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There aren’t too many things businesses can do after a year ends to reduce tax liability for that year. However, you might be able to pay employee bonuses for 2018 in 2019 and still deduct them on your 2018 tax return. In certain circumstances, businesses can deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year (by March 15 for a calendar-year company).

Basic requirements

First, only accrual-basis taxpayers can take advantage of the 2½ month rule. Cash-basis taxpayers must deduct bonuses in the year they’re paid, regardless of when they’re earned.

Second, even for accrual-basis taxpayers, the 2½ month rule isn’t automatic. The bonuses can be deducted on the tax return for the year they’re earned only if the business’s bonus liability was fixed by the end of the year.

Passing the test

For accrual-basis taxpayers, a liability (such as a bonus) is deductible when it is incurred. To determine this, the IRS applies the “all-events test.” Under this test, a liability is incurred when:

All events have occurred that establish the taxpayer’s liability,
The amount of the liability can be determined with reasonable accuracy, and
Economic performance has occurred.

Generally, the last requirement isn’t an issue; it’s satisfied when an employee performs the services required to earn a bonus. But the first two requirements can delay your tax deduction until the year of payment, depending on how your bonus plan is designed.

For example, many bonus plans require an employee to still be an employee on the payment date to receive the bonus. Even when the amount of each employee’s bonus is fixed at the end of the tax year, if employees who leave the company before the payment date forfeit their bonuses, the all-events test isn’t satisfied until the payment date. Why? The business’s liability for bonuses isn’t fixed until then.

Diving into a bonus pool

Fortunately, it’s possible to accelerate deductions with a carefully designed bonus pool arrangement. According to the IRS, employers may deduct bonuses in the year they’re earned — even if there’s a risk of forfeiture — as long as any forfeited bonuses are reallocated among the remaining employees in the bonus pool rather than retained by the employer.

Under such a plan, an employer satisfies the all-events test because the aggregate bonus amount is fixed at the end of the year. It doesn’t matter that amounts allocated to specific employees aren’t determined until the payment date.

When you can deduct bonuses

So does your current bonus plan allow you to take 2018 deductions for bonuses paid in early 2019? If you’re not sure, contact us. We can review your situation and determine when you can deduct your bonus payments.

If you’re an accrual taxpayer but don’t qualify to accelerate your bonus deductions this time, we can help you design a bonus plan for 2019 that will allow you to accelerate deductions when you file your 2019 return next year.

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Tax planning is a year-round activity, but there are still some year-end strategies you can use to lower your 2018 tax bill. Here are six last-minute tax moves business owners should consider:

Postpone invoices. If your business uses the cash method of accounting, and it would benefit from deferring income to next year, wait until early 2019 to send invoices. Accrual-basis businesses can defer recognition of certain advance payments for products to be delivered or services to be provided next year.
Prepay expenses. A cash-basis business may be able to reduce its 2018 taxes by prepaying certain expenses — such as lease payments, insurance premiums, utility bills, office supplies and taxes — before the end of the year. Many expenses can be deducted up to 12 months in advance.
Buy equipment. Take advantage of 100% bonus depreciation and Section 179 expensing to deduct the full cost of qualifying equipment or other fixed assets. Under the Tax Cuts and Jobs Act, bonus depreciation, like Sec. 179 expensing, is now available for both new and used assets. Keep in mind that, to deduct the expense on your 2018 return, the assets must be placed in service — not just purchased — by the end of the year.
Use credit cards. What if you’d like to prepay expenses or buy equipment before the end of the year, but you don’t have the cash? Consider using your business credit card. Generally, expenses paid by credit card are deductible when charged, even if you don’t pay the credit card bill until next year.
Use credit cards. What if you’d like to prepay expenses or buy equipment before the end of the year, but you don’t have the cash? Consider using your business credit card. Generally, expenses paid by credit card are deductible when charged, even if you don’t pay the credit card bill until next year.
Contribute to retirement plans. If you’re self-employed or own a pass-through business — such as a partnership, limited liability company or S corporation — one of the best ways to reduce your 2018 tax bill is to increase deductible contributions to retirement plans. Usually, these contributions must be made by year-end. But certain plans — such as SEP IRAs — allow your business to make 2018 contributions up until its tax return due date (including extensions).
Qualify for the pass-through deduction. If your business is a sole proprietorship or pass-through entity, you may qualify for the new pass-through deduction of up to 20% of qualified business income. But if your taxable income exceeds $157,500 ($315,000 for joint filers), certain limitations kick in that can reduce or even eliminate the deduction. One way to avoid these limitations is to reduce your income below the threshold — for example, by having your business increase its retirement plan contributions.

Most of these strategies are subject to various limitations and restrictions beyond what we’ve covered here, so please consult us before you implement them. We can also offer more ideas for reducing your taxes this year and next.

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As the year winds to a close, most businesses see employees taking a lot of vacation time. After all, it’s the holiday season, and workers want to enjoy it. Some businesses, however, find themselves particularly short-staffed in December because they don’t allow unused paid time off (PTO) to be rolled over to the new year, or they allow only very limited rollovers.

There are good business reasons to limit PTO rollovers. Fortunately, there’s a way to reduce the year-end PTO vortex without having to allow unlimited rollovers: a PTO contribution arrangement.

Retirement saving with a twist

A PTO contribution arrangement allows employees with unused vacation hours to elect to convert them to retirement plan contributions. If the plan has a 401(k) feature, it can treat these amounts as a pretax benefit, similar to normal employee deferrals. Alternatively, the plan can treat the amounts as employer profit sharing, converting excess PTO amounts to employer contributions.

This can be appealing to any employees who end up with a lot of PTO left at the end of the year and don’t want to lose it. But it can be especially valued by employees who are concerned about their level of retirement saving or who simply value money more than time off of work.

Good for the business

Of course the biggest benefit to your business may simply be that it’s easier to ensure you have sufficient staffing at the end of the year. But you could reap that same benefit by allowing PTO rollovers (or, if you allow some rollover, increasing the rollover limit).

A PTO contribution arrangement can be a better option than increasing the number of days employees can roll over. Why? Larger rollover limits can result in employees building up large balances that create a significant liability on your books.

Also, a PTO contribution arrangement might help you improve recruiting and retention, because of its appeal to employees who want to save more for retirement or don’t care about having a lot of PTO.

Set-up is simple

To offer a PTO contribution arrangement, simply amend your retirement plan. However, you must still follow the plan document’s eligibility, vesting, rollover, distribution and loan terms. Additional rules apply.

Have questions about PTO contribution arrangements? Contact us. We can help you assess whether such an arrangement would make sense for your business.

