Five Mistakes Small Businesses Make When They Hire a CPA

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Hiring the Right CPA

If you are a small business owner and you have never hired a CPA before to run any aspect of your business, you probably don’t even know where to begin. Like many small business owners, you are probably very stressed from running your business and have found yourself searching through a limitless number of websites in order to determine what qualifications your CPA should have. While it can be a difficult situation, it doesn’t have to be as long as you learn how to avoid the critical mistakes so many small businesses make.

Here are 5 common mistakes small businesses make which you should go to lengths to avoid when you hire your next CPA.

Focusing On Things That Don’t Matter

While you do want to hire a CPA who knows how to crunch numbers, you don’t want to only focus on numbers. When hiring a CPA, number crunching should actually be among your least important concerns; it is most important that your CPA understand your business and how to take it to the next level.

Hiring Without Knowing What You Need

You can’t hire a CPA without first knowing why you want to hire them. Before you hire your first CPA, make sure you determine not only what you need but how your CPA can help you achieve whatever it is you’re trying to accomplish.

Hiring a CPA Who Doesn’t Work Well With You

As with hiring for most individuals in your company, you want to make sure you hire a CPA who works well with you. You should insist that your prospective CPA complete a personality test which helps you identify the strengths and weaknesses your new CPA has. In turn, this will help determine how this person will fit in with your company. This could potentially save you and your team from dealing with bad business interactions later in the future.

Hiring an Unqualified CPA

Just because a CPA has his or her certification doesn’t mean they are qualified to do the job. There are lots of CPAs who are just good at test taking. Make sure during the interview phase that your new accountant has an understanding of the job you have hired them to do.

Trusting DIY Accountants

Many accountants are self-taught, and while that has saved many accountants thousands of dollars in tuition fees, sometimes DIY accountants can cause headaches for business owners when they are hired to do a job that’s well over their heads.

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Why a CPA Should Always Be Your First Hire

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Hiring Employees

Hiring employees can be super exciting, especially for a new business owner. Being able to hire extra help not only shows that your business is growing; it also shows that your business is in a position to provide extra income to someone else’s life.

Most employers engage in lengthy discussions about the order in which positions should be filled. Some employers automatically assume an operations manager is the first hire you should make; in point of fact, a CPA is actually the first person you should hire, and if financial resources permit, hire a CPA as soon as you can.

Hiring a CPA as your first hire will not only benefit you as the owner but will also benefit future employees by making sure that your company is in strong financial condition. This will enable you to pay your employees a competitive market wage and improve retention.

Additionally, hiring a CPA can help you flesh through inventory data or any data that your company relies on in order to be able to sustain itself. Most people think of CPAs as only being able to handle finances, when in fact, CPAs have the capabilities to analyze most types of numerical data that may or may not impact your business.

Still not convinced a CPA should be your first hire? Does your business want to make money? If you answered yes, our case has been proven.

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Can My CPA Help With Issues Besides Tax?

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CPAs & Non-Tax Issues

Many businesses and business owners struggle every day with whether or not they should hire a CPA or a financial planner. While sometimes these job titles can be used interchangeably, they often perform very different functions. The majority of CPAs focus solely on tax matters, but there are some CPAs who can actually help with non-tax matters as well.

The one great thing about those in the financial industry is that many financial professionals have a wide breadth of knowledge, especially CPAs. It all boils down to the experience and area of expertise for the particular person in question. You can have expertise in one area but working knowledge in another.

If you want to know whether your CPA can help you with non-tax matters, you simply need to ask them that question. Your CPA knows their own capabilities better than anyone else, and if you’ve hired an honest one, he will be entirely candid about his qualifications. He will also be willing to point you in the direction of others who may be more able to assist you in the event that his own qualifications do not meet your particular needs.

When in doubt, always seek the opinion of another CPA or other trusted individual in the field; not only can they give you an unbiased outlook, but they can also possibly save you from wasting money in the future.

Does your CPA help with non-tax issues? Are they well versed in subject matters outside of tax? In what other ways have they helped your business grow? Leave your comments below.

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Why You Should Never Be Your Own Accountant

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Hiring an Accountant

If you’re a business owner in any capacity and you haven’t hired an accountant, you probably know by now that you desperately need to. Perhaps you don’t want to spend the money just yet, or perhaps you don’t really understand what an accountant can do, or maybe, just maybe, you’re being stubborn.

Whatever the case may be, you should never be your own accountant, and here’s why:

You’ll Mess Things Up

Whether you know it or not, if you choose to be your own accountant with no previous experience in accounting or finance you’re destined to mess things up in one way or another. As opposed to delaying the inevitable, avoid the inevitable entirely and hire an accountant.

You Could End Up in Jail

While this may seem extreme, if you mess things up specifically on your taxes you could put yourself at risk of having to go to jail. Is a jail sentence more important to you than hiring an accountant to do the hard work for you?

You Don’t Know What You’re Doing

Most people never want to admit that they have no idea what they’re doing. When it comes to accounting, don’t feel ashamed: most people who aren’t accountants don’t know what they’re doing. That’s why hiring an accountant is a wise policy; an accountant can help guide you through everything you don’t know how to do.

