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  • what is an owner’s draw

    What Is an Owner’s Draw in Accounting?

    posted by Maria Tanski
    Newest Article
  • Use a general ledger to keep your small business's financial transactions organized.

    How’s Your Small Business General Ledger Lookin’?

    posted by Mike Kappel
    Recent Article
  • An Overview of the Consumer Credit Protection Act

    1168056 at work (1)The Consumer Credit Protection Act (CCPA) aims to protect employees whose earnings are being garnished from discharge by employers. The Wage and Hour Division (WHD) of the U.S. Dept. of Labor (DOL) administers the Act.

    All employers are covered by the Act, as well as the employees who receive wages, bonuses, salaries, commissions or periodic payments from retirement or pension plans. Typically, tips income is not included in the Act.

    Wage garnishment refers to an employer withholding wages of an employee to repay a debt, as per a court order or other legal procedure. Even if multiple levies are made and proceedings brought for collection, employers cannot discharge employees because of garnishment for a single debt. However, Title III of the CCPA does not prevent employers from discharging workers if their wages are subject to garnishment for two or more debts.

    The Act also sets a limit on the amount of money that can be garnished from the earnings of a worker per payday. This equals to the sum by which the wages are greater than 30 times the federal minimum wage per hour, as per the Fair Labor Standards Act, or 25% of disposable wages. (Disposable earnings refers to the amount of wages left after legally mandatory deductions like unemployment insurance, Social Security, state employee pension plans and local, state, and federal taxes. Deductions that are not legally mandatory such as life insurance, health insurance, and union dues are not considered while calculating disposable earnings.)

    Regardless of the number of garnishment orders received by an employer, the garnishment limit applies. An amount greater than the above set limit can be garnished from employee wages for the payment of local, state, or federal taxes, bankruptcy, or child support. For more information on the Consumer Credit Protection Act, please refer to the Dept. of Labor (DOL) website.

    What Is an Independent Contractor?

    An independent contractor is an individual who may run their own business, but performs work for other businesses. Independent contractors are not considered employees.

    Independent contractors do not have Medicare tax or Social Security tax deducted from their paychecks. They pay their own self-employment taxes and income tax on earnings. Employees, on the other hand, are individuals hired by a business to perform certain work at the direction of the employers.

    How Electronic Funds Transfer (EFT) Can Help Your Business

    Today’s harried business owners can save time and money by taking advantage of an EFT (Electronic Funds Transfer)process, which is available at financial institutions.

    Using EFT for banking can reduce the time and money spent paying expenses or receiving income. Within hours instead of days, a much-needed payment can be made to meet bill payment deadlines. Convenient for both buyer and seller, an electronic money transfer is secure and convenient for busy professionals who are striving to pay bills on time and manage receivables.

    Here are a few more ways EFTs can help your business:

    • With an electronic transmittal system in place, business owners can manage transfers on an as-needed basis, or set up a routine process.
    • Business owners don’t have to worry about running out of postage or forgetting to pay an invoice.
    • Business owners can use EFTs to pay recurring expenses such as office equipment rentals, payroll, and inventory payments, without spending time to write and mail checks, or paying a staff person to handle them.
    • Privacy is guaranteed by most or all financial institutions. The federal Electric Fund Transfer Act protects consumer rights with respect to unauthorized or inaccurate electronic fund transfers.

    One caveat: Business owners using electronic funds transfer must ensure adequate funds are in the account to cover all scheduled automated payments. If an electronic fund transfer is attempted from an account with an inadequate balance, the account holder may be fined or have to pay a service charge.

    Claiming Tax Credits for Dependent Children

    The IRS offers two tax credits: The Child Tax Credit and the Child and Dependent Care Credit. Knowing which tax credits a family can claim, and how to claim them, can save time and money.

    A family can claim a child tax deduction for a child that is resides with the family for more than half the year. However, if they intend to claim a child that another person may also claim, consult with an accountant to determine who should claim the tax credit. Qualifying children must be under 17 at the end of the tax year to claim the credit, and cannot provide more than half of their own support for the tax year in question. The maximum amount that can be claimed for the Child Tax Credit is $1,000.00 for 2011. More information on the Child Tax Credit is available on the IRS website.

