fascinated by social media, particularly the fast pace of twitter and exploring the world of blogging. I invite you share my journey and get to know each other.

Twitter – Blog – Pinterest – Facebook – Google+

New Year, New Tax Laws: How They May Affect Your Small Business

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Photo Credit: msjacoby via Compfight cc

Photo Credit: msjacoby via Compfight cc

by Deborah Sweeney | Featured Contributor 

Happy New Year! Hopefully you had a relaxing and calm holiday season, because January is going to be busy. Most of us still need to wrap up everything from last year, get all of our bookkeeping in order, prepare for the quarterly payment due January 15th, and then the big April tax deadline. And, with all of this extra work, it can be hard to stay on top of how taxes are actually changing this year. Luckily, 2015 shouldn’t be too shocking, but there are some adjustments that you should be aware of.

It’s now easier to save for retirement

The IRS increased the contribution limit for 401(k)s by $500 to a grand total of $18,000/yr. If you’re over 50, your catch-up contribution limit has also increased by $500 to $6,000/yr. And while this may not sound like much, an extra $500/yr over the course of your career could yield significant returns. The IRS also upped the lower-income limits for those eligible for a ‘saver’s credit’ – the amount of this credit depends on AGI and filing status. And, finally, a new type of retirement account called MyRA has been set up by the US treasury to offer those without an employer-sponsored retirement plan a way to more easily save for their golden years.

Nexus standards are being clarified or lowered

Different states have different standards for what constitutes a ‘nexus point’ – the point where a business has enough of a physical presence within a state that they should collect sales tax. 2014 was rife with nexus-related controversies, with Amazon fighting tooth and nail to keep from having to collect sales tax in the states it ships to. Because of this, a few states have either clarified or lowered their nexus point. In New York, any business doing more than $1 Million in sales to New York customers now has to collect sales tax for the state. Last year Texas forced a Utah-based computer and digital program firm to pay 8-years of sales tax after the comptroller proved ‘sufficient contact with, or activity with, the state.’ Nexus laws are broad, and are moving targets, so if you do a significant amount of sales within an outside state, meet with your accountant to ensure you’re meeting any tax-collection requirements. Even an act as innocuous as web-based advertising could be enough to establish nexus in some states.

Health insurance restrictions are harsher

The penalties for not having health insurance are set to increase in 2015. Whereas last year the penalty was the greater of either $95 or 1% of your total income, this year it has been pinned at the greater of $325 or 2% of total income. Further, as of 2015, any employer with fifty or more full-time employees must offer coverage to the company’s employees, and their dependents. If at least one full-time employee receives premium assistance after purchasing health-care on the open exchange, the employer will have to make an Employer Shared Responsibility payment.

Some deductions and credits were extended

Congress once again waited until the eleventh hour to extend over 50 tax breaks that individual filers and small businesses have enjoyed over the last few years. People are again allowed to deduct state and local sales tax, rather than just state and local income tax. Research and new market credits were approved through 2014, as were the 50% bonus depreciation and the $500,000 Section 179 limit. Now there is no telling whether or not any of these breaks will be extended through 2015, so if you can take advantage of them when filing 2014’s return, make sure you do.

2015 shouldn’t see to many radical changes to tax and business law. But it’s important to know what has, and what could, change – otherwise you might find yourself with some serious fines. As always, I strongly recommend you meet with your accountant or another tax professional to review your records from 2014, and to make sure you’ve paid what the IRS and state agencies expect. Then you can start focusing on making 2015 one of your business’s best years.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney Headshot

As CEO of MyCorporation Business Services, Inc. (MyCorporation.com), Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.

Ms. Sweeney received her JD & MBA degrees from Pepperdine University. She is active in the community and loves working with students and aspiring entrepreneurs. She serves on the Board of Regents at California Lutheran University and is a founding member of Partners of Pepperdine. Deborah has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in the areas of corporate and intellectual property law. Ms. Sweeney is also well-recognized for her written work online as a contributing writer with top business and entrepreneurial blogging sites.  She is a regular contributor on Forbes, American Express, Social Media Today, and BlogHer among many others.

In her ‘free’ time, Deborah enjoys spending time with her husband and two sons, Benjamin (8) and Christopher (6). Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Follow her on Twitter @deborahsweeney and @mycorporation.

The 3 B’s You Need to Start Your Business the Right Way by @RachRodgersEsq

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Woman in her workspaceby Rachel Rodgers | Featured Contributor

So its been a year or two (or three) since you started your business but you still haven’t done some of the key housekeeping required to give your company a solid foundation from which to grow, have you?

I know, I know. Its scary, confusing and you’ve been doing okay ignoring it, right? How long do you think that’s gonna work out for ya? Not long, my friend!

The fact of the matter is that “most women-owned businesses are not able to grow their businesses past $50,000 in annual gross revenue.” The main reasons for this are that women often do not have access to financing and that women business owners see themselves as “chief multi-tasker” instead of Chief Executive Officer.

