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4 Financial Tips for Small Business Owners

4 Financial Tips for Small Business Owners

 As a small business owner, managing your finances can be overwhelming and intimidating. There are so many things to consider, from taxes to cash flow to budgeting. Luckily, there are some simple tips you can follow to help make the process easier. Let’s look at four financial tips every small business owner should know.

1.  Create A Budget and Track Your Expenses:

Creating a budget is essential for any successful business. With a budget, you can easily manage your finances and plan for the future. Plus, tracking your expenses will help you identify areas where you can save money. Make sure to track all of your income and expenses (including taxes!) on a regular basis. This will ensure that everything is accounted for and that you have an accurate picture of your overall financial health.

 2.   Secure Financing Early On

 If you don’t have access to capital or don’t want to use your own funds, securing financing early on is key. Whether it’s taking out a loan, talking to an accountant, applying for grants or even crowdfunding, having the right funding can make all the difference in getting your business off the ground. Make sure that you research all of your options before making any decisions – this will help ensure that you get the best deal possible!

 3.    Keep An Eye on Cash Flow 

Cash flow is one of the most important aspects of running a successful business. Keeping an eye on cash flow means staying on top of invoices and payments from customers as well as keeping track of bills and other expenses that need to be paid in order to keep operations running smoothly. Setting up automated reminders or using an accounting software solution can help make this process easier – but ultimately it’s up to you as the business owner to monitor cash flow closely and stay ahead of any potential issues with payments or collections from customers.

  4.    Hire Professional Help When Needed

 When it comes to managing finances, sometimes it pays (literally!) to hire professional help when needed. Hiring an accountant or bookkeeper can save time and money by ensuring that all paperwork is filed correctly, and all necessary tax documents are in order each year. Additionally, hiring professionals may also provide valuable advice related to cash flow management or other financial matters that can help keep your business on track financially over time!

With these four simple tips in mind, managing your finances as a small business owner doesn’t have to be so daunting! By creating a budget and tracking expenses regularly, securing financing early on if needed, monitoring cash flow closely, and hiring professional help when necessary- you’ll be well on your way towards a successful small business with healthy financials. 

Spotting Red Flag Accounting Practices

Spotting Red Flag Accounting Practices

If you’ve ever attempted a quick Google search for CPAs in your area, you’ve probably learned there’s no such thing as a quick search for an accountant. Accounting is all about the details, and when you’re trying to find someone to handle your finances, it pays to be thorough. Your money is at stake, and you should only choose someone who has your best interests in mind. A small amount of accountants have questionable (to say the least) practices, and knowing the warning signs makes a big difference:

Outdated CPA Certificate

There’s a reason many people prefer to work with a CPA rather than a general financial planner: the title requires a higher level of expertise. In addition to years of schooling, CPAs complete exams to ensure a high-level understanding of auditing, business concepts, financial rules and reporting. It’s worth asking for credentials to ensure your accountant has retained their license. (more…)

Bookkeeping Basics: Determining Your Accounting Method

Bookkeeping Basics: Determining Your Accounting Method

When you start a new business, you have to make a decision regarding how you will approach your financial management. Two basic methods are available to you: cash basis or accrual basis. Although the two methods clash, there are also see some similarities.

Cash basis is an accounting method that counts income only after cash or a check is received and expenses are not counted until they have been paid. This method is the most popular accounting method among entrepreneurs and small businesses.

Accrual basis is an accounting method that counts income when orders are placed or services are requested, regardless of payment being received. Expenses are counted when your request for good or services is fulfilled.

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6 Year-End Tax Tips That Will Save Your Small Business Money

6 Year-End Tax Tips That Will Save Your Small Business Money

As the end of the year draws near, it’s time to start thinking about your tax strategy. If you’re a small business owner, there are a few things you can do to reduce your tax bill and maximize your deductions. Planning ahead and doing some year-end housekeeping can help you make the most of any tax break that your business qualifies for. We have identified six smart tax moves to consider before the clock strikes midnight on December 31st.

