Cleaning files

Are your file cabinets bulging? Are your e-mail files out of control? January was designated by the National Association of Professional Organizers (NAPO) as Get Organized Month, but it’s never too late to look things over and get rid of unneeded communications and papers. According to statistics posted by NAPO, the Small Business Administration estimates that 80% of filed papers are never referenced again, and The Wall Street Journal estimates that the average U.S. executive wastes six weeks each year searching for important documents lost in clutter.

Obviously, some papers, such as employment records, customer communications, and receipts for tax purposes, must be retained. But articles, clippings, and other papers may be taking up space and wasting your time when you need to locate something important. Some of this paperwork can be scanned into your computer or stored in files offsite so you don’t have clutter around you.

Caution: Do not delete e-mail that you are required to save for business reasons. Generally, this includes anything related to customers, employees, pending lawsuits, government regulations, and other topics outlined in your e-mail policy and procedures. You can, however, sort e-mail into designated files or use special storage applications to make it easier to navigate your electronic correspondence.

If you need professional help with organizing, find assistance through NAPO.

Continue Reading

Employment Taxes

As long as you have employees, including yourself, you must deal with payroll taxes. These include:

• Social Security and Medicare (FICA) taxes on wages and other taxable compensation. The tax is paid by the employer and the employee. For 2010, the rate paid by the employer for the Social Security portion is 6.2% on wages up to $106,800; the employee pays a like amount. The rate for the Medicare portion for each is 1.45% on all wages (there is no cap).
• Federal unemployment insurance (FUTA). This applies to the first $7,000 of wages.
• State unemployment insurance. The rate you pay usually is fixed by your state according to your claims experience — the greater the unemployment benefits claims made against your company, the higher your rate will be.

Find information about FICA and FUTA in IRS Publication 15, Employer’s Tax Guide. Contact your state labor department for information about state unemployment insurance (find links to your state here.

If you’re self-employed, there’s no FICA because you don’t have any wages. However, you have a comparable tax burden called self-employment tax. This tax effectively covers the employer and employee share of Social Security and Medicare taxes. You pay self-employment tax as part of your income taxes; usually you’ll need to pay quarterly estimated tax payments to cover your income tax and self-employment tax bill.

Continue Reading

New rules for vehicles
If you drive your personal car or truck for business and opt to deduct costs based on the IRS standard mileage rate (rather than your actual costs), note that the rate for 2010 is much lower than it had been for 2009. The 2010 rate is 50 cents per mile, down from 55 cents per mile in 2009.

For those who purchase a new vehicle in 2010, the IRS has yet to announce depreciation limits. (These probably will not be available until February). However, based on projections that do not foresee an extension of bonus depreciation rules, expect the dollar limit for a car to be $3,060 and for a truck or van to be $3,160 (up slightly from 2009 levels).

Action: Make a note of your vehicle’s odometer reading at the start of the year and keep track of business usage of the vehicle throughout the year so you will be able to optimize your deduction for vehicle usage.

New retirement plan rules
If you already have a 401(k) or other qualified retirement plan, be sure to note that contribution limits remain the same for 2010 as they were in 2009. Thus, the top contribution to a SEP for 2010 is $49,000.

There is a new retirement plan option available in 2010, and businesses with existing plans and those with no plans might consider this new option, called a DBk. It combines a modest defined benefit (pension) plan with a 401(k)-like option. As the year progresses, look for financial institutions to start offering DBk products.

Action: To help you determine which type of plan is best for you, visit the IRS Retirement Plan Navigator and click on “Choose a Plan.”

Continue Reading

• End sales on credit. Require customers to arrange their own credit, by charging purchases to a credit card or arranging their own bank loans.
• Restrict credit to “good customers.” Check the credit ratings of customers you want to give credit to. Obtain permission from customers to do this.  Then, for consumer customers, contact one of the three main credit reporting companies (Equifax, Experian or Transunion. For business customers, check with Dun & Bradstreet or another business credit-reporting company.

• Bill promptly. Don’t wait until the end of the month to send out bills for work completed or goods sold during the month.

Continue Reading

• Create an emergency fund to ensure you can cover your expenses. Start building a 30-day fund and grow from there. Creating the fund is possible if you build savings into your budget.
• Reduce or eliminate credit to customers so they pay immediately. This avoids collections problems.

Follow and un-follow
Twitter enables you to follow the postings of registered users on the site; they can opt to follow you.  Is it impolite to not follow someone who’s following you?  While many advocate for reciprocity, the reality is that following too many Tweeters can eat up time and obscure postings that would be meaningful to you.  Do follow followers who may provide helpful information, but otherwise be selective.

Know the rules
On Twitter, you are limited to 140 characters per posting.  However, it’s still wise to use real words and abbreviations; don’t use SMS-style text (SMS-style shorthand, the type used for text messaging).  Full sentences are not required and symbols, such as “@” and “=” can be acceptable when needed to meet the 140-character limit.  Definitely shorten URLs (using TinyURL or other sites) to save characters.

Continue Reading

If you own or lease the car:
If a personal vehicle is used for business, you can deduct the actual expenses of business use, including gas, maintenance, and depreciation if you own the car or lease payments if you lease it, or use the standard mileage rate set by the IRS ($.55 per mile in 2009).