Setting your business up the right way is the first step (of many) in creating a highly profitable enterprise that enables you to obtain financing (should you ever need it) and simplify managing the business so you can focus on growing.

So here are the 3 essential tasks you need to implement right away:

The first B is for Business Entity. Whether or not you’ve formally formed a business entity, you do have one. Sole proprietorships spring into being, without filing any legal documents, the moment you start selling something. General partnerships also spring into being when one or more persons begin working on a business together. There are a myriad of pluses and minuses attached to each business entity which may include: increased or lowered taxes, shielding of your personal assets from creditors and even your partner’s ability to acquire debt in your name. This is not something that a quick visit to a legal document prep website can fix. You need to consult with your attorney and accountant to determine which entity is the best fit for you and your business. (What’s that you say? You don’t have an attorney, yet? Well, now is the time to get one, sister! Call up your entrepreneur friends a get a referral stat!)

Even if you formed a business entity back when you started your company, such as an LLC or S-Corp, if you have hired employees, seen a significant increase in revenue or experienced other major changes in your business since then, it’s time to reconsider your business structure. Having the wrong business entity can mean paying more taxes and having less protection for your personal assets.

The second B is for Bookkeeping. This one is a hard lesson I had to learn. I used an excel spreadsheet to track my business expenses and income for most of the first year. I dabbled with one or two software systems, none of which seemed to really work for me.

Eventually, I broke down and implemented Outright accounting software in my business. This is something I definitely wish I had done from day 1. Of course, on day 1, I thought it would be a while before I obtained more clients than I could comfortably manage in my spreadsheet but it happened sooner than I expected. I want to spare you the hell I experienced when I had to enter an entire year’s worth of expenses and income into my accounting software. That is not what you want to spend your weekend doing!

Spend the few bucks it takes to get good accounting software now — there are many options such as Less Accounting, Xero and Wave. Trust me, you’ll thank me later. Or even better? Hire a bookkeeper to manage your books — it can be very cost effective. There are virtual bookkeepers who can manage the books of a low volume business for under $100 per month.

Peter Drucker said, “What gets measured, gets managed” and its so true. When you are paying attention to where your money is coming from and going to, you can manage your business better and make sure the money continues to flow.

Plus, you know what’s more expensive than accounting? Forensic accounting.

And from a legal perspective, keeping good records is essential to protecting yourself from vendors, clients, the IRS and others with whom legal issues may arise.

The third B is for Business Bank Accounts. Bookkeeping becomes much harder when you don’t have a business account and you’re commingling funds from personal accounts into the business.

You need to set up an account solely for business income and expenses. This is not only good for managing business finances and bookkeeping but from a legal perspective, commingling funds between a personal account and a business account is a surefire way to lose the liability protection from any business entity you have created. This is often referred to as piercing the corporate veil.

Piercing the corporate veil happens when courts find that a business entity and its owner are not actually two separate entities but one in the same because of the way the business is managed. This means that business creditors can come after your personal assets. Not good. That defeats the whole purpose of having a business entity such as an LLC or S-Corp.

So whether you’re just getting started with your business or have decided that 2014 is the year you get your bases covered, these 3 B’s are where to begin.

Disclaimer: This article is a resource guide for educational and informational purposes only and should not take the place of hiring an attorney. No information in this article creates an attorney-client relationship between the reader and the author.

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Rachel Rodgers – Intellectual Property Strategy & Legal Counsel for Digital Entrepreneurs

Rachel Rodgers

Rachel Rodgers is the intellectual property and business lawyer for digital entrepreneurs. Her one-of-a-kind practice, Rachel Rodgers Law Office, is run entirely online making her services accessible and convenient for tech startups, online-based businesses and thought leaders. Her secure online law office was one of the first of its kind and has filled a void among entrepreneurs in need of savvy legal counsel without breaking the bank or compromising excellent customer service. Rachel and her practice have been featured in Fast Company, MSNBC, The Washington Post, Forbes and various other media outlets and publications.

Rachel co-wrote the most entertaining business law guide for entrepreneurs called Small Business Bodyguard: Cover Your Bases, Cover Your Assets, Cover Your Ass. It has been called “fun and engaging” by New York Times bestselling author Chris Brogan.

Prior to forming her law practice, Rachel served as Judicial Law Clerk to the Honorable James A. Farber in New Jersey Superior Court. Before law school, Rachel worked for non-profits in New York, at a premier lobbying firm in Washington, D.C. and on Capitol Hill in the Senate office of Hillary Rodham Clinton.

At home, Rachel can be found baking in the kitchen, running after her two-year-old daughter, feeding her infant son (because who knew such a small person could eat so much?!), hanging out with her hubby, or planning her next trip to France, her absolute favorite place on the face of the planet.

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