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Do I Pay My Income Tax Bill From My Business? December 6, 2009

Posted by Julie Duriga, CPA in Uncategorized.
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Of course, income taxes are different than unemployment taxes and from the employer’s portion of the social security tax.  Those taxes are deductible.

Income taxes are held from your own income and need to be paid from your salary bucket inside your business.  If your paycheck says that you took home 700.00, then 300.00 is really taxes.  In t heory your paycheck should be 1,000.00 to cover taxes which is normally around 300.00 to be safe.  To be safe means you are not stuck with an enormous tax bill at the end of the year.

If you are a sole proprietor or a partnership then your taxes are paid from the guaranteed payments or from your owner’s draw.  This draw can take place through a physical check written from your business or through a bank transfer from your business account to your personal account.  It is then your responsibility to remit quarterly your income taxes and your social security taxes to the IRS and to the state agencies.  Those taxes are paid from the money that was transferred to your business account.  Some business gross up their partner’s draws and guaranteed payments to cove the cost of the taxes.  Instead of bringing home $1,000.00, they might bring home $1,300.00 to cover the taxes.

Visit us at our website to get your free E-Book titled “How Do I Pay Myself? The Entrepreneur’s Guide to Building a Business AND Bringing Home the Dough.”  www.UniversityForBusiness.com

We also offer a really cool twenty minute video about how running your business affects your bottom line. We use islands, cars and bridges to demonstrate the movement of profits and losses between your personal and business bank accounts. This immediate download is avaialble for only $6.99. Twenty minutes with a CPA for only $6.99, what a deal!

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What Would You Like To Know? June 12, 2009

Posted by Julie Duriga, CPA in Uncategorized.
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I ran into my business coach this morning and he wanted me to ask small business owners what they would like to know about.  I have been writing about what I think  you need to know about in terms of accounting and taxation in your small business.  Tell me about what areas you struggle with in the accounting area.   What do you need to know?  What would you like to learn more about?

I would love to hear from you so I can write about what you would like to know.

Thanks in advance for your time and your contribution!

Help Me Find An Accountant! June 3, 2009

Posted by Julie Duriga, CPA in Uncategorized.
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AccountantWhen starting your business, one of the most important decisions you will make in your small business life is choosing an accountant.    The best place to start looking for an accountant is ask your friends and family to see who they use.  If your friends or family don’t use an accountant, check with your local SCORE office or a local small business incubator in your town.  Interview at least three accountants before you make your decision.

What are some questions that you can ask potential accountants? 

  • “Is the accounting and tax work outsourced to India?  If so, what is the review process when the returns are completed and returned to the US? ”   I don’t believe that outsourcing is a bad idea but I believe that it is something you should know and it may not occur to your accountant to disclose this to you.

 

  • “Do you feel that you work for the IRS or do you work for me the customer?”   I believe that the accountant should say that they work for you.  An accountant’s job is to inform you of the tax law and execute your requests as long as your requests are not fraudulent.

 

  • “How much do you charge?  Do you work by the hour?  Do you work by the tax return or by the job?  Will I be charged if I make an occasional phone call to you?”   It is surprising to me how many accountants put off  discussing their fees.   So, don’t be afraid to ask and monitor their expression to see if your potential accountant feels good about what they charge.

 

  • “Do you have employees?  If so, would I be working with a staff member?”   Ask to meet the staff member who will be doing your work. 

 

  • “Will you help me understand my financial statements?”    The financial statements are a necessary tool for your business but you must read your statements and understand them.   It doesn’t behoove you to pay someone to produce your statements and then not understand what the statements are telling you.  Ask your potential accountant if they will assist you in understanding what your numbers are communicating to you.

 

  • “Would you be willing to work with a team of professionals that I select?”  You may decide that you want to hire a bookkeeper, a tax planner and an accountant.  It is important to choose an accountant who is willing to work with many different people.    I would choose an accountant that would want to work with a team of people that you select rather than one who is resistant to the idea of working as part of your team.

 

  • What are your hobbies and what do you like to do outside of work?  I like this question because a well-rounded accountant is a happy accountant and who will be pleasant and responsive to you.

 

  •  “Do you prefer tax returns, audit work or accounting?”  If your accountant prefers tax work over bookkeeping,  then you might want to separate the duties to another person on your team.  We all do best at what we enjoy the most.

 

  • “Do you have an industry that you specialize in?”    Having an accountant who specializes in your industry is ideal but can be difficult in smaller towns.  If your accountant specializes in restaurants, as an example, they can educate you about benchmarks and industry standards so that you can compare yourself to others in your industry.

