Office managers all over the world are trying to strategise ways of reducing their expenditure on unnecessary overheads and expenses. One of the ways that you can reduce your tax liability is to properly asses and audit the current market value of your fixed assets and register the amount that’s been lost through depreciation.

Fixed Asset Management

However, if there’s any age to your business there’s a good chance that:

a) much of your equipment will be almost worthless on the open market yet you’re still paying too much in tax and insurance on it as it’s still appearing as an asset on your balance sheet and

b) records of when and for how much many of the assets you have throughout your company will be lost, mis-filed, thrown away or otherwise essentially useless.

There aren’t many companies that have the internal structure that would enable them to go through the records and consolidate that information, there are software solutions but that still involves carrying out a physical inventory of every piece of equipment, hardware, software and property that falls under the purview of your company.

It’s possible to outsource to service providers who offer a statistically sampled inventory but the results they provide are simply estimates, they may be rather more accurate than simply guessing “Meh, about fifty grand.” But they are still, nevertheless, estimates.

It’s Inventory Time

In order to be certain about the financial accuracy of your fixed asset inventory it’s necessary to conduct a wall to wall inventory and reconciliation. Giving your company a full audit is best practice to validate your data quality for asset management and the costs are quickly offset when put up against tax, insurance and overhead reductions.

What to Look for in a Fixed Asset Management System

When you’re hunting for a fixed asset management system or service provider if you’re going to outsource there a few things that every business should put on their shopping list:

• Accurate data which can be used for financial reports, asset tracking, compliance and property tax mitigation.
• Exorcise ‘ghost’ assets which can arise from poorly recorded asset wastage.
• Verify, correlate and consolidate the data which exists on your balance sheet.
• Validate data you record for GASB 34/35 compliance.
• Minimise tax liability
• Achieve an accurate financial assessment for the value of your assets for disposal.

In order to achieve a thorough ‘wall to wall’ audit of your fixed assets in what is known as a Fixed Asset Inventory and Reconciliation it is necessary to perform a complete asset inventory then reconcile that data against the financial records you have.

This provides a breakdown that is accurate enough to reduce your tax burden, confirm your asset records for depreciation and loss and also predict when property will be most economical to service or replace.

Making Life Easier in the Long Run

When your company undergoes its inventory implementing a barcode tracking system will make the job considerably easier the next time around, making valuing and asset tracking a much easier and less disruptive for you and your staff. It also means that you will achieve 100% consistency between what’s on the floor and what you have recorded in the balance sheets and ledgers. It’s probably been a long time since anyone’s gone around and actually looked at what you really do own and conducting this type of work ensures your inventory matches your finance reports.

Surveys have revealed that up to 65% of corporate asset information is ether inaccurate or incomplete, in some instances anything up to 30% of recorded property, hardware and equipment is no longer owned by the company.

About the Author: Dan Cash is a feature writer and former financial researcher currently looking into asset tracking and inventory management to limit tax exposure at work. Getting it right can save a fortune in overheads so why not look into the benefits yourself?

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If you’re like most business owners, there are thousands of tax questions running through your head right now, like “Which expenses are considered business and which aren’t?” or “Are there any tax credits I qualify for?” 

Folks… I’m here to help! This article is your ultimate guide for everything you’ll need to file taxes as a small business owner.

You’ll find:

• Top 5 “Must-Knows”  Before Filing
• 18 Essential Deductions to Save You Money
• 6 Small Business Tax Cuts

Before we go any further, let’s first dive into the things you should know before filing taxes this year:

Top 5 Must-Knows Before Filing

Before you sit down with an accountant or other tax professional to file this year’s taxes, spend some time getting organized:

• Make sure your information is accurate – The “married” or “single” question may seem simple, but let’s take a step back. You can only consider yourself married if it took place before December 31, 2010. If it did, decide if you and your spouse want to file together or separately.
• Can you claim your children as dependents? As long as you provide more than half of your child’s support, they can still be filed as a dependent – even if they’re working and earning a paycheck.
• Income and Expenses – Have you kept track of all income and expenses for the year? Take a look at your expenses and make sure they’re all well documented and separated by category.
• Do you have items that can be depreciated? – Section 179 of the Internal Revenue Code says you can deduct up to $500,000 for the cost of new equipment or related assets during 2010 and 2011. However, certain things don’t qualify such as inventory bought for resale, property purchased from a close relative, and real estate. As a rule, property can be depreciated if it meets ALL of the following requirements:
  • It must be used in your business or to produce income.
  • You must own it.
  • It must have a life that’s expected to extend significantly beyond when you began using it.
  • It must have a determinable useful life. This means it can’t be something that gets used up, becomes obsolete, wears out, decays, gets used up, or loses its value from natural causes.
  • It can’t be excepted property, including that placed in service and disposed of the same year.
• Did you make any charitable contributions? – If you’re a limited liability company, S-Corporation, or partnership, you can deduct the charitable contribution from your business or individually. If you’re considered a corporation, the corporation should deduct the contribution.

