How to Avoid a Refund Delay

WASHINGTON – As tax filing season approaches, the Internal Revenue Service is reminding taxpayers about steps they can take now to ensure smooth processing of their 2016 tax return and avoid a delay in getting their tax refund next year.

The IRS reminds taxpayers to be sure they have all the documents they need, such as W-2s and 1099s, before filing a tax return. You may also need a copy of your 2015 tax return to make it easier to fill out a 2016 tax return. 

Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity. Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return. The IRS will begin accepting and processing tax returns once the filing season begins.

If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) on your tax return, the IRS must hold your refund until February 15. This new law requires the IRS to hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure that you receive the refund you are owed by giving the agency more time to help detect and prevent fraud.

Though the IRS issues more than nine out of 10 refunds in less than 21 days, some returns are held for further review.

IRS Reminds Taxpayers of Refund Delays in 2017

Beginning in 2017, a new law approved by Congress requires the IRS to hold refunds on tax returns claiming the EITC or the ACTC until mid-February. The IRS must hold the entire refund — even the portion not associated with the EITC and ACTC — until at least Feb. 15. This change helps ensure that taxpayers get the refund they are owed by giving the agency more time to help detect and prevent fraud.

''This is an important change as some of these taxpayers are used to getting an early refund," said IRS Commissioner John Koskinen. "We want people to be aware of the change for their planning purposes during the holidays. We don't want anyone caught by surprise if they get their refund a few weeks later than in previous years."

As in past years, the IRS will begin accepting and processing tax returns once the filing season begins. All taxpayers should file as usual, and tax return prepares should submit returns as they normally do. Even though the IRS cannot issue refunds for some early filers until at least Feb. 15, the IRS reminds taxpayers that most refunds will be issued within the normal time frame: less than 21 days, after being accepted for processing by the IRS. The Where's My Refund? tool on IRS.gov and the IRS2Go phone app remains the best way to get this status of a refund.

Building Your Business Support Network

Consider the following strategies in either engaging with people you hope to connect with or need to re-engage to strengthen the support around you as well as to look for new business opportunities.

1. Alumni: Reconnect with college and/or high school staff and classmates by letting them what you are doing now and what you have accomplished or plan to accomplish in your business. There might be opportunities to collaborate with university or community college by speaking at the school, hiring seasonal workers or bidding on a project. 

2. Chamber of Commerce: Join a local or state chapter and meet and support business leaders. Becoming an active member can expose you to other industries, opportunities and like-minded contacts.

3. SCORE: Supported by the SBA, SCORE is a nonprofit that helps entrepreneurs launch and grow their business. There are SCORE locations throughout the U.S. Between workshops and mentor-ship business owners can access professional support year-round.

4. Faith-based community: Your spiritual relationship with the members at your place of worship can have a positive effect on your personal life and business goals. Lean on faith-based organizations and activities that promote a healthy, productive lifestyle.

5. Extracurricular groups: It’s easy to forget that we form bonds with people we meet through leisure activities like sports leagues, volunteer and travel groups. When not working on or in your business, it’s essential to have a release.  

6. Former co-workers: If you’ve shared ideas or worked well with previous coworkers and staff, re-engage them to share your current business venture. Their skillet might be useful in your next idea or they can provide insight or contacts that you may have not consider.

7. Professional organizations or conferences: Depending on the nature of your work and business, there might be an established network of professionals who meet annually. Conferences and professional groups are instant support systems because they bring together small and large crowds of people who are similar. You can get a lot of inspiration and information by not only attending events but potentially sponsoring or speaking at one.

8. Online groups via forums, private Facebook groups or Slack communities: Thanks to the internet and social networking, interfacing with other business owners across the world is reality. Building connections that go beyond day-to-day business matters, can provide new ideas and a different perspective. 

Author By Ijeoma S. Nwatu

Preparing Financial Statements

Understanding financial statements is essential to the success of a small business. They can be used as a road map to steer you in the right direction and help you avoid costly breakdowns. Financial statements have a value that goes far beyond preparing tax returns or applying for loans.  

