• April 2015

The Taxman Cometh

Yes, it’s that time of year when all small businesses have the opportunity to account for what went well last year, and to identify what needs to be fixed or changed.

Sure, filing taxes can be stressful, even emotionally painful. But as any business strategist knows, the ability to manage money is the key to small-business success.

So we offer some financial food for thought in the April 2015 issue of Be Inkandescent magazine.

  • Our Entrepreneur of the Month Michael Egan, CFP®, helps us take a bite out of the stress of filing our 2014 taxes. A founding partner of the financial services firm Egan, Berger & Weiner, LLC, he offers Seven Tips to Remember Before You File Your Taxes.
  • We welcome our newest Inkandescent PR client, Michael Vidikan and his firm, Future in Focus. In May, we’ll be launching his new magazine, which will give business owners insights into the international business and consumer trends that are shaping the future. Get a jump start with this month’s money-related brief on the future of Bitcoin.

  • We also asked Beatty’s business partner Michael Egan to offer thoughts about what we need to know about Millennials and Money. What do the Millennials think about this idea? Our Inkandescent Interns interviewed Virginia Commonwealth University senior Alberto Francese, a member of the Gamma Iota Sigma finance fraternity, who offered his perspective in this month’s Millennials column.
    Picture by our VCUarts photo intern, Anna Paige Gibbs
  • Last, but not least, in our Food column we address the controversial concept of the Fat Tax. Do you think the overweight among us should be taxed for their poor eating habits? Send us an email to chime in on the controversy.

We leave you with this parting thought from Warren Buffet: “I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make fewer impulse decisions, than most people in business. I do it because I like this kind of life.”

Wishing you much wealth in your business, as well as your mind, body, and spirit. — Hope Katz Gibbs, publisher, Be Inkandescent magazine • founder, Inkandescent Public Relations

Discovering the Truth About Taxes

What does it take to be the master of your money? In this month’s feature article, we asked two entrepreneurs to offer their advice.

Scroll down for tax tips from Michael Egan, CFP® a founding partner at the Northern VA financial services firm Egan, Berger & Weiner, LLC.

Also below, you’ll find thoughts from Lisa McLeod, author of several best-selling books, including her latest, Selling with Noble Purpose. This small-business owner explains how she made peace with paying taxes.

And, we bring you additional tax advice from the finance experts at our new media partner, AllBusiness.com.

Wishing you prosperity and peace as you make your way to and through April 15.The Inkandescent TeamIllustrations by Michael Gibbs


Ready for Tax Season? Here Are Seven Tips to Remember Before You File Your Taxes

By Michael Egan, CFP®
Partner
Egan, Berger & Weiner, LLC

In our financial planning practice at Egan, Berger & Weiner, LLC, we do not prepare tax returns, but we do receive many tax-related questions around this time of year. Listed below are some important items that people tend to overlook when preparing their taxes. We hope that this information is helpful. As always, we recommend consulting a tax professional before you submit your tax return.

1. Retirement Plan Contribution Deadlines. You can still make an IRA or Roth IRA contribution for the 2014 tax year before April 15, or on your tax filing date, whichever comes first. The contribution limits for 2014 are $5,500, plus an extra $1,000 catch-up contribution if you are age 50 or older.

  • Remember that if you are making a traditional IRA contribution and you are not eligible for the deduction, you will need to file Form 8606 with your taxes.
  • If you are self-employed, you can still make employer contributions to an Indv(k) by your tax-filing deadline. This may include an extension — provided the plan was opened on or before 12/31/2014.
  • You can also make and/or establish SEP-IRA contributions on or before your tax-filing date.

2. Professional Service Fees. Remember to add up and total the fees you spend on professional services. They may be deductible. Fees for tax preparation, legal, and financial management services are deductible to the extent that they exceed 2 percent of your AGI (Adjusted Gross Income) and have not been phased out by your income limits.

3. Long-Term Care Premiums. These premiums may be tax deductible, provided that you purchased a “tax-qualified” plan. Your Long-Term Care premiums can be added to your medical expenses up to certain limits as follows (for 2014, per-person premium limits):

  • Age 51-60: $1,400
  • Age 61-70: $3,720
  • Over age 70: $4,660
    Medical expenses, including Long-Term Care premiums, may be deductible as an itemized deduction if they exceed 10 percent of your AGI. Note: The limit is for 7.5 percent of AGI if you or your spouse are age 65 or older.