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The holiday season is a great time for businesses to show their appreciation for employees and customers by giving them gifts or hosting holiday parties. Before you begin shopping or sending out invitations, though, it’s a good idea to find out whether the expense is tax deductible and whether it’s taxable to the recipient. Here’s a brief review of the rules.

Gifts to customers

When you make gifts to customers, the gifts are deductible up to $25 per recipient per year. For purposes of the $25 limit, you need not include “incidental” costs that don’t substantially add to the gift’s value, such as engraving, gift-wrapping, packaging or shipping. Also excluded from the $25 limit is branded marketing collateral — such as pens or stress balls imprinted with your company’s name and logo — provided they’re widely distributed and cost less than $4.

The $25 limit is for gifts to individuals. There’s no set limit on gifts to a company (a gift basket for all to share, for example) as long as they’re “reasonable.”

Gifts to employees

Generally anything of value that you transfer to an employee is included in the employee’s taxable income (and, therefore, subject to income and payroll taxes) and deductible by you. But there’s an exception for noncash gifts that constitute “de minimis fringe benefits.”

These are items so small in value and given so infrequently that it would be administratively impracticable to account for them. Common examples include holiday turkeys or hams, gift baskets, occasional sports or theater tickets (but not season tickets), and other low-cost merchandise.

De minimis fringe benefits are not included in an employee’s taxable income yet are still deductible by you. Unlike gifts to customers, there’s no specific dollar threshold for de minimis gifts. However, many businesses use an informal cutoff of $75.

Keep in mind that cash gifts — as well as cash equivalents, such as gift cards — are included in an employee’s income and subject to payroll tax withholding regardless of how small and infrequent.

Holiday parties

The Tax Cuts and Jobs Act reduced certain deductions for business-related meals and eliminated the deduction for business entertainment altogether. There’s an exception, however, for certain recreational activities, including holiday parties.

Holiday parties are fully deductible (and excludible from recipients’ income) provided they’re primarily for the benefit of non-highly-compensated employees and their families. If customers also attend, holiday parties may be partially deductible.

Gifts that give back

If you’re thinking about giving holiday gifts to employees or customers or throwing a holiday party, contact us. With a little tax planning, you may receive a gift of your own from Uncle Sam.

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The marketing playbook is being rewritten by the explosion of direct to consumer businesses, like Warby Parker, who have inspired expansion in this new market trend.

Warby encouraged customers to post photos of themselves wearing their trial frames on social media and get style advice from friends, which then gets liked, shared and commented on. Warby Parker found a veritable army of brand advocates lining up to share content on their behalf.

Welcome beauty brand Glossier, whose President and COO, Henry Davis, “doesn’t go by the rules.” The old rules.

Over the past four years, Glossier has carved out a niche in the billion-dollar global beauty market with an e-commerce operation selling its range of 26 skincare and make-up products and retail stores in key locations across the US.

“The company is considered innovative,” said Davis, “because it owns the bottom part of the sales funnel.” Unlike traditional beauty brands that rely on third party sellers, it doesn’t rely on any other players to make the sale to customers on its behalf.

The importance of influencer marketing has steadily increased over the past few years in online markets. In a new report out of the UK, based on the responses of 385 marketing specialists, 80% of respondents agree or strongly agree that influencers are critical to engaging younger consumers and encouraging them to buy.

Still, rather than working with influencers, Glossier reports having much more success engaging its hardcore fans directly, in the style of Warby Parker. In its most successful launch to date the brand deliberately did not send any products to influencers. Instead the company chose to gift the products to 500 super-fans who had bought the most products or were the most engaged.

Engagement is the key factor in developing the essential one-to-one relationships that fuel direct to consumer brands’ loyal customer base. Brands and companies of all sizes can learn from upstarts changing the game. By pivoting their marketing strategy and building sharing seamlessly into their products, controlling brand content and taking ownership of critical first-party data, any brand can learn to thrive in today’s digitized world.
“Customer is at the heart of product development, customer is at the heart of strategy and customer is at the heart of the sale,” Davis says, and to the brands that can’t keep up, “good riddance.”

To start up or stay relevant… Roth&Co.

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Currently operating across more than 280 locations in over 70 cities worldwide, WeWork is the largest private-sector occupier of office space in central London and the second largest in Manhattan. It is poised to become the world’s second most valuable startup after Uber following a funding round in June valuing the business at $35 billion.

The co-working phenomenon began in the wake of the 2008 recession as people found themselves out of work or pursuing freelance opportunities, but the sector has risen to prominence thanks in large part to the high-profile success of property startups like WeWork.

Sales at WeWork more than doubled in the first quarter of 2018 to $342 million according to reports in the Financial Times, with gross earnings rocketing 137% in three months to the end of March.
The business model is tricky. Co-working spaces are low margin businesses that don’t really have economies of scale. So how we can we understand the economics for success in the sector?

Here’s a few options:
• Become non-profit, and profit isn’t important anymore (but subsidies are)
• Increase your margins, and make more money
• Vertically integrate, and make more money

Co-working spaces can be a function for the public good. Like libraries, street lighting and public transportation.
Empty spaces in areas in need of economic development could be bought up and inexpensively renovated into basic co-working spaces. This could have economic benefits. Imagine small town talent working remotely for a company in a big city. They wouldn’t have to live in the city, and they could spend their salary locally.

Another option is to simply make your co-working space a higher margin business by upselling with complementary services.
Coffee, lunch, mail and shipping services, in-house legal or personal assistants… The more you ascertain your clients’ needs, the better.

Of course, most co-working customers are quite frugal. For real growth, you may have to go where the money is.
With more regularity than ever, large corporations, established tech companies and other businesses offer remote work either as a perk, to lure great talent, or to inspire creativity amongst a team. Why not set up satellite offices? Or make offers to remote companies that gather for team building or meetings.

Capturing a share of that market may lead the truly entrepreneurial to vertical integration. After all, any products or services you can help supply to your customers is now potential for more coverage. Sleep space, leisure activities, grooming/beauty, fine dining, shopping… the possibilities are only limited by your imagination.

With the world watching, co-working spaces are certain to further evolve as they grow, making attention to detail more crucial than ever. At Roth&Co, focusing on the details is what they do best.

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Business owners are constantly bombarded with terminology and buzzwords. Although you probably feel a need to keep up with the latest trends, you also may find that many of these ideas induce more anxiety than relief. One example is change management.

This term is used to describe the philosophies and processes an organization uses to manage change. Putting change management into practice in your company may seem scary. What is our philosophy toward change? How should we implement change for best results? Can’t we just avoid all this and let the chips fall where they may?

