WordPress subtly reminded me upon my log-in today that the holiday season is upon us with it’s delightful snow plug-in. Anything I don’t have to shovel gets a big thumbs up from me.
One of the reasons I love this time of year so much is the spirit of giving that everyone seems to share over the course of the next 30 days. As a small business owner, you may want to consider donating a percentage of profits from your products and services to charity this season. From a marketing perspective, advertising this move may entice your customers to buy from you over your competitors.
Here are some charitable causes for you and your business to keep your eye out for as we approach year-end:
1. Toys for Tots: Sponsored by the U.S. Marine Corps, this charity collects unwrapped toys for local children in need. It’s early December, and I’ve already had two opportunities to give through my local alumni association, and a 5k race in my neighborhood where the entry “fee” was an unwrapped toy. Your business can also sign up to be a designated T4T drop spot.
2. Salvation Army: The red kettle and bell-ringing are classic Christmas icons, but there are other ways to provide assistance to the Salvation Army. You can gift airline miles, donate a car, or contribute household goods such as office furniture.
3. Sponsor a Scholarship: Work with your local university to fund a scholarship for deserving students in your industry. Tuition prices continue to climb every year, so even a small scholarship that can help pay for books will be appreciated. As an added bonus, you’ll potentially be investing in your company’s future to ensure you have the best and brightest talent, and maybe help out your company’s website from an SEO perspective if you can get a .edu site to link back to yours with information about your scholarship.
Keep in mind that charitable contributions generally pass through to your personal tax return. For those of you that want to take a personal deduction, you can find the rules at the IRS website. There is a way that you can supercharge the amount of your deduction. The gift of cash represents what you get to keep after you have paid income taxes. Instead, consider gifting appreciated stock that you have held for more than one year. The charity wins when it sells the stock for current market price, you win because you get a tax deduction on the full market value price, and YOU DO NOT have to pay tax on the gain. For example, if a stock you purchased last year for $100 is now selling at $150, your tax deduction is $150 and no tax on the $50 gain is paid.
As we roll into the final month of the year, the question lingering on everyone’s mind is whether or not Black Friday and Cyber Monday are counted within the Twelve Days of Christmas.
If you’re a payroll professional, you might be thinking less today about where the hottest deals on the web are, and more about what needs to be done within the next few weeks to prepare for year end. Early December is the perfect time to preview your W-2s to make sure they will print correctly come December 31, as you still have a payroll or two to update missing taxable fringe benefits.
Things To Look Out For
- Check to make sure the Federal and state tax ID is correct. Also check the spelling of your employees’ names, as the names on the W-2 should match the names they use on their tax returns (ex – Mike’s legal name might be Michael).
- If your employees are covered by a defined benefit or defined contribution plan, then it is important that Box 13 (retirement plan) is checked. To perform this task in QuickBooks, go to:
- Employee center > edit employee > change tab to Payroll and Compensation tab
- If you are an S Corporation, check if the owner has taken a reasonable wage for the services provided during 2011. The IRS has added plenty of new auditors, fully trained them on this one issue. If you don’t take reasonable compensation you could be raising a red flag on your corporate tax return saying “AUDIT ME.”
Also for S Corps, don’t forget to include the cost of the health insurance premiums for the owners in their W2s.
Create an Addition payroll item:
1. Lists menu> Payroll Item List >Right Click and select New payroll item
2. Select Custom Setup and click Next
3. Select Addition and click Next
4. In the Name used in paychecks and payroll reports window, enter the name of the new payroll Addition item (“S-Corp In”) > Next
5. For the Expense account, enter the account that normally holds the gross wages for S Corp owners (officer compensation* ) >Next
6. In the Tax tracking type window, select SCorp Pd Med Premium from the drop-down list > Next
7. Click next in the tax window (QuickBooks does a good job of selecting the appropriate taxes)
8. In the Calculate based on quantity window, select Neither > Next
9. In the Default rate and limit window, clear both fields (they should be blank) and click Finish
Create a Deduction payroll item:
1. From the Lists menu > Payroll Item List > Right Click and select New payroll item
2. In the Select setup method window, select Custom Setup > Next
3. Select Deduction > Next
4. In the Name used in paychecks and payroll reports window, enter the name of the new payroll Deduction item (“S-Corp Out”) > Next
5. Skip the Agency liability field, in the Liability account (employee-paid) Type S Corp Health Reclassified> click on the tab on your keyboard and add the new account as an expense account and make it a sub-account of Health Insurance Expense. > Next
6. In the Tax tracking type window, select None > Next
7. In the Taxes window, do not make any selections. > Next
8. In the Calculate based on quantity window, select Neither > Next
9. In the Gross vs. net window, select net pay > Next
10. In the Default rate and limit window, clear both fields (they should be blank) and click Finish
Now create a paycheck for each S corp owner that is covered by a company health insurance policy.