4. Capital Gains. Do not forget to include your cost basis (which is what you have already paid taxes on) when filing your Form 1099.

If the securities were purchased more recently, the cost basis is probably included right on the 1099 itself. If the securities were purchased several years ago, then the cost basis will probably not be included on the 1099. One mistake that we notice people make very often when they do their own taxes is that they include the dividends and capital gains listed, but miss or do not include the “gross proceeds” section.

Then they receive a letter from the IRS stating that they owe a significant amount of money, simply because they forgot to include the sales and cost basis value for the securities on the tax return. Completing this step correctly the first time can save you considerable unnecessary stress.

5. 529 Plan Contributions. In most states, contributions to that state’s 529 college saving plan will allow you to receive a state tax deduction up to certain limits, provided you are a resident of that state. For example, a Virginia state resident who contributes to a Virginia 529 Plan, and who is also the owner of the plan, may qualify for the deduction.

6. Same-Sex Married Couples. Same-sex married couples may now file a joint return. If you were legally married in a state that recognizes same-sex marriage, you are now eligible to file a joint return with your partner.

7. Foreign Bank Accounts. The IRS and the government are really cracking down in this area of the financial sector, so do not forget to claim any foreign bank accounts. Failure to disclose assets held overseas may result in serious consequences and possible prison sentences.

To learn more about Michael Egan, click here.


How I Reframed Paying My Taxes: Why Self-Talk Matters

By Lisa Earle McLeod
Keynote Speaker and Author
McLeod & More, Inc.

With taxes due this month, here’s something to consider: Do you like paying taxes? I own my own business, which means I write quarterly checks to the IRS. And I confess, in the past I didn’t enjoy paying them. Every Friday we have a meeting to go over the cash flow, the receivables, and the projected revenues. We also track our tax liability — at the top right corner of the weekly report is an account labeled “Taxes.”

We set aside a chunk of every check to cover taxes so that we won’t come up short at the end of the month. After several years of business ups and downs, this has been our best year ever. I’m grateful. Yet as we made more money, the number in the Taxes account grew bigger, too, and I found myself getting more and more frustrated.

I often found myself saying, “I can’t believe we have to send that much of our money to the government.” I didn’t like how that statement made me feel. I was turning into a curmudgeon.

Then one day it clicked: I have to pay taxes whether I like it or not; why am I creating such a negative experience for myself? So we changed the name on the ledger from “Taxes” to “America’s Money.” The next week when we went over the reports, the difference in our attitude was amazing. The conversation went something like this, “Here’s the income, here’s the cash, here are the receivables, and here’s America’s money. Wow, she’s doing great!”

All of a sudden there was a shift in my perception. I realized that this wasn’t our company’s money, it was my country’s money. We began to feel like proud sponsors as we fantasized about the possibilities. What was America going to buy with our money? Holy cow, we almost had enough to pay for a teacher, or a soldier’s rehab. The line item was no longer depressing; it was exciting.

Perhaps you’re reading this and thinking, “She is out of her mind! Doesn’t she know how much money our government wastes?” The answer is yes, I do know that our government wastes money, and I don’t agree with everything it spends tax dollars on.

But that’s a different conversation, a political conversation. This is a personal conversation about how you can feel great about doing something you have to do anyway. Changing the name on the account from “Taxes” to “America’s Money” reframed our thinking. We went from loathing that line on the worksheet to being proud of it. Sure America wastes money, but I mentally earmarked our tax money for things we feel great about. As the account grew, we found ourselves getting more and more excited. My husband says what we did “made us feel more patriotic; it loosened our attachment to the money.”

The bottom line is this: There’s a price to be paid for everything. You can whine about it, or you can enjoy it. Being a parent costs you time and money, being married costs you some personal freedom, and doing business in America means that you have to pay taxes.

Quite frankly, I think it’s a bargain. When I look around at the rest of the world, the checks I write to my country are a price I’ll happily pay. Now when I send in a check for the quarterly taxes we owe, I sign it with a flourish. It’s America’s money and I’m damn proud to send it to her. You go to work, you make the dinner, you raise your kids, and you pay your taxes. In the end, you’re the one who decides whether those are good things or bad things. Learn more about Lisa McLeod here.


Are You a Small and Growing Business?

