Media Adding to Confusion

I say “Business is Simple” often. Because I honestly believe it is. Taxes can be a really tough topic to fit onto the “business is simple” bandwagon though, because some stuff having to do with taxes really is complex. But most of the things that are really complex don’t apply to 95% of people, so it doesn’t matter.
Despite this fact, many professionals like to make up things for people to be worried about. Estate tax is the biggest and best example of this. Something like 1% of the US population has enough net worth to worry about the estate tax. So let it be. Seriously.
The Wall Street Journal published an article recently about how to get organized for tax year 2013. I read this and thought “no wonder people are so overwhelmed by taxes”. I thought, just for fun, I would respond to this article with my two cents and try to reality check this. Hopefully someone will notice and start giving practical, actionable advice?
My comments are in Blue.

January to-do list for taxes 

How to get organized for tax year 2013. Plus, five tax resolutions 

January 07, 2013|Eva Rosenberg, MarketWatch

We start the year off with tax legislation that finally makes it possible to do some definitive tax planning. Some of the measures affect your 2012 taxes; the rest cover 2013-17, with permanent changes.

The single most helpful tool for keeping your tax resolutions is a checklist. Every successful self-improvement course, study program — and even job — benefits from one. Have you ever noticed how many checklists you use on a daily basis?

Consider consolidating them, so you can see your daily, weekly and monthly responsibilities at a glance. Let’s build your tax checklist for January 2013:

Set up your 2013 tax file. Pull out your labelmaker and put new labels on file folders, expanding files, or drawers, so you have a place to drop your 2013 records and receipts. Now you can consistently file all relevant documents for the year in one place. Instead of a set of file folders, consider using an expandable file. While you’re at it, do the same for last year — and get a head start on locating and organizing your 2012 papers.

 Let me understand this. The BEST advice the Wall Street Journal came up with for tracking expenses is to add up the numbers on pieces of paper. Manually. Better idea, why don’t you put DOWN the labelmaker and spend that time getting your account set up?


Set up your 2013 tax calendar. Individuals can use IRS Publication 509 ( ) to locate deadlines for the year. Small businesses can use the IRS’s colorful “Important Tax Dates for Small Business” calendar ( ) to set reminders for 2013 due dates. Not only is it available online, but there’s also a desktop version and a tool to integrate it with a variety of personal electronic calendars. The Spanish print version is sold out and won’t be reprinted again this year due to budget limitations. But the calendar is still available in English.

Any piece of advice that starts with “Read IRS Publication…” is likely going to be overkill. If you need to worry about more than just the year-end tax deadlines, you should have someone helping you who knows them. Simple.


Update your address. If you moved in 2012, be sure to update your address with everyone who is expected to send you tax-related documents: Former employers (W-2s), banks (1099-Int), lenders (1098), brokerages (1099-DIV, 1099-B), the IRS, your state tax agency, clients (1099-MISC), investments (K-1s) and trusts (K-1s).

 Reasonable advice. But if you move, and leave a forwarding address, then the USPS will forward those forms as well. And what address is on most of those forms is not relevant. So focus on just changing your address with people you currently work with.


Update your name. New brides generally remember to change their names on driver’s licenses and paychecks, but often forget to notify the Social Security Administration. You won’t be able to e-file your tax return with your new name if it doesn’t match the Social Security Record.

This actually is good advice. If you change your name, notify SSA.


Get a special IRS PIN. Were you the victim of identity theft last year? Make sure to contact the IRS and have them issue you a special Identity Protection Personal ID Number ( ). Notifying the IRS about the identity theft will flag your account. By getting the IP PIN issued to you, no one will be able to file a tax return under your Social Security Number without it. Your refund will be safe.

This is good advice too. Just make sure to write it down somewhere you won’t lose it! Not having it, once it is issued, can be a huge pain.


File a new W-4 with your employer now — and again in March. The legislature did not extend the 2% reduction of Social Security payments from paychecks. Your paycheck will be a little lower this year. Consider increasing your withholding if you have refinanced your mortgage and your mortgage interest has been reduced, or if your child or children are no longer dependents. You can reduce your withholding if you are making a payment for private mortgage insurance (PMI). The deduction has been restored, retroactive to Jan. 1, 2012. Also, reduce your deductions if you have bought a home, gotten married, have a new child or expect large, deductible losses in 2013. Use the IRS withholding calculator to help ( ).