The balance sheet is a snapshot of your business financials. It includes assets, and liabilities and net worth. The "bottom line" of a balance sheet must always include (assets = liabilities + net worth). 

The individual elements of a balance sheet change from day to day and reflect the activities of a business. Analyzing how the balance sheet changes over time will reveal important financial information about a business. It can help you can monitor your ability to collect revenues, manage your inventory, and assess your ability to satisfy creditors and stockholders.

Liabilities and net worth on the balance sheet represent sources of funds. Liabilities and net worth are composed of creditors and investors who have provided cash or its equivalent to your business. As a source of funds, they enable your business to continue or expand operations.

Assets represent the use of funds. A business uses cash or other funds provided by the creditor/investor to acquire assets. Assets include things of value that are owned or due to a business.

Liabilities represent obligations to creditors while net worth represents the owner's investment in the business. Both creditors and owners are "investors" in the business with the only difference being the timeframe in which they expect repayment.

Breakeven Analysis

It is important to identify your startup costs, which will help you determine your sales revenue needed to pay ongoing business expenses.

For instance, if you have $5,000 of product sales, this will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.

To calculate your breakeven point, you will need to identify your fixed and variable costs.

•  Fixed costs are expenses that do not vary with sales volume, such as rent and administrative salaries. These expenses must be paid regardless of sales, and are often referred to as overhead costs. 
• Variable costs fluctuate directly with sales volume, such as purchasing inventory, shipping, and manufacturing a product. 

To determine your breakeven point, use the equation below:

Breakeven point = fixed costs/ (unit selling price – variable costs)

Using Personal Finances

Personal Finance Budget

Starting a business can be a tremendous strain on your personal finances. It takes time before your new venture turns a profit and provides financial support for you and your family. 

To get started, write a monthly household budget that accounts for your income and your household expenses. Be as conservative as possible because maintaining your household expenses is vital to the success of your business. Any strain on your personal budget can cause a financial risk to your business.

It is also important to check your personal credit history. Because you have not established a business credit history, lenders and suppliers will use your personal credit history to determine your terms of credit.

Your credit report, which is issued by a credit bureau, determines how potential lenders and suppliers will perceive you. You should know what appears on your credit report because you may find errors to  correct.

 You can get a copy of your personal credit report from one of the three major credit bureaus: Equifax, Experian, or TransUnion.

SBA Financial Assistance Eligibility

The types of businesses that are eligible for financial assistance from the SBA, must:

• Operate for profit
• Be engaged in, or propose to do business in, the United States or its possessions
• Have reasonable owner equity to invest
• Use alternative financial resources, including personal assets, before seeking financial assistance

Special Considerations

Special considerations apply to some types of businesses and individuals, which include:

• Franchises are eligible except when a franchiser retains power to control operations to such an extent as to equate to an employment contract. The franchisee must have the right to profit from efforts commensurate with ownership.
• Recreational facilities and clubs are eligible provided: the facilities are open to the general public, or in membership-only situations, membership is not selectively denied or restricted to any particular groups
• Farms and agricultural businesses are eligible. However, these applicants should first explore Farm Service Agency (FSA) programs, particularly if the applicant has a prior or existing relationship with FSA.
• Fishing vessels are eligible. However, those seeking funds for the construction or reconditioning of vessels with a cargo capacity of five tons or more must first request financing from the National Marine Fisheries Service.
• Medical facilities including hospitals, clinics, emergency outpatient facilities, and medical and dental laboratories are eligible. Convalescent and nursing homes are also eligible, provided they are licensed by the appropriate government agency and they provide more than room and board.
• An Eligible Passive Company (EPC) is a small entity that does not engage in regular and continuous business activity. An EPC must use loan proceeds to acquire or lease, and/or improve or renovate real or personal property that it leases to one or more operating companies for use in the operating company's business. .
• Change of ownership . Loans for this purpose are eligible provided the business benefits from the change. In most cases, this benefit should be seen in promoting the development of the business or, perhaps, in preserving its existence.
• Legal aliens are eligible; however, consideration is given to status (e.g., resident, lawful temporary resident) in determining the businesses’ degree of risk.
• Probation or parole . Applications will not be accepted from firms in which a principal is currently incarcerated, on parole, on probation or is a defendant in a criminal proceeding. Judgments are made on a case-by-case evaluation of the nature, frequency, timing of the offenses, and disposition of the offenses. Fingerprint cards are required only when a felony offense is disclosed.