You Actually Want To Make Money

Do you actually want to make money? Seriously? As the saying goes, it takes money to make money; however, if you don’t know how much money to spend from day to day or what you need to cut out of your budget, you’ll never be able to reach the financial goals you dream of.

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Five Traits Every Successful CPA Should Have

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CPA Traits

Hiring a CPA can be a challenging task, especially if you have never hired one before. A quick google search of CPAs in your area will prove to you that the industry is vast and that there are many CPAs available for work throughout the local and national areas. When looking for a CPA, you want to make sure you identify the one who is best for you.

Here are 5 traits every successful CPA should have:

Supportive

I am a firm believer that teamwork makes the dream work, and if your CPA isn’t supportive from the day you meet him or her then they probably are not the CPA for you. A CPA will be responsible for cleaning up any financial messes you find yourself in and you want to be assured that the CPA you hire isn’t just out to get your money but instead is there to help your business grow.

Motivating

While a CPA is in no sense a life coach, they are your finance coach in many ways. It is important that your CPA motivate you to make better financial decisions so that you can improve your overall financial future.

Analytical Thinker

Anyone who becomes a CPA loves numbers and for that reason alone they are able to think on an analytical level. If you meet with your CPA and notice that they don’t think analytically you may want to make sure they are really a properly credentialed and licensed CPA. How can you help manage finances if you don’t enjoy analyzing things to death?

Straightforward

There is no cookie-cutter way to say it, but we all need money to survive. Hiring a CPA who is straightforward and honest with you is imperative to your future success. You want to know not only how to improve your finances but also how you can keep them in a better place in the future.

Confident

As with any profession, it is imperative that the CPA you hire be confident about the expertise they bring to the table. You want to always make sure you have people on your team who are confident in their gifts, especially as it relates to your finances.

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Five Unexpected Ways a CPA Can Rescue Your Business

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CPAs

If your business has ever been in an inescapable bind you know firsthand that you can’t always do everything by yourself. Sometimes you need to enlist the help of others. While a CPA can’t save you from everything, he or she can help you avoid some of the more difficult pitfalls your business can encounter.

Here are just a few ways a CPA can rescue your business:

CPAs Can Help Your Business Save Money

Whether you believe it or not, CPAs can help you save a significant amount of money. They will do this by seeing where you spend the majority of your money and how to eliminate those bad spending habits when possible.

CPAs Can Help Your Business Spend Money

If you have trouble spending money, surprisingly a CPA can help you with that too. They are equipped with the necessary tools to make sure you spend money in the areas which will benefit your business the most.

CPAs Can Automate Your Finances

We waste both time and money when we do our finances manually. While automating your finances may make you as though you have less control, you’re actually increasing your control. The more you automate your bills, the quicker you will be able to gain financial freedom.

CPAs Can Give Your Business a Financial Plan

Do you have specific goals you wish to attain as a business? Are there things you want to accomplish but feel as if you can’t because of your finances? This is where a CPA can step in and come to your rescue. CPAs can offer a financial plan based on the goals you wish to accomplish.

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Can I Still Get a Child Tax Credit if My Spouse and I File Separately

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Tax Credit

Anyone who has ever filed taxes before with their spouse knows that the best way to save money is to file jointly. Filing jointly allows you to claim more credits and most importantly it takes into consideration both you and your spouse’s income. While it is often suggested that couples should file jointly there are some situations in which couples choose to file separately.

Filing separately if you have children could be a bad thing if you’re hoping to rely on the tax credit you get for having children. If you and your spouse decide to file a joint tax return, a child can only be a dependent by being claimed by one parent. This is also only possible if the child doesn’t provide half of their own financial support and reside with you for more than half the year.  This only applies to children under the age of 19, or under the age of 24 if attending school full time.

Tax experts continue to stress the importance of just how much you lose any time you choose to file separately from your spouse. While losing the child tax credit may be the biggest thing you lose when you file separately, especially when you have children, you also lose other credits that may impact just how much refund you receive at the end of each and every year.

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Thin Lines: What You Can and Cannot Claim on a Business Trip

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Air Travel

Many of you will be traveling during the holidays for both business and pleasure. Although we’ve touched on business trip deductions in the past, we figured it’s time to outline more fully what can and cannot be claimed on a business trip, specifically a trip wherein you may mix business and leisure.

Overview

You’re already planning to travel, and maybe you’re planning to have an extra day at either end of the trip. Or maybe you’ll be traveling near your old stomping grounds, and want to visit some friends from college. You’re allowed to deduct any essential business portions of your trip, but anything that is nonessential cannot be claimed on your taxes. That means if you want to take a detour on your business trip to see an old friend, you can still deduct your airfare to a location so long as the principal reason for your trip is business related.