    The Child and Dependent Care Credit can be used to assist families with care of children too young to be unsupervised, or disabled children who cannot care for themselves. Taxpayers must earn income from a salary, wages or self-employment to be eligible for the credit, and the credit cannot be used by those whose children are cared for by a parent or another dependent child. For the Child and Dependent Care Credit, the maximum that can be claimed is 35% of child care expenses. And while employing a nanny does make one eligible for the Child and Dependent Care Credit, doing so may involve other taxes and requirements. Find out more about the Child and Dependent Care Credit on the IRS website.

    Divorced or separated parents must comply with certain conditions to claim a child tax deduction, which include how much time each parent spends with the child, support arrangements, and how much each parent makes. Information on child tax deductions for divorced or separated parents is available on the IRS publication 504.

    Understanding the tax credits that a taxpayer is eligible for is key to avoiding costly and time-consuming mistakes.

    How to Raise Money: Get Our Free Whitepaper

    Money in lightbulb2Small business owners have one thing in common: an entrepreneurial spirit. You started your business because you believed in your product and knew you could sell it. But businesses need money to grow, and that’s in short supply these days. We will show you how to raise money.

    It’s a conundrum: you can’t grow your business without money, but these days, you can’t find money to grow your business! And with traditional funding sources drying up even for high-growth industries, what’s a small business owner to do? Here’s one option: Set up a private offering to your friends and family to raise money for your business. Your investors may get a better return than a traditional bank CD or money market account, and they’ll help you build your business in the process.

    The FREE whitepaper “How to Raise Money for Your Business” from Patriot Software, LLC, describes how small business owners can quickly, easily, and legally raise capital through a private lender investment program. You can infuse your business with the money you need to not only survive, but thrive. We’ll tell you how!

    Summer Day Camp Expenses May Qualify for IRS Tax Credit

    If you have young children, day care expenses may be a costly fact of life for you, as well as for any working parents on your payroll.

    You’re probably aware that you can take a tax credit for child care expenses. But did you know that qualifying summer day camp expenses may also apply? That’s where the Child and Dependent Care Credit comes into play. What is the Child and Dependent Care Credit? It’s a federal tax credit that can reduce your tax bill for certain qualified child and dependent care expenses.

    Keep these IRS tips in mind when determining whether your day camp or other child care expenses qualify for the Child and Dependent Care Expenses Credit:

    • The child must be under age 13 when the care was provided.
    • You cannot take the credit for overnight camp expenses.
    • You may qualify for the credit whether you use a home sitter or a day care facility.
    • Depending on your income, the credit can be up to 35% of your qualifying expenses.
    • You can use up to $3,000 of un-reimbursed expenses annually for one qualifying individual or $6,000 for two or more qualifying individuals.

    You will need to identify the child care provider to the IRS by providing the name, address, and Taxpayer Identification Number. If the provider is a tax-exempt organization such as a church or a school, you don’t have to show the TIN — just write in tax-exempt. Use Form W-10, Dependent Care Provider’s Identification and Certification, to request this info from the child care provider.

    If you pay someone to watch your child in your home, you may be required to withhold payroll taxes. For more information on this rule, check out IRS Publication 503, Child and Dependent Care Expenses.

    IRS Rules Will Weed Out “Ghost” Tax Preparers

    649809 ghost payrollHow much do you know about the person preparing your personal or payroll taxes, and how do you know they’re qualified?

    The Internal Revenue Service recently contacted 100,000 tax return preparers who didn’t follow the new IRS registration requirements effective January 2011. Preparers must now sign tax returns they prepare and include their Preparer Tax Information Number (PTIN), according to Accounting TodayTax preparers who receive the IRS notice may still be using Social Security numbers or outdated PTIN numbers.
    Unscrupulous tax preparers may try to avoid the new program by not signing returns they prepare. Consumers should not use paid tax preparers who refuse to sign tax returns or enter their PTIN, the IRS says.

    All this talk of “ghost preparers” is an IRS effort to improve oversight of the entire tax preparation industry. Last fall, the IRS launched a PTIN registration program, in which all tax preparers must register and pay a fee. Preparers must renew the PTIN annually.

