Expenses

IRS Delays Tax Season Plus Important Deadline Reminders

With all of the last minute tax law changes the IRS needs more time to program their systems. Here are important filing dates:

February 12th: IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.

February 22nd: Projected date for the IRS.gov Where’s My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.

First week of March: Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.

March 15th: Deadline for filing S-corp and partnership returns

April 15th. Deadline for filing individual and corporate tax returns.

May 15th. Deadline for filing exempt organization returns.

September 15th. Deadline for filing extended S-corp and partnership returns

October 15th. Deadline for filing extended individual and corporate returns

 

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PPP2 Overview

Questions about PPP2? Here is an overview:

How much is the loan amount?

The amount is 2.5 times your average monthly payroll during 2019 or trailing 12 months. For hotels and restaurants the amount is 3.5 times average monthly payroll.

How to qualify?

  1. You must have 300 or fewer employees
  2. Have already used or plan to use your original PPP funds
  3. Can demonstrate at least a 25% reduction in revenue during a least one quarter of 2020 when compared to 2019.

When can you start applying?

You can start applying for a second draw PPP now, however, the SBA will initially only accept loan applications from participating community financial institutions.

What is the deadline?

The deadline is March 31, 2021

What can the proceeds be used for?

The loan proceeds can be used for payroll costs, benefits, mortgage interest, rent, utilities, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. The bottom line is that it can be used for many business expenses.

How can it be forgiven?

You must use the entire loan proceeds on covered expenses, stated above, and at least 60% on covered payroll.

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Run Your Business Smoothly During the Holidays

Is that a contradiction, especially if you are a retailer? Aside from retailers and the hecticness from all the holiday shopping, the holidays can go somewhat smoothly for your business. Here are a few ideas for non-retailers and those businesses that are not absolutely crazy during the Holidays:

Schedule time off: Some businesses close during the week between Christmas and New Year’s. Others take that time off and encourage employees to do the same. It is usually quiet during those times anyway. It can be a good way to recharge and connect with family.

Out of office messages/holiday hours: Make sure you have automated messages on your voicemail or email to let customers and vendors know that you are not in the office and/or if you will be checking messages periodically. If there is someone else that can return calls and/or emails, then include that person in your out of office message. Lastly, don’t forget to update your hours on Google and on your website.

Use the time to catch-up: If your business is a little slower, then take this as an opportunity to catch-up on some important, non-urgent items.

Schedule days and times to do your shopping: Schedule your shopping times so you do not feel as though you are constantly in shopping mode. This will help you to be more planned with the time you spend away from your business.

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Are You Tired of Overspending on Christmas?

Even with the best of intentions, almost everyone overspends on Christmas. Here are a few ideas to keep overspending to a minimum:

Go easy on electronics: Electronic devices, aside from TV’s, are usually the smallest, most expensive items to purchase. Top of the line smart phones cost more money than computers and laptops. Also go easy on the electronic devices and gaming consoles.

List of gift recipients: Make a list of everyone that you are going to give gifts to, even if it is only a mental list. This will also make shopping easier when you purchase gifts for less people.

Have a rough estimate of spending: Think of how much you want to spend for each person, which will help to prevent buying massive, spur of the moment, super expensive gifts on a whim

You care more about gifts for your kids then they do: Don’t overthink gift giving for your children. If you spend more money on one child, then you do not have to make up for it by spending more for the one you spent less on. Trust me, kids are not calculating how much you spent.

Most importantly, put it all in perspective: To celebrate Christmas is to celebrate the birth of Jesus. Yes, it has become very secular/commercial nowadays, but this is why we celebrate Christmas.

 

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5 Black Friday Mistakes I Made in the Past

Today is Black Friday and there are sales on virtually everything. It can be both a fun and stressful experience, and there are some mistakes I made in the past:

  1. Allowing myself to be convinced to wake up at 5:30 AM or was it 4:30 AM?. Waking up early does not bring out my “best” self.
  2. Not having a plan of which items to purchase or at least having a budget. This relates to shopping the old-fashioned way and online.
  3. Almost getting into a physical confrontation with someone 3 times my size because he thought that I cut in line. I like challenges.
  4. Not enjoying the experience, especially if it wasn’t your idea. Don’t fight over parking spots, run or walk quickly, complain, cut in line, be rude, or put on a frown.
  5. Remember these mistakes for next year!

 

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Are You Ready to Complete Your PPP Loan Forgiveness Application?