If you are an employee of your corporation, set up an “accountable plan” to provide reimbursement to you for business use of the car; such reimbursement is tax free if done properly. Without such a plan, any deduction for car use is an unreimbursed employee business expense, which is a miscellaneous itemized deduction that can be claimed only to the extent that it is more than 2% of your adjusted gross income (AGI).

If you are a partner or LLC member, vehicle-related write-offs are claimed on Schedule E; they are not subject to the 2% limit applicable to shareholder-employees.

If you are a self-employed person, vehicle-related write-offs are claimed on Schedule C.

Idea: Keep good records of business use. Note the starting and ending odometer reading, the date, the destination and the purpose of each business trip. Keep a digital device, logbook, or other recordkeeper handy to make it easy to jot down this information.

Continue Reading

Payroll costs

1. Eliminate all raises and bonuses. While staff may have come to expect these annual payments, they prefer to have job security, something that can only be assured if you stay in business.
2. Eliminate 401(k) and other retirement plan contributions.
3. Reduce medical coverage. Shift more of the cost to employees or change the type of coverage you provide. To learn more about health savings accounts, a low-cost medical coverage option, visit SBA.
4. Cut back on other perks. Providing lunches, tickets to sports events, cab rides home, and other little benefits that employees have grown to love and expect may be too costly now. Get creative to show staff your appreciation, a personal thank you can go a long way these days.
5. Optimize employee productivity. Get more from your staff. Engage your employees in the conversation about to do this; they may know ways to do things better, faster, and cheaper.
6. Use tax breaks. If you need to hire someone, consider choosing an employee that qualifies you for a tax credit. Review eligibility for the work opportunity tax credit before making a hiring decision.
7. Use contractors and freelancers. If you have a special project or need help but don’t want to commit to an employment relationship in these uncertain economic times, engage independent contractors or freelancers. Find qualified freelancers through Guru (a database of 100,000 people).

Overhead

8. Renegotiate rent. Your landlord wants to keep space filled, something that may be difficult to do in some locations today. Open talks with your landlord, especially if your lease is coming up for renewal.
9. Sublet space. If your lease agreement allows you to sublet, consolidate your operations and reduce your net rent by leasing unused space to other businesses.
10. Conserve electricity. Turn off unused office equipment after hours and on weekends and holidays. The difference between keeping just one PC on all the time versus turning if off on nights and weekends can save you over $100 for the year. Check for savings at Iowa State University.
11. Conserve on heating and cooling costs. Thermostat adjustments in winter and summer can produce sizable savings. Save on summer air conditioning costs by pre-cooling your space. Researchers have found that setting the thermostat to cooler-than-normal temperatures early in the day and to warmer-than-normal in the afternoon keeps the space cooler all day long than a static thermostat and can cut energy usage by 25% to 30% during peak electrical demand.
12. Increase insurance deductibles. Don’t eliminate necessary insurance coverage, but reduce your premiums by increasing deductibles. This leaves insurance to pay for only catastrophic events. Talk with your insurance agent.
13. Opt for better phone plans. Consider using Vonage and other VoIP solutions to reduce monthly phone costs. Select cell phone plans wisely. For example, ATT’s BusinessTalk allows companies to share up to 20,000 “Anytime Minutes” each month among up to 40 employees.

Count pennies

14. Barter for the goods and services you need. Instead of spending cash to acquire products and services, exchange what you sell for the things you need. Join a barter exchange geared to business, such as Itex or International Monetary Systems. While these exchanges are taxable (and subject to sales tax where applicable), they let you save your cash for other things.
15. Sell unused vehicles and equipment. For example, dispose of old iPods, iPhones, PDAs, laptops, and certain other electronic devices in an environmentally sensitive way and get paid using BuyMyTronics.com (payment depends on model and condition and is made via PayPal or a check mailed to you within 48 hours of receiving your item). Other resources: CashOldPhone.com and Ibuyphones.com.
16. Terminate expensive car leases. While leases are contracts that cannot easily be undone, you may be able to sell yours and get out from under it. Try LeaseTrader.com and Swapalease.com (there are advertising fees and seller transaction fees).
17. Repair instead of replace. Make your current equipment last longer by keeping it in good repair. Following manufacturer guidelines on maintenance can help.
18. Buy used equipment. If you need something you don’t already have, consider “pre-owned” equipment. Find it through Used Equipment Network.

Get The Next 12 Great Ideas

Independent contractors
IRS worker classification. One of the hottest audit targets is worker classification. You may treat a worker as an independent contractor (IC) because you believe this is the correct treatment, but the IRS may think otherwise and reclassify your worker is an employee. Result if the IRS is correct: You could owe back employment taxes, plus interest and penalties. You may also owe back state unemployment taxes as well as be liable to the worker for fringe benefits, such as medical coverage and retirement plan contributions. Total cost for misclassification can break the bank. What to do:

• Use the correct classification. This depends on your degree of “control.” If you have the right to say when, where, and how the work gets done, the person is your employee, regardless of any label you may use or whether you actually exert such control.
• Be consistent. If you are using workers as ICs and have done so for years, treat others you hire in the future doing similar work in the same way.
• Use an IC agreement. While the agreement itself does not bind the IRS to your choice of classification, informing your worker that he/she is obligated to pay taxes and not eligible for employee benefits is important information to communicate in writing.
• Issue Form 1099-MISC. If you pay an IC $600 or more in total for the year, be sure to give the person this information form. It shows the company’s classification of the worker and can help to minimize penalties if it later turns out that your classification was incorrect.

Continue to Full Article