You Complete Me

I played tennis throughout my childhood and teenage years....and I mean, I played all the time.  These days, when I play, there is no comparison between the talent I displayed then and now.  One thing hasn't changed, however.  I can tell immediately when I hit a shot in the sweet spot of the racket....that perfect point where the ball flies off the racket at an optimal speed and lands exactly where I intended.

I discovered a new sweet spot for my CPA firm the other day when a new client decided to expand its engagement with us to include CFO services.  When the owners first posed the question to me, I was very intrigued but wary because everyone has a different definition of "CFO services."  They wanted a true financial partner, someone with whom they could share and discuss new business ideas, and someone who would share an opinion with them even if it went against their own.  Of course they need tax preparation and planning, but those necessary compliance services take a back seat to the "big picture work" that adds an extreme amount of value to their business.

We started working with this new client three months ago and I'm as excited as I have ever been about an engagement.  I'm also excited about what this means for us as we build a new practice specialty.  I felt confident after our initial meeting that we would work well with this new client for a common cause. But, it was brought home after a conversation where I brought him an idea and he said to me:

"You complete me."

 It's a match made in heaven in my opinion.

Is it time to discover your new sweet spot?

IRS Tax Tip: Home Office Dedcution

Simplified Option for Home Office Deduction

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home.
This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping. 
Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.
1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.
2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.
3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.
4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.
5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.
6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

Visit IRS.gov for more about this easier way to deduct your home office.
http://content.govdelivery.com/accounts/USIRS/bulletins/84fc7d#.UfgJo4XzJaU.email

Letting Go.

I recently had the opportunity to meet with a business owner who has been at the helm of a growing and profitable business for almost three years.  I could tell by talking with him that he was very proud of what he had accomplished in that time....and why shouldn't he be?  His business doubled from 2011 to 2012 and he is considering opening a second location.

In speaking with this gentleman, it became clear that like the rest of us he started out wearing all the hats.  As he grew, he hired someone to first answer the telephones....then someone to work at the front desk...and finally other professionals who could do what he was doing.  His final relinquishment...the tax returns.  What I saw was a business owner who prepares his own tax returns. Why, you might ask?  He has an accounting degree along with a past career in a very complex area of finance.  This man had actually "made it" more than once, which is such a fantastic accomplishment.  He feels as though he is qualified to do them.

The roadblocks he is facing are the same ones we all face at some point in our entrepreneurial journeys.  What do I have to let go of so I can grow?  Even though I "can" do this task, is it the best and highest use of my time?  Am I ready to let someone else who is an expert at this task step in and free up my time to be an entrepreneur again?

Letting go is very difficult to do, but not letting go also has it's down side.

I know this business owner will be successful whether or not he works with my firm.  I just hate to see business owners feeling stuck and overwhelmed when I know I can help them.

Will Structure Also Matters

I had a meeting with a wonderful client last week, and while most meetings in general are not depressing by nature, this one had some heavy overtones.  His mother had passed away recently and he was in charge of "everything."

I can't say that I started my business and immediately sat down with my estate planner to write my last will and testament.  I wasn't that smart about it.  I didn't have a will prepared until much later, after I had a business, a child and a wife.  That wasn't all that smart, in my opinion.  What would have happened if I had died before I had a will in place?  It could have been a nightmare for those sorting out the pieces afterward.

My client's mother had a will and a couple of trusts set up.  Her intentions were good, but they were not fulfilled to the extent possible.  She hadn't received the best advice on how to structure things and now my client had some serious heartburn as he was reading through everything.  Based on what I know right now, he won't experience horribly adverse tax consequences as a result of anything that happened, but the time he has spent chasing his tail and reading power bill receipts from 1987 is irreplaceable.  I can only imagine how much happier he would be spending his time at the helm of his business as opposed to emptying 4 filing cabinets of useless paper.

