We are almost halfway into 2017. Your small business is doing well and may even be doing better than you had expected. Customers are buying your products, you’re making payroll, you’ve purchased new equipment and you may even be hiring a new employee soon. Business is looking good.
Then, comes the letter in the mail from the IRS.
You owe on your business income taxes! And, it is much more than you thought. You cannot even pay for it right now, even if you put the new equipment and employee on hold.
Now, what do you do?
Don’t panic. It is not the end of your business. There are procedures you can take to resolve it.
Here are Five Steps to Take When You Can’t Pay Your Small Business Taxes:
- Contact the IRS Immediately: Once you get that letter, don’t file it away or stick it in your laptop bag pocket. You may forget it or put it off. The IRS matter never goes away by itself, it just continues to intensify. Even though you can’t pay it now, call the number on the letter and let the IRS know you cannot pay it all by the deadline date. Be honest and open with the IRS official. Document your conversation and create a file where you can put all the documents in, both hard file and computer memory file.
- Pay Whatever You Can: You’ve heard the old saying “Just do what you can.” That works with the IRS, too. Send them a payment of whatever you can, even if it is small amount. That will cut what you do owe down and reduce any fees applicable to the amount you pay. It’s always better to pay something than nothing. The IRS also sees that as a “good faith effort” to pay what you owe,
- Pay in Installments: The IRS may allow you to set up an “Installation Agreement”. This is where you can pay in installments for a certain period of time. Interest and fees may apply but at least you can budget these payments and get it paid off. If you owe 50,000 or less the IRS has a lot of flexibility and will give you up to 36 months. This is a popular way to resolve it, especially for cash-strapped businesses.
- Negotiation in circumstances is Possible: Yes, you read that right. Just because the IRS sent this bill, doesn’t mean you will end up in “debtor’s prison” and life as you know it will end. You may be able to persuade the IRS official to agree to a lower tax debt amount. Believe it or not, the IRS wants this off their books, too. The formal name for this program is the Offer In Compromise. There are set procedures that you have to comply with and you basically have to be insolvent with your financial situation in shambles to qualify. Unfortunately, if you are looking at this option – your business is on the downslide, with the future not looking that bright. That being said you don’t want to be here. The next step down from here is…
- Last Resort: Bankruptcy: Your business is dissolving and you can’t pay the outstanding tax burden. Filing for bankruptcy may be the smartest way to resolve it. This is only for businesses that are closing anyway. Consult a good bankruptcy attorney before taking this action.
The letter from the IRS is no the death knell to your small business. It can cause stress, however, so please don’t panic. You and the IRS want to do the same thing: get it paid off and move on. It can be done! Just take the right steps and keep doing what you and your business do best!
If you need tax advice, both personal and business, please contact our experienced tax and business advisory team at A. K. Burton, PC, for all your personal and business tax and accounting needs. Visit our website at www.cpa-maryland.com or call us at (301) 365-1974 for more information.
In our previous blog we covered a number of steps you can take to get tax-exemption for your non-profit that you have just created. There are quite a few steps to take so we had to split the blog up into two.
Anyway, let’s continue, here are the next Steps to take to get Tax-Exempt Status for your Non-Profit, Part 2:
- List of directors and employees and compensation: You will have manager(s) of your charitable organization and the IRS wants to their names and how much they will be paid by the charity. Your list should include: initial or starter directors, starter officers (executive director, financial officer, chief executive officer, secretary and others); trustees; top five employees who make more than $50,000 a year and any independent contractors which make $50,000 per year.
- List of beneficiaries of your charitable organization: Your non-profit serves a specific population (i.e. homeless, elderly, youth, religious group, etc.) and the IRS wants to see that specific list to make sure that you are legitimate. Your population served is a crucial part of your underwriting. (Researching the local, state of national population is helpful and having that on hand to submit to IRS should they ask is wise to do.)
- Description of your non-profit activities: Provide a complete narrative of all that you do and plan to do with your charity. It should include step-by-step workflow (without including every detail, that may be too much) of your activities and how you plan to do it with your staff. Make sure the pieces fit. In other words, there is no waste in your processes and the staff members all have a role. (Political activity and gambling are prohibited. Be sure to research that or consult a licensed tax advisor.)
- Data on finances: Any 501 C 3 must provide its last five years of financial records to the IRS for review. Other groups have to show finances for all years they have been in existence for three to four years and in good faith for future years depending on the history of the organization. (For more details check with your tax advisor about Form 1023 and IRS non-profit requirements.)