 

Write Off Bad Debt

The IRS allows you to write off bad (un-collectible) debts before the end of the year and deduct those that are unpaid from your taxable business income. By writing off this debt, you can reduce your company’s tax burden for the current tax year.

Note, that if the customer ends up paying their invoice in the future, you will need to reverse  the write-off and declare the payment as income. It’s best to discuss this with your tax advisor to ensure the process is handled properly.

 

Stock Up

At the end of the fiscal year, businesses can reduce their taxable income by purchasing business equipment, supplies and other assets that will be used in the coming year. If your business is in a good financial position, replenishing office supplies or stocking up on inventory, could give you a larger deduction.

 

Prepay Expenses

Businesses can choose to prepay for services they will use in the coming year. For example, insurance coverage, subscription services, business rent, association dues and other fixed expenses can be paid in advance, reducing your businesses taxable income for the year.

 

Defer Income

Small businesses typically use the cash method of accounting, meaning a company recognizes income when cash actually changes hands. This method allows for the option of taking income this year or next year. If you anticipate being in a lower tax bracket next year, you might want to defer income to take advantage of the lower tax rate. Waiting until close to the end of the year to invoice clients will defer income to the next year and lower your current tax bill.

 

401(k) Plan for Employees

Setting up or contributing to an employee retirement account can reduce your business’s taxable income. Business owners can claim a tax credit for the cost of setting up and administering a 401(k) plan. The potential tax savings are usually more than enough to cover the cost of setting up and funding the plan.

 

Employee Bonuses

Many businesses give end of the year bonuses to their employees. These not only serve as extra incentive for employees, but they are also commonly tax-deductible for businesses that operate as corporations. You can deduct the cost of any bonuses paid to employees, if the bonus was given as additional compensation for services, not as a business gift – decreasing your overall tax obligation.

 

Now is the time to start planning your end of the year tax strategy. Don’t miss out on the opportunity to reduce your business’s taxable income and keep more of your hard-earned profits. Taking advantage of these year-end tax planning strategies will aid in minimizing your taxes and help make next tax season a little less taxing.

The small business tax professionals at Motl Accounting are here to ensure that your business is taking full advantage of deductions, write-offs and other tax benefits to end the year right.

What Every American Expat Needs to Know About Paying Taxes

What Every American Expat Needs to Know About Paying Taxes

As a U.S. citizen living abroad, you may be wondering if you are still required to file taxes. The answer is YES. All U.S. citizens are required to file tax returns with the IRS and report 100% of their worldwide income every year. In this blog, we provide an overview of your filing obligations as a U.S. expat and discuss tax exclusions and credits that can reduce your U.S. tax liability.

The United States is one of only two countries that follows a citizenship-based tax system. This means that all citizens of the U.S. are taxed under the same personal tax system, regardless of whether they live in the U.S. or abroad. The only way to stop having to file, and for some expats pay, U.S. taxes is to renounce your U.S. citizenship.

With that said, paying taxes twice on the same income is a common concern for U.S. citizens working abroad. Luckily, expats can qualify for special credits, exemptions and deductions, allowing them to avoid double taxation on their annual U.S. tax return.

Foreign Earned Income Exclusion

One of the most valuable exemptions for expats is the Foreign Earned Income Exclusion(FEIE). For tax year 2022, FEIE allows expats to exclude up to $112,000 of their foreign earned income from their U.S. taxable income. This exclusion can be a significant tax break for expats and can help to reduce their overall tax liability.

Taxpayers qualify for this exemption in one of two ways:

Bona fide residence test – You must reside in a country for the entirety of a tax year, January 1st to December 31st.

Physical presence test – You must live in a foreign country for a full 330 days within a 12-month period.