About that last question — yes, you could. But businesses that proactively manage change tend to suffer far fewer negative consequences from business transformations large and small. Here are some ways to implement change management slowly and, in doing so, make it a little less scary.

Set the tone

When a company creates a positive culture, change is easier. Engaged, well-supported employees feel connected to your mission and are more likely to buy in to transformative ideas. So, the best place to start laying the foundation for successful change management is in the HR department.

When hiring, look for candidates who are open to new ideas and flexible in their approaches to a position. As you “on board” new employees, talk about the latest developments at your company and the possibility of future transformation. From there, encourage openness to change in performance reviews.

Strive for solutions

The most obvious time to seek change is when something goes wrong. Unfortunately, this is also when a company can turn on itself. Fingers start pointing and the possibility of positive change begins to drift further and further away as conflicts play out.

Among the core principles of change management is to view every problem as an opportunity to grow. When you’ve formally discussed this concept among your managers and introduced it to your employees, you’ll be in a better position to avoid a destructive reaction to setbacks and, instead, use them to improve your organization.

Change from the top down

It’s not uncommon for business owners to implement change via a “bottom-up” approach. Doing so involves ordering lower-level employees to modify how they do something and then growing frustrated when resistance arises.

For this reason, another important principle of change management is transforming a business from the top down. Every change, no matter how big or small, needs to originate with leadership and then gradually move downward through the organizational chart through effective communication.

Get started

As the cliché goes, change is scary — and change management can be even more so. But many of the principles of the concept are likely familiar to you. In fact, your company may already be doing a variety of things to make change management far less daunting. Contact us to discuss this and other business-improvement ideas.

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In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance

Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health insurance. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but may be deductible on a limited basis as an itemized deduction.

Disability insurance. Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.

Long-term care insurance. Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.

Life insurance. Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.

Other types of tax-advantaged benefits

Insurance isn’t the only type of tax-free benefit you can provide ¬― but the tax treatment of certain benefits has changed under the Tax Cuts and Jobs Act:

Dependent care assistance. You can provide employees with tax-free dependent care assistance up to $5,000 for 2018 though a dependent care Flexible Spending Account (FSA), also known as a Dependent Care Assistance Program (DCAP).

Adoption assistance. For employees who’re adopting children, you can offer an employee adoption assistance program. Employees can exclude from their taxable income up to $13,810 of adoption benefits in 2018.

Educational assistance. You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance and qualified scholarships.

Moving expense reimbursement. Before the TCJA, if you reimbursed employees for qualifying job-related moving expenses, the reimbursement could be excluded from the employee’s income. The TCJA suspends this break for 2018 through 2025. However, such reimbursements may still be deductible by your business.

Transportation benefits. Qualified employee transportation fringe benefits, such as parking allowances, mass transit passes and van pooling, are tax-free to recipient employees. However, the TCJA suspends through 2025 the business deduction for providing such benefits. It also suspends the tax-free benefit of up to $20 a month for bicycle commuting.

Varying tax treatment

As you can see, the tax treatment of fringe benefits varies. Contact us for more information.

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What matters anywhere in a company, matters everywhere in a company. To accept this truth is to understand the vital importance of communication. Of course the biggest problem we face in communicating is the illusion that it has taken place.

We won’t have a business without being utterly dedicated to serving our customers’ needs, so Marketing Strategy is about communicating with customers. We also need skilled, committed and loyal staff, so HR Strategy is all about communicating with employees. We still need to consider our most important suppliers who are usually just as important to a business as its customers, so Purchasing Strategy must be about more communicating. And even that is still not the whole story.

Yet a recent survey of 975 senior leaders by Deloitte on extended enterprise risk management found that many organizations continue to struggle to fully understand their supply chains. Stepping up to the challenge “would elevate their position in the market by unleashing with confidence the reach, expertise and relationships that third parties bring.” Clearly there’s much to gain, but the expectation seems daunting, especially when we take in to account the nature of business, human nature and the number of Type A personalities in the boardroom.

To communicate for success there are some basic rules that the most successful leaders ascribe to, and it starts with listening. Your version of reality is as good as anyone else’s. We all have a perspective and none is absolute. The opposite of speaking isn’t waiting for your turn to showcase your brilliance. The goal is not to be right about our individual opinions, but to make sure we value differing opinions. Clarity develops when we thoughtfully consider all aspects. We forge connections by listening and learning from each other.

For any opinion to be of value, though, it must be honest and real. It takes work to make space for the hard truths, to allow ourselves to know what we don’t want to know. Most of us come to the table with a basket of undiscussables – unpack those and you begin to examine reality, solve real problems and lead a creative and passionate team.

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If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help you attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2018.

The basics

SIMPLE stands for “savings incentive match plan for employees.” As the name implies, these plans are simple to set up and administer. Unlike 401(k) plans, SIMPLE IRAs don’t require annual filings or discrimination testing.

SIMPLE IRAs are available to businesses with 100 or fewer employees. Employers must contribute and employees have the option to contribute. The contributions are pretax, and accounts can grow tax-deferred like a traditional IRA or 401(k) plan, with distributions taxed when taken in retirement.

As the employer, you can choose from two contribution options:

1. Make a “nonelective” contribution equal to 2% of compensation for all eligible employees. You must make the contribution regardless of whether the employee contributes. This applies to compensation up to the annual limit of $275,000 for 2018 (annually adjusted for inflation).

2. Match employee contributions up to 3% of compensation. Here, you contribute only if the employee contributes. This isn’t subject to the annual compensation limit.

Employees are immediately 100% vested in all SIMPLE IRA contributions.

Employee contribution limits

Any employee who has compensation of at least $5,000 in any prior two years, and is reasonably expected to earn $5,000 in the current year, can elect to have a percentage of compensation put into a SIMPLE IRA.

SIMPLE IRAs offer greater income deferral opportunities than ordinary IRAs, but lower limits than 401(k)s. An employee may contribute up to $12,500 to a SIMPLE IRA in 2018. Employees age 50 or older can also make a catch-up contribution of up to $3,000. This compares to $5,500 and $1,000, respectively, for ordinary IRAs, and to $18,500 and $6,000 for 401(k)s. (Some or all of these limits may increase for 2019 under annual cost-of-living adjustments.)

You’ve got options

A SIMPLE IRA might be a good choice for your small business, but it isn’t the only option. The more-complex 401(k) plan we’ve already mentioned is one alternative. Some others are a Simplified Employee Pension (SEP) and a defined-benefit pension plan. These two plans don’t allow employee contributions and have other pluses and minuses. Contact us to learn more about a SIMPLE IRA or to hear about other retirement plan alternatives for your business.