Use S-Corp payroll items you just set up: This adjustment can be made in a separate paycheck using unscheduled payroll or in the next regular payroll
1. Click into the Review Paycheck
2. In the Other Payroll Items field, select the Addition item created, S-Corp In, from the drop-down list, and then enter the premiums paid for the year in the Rate column
3. On the next line in the Other Payroll Items field, select the new Deduction item you created, S-Corp Out and enter the same amount entered for the Addition item in the Rate column. You will notice that this adjustment will have a calculation for federal and state income tax withholding taxes (that should be it, if there are other taxes withheld, then the payroll item was not setup properly) Change the federal and state income taxes withheld to zero and discuss adding that same amount as additional withholdings on the next regular paycheck. There should be no other taxes deducted.
4. Once the Check Amount is zero, Click OK
*If all your payroll is posted to payroll expenses and not broken into departments or classes of employees, call or e-mail us to discuss a support session to get this problem resolved for you.
Fringe benefits provided by the employer are includable in the W-2. Common fringe benefits include:
- Taxable cost of group term life insurance over $50,000
- Nontaxable sick pay
- Employee personal use of a company vehicle
- Employee discounts over certain limits
Fringe benefits do not include using company time to get great deals on gifts for your loved ones. Enjoy Cyber Monday!
According to the American Farm Bureau Federation, a traditional Thanksgiving dinner complete with turkey, stuffing, cranberries, and my personal favorite, pumpkin pie, will cost you 13% more this year than last year.
Perhaps it’s time to usher in a new era – Thanksgiving lasagna, anyone?
Food and energy prices aside, market watchers and analysts are suggesting we small business owners perhaps need not fear inflation as we have in the past. Whether adjusting your own pricing for inflation or other reasons, QuickBooks can help you accurately update your financial records, providing better balance sheet and income statement reporting for your business.
Keeping on top of your profits per service, per customer is important. So when your costs change, it is important to revisit your sales pricing to determine if an adjustment will help or hurt your business. In QuickBooks Pro and Premier desktop edition, adjusting prices is completed in the Item list.
Click on List menu, then Items
Right click on an item name, select edit item and then replace your old selling price with the new one.
Your existing transactions will not be changed, only new transactions will use the new pricing. So be sure to review open sales orders or active estimates created with the old pricing to determine if you need to update with the new pricing, as this will not happen automatically.
If a vendor has changed many cost prices, you can easily identify those items in your item list and change in a list view, similar to working in excel:
Click on Edit menu; then Add/Edit Multiple List Entries
For those companies that encounter random price changes from vendors through the year, consider upgrading to QuickBooks Enterprise. The 2012 edition introduced a new feature; whenever the cost changes on a purchase transaction, you can have QuickBooks change the selling price. The settings can be applied to each item as to whether you want to approve the price change or just automatically change the selling price. On each item, you can set the markup for that item over cost.
I’d like to wish you and your family a very Happy Thanksgiving this week! And if it isn’t too expensive, have an extra slice of pumpkin pie on my behalf.
I woke up this morning with an extra hour (Thank you Daylight Savings Time) and realized we’re in November. Where has 2011 gone? I guess time flies when you are fighting rogue tornadoes, random Northeastern earthquakes, hurricanes, freak snowstorms, and week-long power outages.
Given that it’s an election week, it seems appropriate to look forward to the future instead of dwelling on the past (and I know that’s easier said than done for our friends still surviving without power from October’s wintery woe). As a QuickBooks Pro Advisor, I advise my clients not to lose sight of how quickly year end is approaching and to start pulling together documentation needed to determine April’s tax liability. Well maintained books help your CPA crunch the numbers to determine your tax bill.
QuickBooks provides an excellent year end checklist to get your books ready which can be accessed by going to Help Menu > QuickBooks Help > Type “Year End Guide” into the help search box.