Developing A Cash Flow Analysis

You need it to start, operate, and expand your operations, but many small business owners often have trouble managing and maintaining cash. Inaccurate cash flow analysis - or lack of available cash - can affect the everyday operations of your business and your eligibility to receive a loan.

Cash flow is the movement of money in and out of your business. The process includes:

An effective cash flow system will help you manage funds to cover operational costs and bills and help you foresee potential problems in the

Profit and loss statements and income statements can be used to determine projections for future cash flow trends of your business.

Cash flow analysis statements are generally separated into three parts:

• Operating activities: This section evaluates net income and loses of a business. By assessing sales and business expenditures, all income from non-cash items is adjusted to incorporate inflows and outflows of cash transactions to determine a net figure.
• Investment activities: This section reports inflows and outflows from purchases and sales of long-term business investments such as property, assets, equipment, and securities. For example - if your bakery business purchases an additional piece of kitchen equipment, this would be considered an investment and accounted for as an outflow of cash. If your business then sold equipment that was no longer needed, this would be considered an inflow of cash..
• Financing activities: This section accounts for the cash flow trends of all money that is related to financing your business. For example: if you received a loan for your small business, the loan itself would be considered an inflow of cash. Loan payments would be considered an outflow of cash, and both would be recorded in this part of the cash flow analysis statement.

Making cash flow projections and computing cash flow statements can be confusing if you have never managed these types of finances before.

 Ask your business accountant or contact a business.

Estimating Startup Cost for Your Business

Asses the cost associated with staring, managing and growing your business.

If you are planning to start a business, it is critical to determine your budgetary needs.

Since every business is different, and has its own specific cash needs at different stages of development, there is no universal method for estimating your startup costs. Some businesses can be started on a smaller budget, while others may require considerable investment in inventory or equipment. Additional considerations may include the cost to acquire or renovate a building or the purchase of long-term equipment.

·         To determine how much seed money you need to start, you must estimate the costs of doing business for the first months.

Some of these expenses will be one-time costs such as the fee for incorporating your business or the price of a sign for your building.

Some will be ongoing costs, such as the cost of utilities, inventory, insurance, etc.

·         While identifying these costs, decide whether they are essential or optional. A realistic startup budget should only include those things that are necessary to start a business.

·         These essential expenses can be divided into two separate categories: fixed and variable. 

Fixed expenses include rent, utilities, administrative costs and insurance costs.

Variable expenses include inventory, shipping and packaging costs, sales commissions, and other costs associated with the direct sale of a product or service.

The most effective way to calculate your startup costs is to use a worksheet that lists both one-time and ongoing costs.

https://www.sba.gov/starting-business/business-financials/estimating-startup-costs

International Online Sales

Selling your products online allows for immediate entry into the global marketplace. However, shipping your product overseas presents a few challenges if you have little experience with taxes, duties, customs laws, and consumer protection issues involved with international commerce.

If you are just getting started, the following resources will help you to understand legal and regulatory requirements when shipping overseas:

• Export.gov - E-Commerce Toolbox: This site brings together information and resources the U.S. Department of Commerce and other U.S. government agencies offer to U.S. businesses interested in using the Internet to export their products.
• Electronic Commerce: Selling Internationally - A Guide for Business: As members of the Organization for Economic Cooperation and Development, the United States and 28 other countries have signed on to guidelines that help protect consumer information on the Internet.