You do not need to make a new W-4 every year. You might consider changing it if something happens that might cause you to pay less tax. My advice? Leave it alone. Why? Getting a large refund you can bank won’t hurt anyone (we can all afford to save more!). Trying to figure out how to re-do a W-4 might.


Send out W-2s this month. Have you been paying household employees? Although the IRS has sort of a short-cut — Schedule H ( ) — for reporting and paying taxes for those workers, you’re still responsible for sending them a W-2 in January. Your state will require full, year-end payroll tax returns.

So, this only applies to business owners. Also, if you cannot afford the 50 bucks a month to pay a payroll company to do all the payroll for you, then you cannot afford to have employees. If you have the time to run your own payroll, you don’t need employees to help you!


Send out 1098s this month. Folks collecting payments on private mortgages or loans must send out Form 1098 ( ) showing the amount of interest paid by their borrowers. Even if you don’t send out the form, be aware that your borrower will be reporting the interest on their Schedule A. There’s an area on Schedule A to list your name, address and taxpayer ID number. So remember to report the private mortgage interest income you receive.

How many people are paying their mortgage to a private party?! Listen, if you are required to issue a 1098, you already know all about it. Including every conceivable contingency in articles like this is is exactly why people think this stuff is so complicated!


Send out a 1099-MISC this month. Although owners of rental properties don’t need to send 1099s to folks who worked for them, all other business owners must still comply. Send Form 1099-MISC ( ) to anyone who was paid $600 or more during the year for services. There’s no need to send it to vendors who supplied merchandise or supplies — just service providers. There’s no need to send 1099s to corporations, except attorneys and medical care providers. When a company operates as an LLC, you don’t know whether or not they are filing as a corporation. So get a Form W-9 ( ) from each vendor and have them tell you. In fact, it’s a good idea to send a new Form W-9 to each vendor in January, so you can have the most up-to-date information before paying them.

This is something you need to do. But I want to reiterate something I said earlier. If you need to be issuing 1099s, then you should have an electronic records keeping system that makes this pretty easy. A new W-9 is every year is overkill though. Why create more work for you, and your vendors, if nothing has changed?


Use up your medical Flexible Spending Account (FSA). If you haven’t spent enough money on medical care to get all your FSA deductions back, you might still have some time. Turn in your receipts from your doctors, dentists, clinics, therapists and pharmacies immediately. If you don’t have enough receipts to get all your money back, contact your FSA administrator or payroll department to find out if your plan gives you extra time. Some plans are set up to give you until March 31 to get the medical care and the related receipts. Naturally, if you get reimbursed by your FSA plan for these costs, you may not list them as itemized deductions.

If you just realized that you have an FSA and you are trying to use it up, you are a little late to the game. Better advice? Spend an hour figuring out what benefits your company offers and how they work so you can have all of 2013 to make sure you don’t leave money on the table.


Retirees: Make contributions from your IRA in January. Congress has restored the special provision for those age 70.5 or over to transfer up to $100,000 from their IRA ( ) to a charity for 2012. You have until Jan. 31, 2013, to make this donation. You will not get a deduction for the charitable contribution. But you will avoid all taxes on this withdrawal. It will count as your required minimum distribution.

I don’t know about you, but if I was going to transfer $100,000 to a charity, I wouldn’t have forgotten about it and been glad this article reminded me. Yes, you can transfer money directly from your IRA, to a charity, to satisfy your RMD requirement. But this is not something that should be done last minute. It should be part of a considered strategy.


Make your fourth estimated tax payment. Jan. 15 is the due date for the fourth quarter estimated tax payment for 2012. This is important for folks who have investment income, unemployment income or any freelance income. If your business profits were over $400, you will owe self-employment taxes, even if you don’t owe income taxes.

Yes, you should probably do this.


Make 5 tax resolutions for 2013.

Resolve to pay not more than your fair share of taxes.

 OK, but none of this advice helps with this.

Resolve to pay no penalties and interest this year. 

Actually, you might want to pay interest. Currently the IRS charges 4% on underpayment. If you make more than that, keep your cash, make the higher return, pay the penalty, and bank the difference.