These questions will get you started in the interview process.  You should have a good feeling overall about your accountant and you should  feel confident in their technical ability.  Your relationship with your accountant is a very personal and you want to look forward to going to see your accountant.   Good luck in your search and good luck starting your business! 

Visit us at our website to get your free E-Book titled “How Do I Pay Myself? The Entrepreneur’s Guide to Building a Business AND Bringing Home the Dough.”  www.UniversityForBusiness.com

We also offer a really cool twenty minute video about how running your business affects your bottom line. We use islands, cars and bridges to demonstrate the movement of profits and losses between your personal and business bank accounts. This immediate download is avaialble for only $6.99. Twenty minutes with a CPA for only $6.99, what a deal!

Eight Vocabulary Words Every Small Business Owner Needs To Know May 27, 2009

Posted by Julie Duriga, CPA in accounting, Income Statement, profit, Small Business.
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Words To Grow Your Business 

Tomorrow I am speaking at the annual Mountain BizWorks Women In Business Conference.   My break out session is going to be a great review for small business owners.  I will to reconnect the business owners with their income statement and the terms needed to understand this statement.  I  realized yesterday that I needed to jot down some topics to talk about at the conference.   I  also realized that I needed to start a blog.  So, here I am a new blogger, writing my first blog and while drafting some discussion topics for the conference tomorrow.

  • Income or Profit and Loss Statement-This statement shows how much revenue you have generated and how much in expenses you have generated.  It also gives us important historical information but we can use our income statement to make decisive and informed decisions.  We can count on our numbers to tell us a story, sometimes it is a story we want to hear and sometimes the story can be uncomfortable.

 

  • Revenue-This number represents what you have earned selling your goods or services.  Revenue is the dollar amount that you have actively earned during the normal course of your business.   If you receive a loan, this is NOT revenue.  If you receive cash at the time you have completed your sale, then your cash in the bank and revenue would most likely be the same.   If you invoice your customers, then your revenue versus what you have in your bank account could be dramatically different.

 

  • Cost of Goods Sold-This number represents what the cost of the goods or services that you have sold cost you.   If I sell a dress for $20.00 (this is my revenue) and I paid $5.00 for this dress, my cost of goods sold is $5.00.   Measuring cost of goods sold for those of us in the service business is a little tricky.  If we are selling other people’s time, we should classify that person’s time as cost of goods sold.  Manufacturing cost of goods sold is complex, bigger than the scope of this blog, but certainly worth a blog entry of its own.

 

  • Gross Profit-This calculation is simply found by subtracting our cost of goods sold from our revenue.  Hopefully, we have more revenue than our cost of goods sold.   Gross profit is represented as a dollar figure.  Looking at the dress example above, our gross profit is $15.00.

 

  • Gross Profit Margin-This calculation is a percentage figure.  Again, referring to our dress example above, our gross profit margin is 75%.  We arrive at this figure as follows: Gross Profit/Revenue.  Try it yourself and see if you get the same answer.  Two calculations are necessary.  First, figure the gross profit and then you can figure out your gross profit margin.  This is one of the most important figures in your business.  Your gross profit margin might reveal that you need to raise your prices or find a new supplier or that everything is just fine.  Of course, the higher the gross profit margin, the better you are doing financially

 

  • Expenses-These are cash outlays that are required  to operate your business.   In business,  expenses are any cash outlay that contribute to the continuation of the business.  Rent, utilities and advertising are examples of expenses.  Equipment that you purchase is not considered an expense.    If you are paying back loans, the principal payment is not an expense but the interest portion is an expense. 

 

  • Net Profit or Net Income-This is also known as your bottom line.  This is simple addition and subtraction.  Your net income or net profit is found by subtracting all of our expenses from our revenue.   Our net profit is what is left over after all of our expenses have been accounted for.  If we had $100.00 in dress sales and $50.00 in expenses, we are left with $50.00 in net income.

 

  • Net Profit Margin-Like our gross profit margin figure, this is one of the most important figures of your business.  The higher the net profit margin, the better.  In our example above we have a 50% net profit ($50.00/$100.00).

These eight vocabulary words will help you understand your income statement with a new empowered approach.  I want to help you love your numbers and I want you to have a relationship with your numbers.  I want you to make all of your business decisions only after reviewing your numbers.   Your numbers need you! 

Visit us at our website to get your free E-Book titled “How Do I Pay Myself? The Entrepreneur’s Guide to Building a Business AND Bringing Home the Dough.”  www.UniversityForBusiness.com

We also offer a really cool twenty minute video about how running your business affects your bottom line. We use islands, cars and bridges to demonstrate the movement of profits and losses between your personal and business bank accounts. This immediate download is avaialble for only $6.99. Twenty minutes with a CPA for only $6.99, what a deal!