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Late summer and early fall, when so many families have members returning to educational facilities of all shapes and sizes, is also a good time for businesses to creatively step up their business development efforts, whether it’s launching new marketing initiatives, developing future employees or simply generating goodwill in the community. Here are a few examples that might inspire you.

Becoming a sponsor

A real estate agency sponsors a local middle school’s parent-teacher organization (PTO). The sponsorship includes ads in the school’s weekly e-newsletter and in welcome packets for new PTO members. Individual agents in the group also conduct monthly gift card drawings for parents and teachers who follow them on Facebook.

The agency hopes parents and teachers will remember its agents’ names and faces when they’re ready to buy or sell their homes.

Planting the seeds of STEM

An engineering firm donates old computers and printers to an elementary school that serves economically disadvantaged students. The equipment will be used in the school district’s K-12 program to get kids interested in careers in science, technology, engineering and math (STEM) disciplines.

At back-to-school time, a firm rep gives presentations at the schools and hands out literature. Then, in the spring, the company will mentor a select group of high school seniors who are planning to pursue engineering degrees in college.

Participating in STEM programs fosters corporate charity and goodwill. It can also pay back over the long run: When the firm’s HR department is looking for skilled talent, kids who benefited from the firm’s STEM efforts may return as loyal, full-time employees.

Launching an apprenticeship program

The back-to-school season motivates a high-tech manufacturer to partner with a vocational program at the local community college to offer registered apprenticeships through a state apprenticeship agency. In exchange for working for the manufacturer, students will receive college credits, on-the-job training and weekly paychecks. Their hourly wages will increase as they demonstrate proficiency.

The company hopes to hire at least some of these apprentices to fill full-time positions in the coming year or two.

Finding the right fit

Whether schools near you are already in session or will open soon, it’s not too late to think about how your business can benefit. Sit down with your management team and brainstorm ways to leverage relationships with local schools to boost revenues, give back to your community and add long-term value. We can provide other ideas and help you assess return on investment.

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The S corporation business structure offers many advantages, including limited liability for owners and no double taxation (at least at the federal level). But not all businesses are eligible – and, with the new 21% flat income tax rate that now applies to C corporations, S corps may not be quite as attractive as they once were.

Tax comparison

The primary reason for electing S status is the combination of the limited liability of a corporation and the ability to pass corporate income, losses, deductions and credits through to shareholders. In other words, S corps generally avoid double taxation of corporate income — once at the corporate level and again when distributed to the shareholder. Instead, S corp tax items pass through to the shareholders’ personal returns and the shareholders pay tax at their individual income tax rates.

But now that the C corp rate is only 21% and the top rate on qualified dividends remains at 20%, while the top individual rate is 37%, double taxation might be less of a concern. On the other hand, S corp owners may be able to take advantage of the new qualified business income (QBI) deduction, which can be equal to as much as 20% of QBI.

You have to run the numbers with your tax advisor, factoring in state taxes, too, to determine which structure will be the most tax efficient for you and your business.

S eligibility requirements

If S corp status makes tax sense for your business, you need to make sure you qualify – and stay qualified. To be eligible to elect to be an S corp or to convert to S status, your business must:

Be a domestic corporation and have only one class of stock,
Have no more than 100 shareholders, and
Have only “allowable” shareholders, including individuals, certain trusts and estates. Shareholders can’t include partnerships, corporations and nonresident alien shareholders.

In addition, certain businesses are ineligible, such as insurance companies.

Reasonable compensation

Another important consideration when electing S status is shareholder compensation. The IRS is on the lookout for S corps that pay shareholder-employees an unreasonably low salary to avoid paying Social Security and Medicare taxes and then make distributions that aren’t subject to payroll taxes.

Compensation paid to a shareholder should be reasonable considering what a nonowner would be paid for a comparable position. If a shareholder’s compensation doesn’t reflect the fair market value of the services he or she provides, the IRS may reclassify a portion of distributions as unpaid wages. The company will then owe payroll taxes, interest and penalties on the reclassified wages.

Pros and cons

S corp status isn’t the best option for every business. To ensure that you’ve considered all the pros and cons, contact us. Assessing the tax differences can be tricky — especially with the tax law changes going into effect this year.

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August is back-to-school time across the country. Whether the school buses are already rumbling down your block, or will be soon, the start of the school year brings marketing opportunities for savvy business owners. Here are some examples of ways companies can promote themselves.

A virtual “brag book”
A creative agency posts on social media a vibrant photographic slideshow of employees and their children on the first day of school. It gives the parents an opportunity to show off their kids — and creates a buzz on the agency’s Facebook page.

The brag book’s innovative design also demonstrates the agency’s creative skills in a fun, personal way. And it helps attract talent by showcasing the company’s fun, family-friendly atmosphere.

Promos for parents
In August, many parents are in the midst of desperately trying to complete checklists of required school supply purchases. To help them cope, a home remodeling / landscape business offers free school supplies with every estimate completed during the month.

Customers receive colorful bags containing relatively inexpensive items such as pencils, pens, pads of paper and glue sticks all stamped with the company’s logo. And even though every estimate won’t result in a new job, completing more estimates helps create an uptick in fall projects.

Freebies for students
During the first week of school, a suburban burger joint offers students a free milkshake with the purchase of a burger. Kids love milkshakes and, because the freebie is associated with a purchase, the business preserves its profitability.

Meanwhile, the promotion brings entire families into the restaurant — widening the customer base and adding revenue. The campaign creates goodwill in the community by nurturing students’ enthusiasm for the beginning of the school year, too.

Determine what’s right for you
Obviously, these examples are industry-specific. But we hope you find them informative and inspirational. We can help you leverage smart marketing moves to strengthen profitability and add long-term value to your business.

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Tax reform has been a major topic of discussion in Washington, but it’s still unclear exactly what such legislation will include and whether it will be signed into law this year. However, the last major tax legislation that was signed into law — back in December of 2015 — still has a significant impact on tax planning for businesses. Let’s look at three midyear tax strategies inspired by the Protecting Americans from Tax Hikes (PATH) Act:

1. Buy equipment. The PATH Act preserved both the generous limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks generally apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2017, the maximum Sec. 179 deduction is $510,000, subject to a $2,030,000 phaseout threshold. Without the PATH Act, the 2017 limits would have been $25,000 and $200,000, respectively. Higher limits are now permanent and subject to inflation indexing.