Resolve to take advantage of every tax credit and deduction legally available to you.

Because last year I didn’t care about this? Thank God I made tax resolutions for 2013!

Resolve to make your tax return audit-proof

This does not exist. Trust me.

Resolve to read MarketWatch’s tax columns year-round.

Not likely.


Eva Rosenberg is the publisher of, where your tax questions are answered for free. She is the author of several books and ebooks, including Small Business Taxes Made Easy. And she teaches tax courses at and CPELINK.

What To Look for In a CPA

I had a very nice reader email me my thoughts about what to look for in a CPA. They were looking for someone local to their area. Offered without comment is my response to her:


As for finding someone my advice would be to make sure that you pick someone you get along with, first and foremost. If you have different work styles, generational gap, cultural issues, or just a funky vibe keep looking.


The next most important thing is to make sure that your interests and the interests of the person you are hiring are aligned. What I mean by this is, how do they bill? What other services do they offer? If they bill by the hour, then you might hesitate to call, for fear of getting a bill you can’t/don’t want to afford. This can cause you to not seek out advice when you need it! This is why I bill, and advise you to find someone who does also, on a flat fee basis. When I quote a price for a tax return, it includes tax projections throughout the year, unlimited tax questions, etc. I find it easier for everyone to just have one price to “be your guy”. It also makes sure that I do things right the first time and explain everything clearly and well. Because if I don’t, it makes more work for me, which I do not get paid for!


Find someone who takes the time to understand your business, and who works with people like you. I do not mean someone who is in the “widget” business like you are. CPA work is, for the most part, industry agnostic. What I mean is, if you work on a paper system, make sure he/she understands that. If you like face to face meetings, he/she should too. If you live most of your life online, your adviser should understand the ins and outs of how that works. In addition, when you interview them (and you should) they should be asking insightful questions that demonstrate they have a grasp of what you do to make money.


Lastly, look for professional education and designation. I would suggest a CPA, I think they are the best equipped to handle these things. I might be biased in making the recommendation though :-) Additional education and designations are great as well. Not because of what they mean, per se, but it shows a drive to go above and beyond that can be very positive.


What to avoid:

If you don’t understand what they are advising you to do, stop and ask them to clarify. If they struggle to explain it in a way you understand it stay away. This is a dead giveaway they don’t know it very well either.


Avoid people that seem to just be agreeing to fill in forms for you. Someone in your position needs so much more than forms prepped. Make sure they understand this and will offer suggestions, ideas, and insights into your business. A good adviser knows the problems you will face better than you do and will take steps to help protect you before you even know you need it. If they are reactive, not proactive, stay away.


The best place to start, in my opinion, is with people you know. See who other business owners are using. Talk with your local chamber and see who is active in the community.


That being said, I would be happy to try and answer questions you might have that are specific to your business or financial situation in general. I love working with people who have the drive to start “side businesses” and the smarts to make them successful!


Don’t forget the special offer that I am doing right now. If you get in touch with me and let me prepare your taxes via dropbox or Evernote, I will give you 25% off my normal price! This won’t last forever, so give drop me a line soon!


Evernote, Taxes, & A Special Offer

Hello again friends.

As that lovely time of year sneaks up on us again, I wanted to re-post something I wrote last year at this time. A about a year ago, Brett Kelly and I wrote blog posts about how we did his tax return entirely via Evernote. It was a great post and was a really fantastic proof of concept. Brett’s post was better though.

This year, I wanted to take it one step further though. Because I love Evernote so much and I love having a digital workflow so much I want to offer you cash to let me do your taxes via Evernote.

That’s right. If you contact me, mention this blog post, and share an Evernote notebook with me where you have stored your tax documents  I will give you 25% your tax prep fee. In some cases, that can be as much as $250 (or more) in your pocket.

No, I am not kidding. You can save 25% on your tax prep if you let me do your taxes via Evernote. 

So check out my side of how it worked here and also from the client side.

And if you want to make your life easier and save some serious dough, email me at  and we will get started.



Tax Time…. ARRGGHH!

People ask me all the time “What do I need to bring you for my taxes?” or “I need to do taxes, what do I do?” or some other derivation of that. Often times with a sigh. Or profanity.