I have asked some of you about the existence of your wills.  I will do a better job of asking all of you as the year wears on.  If you need a referral, I have some great ones.  But, for the love and sanity of your loved ones, review the will you have now and make sure it does its job (because things change over time, and the will you wrote in 1980 may need revising); or sit down with a trusted attorney and prepare it for the first time.  There are cases where serious tax problems can emerge from the improper handling of your assets upon your death, because tax structure matters.

http://www.accountingtoday.com/debits_credits/Gandolfini-Will-Leaves-Family-Exposed-Heavy-Estate-Taxes-67362-1.html?ET=webcpa:e7377:53503a:&st=email

RIP:Planning for the Death of your Business

It may sound crazy, but you need to start planning for your business' death while you're setting it up. It's not like drafting a will in the 9th grade, or buying cleats for your son the night he's born.  Planning for the demise of your business in the initial set-up is pretty important and not nearly as crazy as those cleats.

I'm not talking about deciding whether to sell the business' assets or its stock (in the corporate world) or whether to sell your membership interests to someone else (in the LLC world).  I'm referring to the tax outcomes....real dollars....what you may have to pay when you decide to get out.  What are you really selling?  How are you taxed as a result of the transactions?

For example, in the C-Corporation world, when you sell the business' assets to a willing buyer, you could be paying taxes twice.  You could be paying taxes as a result of the asset sale, then you could be subject to taxes on any distribution that is paid out as the corporation's bank accounts are closed and business is wound down.  In the S-Corporation world, that isn't necessarily the case.  In both the S-Corporation and C-Corporation, if you sell your stock and not your assets, then the transaction is taxed differently.  If you have an LLC taxed as a partnership, and you are in the real estate rental business, you could decide that you want to do something different but you'd like to take one of those properties for your own.  Can you do that and avoid burdensome taxation?

Tax structure matters when selling your business, since that structure could dictate the tax implications that await you.  You worked really hard to build it, so don't plan foolishly for the business' end by choosing a less-than-advantageous tax structure.

Tax Structure Matters

I was having coffee with a colleague a while back, shortly after we reprinted our business cards. This time, we included the phrase, "Tax Structure Matters."

He said, "OK, so is it 'tax structure matters' or 'tax structure matters'?"

I replied, as most CPAs do, with "It depends."  (In case you don't know, that's our answer for EVERYTHING you ask.)

We intentionally left out any emphasis because it could be read either way and be right. As experts in the field of advising business clients on the best tax structure for their new or existing businesses, we focus on the advantages and disadvantages of the many different tax structures.  The last thing we want to do is saddle a business owner with a less-than-advantageous manner of reporting taxes.  

Once we help the clients set up the foundation, then we continue working with them for the life of their business to advise and counsel on tax structure matters that arise along the way.  We offer planning services to all our business clients by monitoring their tax position all year rather than just in December or January.  Pro-active analysis reduces surprises, and who doesn't want less surprises when it comes to taxes?

What Is Up With Your Logo?

I was having a conversation with a friend of mine last week, when the question arose about our firm's logo. "Mmmm, I just realized it was an abacus, Jonathan."  It occurred to me, right then, that I have never told my clients about why this was important to me.

An abacus is one of the oldest methods known to man to calculate a series of numbers.  The earliest known written documentation of the familiar Chinese abacus dates back to the 2nd century BC.  That's a LONG TIME AGO!  I wanted to present ourselves to clients as standard-bearers; a reliable and tried-and-true resource for the services we offer clients.  

But this is the 21st century, and being a 21st century kind of guy, I wanted a modern, edgy look to the abacus.  As I recall, my conversation about the design went something like this:

"What do you want the logo to be?"

"I would like an abacus, I think."

"Really?  Aren't those really old?  Isn't your profession regarded as stodgy anyway?"

"I suppose that's true....but what can we do to blend reliable and modern?"

I'll admit, I wasn't completely sold on it at first.  I guess I am slightly stodgy. I used old letterhead and cards for six months after we agreed on the logo. Over time it began to stick.  For me, the message behind the logo began to take shape. I am a standard-bearer.  I am a tried-and-true resource.  And I look good doing it.

This service is just as relevant now as it was 100 years ago.