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

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

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

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

Generally, the maximum Work Opportunity credit is $2,400 per worker. But it’s higher for workers from certain target groups, such as disabled veterans.

One last thing to keep in mind is that, in terms of tax breaks, “permanent” only means that there’s no scheduled expiration date. Congress could still pass legislation that changes or eliminates “permanent” breaks. But it’s unlikely any of the breaks discussed here would be eliminated or reduced for 2017. To keep up to date on tax law changes and get a jump start on your 2017 tax planning, contact us.

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Many business owners buy accounting software and, even if the installation goes well, eventually grow frustrated when they don’t get the return on investment they’d expected. There’s a simple reason for this: Stuff changes.
Technological improvements are occurring at a breakneck speed. So yesterday’s cutting-edge system can quickly become today’s sluggishly performing albatross. And this isn’t the only reason to regularly upgrade your accounting software. Here are two more to consider.

1. Cleaning up
You’ve probably heard that old tech adage, “garbage in, garbage out.” The “garbage” referred to is bad data. If inaccurate or garbled information goes into your system, the reports coming out of it will be flawed. And this is a particular danger as software ages.
For example, you may be working off of inaccurate inventory counts or struggling with duplicate vendor entries. On a more serious level, your database may store information that reflects improperly closed quarters or unbalanced accounts because of data entry errors.
A regular implementation of upgraded software should uncover some or, one hopes, all of such problems. You can then clean up the bad data and adjust entries to tighten the accuracy of your accounting records and, thereby, improve your financial reporting.

2. Getting better
Neglecting to regularly upgrade or even replace your accounting software can also put you at risk of missing a major business-improvement opportunity. When implementing a new system, you’ll have the chance to enhance your accounting procedures. You may be able to, for instance, add new code groups that allow you to manage expenses much more efficiently and closely.
Other opportunities for improvement include optimizing your chart of accounts and strengthening your internal controls. Again, to obtain these benefits, you’ll need to take a slow, patient approach to the software implementation and do it often enough to prevent outdated ways of doing things from getting the better of your company.

Choosing the best
These days, every business bigger than a lemonade stand needs the best accounting software it can afford to buy. We can help you set a budget and choose the product that best fits your current needs.

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For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so have its tax collection practices. As recently as 2011, the nation’s largest e-retailer was collecting sales tax in just 5 states, home to 11 percent of the country’s population. Starting next month, when the company begins collection in Hawaii, Idaho, Maine, and New Mexico, it will officially collect every state-level sales tax in the nation on its direct sales.

Despite this progress, the company’s sales tax collection practices are still not comprehensive. It appears that Amazon is not collecting some local-level sales taxes in states such as Alaska, for instance. And Amazon refuses to require sales tax collection by many third-party sellers using its website, meaning that companies with names such as “Buy Tax Free” are using Amazon.com as a way to allow their customers to evade their sales tax responsibilities. Notably, New York Gov. Andrew Cuomo has proposed fixing this problem by requiring “marketplaces” with more than $100 million in annual sales to collect sales taxes on sales made by third-party retailers.

But despite its shortcomings, this expansion in Amazon’s tax collection practices represents a step forward for rational sales tax policy. It is therefore worth taking a look at the variety of factors that led to this reversal.

First, and perhaps most important, is that Amazon’s effort to shorten delivery times caused it to open distribution centers around the country. Whenever a retailer establishes a physical presence in a state, it comes within reach of that state’s sales tax collection laws.

Second, state lawmakers have become increasingly frustrated by the sales tax revenue gap created by e-retail and some have taken matters into their own hands by enacting laws expanding their sales tax collection requirements. The U.S. Supreme Court has placed limits on states’ authority in this area, but creative lawmakers have found ways to encourage some e-retailers to collect nonetheless.

Third and finally, it appears that Amazon’s pivot away from facilitating sales tax evasion may be helpful in building goodwill with lawmakers from whom it is asking for subsidies. Good Jobs First estimates that Amazon could soon surpass Wal-Mart as the largest retail-sector recipient of state and local government aid, meaning that it would have received over $1.2 billion in public subsidies.

While the nature of the debate surrounding Amazon and state and local tax policy may be changing, it’s certainly not coming to an end.

http://www.taxjusticeblog.org/archive/2017/03/amazon_will_collect_every_stat.php#.WNFpGvnyuUk

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Meal, vehicle and travel expenses are common deductions for businesses. But if you don’t properly document these expenses, you could find your deductions denied by the IRS. (more…)

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For small businesses, managing payroll can be one of the most arduous tasks. Adding to the burden earlier this year was adjusting income tax withholding based on the new tables issued by the IRS. (Those tables account for changes under the Tax Cuts and Jobs Act.) But it’s crucial not only to withhold the appropriate taxes — including both income tax and employment taxes — but also to remit them on time to the federal government. (more…)

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For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%. (more…)

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Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. (more…)

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Congratulations! You have finally decided to start your own business.

Or maybe you have been operating as a sole proprietor and have decided it is time to protect your personal assets from those involved with your growing business.

You now face the choice of whether to structure your business as an S corporation (S corp), or a limited liability corporation (LLC).

(more…)

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At this time of year, a summer vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting. (more…)

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Every business owner launches his or her company wanting to be successful. But once you get out there, it usually becomes apparent that you’re not alone. To reach any level of success, you’ve got to be competitive with other similar businesses in your market.

When strategic planning, one important question to regularly ask is: Just how competitive are we anyway? Objectively making this determination entails scrutinizing key factors that affect profitability, including: (more…)

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Now that small businesses and their owners have filed their 2017 income tax returns (or filed for an extension), it’s a good time to review some of the provisions of the Tax Cuts and Jobs Act (TCJA) that may significantly impact their taxes for 2018 and beyond. Generally, the changes apply to tax years beginning after December 31, 2017, and are permanent, unless otherwise noted. (more…)

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Classifying workers as independent contractors — rather than employees — can save businesses money and provide other benefits. But the IRS is on the lookout for businesses that do this improperly to avoid taxes and employee benefit obligations. (more…)

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When it comes to income tax returns, April 15 (actually April 17 this year, because of a weekend and a Washington, D.C., holiday) isn’t the only deadline taxpayers need to think about. The federal income tax filing deadline for calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes is March 15. While this has been the S corporation deadline for a long time, it’s only the second year the partnership deadline has been in March rather than in April. (more…)

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If you purchased qualifying property by December 31, 2017, you may be able to take advantage of Section 179 expensing on your 2017 tax return. You’ll also want to keep this tax break in mind in your property purchase planning, because the Tax Cuts and Jobs Act (TCJA), signed into law this past December, significantly enhances it beginning in 2018. (more…)