People make such a big deal out of taxes. The world has talked it up into this giant mountain when it really doesn’t need to be.


So, deep breaths.


Business is simple.


What do you pay taxes on? Simple: Profit. Most businesses owners know that. If you don’t, now you do. I just told you. You pay tax on your profit. Not the total sales, not the deposits, just the profit.

Ok, so what was your profit? Easy. Revenue minus expenses.

Figure out your total revenue. This can be found in lots of ways. Don’t have books? No problem; look at bank statements. Add up customers manually. Go pull up all your invoices and add them up. Easy stuff.

Now add up your expenses. Hopefully, you have books and you have been adding it up a little at a time each week, instead of causing yourself to do all the work now. But if you haven’t, it isn’t the end of the world. Again, look at bank statements. Add up receipts. Make sure you don’t forget something. Do you have an online account like Paypal? Grab the expenses from there. Check your credit card statements.


Subtract your expenses from your revenue. That’s your profit. Pay tax on that.


Now, if you want to pay even less tax, it helps to have someone that can help you. Like me. But, you do not need that. And if you are scared of using someone because you are embarrassed to show up with your shoe box, now you know how to do it like a pro.

Show up at my office with revenue and some expenses and we can make that work, no problem. The same is likely true with any decent CPA.


And before you get overwhelmed, think about it this way. It doesn’t take long:


First week of January: Add up your revenue. That’s it. Just do that little bit.


Second week of January: Look at your bank statements and add up expenses there.


Third week of January: Look at your credit card statements and online account.


Fourth week of January: Gather up any other miscellaneous receipts you have.


First week of February: Your other documents start coming in the mail (1099s, W-2s, etc). Put those in the folder with the things you pulled together in the previous weeks. You are now ready to get your taxes done


Second week of February: Add up what you brought in. Add up what you spent.


Give those to your CPA.




Business is Simple


How to Grow Your Business

imagesA new day, a new year. Since many business owners are likely setting a goal to “grow my business in 2012” I thought I would offer my tips and tricks for growing your business.


What is the secret to growing your business? As simple as I like to make things, “growing your business” is way too broad a topic to be explained simply. There are, however, several relatively simple ideas that you should be keeping in mind. If you are growing quickly (or even growing at all!) you are likely very busy. When you are moving a mile a minute, it can be easy to get derailed. As always, remember to not over-complicate things, business really is simple!



Keep It Simple

Which brings me to the first point: keep it simple! When you were one a one-person operation the way you ran your business was simple. Then problems, mistakes, little snafus here and there started to pop up. Being a responsible business owner, you started adding steps and systems and controls to help you keep tabs on things. Then one day you wake up and find out that everything takes twice as long to do as you think it should. All your “systems” are clogging the pipeline. This is not to say that you don’t need controls as you grow. I know I just told you “What got you here, Won’t get you there”. But sometimes people don’t consider the cost of a system. 100% accuracy can be prohibitively expensive to maintain. Unless you make things like heart valves or airplane wings, it probably isn’t even necessary. Before putting in a control system, think “What is the downside to this going wrong”? If it is just as simple as “the client will be annoyed” then maybe the better system is to just plan to accept a certain amount of failure, to refund the client, and send an apology letter. The client will be content and you can keep producing more efficiently. Often times the cost of the refund and apology for the once in a great while you have a problem is significantly less than the cost of slowing yourself down. You should always be evaluating your systems with an eye towards making it simple. Remove complexity wherever you can!



Avoid “Thrashing”

As with most things in life, moderation in business and growth strategies is a good strategy. Don’t take failures too hard. Also don’t assume that a success will continue indefinitely. Making course corrections is a great idea. Almost all successful businesses make changes constantly. Changes to products and services, changes to marketing, changes to their models, etc. But don’t let one bad experience make you change everything. If you put real effort and research into your business plan one unhappy customer shouldn’t be enough to change it. Making changes off-the-cuff can also be killer. When the time comes to make changes, and the time will come, it should be done strategically as part of your annual planning process. The same care and effort that you put into your original business plan should be put into looking at what the next steps or changes your business needs for growth. And, generally speaking, incremental adjustments have a better risk-reward trade-off than the big ones do.