Privacy Law (Do You Know)

For many companies, collecting sensitive consumer and employee information is an essential part of doing business. It is your legal responsibility to take steps to properly secure or dispose of it.  Financial data, personal information from children, and material derived from credit reports may raise additional compliance considerations. In addition, you may have legal responsibilities to victims of identity theft. 

The Federal Trade Commission (FTC) regulates and oversees business privacy laws and policies that impact consumers. Check out the following guides from more information on how you can ensure you are compliant.

• Protecting Consumer Privacy – In general, your online and offline privacy policy is your company’s pledge to your customers about how you will collect, use, share, and protect the consumer data you collect from them. While not required by law, the FTC prohibits deceptive practices. Learn more in this FTC guide and read “7 Considerations for Crafting an Online Privacy Policy” to help you develop yours.
•  Protecting Children’s Privacy Online – The law sets out specific guidelines about the online collection of personal information from children under 13. Refer to this guide to see if your site is compliant.
• Using and Disposing of Consumer and Employee Credit Reports – Does your business use consumer or credit reports to evaluate customers’ creditworthiness?  Do you consult reports when evaluating applications for jobs, leases, and insurance?  Learn more about your responsibilities for handling this data.
• Enforcing Data Security and Preventing Identity Theft – If you keep sensitive personal information about customers or employees in your files, you are required to have a sound security plan in place to collect only what you need, keep it safe, and dispose of it securely. Develop your plan with help from this FTC guide.
• Safeguarding Sensitive Financial Data – Do you offer your customers financial products or services, like loans, investment advice, or insurance? Learn how to comply with information-sharing practices to safeguard sensitive data.

Collecting Sales Tax Online

Selling your products online Sales Taxes are handle differently.

 Does that mean you charge customers the same sales taxes that you do to those who are coming into your store? It depends.

When to Collect Sales Tax Online

If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.

In legal terms, this physical presence is known as a "nexus." Each state defines nexus differently, but all agree that if you have a store or office of some sort, a nexus exists. If you are uncertain whether or not your business qualifies as a physical presence, contact your state's revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state.

This rule is based on a 1992 Supreme Court ruling in which the justices ruled that states cannot require mail-order businesses, and by extension, online retailers to collect sales tax unless they have a physical presence in the state.

State Exemptions

Keep in mind that not every state and locality has a sales tax. Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon do not have a sales tax. In addition, most states have tax exemptions on certain items, such as food or clothing. If you are charging sales tax, you need be familiar with applicable rates.

Determining which sales tax to charge can be a challenge. Many online retailers use online shopping-cart software services to handle their sales transactions. Several of these services are programmed to calculate sales tax rates for you.

2017 Tax Counseling for the Elderly and Volunteer Income Tax Assistance Program Grants

The TCE program, established in 1978, provides tax counseling and return preparation nationwide to people who are 60 or older. Volunteers receive training and technical assistance.

The VITA program, created in 1969, assists underserved communities, such as low and moderate income individuals and limited English proficient taxpayers. VITA grant recipients provide free federal tax return preparation and electronic filing. 

WASHINGTON — The Internal Revenue Service recently awarded over $21.5 million in Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grants to organizations that provide free federal tax return preparation.

This year, the IRS awarded grants to 25 TCE and 246 VITA applicants.  The TCE grants cover one year and the VITA grants cover two years. The IRS received 330 applications requesting $54.6 million.

www.irs.gov

Tax Relief for Victims of Hurricane Matthew in South Carolina

South Carolina — Victims of Hurricane Matthew that took place beginning on October 4, 2016 in parts of South Carolina may qualify for tax relief from the Internal Revenue Service.

Individuals who reside or have a business in Marion and Orangeburg Counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after October 4, 2016, and on or before March 15, 2017 have been postponed to March 15, 2017.  This includes the  January 17, 2017 deadline for making quarterly estimated tax payments and the 2015 individual returns on extension to October 17. Also included are the Oct 31 and Jan 31 deadlines for quarterly payroll and excise tax returns.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after October 4, as long as the deposits were made by October 19, 2016.