From the Finance & Accounting Center
AllBusiness.com

Taxes are one of the most important issues facing small and growing businesses. And like a company’s profits, its annual tax bill will in part reflect the owner’s skills and knowledge. Business owners need to be sure that they are meeting all of their responsibilities to the taxman — and also seizing every opportunity to reduce their taxes.

1. Deductions: Businesses can deduct all “ordinary and necessary” business expenses from their revenues to reduce their taxable income. Some deductions are obvious — expenditures in such areas as business travel, equipment, salaries, or rent. But the rules governing write-offs aren’t always simple.

2. Employee Taxes: If a business has employees, a variety of taxes will have to be withheld from their salaries. Among them are withholding, employer matching, and unemployment tax.

Click here to read more Tax Tips for Entrepreneurs.

Top 10 Tax Tips for Small and Growing Businesses

From the Finance & Accounting Center
AllBusiness.com

Illustration
by Michael Gibbs

Taxes are one of the most important issues facing small and growing businesses. And like a company’s profits, its annual tax bill will in part reflect the owner’s skills and knowledge. Business owners need to be sure that they are meeting all of their responsibilities to the tax man — and also seizing every opportunity to reduce their taxes.

1. Deductions: Businesses can deduct all “ordinary and necessary” business expenses from their revenues to reduce their taxable income. Some deductions are obvious — expenditures in such areas as business travel, equipment, salaries, or rent. But the rules governing write-offs aren’t always simple. Don’t overlook these other two potential deductions:

  • Business losses. Business losses can be deducted against a business owner’s personal income to reduce taxes. If a business owner’s losses exceed personal income for the year, some of the year’s business losses can be used to reduce taxable income in future years.
  • Trips that combine business and pleasure. If more than half of a business trip is devoted to business, deduct the traveling costs, as well as other business-related expenses.

2. Employee Taxes: If a business has employees, a variety of taxes will have to be withheld from their salaries. Among them are:

  • Withholding. Social Security (FICA), Medicare, and federal and state income taxes must be withheld from employees’ pay.
  • Employer matching. Businesses must match the FICA and Medicare taxes and pay them along with employees.
  • Unemployment tax. Businesses must pay federal and state unemployment taxes.

3. Quarterly Estimated Taxes: This area trips up many an entrepreneur and is especially vexing for home-based businesses. Failure to keep up with estimated tax bills can create cash flow problems and has the potential for punishing IRS penalties.

Among the issues are:

  • Who should pay? A business probably must pay quarterly estimated taxes if the total tax bill in a given year will exceed $500.
  • How much should you pay? By the end of the year, either 90 percent of the tax that is owed or 100 percent of last year’s tax must be paid (the figure is 110 percent if a business’ income exceeds $150,000). Businesses can subtract their expenses from their income each quarter and apply their income tax rate (and any self-employment tax rate) to the resulting figure (their quarterly profit).

4. Sales Taxes: Most services remain exempt from sales tax, but most products are taxable (typical exceptions are food and drugs). If a business owner sells a product or service that is subject to sales tax, he or she must register with the state’s tax department. Then taxable and nontaxable sales must be tracked and included on the company’s sales tax return.

Having what is considered a “presence” in a state is the criteria used by the IRS to determine whether or not you are liable for paying state sales tax.

If you do not have a physical presence in another state, but sell items via the Internet or by catalog in that state, you can be subject to a state’s “use tax,” but typically not to its sales tax. A “presence” in another state does not necessarily mean that you have a retail outlet in that state. If you have an office, warehouse, or employees working for you in that state, the IRS may consider you to have a presence in that state. Make sure you are aware of your sales tax responsibilities in all states in which you are doing business.

5. Record-Keeping. Keep tax documents for at least seven years. Good record-keeping saves money. Some things — such as copies of business tax returns, licenses, incorporation papers, and capital equipment expenses — should be preserved indefinitely. Keep any tax-related documents (e.g., expense receipts, client 1099 forms, and vehicle mileage logs) for a minimum of seven years.

6. Charitable Contributions. Unless your business is a C corporation, charitable contributions typically “flow through” the business and are claimed as deductions on the individual tax returns of the shareholders of the company. That’s true whether you’re running a sole proprietorship, partnership, limited liability corporation, or S corporation.