Buy Low, Sell High

Throwing money at a problem typically won’t solve the problem. Neither will not throwing any money in. Validation is a very powerful emotion. Business owners are highly susceptible to being blinded by the success of their business. You had the idea, you did the work, you took the risk and now it is paying off! Why shouldn’t you feel good? The truth is you should. But just because you were right once, does not mean you will be right again or right always. Business moves in cycles just like the stock market. Boom times and trough times. If you want to really supercharge your growth don’t spend the “easy money” that comes with being at the top of a business cycle. Save it to reinvest it when the trough time comes. Because your competitors will not do this and will be struggling to stay alive when the slowdown comes. But if you have a war chest to get you through that period, you will come out of the trough tremendously successful. As I write this, we are still muddling along in the end of a recessionary period in the US. But there are lot’s of people making a killing right now. Why? Because they were conservative when the top was here and saved money. When the crash came, their competitors went out of business. Now they have money to reinvest in growth and are picking up business left and right.


This is exactly the same strategy you would use to invest in the stock market. Sell high, buy low. But just like most investors do the OPPOSITE of this, most business owners spend when the money is “easy” and barely scrape by when then trough comes. Have the foresight to flip this usual behavior on it’s head and reinvest when the bottom comes. You will shocked at how much you can grow.



Slow Yourself Down

When you start your business you can make decisions easily. You know your business inside and out. There is very little (relatively speaking) going on. Which means that you have a handle on the heartbeat of your company. This allows you to make tactical decisions quickly because you instinctively know what you want to do. But you can trust your gut too much. When your business is simpler, your gut is probably pretty accurate. As your business grows, it will naturally get more and more complex. At a certain point, your brain cannot integrate all the variables necessary for you to make “gut” level decisions. That is when your “gut” will start to not be right any more. As with overreacting point above, care and research is required to support growth. Force yourself to slow down and consider the options. In this day and age, it seems ridiculous to not move as quickly as possible. But the reality is that all our modern technology only moves information to us and away from us faster. We have not yet invented something that can make decisions for us. Only a human being can take in the data and make a decision. And none of our current tablets, phones or computers has increased the processing speed of our brains. So don’t kid yourself into thinking that you need to “think faster”. It isn’t possible. And please, don’t kid yourself into thinking that you “need to move faster” and you don’t have time to do the research. That is just excusing laziness.



“Burn a Hole”

Something of a continuation of the last point is an idea that I stole from Patrick Rhone. I searched everywhere I could online and I think that he mentioned it in his podcast, which you should check out. But the idea is that laser like focus will allow you to “burn a hole” through your projects. Productivity has given us all the impression that we can and should be doing more than we are. But the reality is you can only move forward so many projects, ideas and products at a time. Productivity is great but I believe that it should be used to allow you to dedicate more substantial time to a few important projects, not dedicating a little time to dozens of projects. As a successful business owner, you will likely have many opportunities and ideas. In fact, you will have more than you can deal with at any one point in time. You will be more successful if you do them one at a time. My way of accomplishing this is to create “Paths”. I have four paths, two personal and two business. That means that I can only have four projects going forward at any one time. For the business paths, I have one for my online projects and one for my full-time job. But I have many, many ideas and projects that I want to do. So during my quarterly planning I update my “path time-line”. For example, I have a list of all the major projects I want to do at NCH (NCH Tax & Wealth Advisors is where I work). It can be anything from marketing to a new niche, developing a new IT infrastructure, or recruiting more staff to grow the business. After making the list, I review each of them for timeliness, seasonality, and resources required. Then I “time line” them out. Project A will be complete by end of January at which time I will start work on Project B which I estimate will take three months which means Project C will start at the beginning of May, etc. This has allowed me to “burn a hole”. I have accomplished more since I have started doing this than I ever did when I tried to work on everything I wanted to do. It also means that I do not lose track of projects or ideas. I can take comfort in the fact that, when the right time for a project arises, I will have that project ready to go.


The point is: If you have 12 ideas you will likely finish all 12 faster by putting focused effort into one project at a time, than you will trying to move all 12 projects forward at once.



I hope this has been helpful and you are as excited for the new year as I am.


What growth strategies are you planning to work on this year?