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Are you a high-income small-business owner who doesn’t currently have a tax-advantaged retirement plan set up for yourself? A Simplified Employee Pension (SEP) may be just what you need, and now may be a great time to establish one. A SEP has high contribution limits and is simple to set up. Best of all, there’s still time to establish a SEP for 2017 and make contributions to it that you can deduct on your 2017 income tax return. (more…)

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With bonus depreciation, a business can recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Tax Cuts and Jobs Act (TCJA), signed into law in December, enhances bonus depreciation. (more…)

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Tax credits reduce tax liability dollar-for-dollar, potentially making them more valuable than deductions, which reduce only the amount of income subject to tax. Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. Two still-available tax credits are especially for small businesses that provide certain employee benefits. (more…)

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For many years, owners of small and midsize businesses looked at outsourcing much like some homeowners viewed hiring a cleaning person. That is, they saw it as a luxury. But no more — in today’s increasingly specialized economy, outsourcing has become a common way to cut costs and obtain expert assistance.
(more…)

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Although the drop of the corporate tax rate from a top rate of 35% to a flat rate of 21% may be one of the most talked about provisions of the Tax Cuts and Jobs Act (TCJA), C corporations aren’t the only type of entity significantly benefiting from the new law. Owners of noncorporate “pass-through” entities may see some major — albeit temporary — relief in the form of a new deduction for a portion of qualified business income (QBI).
(more…)

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It’s important to resist the temptation to rely on gut instinct or take shortcuts when budgeting for 2018. Creating a solid budget that’s based on the three components of your company’s financial statements will help you manage profits, cash flow and debt.
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Many people scoff at New Year’s resolutions. It’s no mystery why — these self-directed promises to visit the gym regularly or read a book a month tend to quickly fade once the unavoidable busyness of life sets in.
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One way to reduce your 2017 tax bill is to buy a business vehicle before year end. But don’t make a purchase without first looking at what your 2017 deduction would be and whether tax reform legislation could affect the tax benefit of a 2017 vs. 2018 purchase.
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The artificial intelligence (AI) revolution isn’t coming — it’s here. While AI’s potential for your company might not seem immediately obvious, this technology is capable of helping businesses of all shapes and sizes “get smart.”
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Husbands everywhere agree: for maximum attention, nothing beats a good mistake. But nothing perhaps illustrates that better than the response to the Coca Cola company’s stunning announcement, in 1985, that they had reformulated their popular product and relegated the beloved Coke recipe to a locked vault forever…until they pulled it out again – quickly! The whole fiasco lasted 3 months and is considered one of the greatest marketing blunders of all time. The memory still reverberates 25 years later, and its anniversary was celebrated this month with business and marketing publications everywhere rehashing the Coca Cola co.’s epic fail during the cola wars.

(more…)

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With so much data flying around these days, it’s easy for a company of any size to get overwhelmed. If something important falls through the cracks, say a contract renewal or outstanding bill, your financial standing and reputation could suffer. Here are four ways to get — and keep — your business data in order:

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As we head toward year end, your company may be reviewing its business strategy for 2017 or devising plans for 2018. As you do so, be sure to give some attention to the prices you’re asking for your existing products and services, as well as those you plan to launch in the near future.

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If you own a profitable, unincorporated business with your spouse, you probably find the high self-employment (SE) tax bills burdensome. An unincorporated business in which both spouses are active is typically treated by the IRS as a partnership owned 50/50 by the spouses. (For simplicity, when we refer to “partnerships,” we’ll include in our definition limited liability companies that are treated as partnerships for federal tax purposes.)

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“We love our customers!” Every business owner says it. But all customers aren’t created equal, and it’s in your strategic interest to know which customers are really strengthening your bottom line and by how much.

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“Sorry, we don’t carry that item.” Or perhaps, “No, that’s not part of our service package.” How many times a year do your salespeople utter these words or ones like them? The specific number is critical because, if you don’t know it, you could be losing out on profit potential.

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Just about every business intends to provide world-class customer service. And though many claim their customer service is exceptional, very few can back up that assertion. After all, once a company has established a baseline level of success in interacting with customers, it’s not easy to get to that next level of truly great service. But, fear not, there are ways to elevate your game and, ultimately, strengthen your bottom line in the process.

Start at the top
As is the case for many things in business, success starts at the top. Encourage your fellow owners (if any) and management team to regularly serve customers. Doing so cements customer relationships and communicates to employees that serving others is important and rewarding. Your involvement shows that customer service is the source of your company’s ultimate triumph.

Moving down the organizational chart, cultivate customer-service heroes. Publish articles about your customer service achievements in your company’s newsletter or post them on your website. Champion these heroes in meetings. Public praise turns ordinary employees into stars and encourages future service excellence.

Just make sure to empower all employees to make customer-service decisions. Don’t talk of catering to customers unless your staff can really take the initiative to meet your customers’ needs.

Create a system
Like everyone in today’s data-driven world, customers want information. So strive to provide immediate feedback to customers with a highly visible response system. This will let customers know that their input matters and you’ll reward them for speaking up.

The size and shape of this system will depend on the size, shape and specialty of the company itself. But it should likely encompass the right combination of instant, electronic responses to customer inquires along with phone calls and, where appropriate, face-to-face interactions that reinforce how much you value their business.

Give them a thrill
Consistently great customer service can be an elusive goal. You may succeed for months at a time only to suffer setbacks. Don’t get discouraged. Our firm can help you build a profitable company that excels at thrilling your customers.

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Some business owners make major decisions by relying on gut instinct. But investments made on a “hunch” often fall short of management’s expectations.

In the broadest sense, you’re really trying to answer a simple question: If my company buys a given asset, will the asset’s benefits be greater than its cost? The good news is that there are ways — using financial metrics — to obtain an answer.

Accounting payback

Perhaps the most common and basic way to evaluate investment decisions is with a calculation called “accounting payback.” For example, a piece of equipment that costs $100,000 and generates an additional gross margin of $25,000 per year has an accounting payback period of four years ($100,000 divided by $25,000).

But this oversimplified metric ignores a key ingredient in the decision-making process: the time value of money. And accounting payback can be harder to calculate when cash flows vary over time.

Better metrics

Discounted cash flow metrics solve these shortcomings. These are often applied by business appraisers. But they can help you evaluate investment decisions as well. Examples include:

Net present value (NPV). This measures how much value a capital investment adds to the business. To estimate NPV, a financial expert forecasts how much cash inflow and outflow an asset will generate over time. Then he or she discounts each period’s expected net cash flows to its current market value, using the company’s cost of capital or a rate commensurate with the asset’s risk. In general, assets that generate an NPV greater than zero are worth pursuing.