If you want to get the maximum tax benefits from charitable contributions, you should know these basic rules:

  • Only contributions to charities listed as “qualified organizations” by the IRS are deductible. Consult IRS Publication 78 for a list of qualified organizations, or search online at the IRS home page.
  • Contributions of more than $250 require a letter of receipt from the qualified organization. For contributions of less than $250, a canceled check is sufficient.
  • In general, donations of property can be deducted for their fair market value at the time of the contribution. You cannot deduct a contribution that has already been written off as a depreciated asset.
  • You cannot deduct the value of time or services that you volunteer.
  • You cannot deduct the part of a contribution that benefits you. If you receive a gift in exchange for a charitable donation, for example, you can deduct only the amount of the contribution that exceeds the value of the gift.
  • In general, you can deduct contributions only in the year you make them. Pledged contributions cannot be deducted until they are actually paid.

7. Important Tax Deadlines for Businesses. April 15 isn’t the only important tax date for business owners. The following dates are also important:

  • Annual returns. Most annual returns are due April 15 for unincorporated companies and S corporations. C corporations must file annual corporate returns within two-and-a-half months after the close of their fiscal year.
  • Estimated taxes. Estimated taxes are due four times a year: April 15, June 15, September 15, and January 15.
  • Sales taxes. Sales taxes are due quarterly or monthly, depending on the rules in your state.
  • Employee taxes. Depending on the size of your payroll, employee taxes are due weekly, monthly, or quarterly.

8. Business Loans. Most business loans are not considered business income. One notable exception is a situation in which you negotiate with a creditor or lender to reduce your debt. If any debt is forgiven, you will owe taxes on this amount.

On the other hand, business loans can offer substantial tax benefits. The principal and interest you pay on your loan are business expenses, and you can deduct them from your taxes as such. In order to take advantage of a tax deduction, you must report the total amount of the loan, and the assets and expenditures financed must be necessary to operating the business.

9. Tax Audits. The very thought of an IRS audit is enough to make most business owners break into a cold sweat. But not all audits are created alike: There are several different types of tax audits, ranging from simple requests for a particular piece of information to comprehensive reviews that cover every aspect of a business.

  • Correspondence audit. This is a relatively simple procedure in which the IRS asks you to document an item on your return by a specified date. This is usually a routine test for compliance with certain items on your return.
  • Office audit. The IRS may ask you to report to a nearby IRS office and document one or more items on your return. You may be able to send them copies of this proof in advance of the appointment and resolve the issue without actually going to the office.
  • Field audit. This is the audit most people dread. The IRS will ask you to provide documentation of various items on your return and to meet with an IRS agent for a thorough review of your records. Be prepared to answer the auditor’s questions, but don’t volunteer information.
  • Taxpayer Compliance Measurement Program audit. This rather lengthy and detailed audit asks you to document and prove every single item in your return. The IRS and Congress use the data from these audits for research and statistical purposes. These audits are arbitrary, and anyone can face them regardless of how carefully they prepare their tax returns.
  • Criminal investigation audit. If you are suspected of tax evasion, the IRS will conduct a criminal-investigation audit. If they prove that you have purposefully not paid your income taxes, you can face substantial fines and even jail time. Obviously, you should retain qualified legal counsel if you face this type of audit.

10. The IRS. Be sure to review the information at the IRS Small Business and Self-Employed Tax Center www.irs.gov, which provides a wealth of information to small and growing businesses. Its handy checklist includes information on choosing a business structure, employee taxes, and business tax deductions.

For more information, visit the Finance & Accounting Center at AllBusiness.com

Do not be afraid of mistakes, providing you do not make the same one twice.”

– Eleanor Roosevelt

Happy are those who dream dreams and are ready to pay the price to make them come true.”

– Leon Joseph Suenens

The young man knows the rules, but the old man knows the exceptions.”

– Oliver Wendell Holmes Jr., U.S. Supreme Court justice

Many people prefer to play it safe when it comes to business matters. Are you willing to take risks in the pursuit of entrepreneurial success?”

– Steven Schussler

The dove descending breaks the air / With flame of inkandescent terror.”

– T.S. Eliott

The awakening to the mystery of life is a revolutionary event; in it an old world is destroyed so that a new and better one may take its place.”

– J.J. Van Der Leeuw, The Conquest of Illusion

Whosoever knows how to fight well is not angry. Whosoever knows how to conquer enemies does not fight them.”