- Are you a “Private Foundation” or a “Public Charity”?: Typically churches, temples, hospitals, schools, etc. are categorized as “public charities” whereas “private foundations” may be organizations that exist to donate money to causes, individuals and others (i.e. Gates Foundation, Kiwanis Foundation, etc.). There are specific rules, of course, for these too so please consult your licensed tax advisor.
- IRS Fee: You didn’t think you could do this for free with the IRS, did you? They do charge certain fees and there is a list of those fees available online and with your tax advisor. Be sure to include the fee payment with your filing or it will be delayed.
Yes, anything worthwhile takes work, sometimes a lot of work. But, if you follow these steps you may be able to get your non-profit organization up and running.
Contact us if you need personal or professional counseling, from tax planning, to payroll to Business/Financial Entity planning and many other services, A. K. Burton, PC, can meet all your personal and business accounting needs. Call us at (301) 365-1974 for more information.
There are many intimidating processes in the world of charitable causes. Sometimes, they change over time due to new laws passed by Congress and enforced by the IRS.
It can be difficult keeping track. Your accountant should always be up-to-date on these changes, for sure.
However, when it comes to tax-exemption, once your charitable organization has incorporated, it is fairly cut-and-dry, as they say. But, for a review, here is How to Get Your Non-Profit Tax Exemption, Part 1:
- Complete IRS Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code: Ironically, this first step may be the most difficult. This form has a number of legal and tax-related technical prose within it, making it a laborious venture. You may want to seek advice from your accountant as you embark on this first part.
- File for Non-exempt Status within 27 months of Articles of Incorporation: When you file during this time period, your charitable organization’s tax exemption will take effect on the date you filed for incorporation. When you do that, then all donations received will be tax-deductible. However, should you delay incorporating during this 27-month period without a “reasonable cause”, then your non-profit’s tax-exempt status starts the date of the postmark on the IRS Form 1023 application.
- Form 1023 Completion: This long form has eleven parts to it. If you have a smaller non-profit, then you may want to do the 1023 EZ Form Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. It is quite evident how this form is so much easier for smaller non-profits so go the IRS website and see if your non-profit is eligible.
- Applicant Identification: This is all basic information about your non-profit organization. Your organization needs an EIN (federal employee identification number). Don’t use the old one when you began this process. Request a new on from the IRS as you start this process. It’s actually pretty easy and they send one fairly quickly.
- Structure of the Organization: You need to attach a copy of articles of incorporation and your bylaws. (Just an FYI: If your non-profit is a LLC, unincorporated association or non-profit trust, please contact your tax lawyer. It gets very complicated if you have those designations.)
- Organizational Document’s Required Provisions: You need to add certain clauses to get your 501(c)(3) exemption: a clause stating that your corporation was formed for a recognized 501(c)(3) tax-exempt purpose and a clause stating that that any assets of the nonprofit that remain after the entity dissolves will be distributed to another 501(c)(3) tax-exempt nonprofit or to a federal, state, or local government for a public purpose.
There are several more steps and we will cover those in our next blog. If you need assistance with your non-profit’s tax-exempt status, we can take you through the entire process (and help reduce the stress).
Call us at if you need personal or professional counseling, from tax planning, to payroll to choice of Business/Financial Entity planning and many other services, A. K. Burton, PC, can meet all your private and business accounting needs. Call us at (301) 365-1974 for more information.
The famous humorist, Will Rogers, once said, “Too many people spend money they earned…to buy things they don’t want…to impress people that they don’t like.”
It is a timeless quote that characterizes so many of us, both personally and professionally. We buy too much, get into debt and find our lives spiraling out of control as our income can no longer support our lifestyle or business.
But this is a New Year. And there is hope. 2017 is here and whatever happened or failed to happen last year is history. You can truly start anew with better financial habits.
So, here are Ten Quick Smart Ways to Save Money in 2017:
- Pay off Debts: This is the most important one of all. Pay off your debts, maybe starting from the lowest to the largest, as quickly as you can. It may mean fewer meals out or holding off on doing vacation this year, but meet with a financial expert and create pay plans to pay them off. Once this is done, you may be surprised at how your life will improve.
- Use Coupons: Just about every grocery store has coupons, most are now in their apps, for their customers. Make a grocery list and use the coupons (or their MVP or preferred customer card) when you buy.
- Brew coffee at home: The fufu coffee beverages at $4.00 and more, add up quickly on a weekly basis. Buy several pounds of coffee and brew it at home before you leave for work. Treat yourself on Friday with one Starbucks drink or other similar coffee shop. You may save $500 a year just doing this!