But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

www.irs.gov 

Updated 10/20/16 to include Calhoun, Clarendon and Marlboro counties.

Updated 10/18/16 to include Allendale, Bamberg, Barnwell, Hampton, Lee and Sumter counties.

Updated 10/17/16 to include Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper and Williamsburg counties.

SC-2016-21, October 17, 2016

Tax Relief for Victims of Hurricane Matthew in Georgia

Georgia — Victims of Hurricane Matthew that took place beginning on October 4, 2016 in parts of Georgia may qualify for tax relief from the Internal Revenue Service.

Individuals who reside or have a business in Bryan, Camden, Chatham, Glynn, Liberty and McIntosh Counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after October 4, 2016, and on or before March 15, 2017 have been postponed to March 15, 2017.  This includes the  January 17, 2017 deadline for making quarterly estimated tax payments and the 2015 individual returns on extension to October 17. Also included are the Oct 31 and Jan 31 deadlines for quarterly payroll and excise tax returns.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after October 4, as long as the deposits were made by October 19, 2016.

 But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

www.irs.gov  GA-2016-05, October 18, 2016

Law Changes Causes Delay in 2017 Refund

Some Refunds Delayed in 2017

Due to changes in the law, starting in 2017, the IRS can’t issue refunds before Feb. 15, 2017, for returns that claim the Earned Income Credit (EIC) or the Additional Child Tax Credit (ACTC). This applies to the entire refund, not just the portion associated with these credits. As in past years, the IRS will begin accepting and processing tax returns once the filing season begins. All taxpayers should file as usual, and tax return preparers should also submit returns as they normally do. Even though the IRS cannot issue refunds for some early filers until at least Feb. 15, the IRS reminds taxpayers that most refunds will still be issued within the normal timeframe: 21 days or less, after being accepted for processing by the IRS.

Changes to the ITIN Program Deadline

Like - Click this link to Add this page to your bookmarks Share - Click this link to Share this page through email or social media Print - Click this link to Print this page

As announced in August 2016, all ITINs not used on a federal income tax return at least once in the last three consecutive tax years will expire at the end of the year, based on the 2015 PATH Act. Additionally, all ITINs issued before 2013 will begin expiring this year, starting with those with middle digits of 78 and 79. All expired ITINs must be renewed before being used on a U.S. tax return. No action is needed by ITIN holders who don’t need to file a tax return in 2017.

Also, there are new documentation requirements when applying for or renewing an ITIN for certain dependents. Dependents without a date of U.S. entry on their passports from countries other than Mexico or Canada will need to prove residency before an ITIN can be issued.

IRS Warns Consumers of Possible Scams Relating to Orlando Mass Shooting

WASHINGTON ― The Internal Revenue Service today issued a consumer alert about possible fake charity scams emerging due to last weekend’s mass shooting in Orlando, Fla., and encouraged taxpayers to seek out recognized charitable groups.

When making donations to assist victims of last weekend’s terrible tragedy, there are simple steps taxpayers can take to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to quickly and easily check out the status of charitable organizations.

While there has been an enormous wave of support across the country for the victims and families of Orlando, it is common for scam artists to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.

Bogus websites may solicit funds for victims of this tragedy. These sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade people to send money or provide personal financial information that can be used to steal identities or financial resources.

Preparing Analytical Tools

Management should have an accountant or analyst prepare analytical tools such as a common-size income statement. This income statement shows every expense as a percentage of sales, allowing management to isolate costs that could contribute to decreasing profits. The company can perform this analysis for, preferably, three years of historical data. An analyst compares the three years to each other by reading across horizontally. Expenses as a percent of revenue are compared for each year to reveal trends that show expenses rising or lowering as a percent of sales over time. Some costs, such as the cost of goods sold, will naturally rise with sales increases because they represent the raw goods used to make products to sell. Building rent, administrative costs and some utility bills should remain the same, regardless of increases in sales.