– Lao Tzu, Tao Te Ching

Think of yourself as on the threshold of unparalleled success. A whole, clear, glorious life lies before you. Achieve! Achieve!”

– Andrew Carnegie

If people like you they’ll listen to you; if they trust you, they’ll do business with you.”

– Zig Ziglar

Once you find something you love to do, be the best at doing it.”

– Debbi Fields, Mrs. Fields Cookies

Passion makes perfect.”

– Eugene Biro

Find somebody to be successful for. Raise their hopes. Think of their needs.”

– Barack Obama

I find out what the world needs, then I proceed to invent.”

– Thomas Edison

The aim of life is to live, and to live means to be aware, joyously, drunkenly, serenely, divinely aware.”

– Henry Miller

You may ask me for anything you like except time.”

– Napoleon

If your success is not on your own terms, if it looks good to the world but does not feel good in your heart, it is not success at all.”

– Anna Quindlen

The real voyage of discovery consists not in seeking new lands, but in seeing with new eyes.”

– Marcel Proust

If it really was a no-brainer to make it on your own in business there’d be millions of no-brained, harebrained individuals quitting their day jobs.”

– Bill Rancic, "The Apprentice"

There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.”

– JFK

An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.“


– Roy Ash, co-founder of Litton Industries

There is a crack in everything, that’s how the light gets in.”

– Leonard Cohen

Success is about finding a livelihood that brings joy, self-sufficiency, and a sense of contributing.”

– Anita Roddick

Outside of a dog, a book is man’s best friend. Inside of a dog it’s too dark to read.”

– Groucho Marx

But all the while I was alone, the past was close behind, I seen a lot of women, but she never escaped my mind, and I just grew, tangled up in blue.”

– Bob Dylan

You’ve got to be willing to crash and burn. If you’re afraid of failing, you won’t get very far.”

– Steve Jobs

There’s nowhere you can be that isn’t where you’re meant to be…”

– John Lennon

A great secret of success is to go through life as a man who never gets used up.”

– Albert Schweitzer

Permanence, perseverance and persistence in spite of all obstacles distinguishes the strong soul from the weak.”

– Thomas Carlyle

In three words I can sum up everything I’ve learned about life: it goes on.

– Robert Frost

You must have chaos within you, to create a dancing star.”

– Frederic Nietzsche

‎No one is useless in this world who lightens the burden of another.”

– Charles Dickens

Be bold and mighty forces will come to your aid.”

– Basil King

If you look at what you have in life, you’ll always have more.
 If you look at what you don’t have in life, you’ll never have enough.”

– Oprah Winfrey

As your desire is, so is your will. As your will is, so is your deed. As your deed is, so is your destiny.”

– Brihadaranyaka Upanishad

It is to no purpose to turn away from the real nature of the affair because the honor of its elements excites repugnance.

– Carl von Clausewitz, On War

Ambition is the germ from which all growth of nobleness proceeds.”

– Thomas Dunn

Things don’t change. You change your way of looking, that’s all.”

– Carlos Castaneda

‎Excellence is to do a common thing in an uncommon way.”

– Booker T. Washington

Do not follow where the path may lead. Go, instead, where there is no path and leave a trail.”

– Ralph Waldo Emerson

No longer talk at all about the kind of man a good man ought to be, but be such.”

– Marcus Aurelius Antoninus

Success is the necessary misfortune of life, but it is only to the very unfortunate that it comes early.”

– Anthony Trollope

Persist and persevere, and you will find most things that are attainable, possible.”

– Lord Chesterfield

Who cares if my glass is half empty or half full; I still have something to drink.”

– Optimism rules

The only way to compel men to speak good of us is to do it.”

– Voltaire

Great minds discuss ideas. Average minds discuss events. Small minds discuss people.”

– Eleanor Roosevelt

Simplicity is the ultimate sophistication.”

– Leonardo da Vinci

When a dog runs at you, whistle for him.”

– Henry David Thoreau

I was taught at a very young age that you can do whatever you want to, but you have to make it happen — not just talk about it.”

– Kathleen Jo Ryan

Instead of loving your enemies, treat your friends a little better.”

– Edgar W. Howe

Entrepreneurs willingly assume responsibility for the success or failure of a venture and are answerable for all its facets.”

– Victor Kiam

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