Internal rate of return (IRR). Here an expert estimates a single rate of return that summarizes the investment opportunity. Most companies have a predetermined “hurdle rate” that an investment must exceed to justify pursuing it. Often the hurdle rate equals the company’s overall cost of capital — but not always.

A mathematical approach

Like most companies, yours probably has limited funds and can’t pursue every investment opportunity that comes along. Using metrics improves the chances that you’ll not only make the right decisions, but that other stakeholders will buy into the move. Please contact our firm for help crunching the numbers and managing the decision-making process.

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Just days after President Trump signed a much-anticipated executive order on cybersecurity, a massive cyberattack—potentially the largest the world has ever seen, with more than 75,000 ransomware attacks in 153 countries—stole headlines.

The “WannaCry” ransomware program hit organizations around the world on Friday, May 12, encrypting computer files and demanding roughly the equivalent of $300 in Bitcoin (increasing over time) to restore user access.

Russia, Ukraine, India and Taiwan were reportedly the most affected countries, but organizations across Europe, Asia and North America—with an estimated 3,300 infections in the U.S. alone—were also attacked. Notable targets included, among others, the Russian Interior Ministry, logistics carrier FedEx, automakers Renault and Nissan, a number of Chinese universities and secondary schools, as well as Britain’s National Health System (NHS). Forty-seven of the 248 NHS trusts were attacked by the ransomware program, and as of May 15, seven trusts had yet to regain control of their computer systems.

The rapid spread of WannaCry is slowing, for two primary reasons: 1) Microsoft took the rare step of issuing patches for outdated versions of Windows operating systems it no longer supports, going back as far as 14 years; and 2) the accidental discovery of a “kill switch” by a security researcher in Britain, which spared much of the U.S. However, neither “fix” helps systems that are already infected, and hackers could easily create a new strain of WannaCry that bypasses or negates the kill switch.

In response to the threat, the FBI issued a FLASH (FBI Liaison Alert System) report with confirmed threat indicators and recommended steps for prevention, remediation, and defending against ransomware generally.

What is ransomware?

Ransomware is a type of malware that targets critical data and information systems for purposes of extortion, preventing users from accessing their data files until a ransom is paid. The software frequently infects computers through spear-phishing—a targeted attack via a malicious link or email attachment. Ransom demands are most often made in the difficult-to-trace virtual currency Bitcoin.

What’s different about WannaCry?

In April, an elusive cyber group called the “Shadow Brokers” leaked a cache of powerful NSA hacking tools, including highly sophisticated (and expensive) software exploits. WannaCry is purportedly based on one or more of these exploits, taking advantage of a zero-day vulnerability in Microsoft Windows that enables it to spread itself laterally. Microsoft issued a security update to address this bug in March, but users that didn’t make the update remain vulnerable.

WannaCry is the first cyber program to make use of the leaked NSA tools—but likely not the last.

Why were healthcare organizations the hardest hit?

The healthcare sector remains uniquely at risk to cyber incidents due to a variety of factors, including a lack of resources devoted to cybersecurity, the complexity of networks, and the vast array of internet-connected devices. Because many hospitals still maintain and rely on end-of-life technologies, and may prioritize immediate access to data over data security, cybercriminals have found their systems relatively easy to penetrate.

The healthcare sector is also one of the most targeted sectors by cybercriminals and nation states because it is the only sector which combines highly valuable and sought-after bulk data sets of personal health information, personally identifiable information, payment information, medical research and intellectual property.

Hospitals also don’t have the luxury of time: A ransomware infection that blocks access to critical medical data endangers patients’ health. Ahead of a scenario where patients’ lives are at risk, organizations should ensure they have preventive measures in place.

Is your organization safe?

The FBI recommends the following preventative measures:

Apply the Microsoft patch for the MS17-010 SMB vulnerability dated March 14, 2017. (Organizations using unsupported Windows operating systems including Windows XP, Windows 8 and Windows Server 2003 should follow customer guidance from Microsoft.)
Enable strong spam filters to prevent phishing e-mails from reaching end users and authenticate in-bound e-mail using technologies like Sender Policy Framework, Domain Message Authentication Reporting and Conformance, and DomainKeys Identified Mail.
Scan all incoming and outgoing e-mails to detect threats and filter executable files from reaching the end users.
Ensure anti-virus and anti-malware solutions are set to automatically conduct regular scans.
Manage the use of privileged accounts, assigning administrative access only when absolutely needed.
Configure access controls including file, directory, and network share permissions with least privilege in mind.
Disable macro scripts from Microsoft Office files transmitted via e-mail. Consider using Office Viewer software to open Microsoft Office files transmitted via e-mail instead of full Office suite applications. Develop, institute and practice employee education programs for identifying scams, malicious links and attempted social engineering.
Have regular penetration tests run against the network, no less than once a year, and ideally, as often as possible/practical.
Test your backups to ensure they work correctly upon use.

We offer these additional recommendations:

Don’t forget the human element. The WannaCry attack was entirely preventable. It succeeded at infecting computers because users failed to install a months-old patch—in other words, because of human negligence and a lack of awareness. Change user behavior by introducing a training program based on employees’ organizational roles, implementing cyber hygiene best practices (i.e., not opening suspicious emails or attachments) and regularly testing the program’s effectiveness.

Implement a risk-based, threat-driven patch management program. Patch management should be a dynamic, risk-based process rather than a check-the-box compliance approach. Organizations must be able to identify system vulnerabilities and relevant patches in a timely manner, understand the degree of risk the vulnerability presents, and work with asset owners to deploy the update.

Monitor, monitor, monitor. To be cyber resilient, organizations need to have threat monitoring and analytics tools to detect an attack, as well as the investigative and digital forensics capabilities to understand what went wrong and the scope of the damage. The sooner a cyberattack is detected, the sooner incident response and mitigation strategies can be put into effect. When it comes to ransomware, early detection can make all the difference in salvaging critical data and information systems.

What should you do when preventative measures fall short?