Devil is in the details

So what does that boil down to? It means that every small expense that is unrelated to your business portion of the trip cannot be claimed. When does this become tricky? Let’s say you travel to Austin for a business trip to meet with a client, and upon arriving in Austin you and the client have a lunch meeting: you are allowed the standard 50% meal deduction. Similarly, if that morning before the meeting you eat breakfast alone at the hotel restaurant, you can deduct 50% of your meal cost. Actually you can claim that deduction at any restaurant in town so long as it’s part of your business trip. But if you’re in, say, the hotel bar and grab lunch with your old college roommate, that’s no longer a business expense and you cannot claim the deduction for that meal–unless of course said former college roommate is the client in question.

The key is moderation and meticulousness. If you’re unsure, ask your CPA or tax advisor: you don’t want to draw the attention of the IRS.

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Season of Giving: Maximize Deductions for Your Charitable Contributions

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Tax Deductions

The holidays are a time for family, feast, and often for giving. Feeling the holiday spirit and feel like donating to a charity? That’s great! The good news is that your contribution may be tax deductible! However, not all money you give to a charity is deductible. Charitable, financial gifts to 501(c)(3) organizations are often deductible, but it’s worth noting that not all donations can be claimed. Before we get to the list, know that generally you can deduct up to 50% of your adjusted gross income, but limitations may apply. That aside, here are a few things to know before you open your wallet hoping for a tax write-off.

Not all money you give is deductible

Perhaps the most infamous example being lottery tickets: if you attend a fundraiser event for a nonprofit and purchase a lottery ticket or raffle ticket, the cost of the ticket is not deductible.

Don’t expect to make money on a non-financial contribution

When donating goods such as real estate or a vehicle, the IRS will deduct only the fair market value from your tax liability. In other words, don’t donate a clunker car and except to be able to deduce the price of a mint vehicle.

You need to provide a record for any financial contribution

Regardless of size, the IRS will want to see a record. This could take the form of a written acknowledgment from the organization to which you donated, a bank record of a transaction, a check copy, or other type of record.

That also goes for any non-financial contribution over $250. Similarly you can submit a written acknowledgement from the recipient, or a written acknowledgement of value from a qualified third-party organization.

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5 Things You Didn’t Know About Taxes and Nonprofits

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Tax Facts

Whether you’re a regular employee, a volunteer, or starting your own nonprofit, charitable work can be rewarding well beyond a paycheck. However, there are some misconceptions about the tax deductions available to those who assist nonprofits. Check out these things that you may or may not have known about your local (or national) nonprofit.

Volunteers can deduct expenses while volunteering

Nonprofits often rely on two forms of assistance: charitable contributions and volunteers. If you don’t have money to spare, volunteering is a great way to contribute to a nonprofit. As a volunteer, you can deduct travel expenses, clothing or uniform costs, and other out-of-pocket expenses.

Not all nonprofits are tax exempt

Nonprofits are all tax exempt, right? Actually, some organizations such as public schools and churches are not required to apply for tax-exempt status.

Not all tax-exempt organizations can receive tax-deductible contributions

Isn’t that confusing? Generally 501(c)(3) and private foundations can accept tax-deductible donations. However there are 30 different types of tax exempt status, and not all of them can receive tax-deductible contributions.

Employees and officers pay the same taxes as everyone else

Although volunteers are able to deduct their out-of-pocket expenses, regular employees are subject to the same taxes of employees of for-profit companies and not for profit organizations.

Not all financial donations are deductible

Charitable, financial gifts to 503(c)(3) organizations are often deductible, but it’s worth noting that not all donations can be claimed. Perhaps the most infamous example being lottery tickets: if you attend a fundraiser event for a nonprofit and purchase a lottery ticket or raffle ticket the cost of the ticket is not deductible.

Thinking about starting a Nonprofit? Know Your Orgs

Historically the 501(c)(3) was the standard for entrepreneurs who wanted to operate a business with a greater purpose than financial returns to investors. However there are more options available to entrepreneurs who want to give their work a social or environmental purpose. Here are a variety of other options for consideration.

Nonprofit

Simply put, a nonprofit is an organization from which those who run it cannot earn a profit. This is not to say that a nonprofit cannot earn a profit, however all profits must go back into the organization–there is no profit sharing among controlling members. 501(c)(3) status is often known as the “charitable tax exemption,” which allows exemption from federal corporation and income taxes on most types of revenue. Further, 501(c)(3) organizations are able to solicit tax deductible contributions and their volunteers are able to deduct their out-of-pocket expenses.

Not For Profit

Although you may often encounter this distinction, there’s no technical difference between the “not for profit” and “nonprofit” — the two are often used interchangeably. However the IRS has made one distinction: “not for profit” refers to an activity, in contrast to an organization established for purposes other than generation of profit. In sum, you cannot deduct expenses incurred in the pursuit of a not for profit activity.

B Corp (Social Action Corp)

Benefit Corporations are still a fairly new classification. B corps differ from regular corporations in that their investors and entrepreneurs are not committed solely to maximizing the profits of shareholders. Rather, B corps have a legal framework that requires the corporation to also account for environmental and social factors. B corps are not, as it may seem, a for-profit/nonprofit hybrid: a company still elects to be taxed as a C or S corp. B corp status only affects the requirements of corporate accountability, purpose, and transparency. That being said, it’s worth noting that B corps do not qualify for the tax deductions that are specific to nonprofits.

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