Foreign Tax Credit

Another tax saving alternative for American expats is the Foreign Tax Credit (FTC). The Foreign Tax Credit allows expats to credit up to $300, $600 if filing jointly, of foreign taxes paid against their U.S. tax liability. This credit can help to offset some of the tax burden for expats who are paying taxes in both the U.S. and another country.

Generally, the following four tests must be met for any foreign tax to qualify for the credit:

You can’t claim both the Foreign Earned Income Exclusion and the Foreign Tax Credit against the same income. You must choose one or the other. Work with your expat tax advisor to determine which one is most beneficial for you to claim. 

Foreign Housing Exclusion

The Foreign Housing Exclusion allows U.S. taxpayers living abroad to write off overseas expenses associated with housing costs from their gross income on their U.S. tax return. This expat-friendly tax deduction can be used together with the Foreign Earned Income Exclusion. 

Just like the FEIE, taxpayers must qualify under the bona fide residence test or the physical presence test. 

If you qualify for the Foreign Housing Exclusion, the following expenses can usually be excluded on your U.S. tax return:

    • Rent in a foreign country
    • Utilities minus your phone, TV and internet
    • Homeowner’s or renter’s insurance
    • Property or leasing fees
    • Furniture and parking rentals
    • Rental repairs 

Calculating the amount that can be excluded under the Foreign Housing Exclusion is complicated. Work with a professional expat tax advisor to make sure you are excluding the maximum amount allowed. 

If you are an American expat, it is important to understand your tax responsibilities. The good news is that there are several resources available to help you navigate the complex world of international taxation. At Motl Accounting, we have extensive experience helping Americans living and working abroad meet their tax obligations. We can provide you with all the information you need to file your taxes accurately and on time. 

We are here to help make this process as easy as possible so you can focus on living your best life overseas. Contact us today!

Source: IRS.gov

How Working from Home Affects Taxes

How Working from Home Affects Taxes

The pandemic led to a large number of professionals working from home instead of their office space. Many may be wondering how this will affect their taxes and if they’ll get a tax break.

The general thinking could be leaning towards you getting a break as an employee working from home, but that may not be the case. Tax breaks of the sort ended with the 2017 tax cuts with little exemptions. This means employees who don’t get reimbursed for their expenses by their employers can’t claim those expenses the way they used to. It’s more complex If you are self-employed and there are rules to be mindful of. You can still deduct a home office and some other expenses related to working from home, but want to ensure you are following the guidelines. It helps to speak with an accountant to get more clarity, but here is some helpful information:

What Can I Claim On My Taxes Working from Home?

Employee

You are not supposed to deduct your expenses when you work from home as an employee if your taxes, social security and medicare are deducted from your paycheck. Prior to the 2017 Tax Cuts and Jobs Act passed by the United States Congress, employees could deduct expenses like mileage, home office supplies, work outfits and more. The IRS now tends to qualify remote employee expenses of that manner as “miscellaneous itemized deductions” and since 2018 itemized deductions can only be taken if they exceed the standardized deductions. 

Self Employed 

Self employed professionals and business owners can still deduct for their office, meals, mileage supplies, marketing and more. Expenses you get in regards to working from home are tax deductible. It’s important to note that the expenses need to be exclusive to the business’s operations. A space used as an office by day and bedroom any other time would likely not be compliant. The space being used needs to be exclusively used for your business. 

Tax Breaks Due to Covid-19?

There aren’t currently any special tax breaks for those working from home due to the pandemic. You can however count on a good accountant to ensure you get any tax breaks related to the pandemic if there are changes in the future. 

In conclusion, the changes to the tax laws with regards to working from home may be confusing as time goes on. Having a professional assist you with your finances as an employee or business owner can make a difference. Accountant’s like us here at Motl Accounting are mostly aware of these changes and can help you get the most out of your taxes. 

If you need to know more about what you can claim on your taxes, contact a professional at We’ve helped several individuals, families and businesses with getting the most they deserve out of their taxes.