18 Essential Deductions That Will Save You Money

Now that we have that covered, let’s move on to your deductions. Take a look at the following list that outlines which business expenses can be used as deductions on your tax return:

• Auto expenses – If you use your car for business (or your business has its own vehicle), you can deduct a portion of the costs including mileage, business-related tolls, maintenance, repairs, and more. You can decide whether to use the actual expense or standard mileage rate method:
  • Actual expense – Keep track of (and deduct) all business-related expenses
  • Standard mileage – Deduct the standard mileage rate for each mile driven (For 2010, the rate is $0.50/mile), as well as parking fees and business-related tolls.
• Advertising and promotional materials
• Business books (or others related to your industry)
• Business travel – Many business-related travel expenses can be deducted, including airfare, taxis, lodging, dry cleaning, and a rental car.
• Computer software – For this year’s taxes, any computer software purchased and used this year is 100% deductible under Section 179. In 2011, this will no longer be the case.
• Contributions to your retirement fund
• Client gifts (up to $25 per year)
• Employment taxes – If your business pays employment taxes, your share is deductible as a business expense. Self-employment tax, however, isn’t considered a business expense.
• Employee pay – This can be deducted as long as it’s in cash, property, or services.
• Employee benefits – Health insurance plans, educational assistance, and life insurance for your employees are all deductible.
• Educational expenses – Any educational expenses related to your current business, occupation, or trade (that are used to improve skills required in your current position) are deductible.
• Home office – Only the percentage of your home that’s used for a home office can be deducted.
• Interest and carrying charges – Any interest or carrying charges when using credit or a personal loan to finance business purchases are deductible.
• Professional fees to lawyers, tax professionals, and consultants
• Meals and entertainment – 50% can be deducted for all client-related meals or entertainment.
• Moving costs – If you move for your business and your new place of work is at least 50 miles further from your old home than your old workplace was, this is deductible.
• Utilities – Water, gas, Internet, and cable
• Inventory – If your business manufactures products or purchases them for resale, you can deduct the cost of goods sold.

6 Small Business Tax Cuts

When filing this year’s taxes, you’ll find a few things are different thanks the Small Business Jobs Act, or SBA. The act aims to give business owners better tax breaks and better access to credit. Here are six new tax cuts that may help during this year’s tax season:

• A new provision eliminates capital gains taxes on small business investments (if held for five years).
• It increases the amount of investments a business can write off to $500,000. Prior to the act, the expensing limit was $250,000.
• The act also implemented a 50% “bonus depreciation” through 2010.
• A new deduction for the cost of health insurance for a business owner and his/her family members.
• Cell phone usage can be deducted without requiring extra documentation.
• Start-ups can deduct $10,000 in expenditures (vs. a prior $5,000).

Keep the above in mind when filing taxes this year. Having this knowledge ahead of time can help save you money – and much stress – when tax time hits!

About the Author: Pamela King promotes tax literacy and tax payer empowerment through research and education. She preaches the “KISS-AF” gospel – Keep it Super Simple and Free. If you can use the 1040ez form for your tax returns then do it!

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It’s the time of year, again. Tax season. Business owners and employees alike are trying to figure out how kind, or cruel, Uncle Sam is this year. Fortunately, for restaurant owners, Congress passed a handful of new laws that ease the tax burden for small business owners. Here are five tax breaks that restaurant owners can greatly benefit from, if you qualify.

Expanded Section 179 Deductions

In September, President Obama signed the Small Business Jobs Act of 2010 into law. The law doubled the amount business owners can expense on their tax return. The section 179 deductions were increased from $250,000 to $500,000 for property that was put in service in 2010 and 2011. Basically, you can write off up to half a million of new equipment expenses or anything else that qualifies as a 179 deduction.

Bonus Depreciation for Qualified Property

In addition to the increased 179 deductions, restaurant owners can also take a 100% bonus depreciation on new equipment or software placed into service between September 8, 2010 and December 31, 2011. This is part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act that Congress passed in December. This helps you recover the investment costs faster.

Tax Break for Hiring New Employees

In March, Congress passed the HIRE Act which exempts employers from paying their share of Social Security taxes on qualified employees. The exemption is only for new employees hired between February 3, 2010 and January 1, 2011. The new workers had to be unemployed or work less than 40 hours a week for 60 days prior to employment. For each new employee who falls within this category, the employer qualifies for a $1,000 tax credit per employee.

Tax Break for Leased Building Improvements

Another part of the Small Business Jobs Act allows lease holders to write off up to $250,000 in building improvements. So, if you lease your restaurant space and made any improvements, you can write off the cost.