    Also, starting this fall, certain paid preparers who aren’t CPAs, attorneys, or enrolled agents must pass a competency test and a suitability check. The IRS will also require certain preparers to complete 15 annual hours of continuing education credits, starting in 2012. The IRS may also conduct periodic tax compliance and background checks on tax preparers.
    Some small business owners may use an unregistered preparer to keep their small business tax preparation cost down. However, the IRS is planning to contact taxpayers who appear to have had help with their return but lack a tax preparer signature — a sign of a unregistered “ghost preparer.” The letter will explain how a consumer can file a complaint against their preparer and choose a tax preparer who’s legitimate.

    The takeaway: Make sure you check your small business tax return or personal tax return for your preparer’s signature and PTIN number. You want to be sure you receive the best service from a qualified preparer, and not a ghost (oooooooo).

    Ohio’s Estate Tax Repeal Offers Boost to Small Business Payroll

    Lawwmakers boost Ohio payroll with repeal of death taxDying in Ohio won’t be quite as costly for small business owners now that the state’s estate tax — also known as the “death tax” — has been put down by Gov. John Kasich. Maine and Oregon are also making changes to their estate taxes.

    Gov. Kasich’s move, signed into law July 1, helps the state look more attractive to Ohio’s 200,000 small business owners. Ohio’s small business payroll contributes more than $77 billion dollars to Ohio’s economy, according to the Wall Street Journal.

    Although the repeal doesn’t go into effect until Jan. 1, 2013, the elimination of the estate tax will hopefully help end the exodus of Ohio businesses planning to move to more business-friendly climates.

    In Maine, the estate tax exemption will double to $2 million Jan. 1, 2013. Oregon has new graduated rates from 10-16% for estates that exceed $1 million. Oregon’s changes to their estate tax goes into effect later this year.

    According to Forbes, 22 states, including Ohio and the District of Columbia, still impose an estate or inheritance tax on residents. Ohio currently imposes estate taxes on all personal assets which includes business assets, with the lowest exemption amount per estate at $338,333 but also the lowest top rate at 7%. As recently as January, Illinois enacted a state estate tax with an exemption of $2 million and a top tax rate of 16%.

    Don’t Be Fooled by Bogus Email, IRS Warns

    1231735 thumb print 1Don’t fall for the latest scam email claiming to be from the Internal Revenue Service, the IRS is warning on its website. A new scam email is circulating the Internet regarding electronic federal tax payments or the Electronic Federal Tax Payment System (EFTPS).

    The “phishing” email informs recipients that their federal tax payments made through EFTPS have been rejected. It instructs them to click a link which, unfortunately, is bogus, and downloads malware to infect the recipient’s computer. If you fall victim to this scam, the sender can capture your personal and financial information and commit identity theft.

    If you receive a suspicious email claiming to be from the IRS or referencing the EFTPS system or electronic federal tax payments, do not click on any links contained within the email, open any attachments, or reply to the sender. However, you should report unsolicited email claiming to be from the IRS at phishing@irs.gov.

    The IRS does not initiate taxpayer communications through email. This latest scam comes at a time when most employers are now required to use EFTPS to make federal payroll tax payments and other tax payments. It’s another way that scam artists are trying to hoodwink consumers into giving up their personal or financial information. Many phishing emails include seemingly genuine logos and mention specific programs such as EFTPS to appear more credible. Don’t fall for it!

    If you think you may be a victim of identity theft due to this phishing scam, follow the instructions on the IRS website to report the incident.

    Payroll News: President Obama Repeals 1099 Reporting Rules

    payroll newsGood news for small business owners — President Obama has signed the repeal of the controversial new 1099 reporting requirements.
    The proposed reporting requirements were part of the Affordable Care Act, and would have required all businesses to issue 1099-MISC forms to vendors for all services as well as goods over $600. The repeal of this law saves small business owners and payroll administrators from a burdensome amount of added paperwork.

    Here’s how the law stands now: you must issue a 1099 to anyone who is not an employee (excluding most corporations) if you pay them more than $600 for their services only. “With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth,” said Karen Mills, administrator of the Small Business Administration.

