Organized Finances Ensure Business Success

English: Findlay, Ohio, September 20, 2007 -- ...
English: Findlay, Ohio, September 20, 2007 — Gilbert Yingling, a representative with Small Business Administration (SBA) makes calls to local business owners from a local chamber of commerce business directory as part of an SBA outreach program. He then follows up with person to person meetings with the business owners. John Ficara/FEMA (Photo credit: Wikipedia)

It is important for any business to keep its finances in order. Numerous websites stress this, such as the Scott Reiman crunchbase profile. Having organized finances ensures that business owners will always be able to know where their businesses stand and whether or not they are incurring profits or losses. If they are incurring losses, then they might need to reevaluate their business structure and marketing tactics and change them to find a more effective solution that works. It is also important for businesses to have their finances in order for tax purposes as well. There are a few tips that business owners can keep in mind to help keep their business’s finances organized.

Retain a CPA

Retain the services of a certified public accountant. Accountants are one of the most important resources that a business can have. Accountants are skilled in ensuring that finances are in proper order. They are also invaluable to helping business owners make informed decisions concerning their businesses. Accountants can generate virtually any type of business report that owners need to determine where their business stands in the way of successfulness.

Re-evaluate Business Entity

Many business owners begin their businesses as sole proprietorships or partnerships. However, over time and with expansion, it might be ideal for them to incorporate their businesses or form an LLC that can help shelter them from financial risks. Incorporating a business entity or forming an LLC can also help business owners save money on their taxes. Additionally, failing to adjust a business’s entity to accommodate a different income level could end up being a costly mistake. Business owners might want to discuss their different entity options with a CPA so that they can determine the right entities for their businesses and the appropriate times to make any changes, if necessary.

Review Estimated Tax Payments

Business owners have to pay estimated tax payments, which are quarterly payments. Underestimating estimated tax payments can result in penalties for businesses, so when estimating estimated tax payments, round up rather than down. It is better to overpay than to underpay because anything that is overpaid will be returned back the business in the long run when tax refund time rolls around. By properly estimating taxes, business owners can prevent underpaying and overpaying, though. Reviewing what the business has earned year to date and then projecting what it is expected to earn throughout the rest of the year is how estimated taxes are discerned.

Keep Business and Personal Finances Separate

One of the most important rules to managing business finances is to keep them separate from any personal finances. Although this is not mandatory for sole proprietorships, it is mandatory for corporations or LLCs. It is still a good practice for all business owners to employ, though. Open up separate accounts strictly for the business that are separate from any personal accounts. Likewise, have debit cards that are solely for the business as well. It is also a good idea to open up a dedicated savings account or money market account where approximately 25 percent of each check can be transferred to save for estimated tax payments.

No matter whether a business is large or small, keeping its finances properly maintained is essential to appropriate business operation.

What is the Federal Fresh Start Program?

The IRS created The Fresh Start program in early 2011 to help aid struggling taxpayers. They expanded the program in early 2012 to provide even more relief for people who are mired in tax debt. Here are the relief programs offered under the original and the new Federal Fresh Start Program.

Penalty Breaks

Taxpayers who were unemployed for at least a month in 2011 or before April 17, 2012 are exempt from failure-to-pay-penalties as long as they pay their taxes before the federal deadline. Additionally, taxpayers who qualify for this program can get a six-month extension before their taxes are due. The 2012 due date for the extension is October 15. This program is also available to anyone who is self-employed and experienced more than a 25% reduction in income.

Payment Agreements

If you cannot pay your entire tax bill before the federal deadline, you may qualify for an installment agreement that allows you to set-up a payment plan with the IRS. The only conditions are that you can own no more than $50,000 in taxes and you have to allow the IRS to withdraw money from your bank account every month. The penalties are for doing this are lower now, although you will accrue interest. Small businesses are also eligible for an installment agreement if they owe less than $50,000 dollars or they can lower their debt to under the $50,000 threshold.

Offer in Compromise (OIC)

You may actually be able to pay back less tax than you owe under the Fresh Start Program. The IRS determines OIC eligibility based on your income and personal assets. If the IRS feels you can pay your debt in full or with an installment agreement, you will not be eligible for the tax reduction.

Tax Liens

If you do not pay your taxes, the IRS can put a lien on all the property you own. Starting in 2011, the IRS raised the dollar amount of taxes you owe before the file a lien. They also streamlined the lien withdraw process internally so that if you do encounter this problem, you can get the lien withdrawn quicker after you settle your debt. Additionally, if the IRS does put a lien on your property, you can have it removed it you enter into a payment agreement.

Believe it or not, the IRS is not out to get you. If you are having trouble paying your taxes, visit irs.gov. The IRS website is home to volumes of advice on how to deal with your tax problems including the forms you need and even a series of eight YouTube videos on how the IRS handles collection efforts. Do not wait until it is too late, visit the IRS website today and see what kind of help you qualify for.

About the Author: Julio Pasco is a personal consultant who helps his clients with budgeting and day to day tasks. He spends a lot of time looking for discount and coupons for area attractions so that his clients can learn to save while still enjoying life.