Use the Same Tax Professional for Personal and Business

Many taxpayers will hire a professional to prepare their business return, and then will prepare their personal return themselves.  I do not recommend this if you own an S-Corporation or a closely held Partnership.

The primary reason you should not do this is because of the way Bonus Depreciation and the Section 179 deduction is handled.  If you take more Bonus Depreciation or Section 179 than you need, it is lost forever.  When I prepare an S-Corporation return that is closely held and the owner’s personal return(s) I toggle back and forth between the personal and business returns.  This ensures that the taxpayer(s) pay the least amount of tax possible without forfeiting Section 179 or Bonus Depreciation.  Without doing both returns at the same time you really don’t know for sure if you are maximizing your tax savings.

I’ve had business owners tell me to “just take the max” of Section 179.  They say this without really understanding it.  Then they prepare their personal return.  It is possible that they could be forfeiting thousands of dollars of future deductions by taking more Section 179 than they really need for that year.  The future deductions would more than pay for the extra preparation fee.

Of course, one could always file amended returns going back three years.  But, how would you know if you needed to file amended returns unless you hired a professional to take a look.  Also, if you did realize that you took too much Section 179 or depreciation in prior years and went back and filed amended returns, you would have to amend both business and personal, which would result in more preparation fees.  The best option is to simply have your tax professional prepare both your business and personal returns from the beginning.

Change Things Up In 2012

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My family and I just got back from a fun and relaxing trip to Snowshoe Mountain, WV.  There is something special about being on the ski slopes high up in the mountains that is unlike any other vacation.  The freedom and excitement of choosing your own route down the mountain.  The coziness you feel in front of the fireplace at night with your family.  The removal of all of the daily distractions that we all experience.  The memories you create with your family make it well worth it.

Taking vacations also helps you to re-focus on your business with a new energy.  I think one of the reasons that vacations help you to re-focus and dive back into your business with excitement and energy is because you have changed up your routine.  For me this is especially important to do right before tax season.  The next few months are going to be very busy so getting renewed and refreshed is a great way to start off the year.

One of the worst things you can do in your business is the same thing – over and over.   Successful businesses are constantly changing and adapting.*

We all fall into the trap of redundancy.  We’re just wired that way.  Most of us do the exact same things, the exact same way, day in and day out.  The problem is, doing this causes us to create blind spots which makes it hard for us to improve.

Take your web-site for example.  How many times have you looked at your web-site/blog?  Hundreds, thousands?  At some point, you can’t tell anymore if it looks good.  You’ve looked at it too many times and you can no longer be objective.

Or, if you own a restaurant or a salon, you’ve walked through it hundreds, maybe thousands of times.  You are there so much that you can no longer see what the customer sees when they walk in.  You are blind from overexposure.

Change Things Up 

In 2012 one of my resolution is to Change Things Up.  I’m going to start doing things differently.  My goal is to do one thing differently each day.  Maybe I’ll take a different route to my office.  Maybe I’ll start off my day differently.  By doing this, we train out brains to think differently.

Another way to change things up is to ask for objective opinions from independent parties about your web-site, business cards, marketing materials, store image, etc.  And, the more people you ask the better.  For example, let’s say you own a restaurant and you are wondering what your customers think and feel when they walk in.  Find at least 5 – 10 people who would be willing to help you by coming in to your business and writing down everything that they notice, good and bad.  Then compare the results and you might be surprised by what you find out.  Make sure that you tell them that you are open to constructive criticism.  You could also offer them a gift card for $25 or something like that for their help.

These are some things I plan to do in my business in 2012 and I hope you do to.  Have a Happy and Prosperous New Year!

*This seems to work even with successful products, like whenever Coke changed to New Coke.  At first, the people at Coke looked like complete idiots.  But, when they changed back to Coca-Cola Classic their sales increased dramatically.  It was as if the whole thing was just a marketing ploy.

New Year’s Resolutions

Happy New Year everyone!

The “In Thing” right now is to not do resolutions.  Instead we hear things like “goals”, “words for the year”, etc.  That is fine.  Whatever works for you.  Personally, I think the problem with most New Year’s resolutions is that they set you up for failure.  For example, if you say, “I’m going to go to the gym at least twice a week in 2012″, that is great.  The problem is, the first week that you don’t make it twice, you feel like a failure.  Once you feel like you’ve failed the “resolution” seems pointless from that point forward.  I think a better idea for your resolution would be something like, “I’m going to make it to the gym 100 times in 2012.”  That way you have all year to do it and the average will still be about 2 times per week.

One of my resolutions for my business is to talk to 250 business owners this year, in person, about using my firms services.  That may sound like a lot but in reality it is only 5 per week.  In the second half of 2011 I spoke to nearly 100 business owners in person about using my firms services so I know I can speak with 250 in a full year.

Another resolution for my business this year is to “Change Things Up.”  I’ll be sharing more specifically what that means in the coming days.

Stay safe and God bless!

Should You Borrow Money To Increase Year-End Expenses?

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If you’ve read Santa’s Year-End Tax Tips you know that spending money in your business at year-end is a great time to reduce your tax liability.  But, what if you don’t have the money?  Should you use a credit card or a line of credit?

Let’s look at the numbers.  Let’s say that you spend $5,000 using a credit card or a line of credit in order to increase your year-end expenses.  And, let’s say that you are in the 25% tax bracket.  The $5,000 in expenses will reduce your tax liability by $1,250.

Now, how much will it cost to borrow the $5,000?  Well, let’s say that your business line of credit charges 10% annually.  If you borrowed the $5,000 for one month it would cost you $41.67 in interest.  If you had to borrow it for 1 year it would cost you $500.  Since you would get the tax deduction the following year anyway I don’t think it would be worth it to finance the purchases for an entire year.  Of course, you’ll need to crunch the numbers to see exactly how you would come out.

As you can see, it could be worth it to borrow the money to increase your year-end expenses for your business on a short term basis.  If it ends up being a long term debt it could end up costing you more money in interest in the long run than the short term tax savings.  And, you should only do it if the items you purchase are necessary items for your business and you plan on purchasing them anyway.

What I Learned From Watching “Elf”

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Elf is hilarious.  No matter how many times I watch it I find myself laughing out loud at the same silly scenes.  I think the funniest part is when he first gets to New York and screams “Santa! Oh, My God!” when they announce that Santa is coming to the department store the next day.  The part where he mistakes Miles Finch for one of Santa’s elves is pretty funny too.

If you haven’t seen it, I don’t want to ruin it for you so continue reading at your own risk.  But, as you know,

To Lease or Buy

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It is almost always better to buy an automobile for your business (or for yourself) than to lease.  But, here are some basic  Pros & Cons of each:

Do You Need A Business Plan?

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Business plans are overrated.  In fact, most people that take the time to actually write one never really use it for anything.  So, should you write one at all?

Why should people buy your product or your service?

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When you are trying to sell your product/service to someone, remember there is really only one reason that people buy something from you.  It is “You can solve a problem for them”.  I’ve broken this down even further into these 3 categories:

Under Promise and Over Deliver?

We’ve all probably heard the old adage, “Under Promise and Over Deliver.”  This is suppose to be great advice because your customers will walk away thrilled!  The problem is, it doesn’t work.  Not if you are looking for new clients/customers, that is.