    For more information about the current 1099 requirements for independent contractors, visit the IRS website.

    An Overview of the Consumer Credit Protection Act

    1168056 at work (1)The Consumer Credit Protection Act (CCPA) aims to protect employees whose earnings are being garnished from discharge by employers. The Wage and Hour Division (WHD) of the U.S. Dept. of Labor (DOL) administers the Act.

    All employers are covered by the Act, as well as the employees who receive wages, bonuses, salaries, commissions or periodic payments from retirement or pension plans. Typically, tips income is not included in the Act.

    Wage garnishment refers to an employer withholding wages of an employee to repay a debt, as per a court order or other legal procedure. Even if multiple levies are made and proceedings brought for collection, employers cannot discharge employees because of garnishment for a single debt. However, Title III of the CCPA does not prevent employers from discharging workers if their wages are subject to garnishment for two or more debts.

    The Act also sets a limit on the amount of money that can be garnished from the earnings of a worker per payday. This equals to the sum by which the wages are greater than 30 times the federal minimum wage per hour, as per the Fair Labor Standards Act, or 25% of disposable wages. (Disposable earnings refers to the amount of wages left after legally mandatory deductions like unemployment insurance, Social Security, state employee pension plans and local, state, and federal taxes. Deductions that are not legally mandatory such as life insurance, health insurance, and union dues are not considered while calculating disposable earnings.)

    Regardless of the number of garnishment orders received by an employer, the garnishment limit applies. An amount greater than the above set limit can be garnished from employee wages for the payment of local, state, or federal taxes, bankruptcy, or child support. For more information on the Consumer Credit Protection Act, please refer to the Dept. of Labor (DOL) website.

    What Is an Independent Contractor?

    An independent contractor is an individual who may run their own business, but performs work for other businesses. Independent contractors are not considered employees.

    Independent contractors do not have Medicare tax or Social Security tax deducted from their paychecks. They pay their own self-employment taxes and income tax on earnings. Employees, on the other hand, are individuals hired by a business to perform certain work at the direction of the employers.

    How Electronic Funds Transfer (EFT) Can Help Your Business

    Today’s harried business owners can save time and money by taking advantage of an EFT (Electronic Funds Transfer)process, which is available at financial institutions.

    Using EFT for banking can reduce the time and money spent paying expenses or receiving income. Within hours instead of days, a much-needed payment can be made to meet bill payment deadlines. Convenient for both buyer and seller, an electronic money transfer is secure and convenient for busy professionals who are striving to pay bills on time and manage receivables.

    Here are a few more ways EFTs can help your business:

    • With an electronic transmittal system in place, business owners can manage transfers on an as-needed basis, or set up a routine process.
    • Business owners don’t have to worry about running out of postage or forgetting to pay an invoice.
    • Business owners can use EFTs to pay recurring expenses such as office equipment rentals, payroll, and inventory payments, without spending time to write and mail checks, or paying a staff person to handle them.
    • Privacy is guaranteed by most or all financial institutions. The federal Electric Fund Transfer Act protects consumer rights with respect to unauthorized or inaccurate electronic fund transfers.

    One caveat: Business owners using electronic funds transfer must ensure adequate funds are in the account to cover all scheduled automated payments. If an electronic fund transfer is attempted from an account with an inadequate balance, the account holder may be fined or have to pay a service charge.

    Claiming Tax Credits for Dependent Children

    The IRS offers two tax credits: The Child Tax Credit and the Child and Dependent Care Credit. Knowing which tax credits a family can claim, and how to claim them, can save time and money.

    A family can claim a child tax deduction for a child that is resides with the family for more than half the year. However, if they intend to claim a child that another person may also claim, consult with an accountant to determine who should claim the tax credit. Qualifying children must be under 17 at the end of the tax year to claim the credit, and cannot provide more than half of their own support for the tax year in question. The maximum amount that can be claimed for the Child Tax Credit is $1,000.00 for 2011. More information on the Child Tax Credit is available on the IRS website.