Tax Break for Entrepreneurs

For new restaurant owners, who set up shop in 2010, the Small Business Jobs Act allows these entrepreneurs to deduct up to $10,000 in start-up expenses. This is double the amount of the previous year and is designed to encourage new business ventures.

With the government doing everything it can to create new jobs, restaurant owners are among the groups benefiting most from new tax breaks. However, talk to your accountant and make sure everything gets itemized on your tax return correctly, because you can bet the IRS is going to be keeping an eye out for anyone who tries to take advantage of the new tax incentives.

About the Author: Monica is a marketing coordinator at Food Service Warehouse, a restaurant equipment and supplies web store.

Photo Credit: the russians are here

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The following guest post from top selling author, attorney, tax and small business expert, Barbara Weltman is extremely timely for people like myself who put off taxes until the last minute. Here Barbara shares her best last minute tips for tax day.

In today’s economic environment, every financial milestone is an important one. It’s critical that small business owners have the right tools and know-how to properly manage their taxes year-round so they’re not dealing with undue stress on the days leading up to April 15th. The right solutions can help small business owners efficiently and easily manage their business’s finances and employee tax withholdings, so they can spend more time running their business. With the April 15th deadline looming, here are some things you can still do to reduce your tax bill and make the filing process a little easier.

5 Very Last Minute Tax Tips

1. Contribute to a deductible IRA or HSA. Yes, even though 2008 is over, you can put money into an IRA or health savings account (HSA) for the 2008 year (assuming you’re eligible for these accounts) and deduct the contributions on your 2008 return. You must act by April 15th. IRA contribution limits for 2008: $5,000, or $6,000 for those 50 or older on December 31, 2008. HSA contribution limits for 2008 depend on whether you have self-only coverage under a high-deductible health plan, or family coverage; those 55 or older on December 31, 2008, can add another $900.

2. Double check for carryovers. You may have forgotten tax breaks from your 2007 tax return that can be used to cut your 2008 tax bill. Look for capital loss carryovers (reported on last year’s Schedule D of Form 1040), which can be used to offset any capital gains in 2008 if you had them, plus up to $3,000 of ordinary income. Other carryover possibilities: home office deductions, charitable contributions, and net operating losses.

3. Settle up your tax bill. If you owe a small amount, pay it by check or charge it to a major credit card. While the IRS doesn’t charge a fee for paying by credit card, there’s a 2.49% convenience fee imposed by the credit card processor, so if you charge $1,000 in taxes, you’ll pay $24.90 to the processor—a hefty cost for racking up frequent flyer miles. Larger bill? If you can’t pay in full, ask the IRS for an installment agreement by filing Form 9564 This usually allows you to pay what you owe, plus interest, over the next three years.

4. File electronically. If you wait until the last minute, avoid lines at the Post Office, as well as save paper and postage, by using e-File to submit your return. Electronic filing also ensures that your return is free from math errors and has all the required information (e.g., Social Security numbers) for processing; you’ll receive an electronic acknowledgment from the IRS that the return has been accepted for filing. You may even be eligible to use FreeFile to prepare your return online and file it electronically at no cost. Bonus: If you’re owed a tax refund, you’ll get it sooner by filing electronically than you would if you send in a paper return.

5. Put your refund to work. If you’re owed money, use it to create future tax savings. You can have the IRS deposit your refund directly into an IRA, an HSA, or a Coverdell education savings account. Provide the account information (account number and routing number). Make sure the account custodian credits your refund to the correct tax year (e.g., your 2008 is applied toward your 2009 IRA contribution). You can even split your refund into two or more accounts (file Form 8888 to provide all account information.)

Caution: If you had a large refund, recognize that it amounts to an interest-free loan you made to Uncle Sam. To avoid this next year, reduce quarterly estimated tax payments related to your business income to better equal your actual tax bill for the year. Under a new rule for small business owners (more than half your income is derived from a small business and your 2008 adjusted gross income was under $500,000), you won’t be penalized for underpaying estimated taxes and you’ll improve your cash flow by pegging 2009 estimated tax payments (plus any tax withholding) at 90% or more of last year’s tax bill.

Final word. If, for any reason, you don’t want to think about taxes now, be sure to obtain an automatic six-month filing extension. File Form 4868 no later than April 15 to avoid late filing penalties. Also, if you expect to owe money, pay as much of it as you can now to minimize or avoid interest and penalties for late tax payments.

About Barbara

Barbara Weltman is a top selling author, attorney, tax and small business expert. Barbara serves as an expert on the Small Business Online Community, powered by Bank of America. She recently conducted an expert forum on the Small Business Online Community, where she answered questions about the impact of the stimulus package on small business owners. Barbara has also authored several books include “J.K. Lasser’s Small Business Taxes” and “The Complete Idiot’s Guide to Starting a Home-Based Business.”

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