Did 24 weeks pass after you received your PPP funds? If so, then now is the time to complete your PPP loan forgiveness application. Here are a few tips from the SBA:

  1. There are several different forms to use, including SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a lender equivalent. To quickly determine which form you should use, take a look if you meet the main criteria for each.
    1. SBA Form 3508EZ is generally for sole proprietors without any employees
    2. SBA Form 3508S is generally used if your loan was $50,000 or less
    3. SBA Form 3508 is used if you do not meet the criteria to use the other forms
  2. Information you may/will need:
    1. Bank statements
    2. Payroll service provider reports
    3. Payroll tax filings filed during the covered period
    4. Payment receipts or cancelled checks to document health insurance, retirement plan expenses, mortgage payments, rent payments, and utility payments
    5. Copies of lender account statements, lease agreements, and invoices
  3. Submit the forgiveness application, along with supporting documentation
  4. Follow-up with your lender. I’m not really sure how long it will take, but I assume that it depends upon your lender, application volume, form used, how you prepared the application, and the amount of the loan.

If you need help completing your application, then let me know.

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Do You Want a Free Credit Report?

Anytime you hear the word “Free” there is usually a catch and the free item isn’t really free. Surprisingly, you can receive a free credit report by doing this:

Type annualcreditreport.com into your browser, click on “Request your free credit reports,” and start the process. It will take you less than 10 minutes and it is completely free. Federal law requires each of the three consumer credit reporting companies, Equifax, Experian, and TransUnion, to give you a free credit report every 12 months if you request it. Technically, you can receive 3 each year if you obtain one from a different credit reporting company every 4 months.

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Don’t Do This

There is one financial transaction that I strongly discourage clients from doing and here’s why . . .

Do not withdraw from your retirement accounts early! Here are the reasons why I hear most people want to withdraw from their retirement accounts:

  1. Purchase a house
  2. Pay for expenses while unemployed
  3. As a temporary loan, with the intentions of replacing the money
  4. To pay for unforeseen expenses
  5. You need the money for (fill in the blanks)

The main reason to not do this is because it is one of the major reasons for tax problems. Aside from early withdrawal penalties, additional income taxes are accessed  on the balance, withholdings are not usually taken or not enough, and you may end up increasing your income, which sometimes pushes you into an even higher tax bracket. Once you add up all of the penalties and taxes, then the amount withdrawn can disappear by half for some.

What are some other options as you are most likely withdrawing your retirement funds because you desperately need the money and do not have a cash cushion? If you are employed, you may be able to obtain a retirement plan loan from your employer, which is not a taxable event. Alternatively, you might be able to borrow the money from your home’s equity. In some cases, you may be able to delay what you need the money for if not needed for emergency purposes.

Over the long-term, this is why I stress slowly building up a cash emergency fund. Yes, it’s boring and unexciting, but you will be glad you did when the time comes.

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I Was Scammed

Even the smart professional gets scammed every now and then. I’m supposed to be impervious to anything related to parting with money foolishly. How humbling . . .

Fortunately, I didn’t fall for a huge scam, but I fell for it nonetheless. How did this happen? The scam penetrated my ultimate weakness; not thinking clearly when sleep deprived. Here’s the story:

I woke up in the middle of the night and couldn’t go back to sleep right away. By the way, I heard that if this happens it’s best to just get out of bed for a little while instead of lying there sleepless or using your phone. Eventually, I picked up my phone, and started to watch YouTube videos. In the middle of a video appeared an infomercial about a special fan that cools air quickly with the use of water and some sort of advanced technology. It was probably a warm night because I purchased the fan thinking that it may come in handy, especially if making pizza in a hot oven during the summer. If the fan can cool down a factory that melts steel, then it can certainly cool down my kitchen.

Fast forward a few weeks, and fortunately only $90 later after shipping and handling, arrived this magical air cooling fan. I read the directions, added some water, plugged it in, and laughed at myself for being so stupid. The fan was so weak that you couldn’t even feel it unless you were within a foot or two away from the breeze. Nothing was really cooled except for my pride.

Fortunately, it wasn’t a lot of money, but I did learn two lessons. First, anyone can get scammed under the right circumstances, and two, don’t watch YouTube videos at night, especially when you’re tired.

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Are You Striving Too Hard or Too Little?

There is nothing wrong with striving to have financial success but be careful of taking it too far. The opposite can also be true, whereas you don’t strive enough, which can create another set of problems. Here are some signs of each:

Signs You are Striving too Hard

  1. You work an excessive amount of hours to get ahead at the peril of your own health and relationships
  2. No matter what you accomplish it never seems to be enough
  3. Most of your conversations involve making more money. However, this doesn’t apply to financial professionals.
  4. Your drive is not enjoyable anymore

Signs You are Striving too Little

  1. You are always behind financially due to a lack of effort
  2. When business is down, aside from a worldwide pandemic, you do nothing to turn it around
  3. Your efforts are not producing any real financial success
  4. You take little to no corrective actions to get ahead

The Right Balance

The right balance may be as simple as striving for success, while putting financial success in its proper place. It’s different for everyone and if you are honest with yourself you will know when you are striving in an unhealthy way or not striving enough.

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