    The Child and Dependent Care Credit can be used to assist families with care of children too young to be unsupervised, or disabled children who cannot care for themselves. Taxpayers must earn income from a salary, wages or self-employment to be eligible for the credit, and the credit cannot be used by those whose children are cared for by a parent or another dependent child. For the Child and Dependent Care Credit, the maximum that can be claimed is 35% of child care expenses. And while employing a nanny does make one eligible for the Child and Dependent Care Credit, doing so may involve other taxes and requirements. Find out more about the Child and Dependent Care Credit on the IRS website.

    Divorced or separated parents must comply with certain conditions to claim a child tax deduction, which include how much time each parent spends with the child, support arrangements, and how much each parent makes. Information on child tax deductions for divorced or separated parents is available on the IRS publication 504.

    Understanding the tax credits that a taxpayer is eligible for is key to avoiding costly and time-consuming mistakes.

    How to Raise Money: Get Our Free Whitepaper

    Money in lightbulb2Small business owners have one thing in common: an entrepreneurial spirit. You started your business because you believed in your product and knew you could sell it. But businesses need money to grow, and that’s in short supply these days. We will show you how to raise money.

    It’s a conundrum: you can’t grow your business without money, but these days, you can’t find money to grow your business! And with traditional funding sources drying up even for high-growth industries, what’s a small business owner to do? Here’s one option: Set up a private offering to your friends and family to raise money for your business. Your investors may get a better return than a traditional bank CD or money market account, and they’ll help you build your business in the process.

    The FREE whitepaper “How to Raise Money for Your Business” from Patriot Software, LLC, describes how small business owners can quickly, easily, and legally raise capital through a private lender investment program. You can infuse your business with the money you need to not only survive, but thrive. We’ll tell you how!

    Summer Day Camp Expenses May Qualify for IRS Tax Credit

    If you have young children, day care expenses may be a costly fact of life for you, as well as for any working parents on your payroll.

    You’re probably aware that you can take a tax credit for child care expenses. But did you know that qualifying summer day camp expenses may also apply? That’s where the Child and Dependent Care Credit comes into play. What is the Child and Dependent Care Credit? It’s a federal tax credit that can reduce your tax bill for certain qualified child and dependent care expenses.

    Keep these IRS tips in mind when determining whether your day camp or other child care expenses qualify for the Child and Dependent Care Expenses Credit:

    • The child must be under age 13 when the care was provided.
    • You cannot take the credit for overnight camp expenses.
    • You may qualify for the credit whether you use a home sitter or a day care facility.
    • Depending on your income, the credit can be up to 35% of your qualifying expenses.
    • You can use up to $3,000 of un-reimbursed expenses annually for one qualifying individual or $6,000 for two or more qualifying individuals.

    You will need to identify the child care provider to the IRS by providing the name, address, and Taxpayer Identification Number. If the provider is a tax-exempt organization such as a church or a school, you don’t have to show the TIN — just write in tax-exempt. Use Form W-10, Dependent Care Provider’s Identification and Certification, to request this info from the child care provider.

    If you pay someone to watch your child in your home, you may be required to withhold payroll taxes. For more information on this rule, check out IRS Publication 503, Child and Dependent Care Expenses.

    IRS Rules Will Weed Out “Ghost” Tax Preparers

    649809 ghost payrollHow much do you know about the person preparing your personal or payroll taxes, and how do you know they’re qualified?

    The Internal Revenue Service recently contacted 100,000 tax return preparers who didn’t follow the new IRS registration requirements effective January 2011. Preparers must now sign tax returns they prepare and include their Preparer Tax Information Number (PTIN), according to Accounting TodayTax preparers who receive the IRS notice may still be using Social Security numbers or outdated PTIN numbers.
    Unscrupulous tax preparers may try to avoid the new program by not signing returns they prepare. Consumers should not use paid tax preparers who refuse to sign tax returns or enter their PTIN, the IRS says.

    All this talk of “ghost preparers” is an IRS effort to improve oversight of the entire tax preparation industry. Last fall, the IRS launched a PTIN registration program, in which all tax preparers must register and pay a fee. Preparers must renew the PTIN annually.