You can also visit Intuit for an even better checklist (although note that this will download a Word document to your downloaded files folder).
Of course, don’t forget to plan how you can make next year even bigger and better for your business. Developing a sound budget for 2012 that includes anticipating sales as well as with forecasting expenses for the year that typically come along with growth. You can find a great budgeting tool in QuickBooks under the company menu > planning and budgeting tools.
Unless you do the brainstorming necessary to determine exactly how you will grow, the preceding point becomes moot.
Much of business growth comes from increased sales. In order to free up some of your time, think about turning over your payroll functions to Intuit who will pay the taxes and prepare the forms. Call us for quotes (800-216-0763).
In addition, if you are not using a CRM (Customer Relationship Management tool), it may be time to investigate one that will work for you. We offer a CRM that gives your sales team access online to the QuickBooks transaction history for just their customers.
Key features of a CRM that will lead your team to high productivity are:
1. Tracks sales leads, phone calls, emails and reminders
2. Track effectiveness of marketing campaigns
3. Schedules follow-ups for tasks
4. Eliminates duplicate entry and enforces business processes set up by management
5. Offers management increased awareness of clientele and sales opportunities
6. Offers a customer and vendor portal
Closing out 2011 with proper planning will get you off to a fast (and hopefully weather-free) 2012.
I envision a future in which traditional Halloween decorations and haunting music will be replaced by stock market tickers and closing bells. For an individual nearing retirement, nothing is more bone chilling than reviewing their quarterly 401(k) statements. Although we’ve ended October 2011 in the black, the volatility of the market over the course of the month certainly hasn’t instilled any confidence in our employees ability to retire.
According to a recent Prudential white paper on defined contribution (DC) plan solutions, this poses challenges for employers as well:
- Increased volatility in staffing needs: DC participants’ retirement decisions will be heavily impacted by fluctuations in the financial markets (a 1% increase in the S&P 500 index in any given year increases the probability that a pre-retiree will retire by 2.5%). DC participants are more likely to delay retirement when financial markets decline, when employers are facing headwinds in their businesses and would therefore prefer that forecasted employee retirements take place.
- Higher workforce costs: The relationship between the age of your workforce and cost is complex – wages paid to an older worker vs. a younger worker may play a factor, as well as healthcare costs.
- Reduced workforce engagement: Morale may suffer in your organization if the lack of retirements prevent opportunities for staff members to advance in their careers.
- Has a higher probability of being able to retire on time
- May be able to withdraw more during retirement
- Will always have an income source in retirement
- May or may not be able to leave a bequest – however, keep in mind that retirement savings should be designated for just that purpose. If it is important to your employees to leave something to heirs, whole life insurance may be a good solution.
Earlier this month, Starbucks CEO Howard Schultz shared his plan to solicit donations from Starbucks customers to help fund small businesses in a joint program with the Opportunity Finance Network called Create Jobs for USA. Starting November 1, for every $5 donated at a Starbucks (roughly the cost of a second grande non-fat Pumpkin Spice Latte), you can walk out with a cool wristband and the satisfaction of helping fund Main Street. Starbucks has already made a $5 million donation, which, coincidentally, would yield enough wristbands for each QuickBooks user out there.
Important to point out is the subtle note that verifies each wristband is made in the USA!
Small businesses that have not been able to obtain a loan through conventional banking methods may be eligible to receive a Starbucks loan. Whether you’re just starting up or looking to expand, there is one basic requirement: proof that jobs will be created (temporary or permanent) by the business seeking the loan. According to this NJ.com article, one new job will be created for every $3,000 donated to the program. If you think your business qualifies, you can start the process by visiting the OFN Community Development Financial Institution (CDFI) Finder. (Very easy to use – a quick search yielded two in my community).
While Starbucks is the latest to receive kudos for helping out the little guy, they’re certainly not the first. The Sam Adams brewery has provided small business loans and free business education seminars to the community since April, although clearly an additional requirement to receiving a Sam Adams loan is being at least 21 years of age (the website prompts you to verify your age twice before you can even get to the link provided above).
Regardless of your preference to fill your mugs with coffee vs. beer, I think we can all raise our glasses to these two companies and their positive steps towards investing back into entrepreneurship. Cheers until next week!
What other micro-lending ventures have you heard about? Leave a comment to share resources with other small business owners here.