Isolate the issue. Buy more time to respond to the attack by removing infected systems from the network and cutting off access to the parts of the network that are not corrupted. Change the passwords to those isolated segments, if possible.
Secure backup data or systems by taking them offline. Make sure your backups are clean.
Contact your local FBI field office’s Cyber Task Force immediately. The FBI is there to help; its role is not to find fault or lay regulatory blame on a victim organization, but rather to conduct the investigation in cooperation with the victim organization and determine who perpetrated the attack.
Implement your incident response plan. Ensure all stakeholders have been notified and understand their respective responsibilities.
Change all passwords. Once your networks are back up and running, change all online account and network passwords.

https://alliance.bdo.com/document/cybersecurity-alert-wannacry-ransomware-program

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Small businesses (fewer than 100 employees) lose relatively more to employee fraud than larger business do. About 87% of embezzlers are first time offenders. Nearly every one is a trusted employee. That is (in 31 words) why you need to improve the internal controls at your business.
Segregation of duties is one of the most effective means of reducing employee fraud. You should separate the following responsibilities in each business process:
• Custody of assets
• Record keeping
• Authorization
• Reconciliation

In this article we discuss controls over the Cash Receipts business cycle.

The person who receives customer payments should record the payments either in a cash register, on a deposit slip, or in a receipts log. This person should not be able to record or authorize transactions in the accounts receivable ledger or customer accounts. In addition, this person should not be allowed to record cash transactions or prepare the bank reconciliation.

Adjustments and write-offs to customer accounts should be reviewed and approved by an employee who is not able to record these transactions. In addition, this person should not be allowed to reconcile the accounts receivable subsidiary ledger to the general ledger.

Employees responsible for recording adjustments to customer accounts should not process customer payments or prepare the bank deposit.

The bank accounts should be reconciled by someone who is not able to record cash receipts or disbursements. Bank reconciliations should be reviewed and approved by someone other than the preparer.

When duties cannot be segregated, compensating controls should be used. For example, two employees, working together, could receive and open customer payments and prepare the bank deposit.

Roth&Co is ready and willing to help you design and implement a better internal control system. For further discussion or a specific proposal, please reach out.

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Heshy Katz, Roth&Co partner, discusses the use of innovation in the workplace, how you can apply these lessons to your business.

“Innovation is not a technology, but rather a method of evolving and changing to help keep businesses unique and relevant”

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• The minimum wage has been raised in New York and New Jersey as of beginning of this year.
• Review and update your wage schedules as soon as possible.
• Employees subject to minimum wage laws need to be paid the higher of the federal and applicable state minimum wage.

Federal:
The federal minimum wage for covered nonexempt employees is $7.25.

Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

New York:
The 2017 minimum wage in New York State can be from $9.70 to $11.00 and in some cases $12.00. This depends on your location, industry and size.

For example:
• A large (11 or more employees) employer in New York City must pay $11.00/hour.
• Fast food employers in New York City must pay $12.00/hour.

New Jersey:
The 2017 minimum wage in New Jersey is $8.44 (up from $8.38 in 2016).

If you have any questions about whether and how this will impact you, please speak with a Roth & Co professional, who will be able to guide you with any changes that may be necessary.

Additional resources
Federal Minimum Wage: http://bit.ly/2iACTgg
New York Minimum Wage: http://on.ny.gov/2j4QoBU
New Jersey Minimum: Wage: http://bit.ly/2iIw4dh
Other states: http://bit.ly/1T5AzJV

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Small businesses are loved because of the personalized service they can provide. But what happens when a customer shows up with a list of demands longer than the mighty Mississippi? Unfortunately, it’s not uncommon for an oddball request to push the boundaries of the owner-client relationship. When demands are made, remember these tips:

1. Don’t blow a fuse.
Even if the request seems ridiculous, take a deep breath and maintain your composure. Your calm demeanor can help change the course of the conversation and get to a reasonable resolution.

2. Empathy goes a long way.

Even if the request is over the top, put yourself in your customers’ shoes. It shows that you’re listening and willing to work toward a solution.

3. Just say no.
There may be a time when you simply can’t honor a request, such as if it conflicts with company policy or legal regulations. Instead, offer a new option the customer might not have considered and work toward a compromise.

4. Rein it in.
After handling a request, gently set the expectation that this will be a one-time option due to business constraints, but that you’re happy to make an exception for a loyal customer.

Seemingly unreasonable demands can test anyone’s patience. But if handled appropriately—with tact and understanding—you can still maintain high customer satisfaction and loyalty.

Roth&Co’s team can assist you with all of your accounting and financial needs. Speak to your account representative for more information, or contact an accountant today at 718.236.1600 to schedule an appointment.

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When booking profits on paper, be sure to have the cash in the bank. This may seem obvious, but a lot of business owners don’t make the distinction—to their detriment. For example, your business may get a big order, but you have to sink money into production to fill it. If the client pays you 90 to 120 days later, your cash flow can turn negative. According to Parsons, many small businesses that fail do so not because they are unprofitable, but because they run out of money. The reasons vary, from long payment cycles to inventory management to a lack of investment capital. Understanding the levers that impact your cash flow can help you get a handle on this important metric. Parsons recommends using one of the many free cash flow calculators available to analyze and forecast your cash flow, like this one on her company’s site.

Is there still time to pay 2018 bonuses and deduct them on your 2018 return?

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When holiday gifts and parties are deductible or taxable

In One To One Relationships – Engagement is the Key

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Tax-free fringe benefits help small businesses and their employees

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Assessing the S corp

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Amazon Will Collect Every State Sales Tax by April 1

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Choosing the best business entity structure post-TCJA

2018 Q3 tax calendar: Key deadlines for businesses and other employers

Should your business be an S Corp or an LLC?

Can you deduct business travel when it’s combined with a vacation?

Say, just how competitive is your business anyway?

A review of significant TCJA provisions affecting small businesses

Should you file Form SS-8 to ask the IRS to determine a worker’s status?

2017 tax filing deadline for pass-through entities is March 15

Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future

Small business owners: A SEP may give you one last 2017 tax and retirement saving opportunity

Claiming bonus depreciation on your 2017 tax return may be particularly beneficial

2 tax credits just for small businesses may reduce your 2017 and 2018 tax bills

Not necessarily a luxury: Outsourcing

New tax law gives pass-through businesses a valuable deduction

Make budgeting part of your New Year’s resolution

Make New Year’s resolutions to improve profitability

Should you buy a business vehicle before year end?

Get smart: How AI can help your business

Leadership For A New Generation

4 ways to get (and keep) your business data in order

Critical Connection: How Costs Impact Pricing

2 ways spouse-owned businesses can reduce their self-employment tax bill

How Profitable Are Your Customers?

Listening to Your Customers by Tracking Lost Sales

How can you take customer service to the next level?

Don’t Make Hunches- Crunch The Numbers

A Cyberattack of Unprecedented Scale

The importance of Internal Control

Thinking BIG: Growing Your Business in 2017

New York and New Jersey Increase Minimum Wage

Mind My Business – Small Businesses

Managing Cash Flow