    Also, starting this fall, certain paid preparers who aren’t CPAs, attorneys, or enrolled agents must pass a competency test and a suitability check. The IRS will also require certain preparers to complete 15 annual hours of continuing education credits, starting in 2012. The IRS may also conduct periodic tax compliance and background checks on tax preparers.
    Some small business owners may use an unregistered preparer to keep their small business tax preparation cost down. However, the IRS is planning to contact taxpayers who appear to have had help with their return but lack a tax preparer signature — a sign of a unregistered “ghost preparer.” The letter will explain how a consumer can file a complaint against their preparer and choose a tax preparer who’s legitimate.

    The takeaway: Make sure you check your small business tax return or personal tax return for your preparer’s signature and PTIN number. You want to be sure you receive the best service from a qualified preparer, and not a ghost (oooooooo).

    Ohio’s Estate Tax Repeal Offers Boost to Small Business Payroll

    Lawwmakers boost Ohio payroll with repeal of death taxDying in Ohio won’t be quite as costly for small business owners now that the state’s estate tax — also known as the “death tax” — has been put down by Gov. John Kasich. Maine and Oregon are also making changes to their estate taxes.

    Gov. Kasich’s move, signed into law July 1, helps the state look more attractive to Ohio’s 200,000 small business owners. Ohio’s small business payroll contributes more than $77 billion dollars to Ohio’s economy, according to the Wall Street Journal.

    Although the repeal doesn’t go into effect until Jan. 1, 2013, the elimination of the estate tax will hopefully help end the exodus of Ohio businesses planning to move to more business-friendly climates.

    In Maine, the estate tax exemption will double to $2 million Jan. 1, 2013. Oregon has new graduated rates from 10-16% for estates that exceed $1 million. Oregon’s changes to their estate tax goes into effect later this year.

    According to Forbes, 22 states, including Ohio and the District of Columbia, still impose an estate or inheritance tax on residents. Ohio currently imposes estate taxes on all personal assets which includes business assets, with the lowest exemption amount per estate at $338,333 but also the lowest top rate at 7%. As recently as January, Illinois enacted a state estate tax with an exemption of $2 million and a top tax rate of 16%.

    Don’t Be Fooled by Bogus Email, IRS Warns

    1231735 thumb print 1Don’t fall for the latest scam email claiming to be from the Internal Revenue Service, the IRS is warning on its website. A new scam email is circulating the Internet regarding electronic federal tax payments or the Electronic Federal Tax Payment System (EFTPS).

    The “phishing” email informs recipients that their federal tax payments made through EFTPS have been rejected. It instructs them to click a link which, unfortunately, is bogus, and downloads malware to infect the recipient’s computer. If you fall victim to this scam, the sender can capture your personal and financial information and commit identity theft.

    If you receive a suspicious email claiming to be from the IRS or referencing the EFTPS system or electronic federal tax payments, do not click on any links contained within the email, open any attachments, or reply to the sender. However, you should report unsolicited email claiming to be from the IRS at phishing@irs.gov.

    The IRS does not initiate taxpayer communications through email. This latest scam comes at a time when most employers are now required to use EFTPS to make federal payroll tax payments and other tax payments. It’s another way that scam artists are trying to hoodwink consumers into giving up their personal or financial information. Many phishing emails include seemingly genuine logos and mention specific programs such as EFTPS to appear more credible. Don’t fall for it!

    If you think you may be a victim of identity theft due to this phishing scam, follow the instructions on the IRS website to report the incident.

    Payroll News: President Obama Repeals 1099 Reporting Rules

    payroll newsGood news for small business owners — President Obama has signed the repeal of the controversial new 1099 reporting requirements.
    The proposed reporting requirements were part of the Affordable Care Act, and would have required all businesses to issue 1099-MISC forms to vendors for all services as well as goods over $600. The repeal of this law saves small business owners and payroll administrators from a burdensome amount of added paperwork.

    Here’s how the law stands now: you must issue a 1099 to anyone who is not an employee (excluding most corporations) if you pay them more than $600 for their services only. “With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth,” said Karen Mills, administrator of the Small Business Administration.

    For more information about the current 1099 requirements for independent contractors, visit the IRS website.

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