- Fill up your car: Gas is expensive, especially in the metropolitan areas. If you can fill up your car instead of getting a few dollars’ worth, you can save quite a bit of money in the long run.
- Buy movies online: Going to see a movie can be $15 per person or higher. Plus, the popcorn and candy adds to the outrageous price. Instead, load Amazon Prime or Netflix to your devices and TV. The yearly price may be less than you pay for one or two movies with the family.
- Combine errands: We travel so much around the Washington, D.C. Beltway! It may take several hours to just run an errand or two because of the traffic. So, save time and money by combining your errands (grocery, gas, appointments, visits, etc.) if possible. Less stress and expense!
- Compare Fees on mobile phone plans: There are many different phone plans now. You may have completed your 2-year contract so look around. There are several vendors which charge only a monthly fee for unlimited usage.
- Eat Out Less: This is a tough one and I can understand the reluctance. Eating out is fun at your favorite restaurants. But this can cost hundreds even thousands of dollars a year. So, eat out maybe once a week as a treat. Save up that money for paying off debts, children’s education or home improvements, etc.
- Keep a Spending Journal: Record your expenses for several months and see where your hard-earned income is going. This is a proven way to cool the spending jets and get on track for smarter spending.
- Volunteer: This may sound kind of weird but hear me out. When you are volunteering and helping the underprivileged in your community it does three things: Makes you appreciate what you do have, gives you an opportunity to share your skills with an agency that is assisting others and, lastly, when you are volunteering you are not out spending. Everyone gains from helping others.
I hope this has been a help to you. Get this year off to the right track by saving your hard-earned money and improving your life and others.
If you need personal or professional financial counseling, from tax planning, to payroll to choice of Business/Financial Entity planning and many other services, A. K. Burton, PC, can meet all your private and business accounting needs. Call us at (301) 365-1974 for more information.
When you hear the word “Quickbooks” does it send a shiver down your spine? Do you reflexively spill your mocha on your laptop keyboard? Kick the sides of your accounting files cabinet in disgust?
Well, we can understand your frustration with Quickbooks, we have all felt it at some time or other. However, this is not your grandfather’s accounting program anymore.
In fact, Quickbooks continues to improve its user experience and make it a positive experience for accounting veterans and small business owners (who do it all), alike. Quickbooks is actually easier now, we think.
And, since 2017 is just around the corner and Tax Season (our favorite time of year) begins January 1, utilizing Quickbooks’ many features is essential for us and both our small business and personal business clients. Now is the time to master this stuff.
So, here are Four Helpful Quickbooks Tips for 2017 that will prove extremely helpful:
- Schedule with it: The scheduling feature plans employees’ work schedules and can keep track of meetings, dates and now can schedule the mortgage payment. Deadlines can be automated and bills paid through it, too. It is amazing how much can be loaded into this feature so you have more free time to meet with present clients and solicit new clients.
- Utilize the “Undeposited Funds” account: This Quickbooks feature scared a lot of users because we just didn’t understand it, frankly. It’s quite simple though as this is used to track moneys deposited until the deposit is entered in Quickbooks. This is actually not that intimidating anymore and very helpful. Your monthly reconciliation is simpler now as the amount entered in Quickbooks will match (or should, anyway) the deposit amount on the bank statement. Forget doing it manually from here on out. This is truly not worth having nightmares anymore. It works like a charm.
- Changing Transactions: Once the absolute bane of accountants everywhere because it was too easy for company personnel to make (unwarranted or incorrect) changes, this feature is much improved now. You can change the settings and password protect the “Date Warnings” so you can restrict changes to a select few. This is a vast improvement and will reduce some major stress as you manage accounts.
- Merge all finances into one program: You should track all your bank statements and transactions and then reconcile Quickbooks with your other statements. Your accounting numbers will be up-to-date, then. You can do your income, credit lines, billing and bank statements here. All your data runs through one central location.
There are many more aspects of Quickbooks (and their many programs) that we can explore in future blogs. The New Year is coming and certainly there will be updates and improvements. We will definitely keep you informed.
In the meantime, utilize Quickbooks! It’s not as intimidating or aggravating as it once was. So, drink your mocha and repair the dents in your filing cabinet. Life for us Quickbooks users is better now and, dare we say, simpler.
If your business needs accounting & tax services of any nature, our team at A. K. Burton, PC, can meet all your private and business accounting & tax service needs. Call us at (301) 365-1974 for more information.