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Tag: accounting

  • Am I being tricked into overtipping when I eat out? Should I tip before or after sales tax is added?

    Am I being tricked into overtipping when I eat out? Should I tip before or after sales tax is added?

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    Dear Quentin,

    I’ve read your previous responses to letters on tipping, and my thoughts are simple: Tipping is dependent on the service given. I won’t tip at a deli counter, but I will tip more in a diner. I see no reason to tip a deli counter person on a regular basis. The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag.

    As far as restaurants go, 15% is the starting point and I will go up from that as warranted. I do tend to tip a high percentage in diners. The waitstaff there are generally fabulous, deal with lower price points and a varied clientele. I feel they also suffer from customer bias where some people seem to think it’s only a diner not a fancy restaurant.

    “‘Helping others is not always through money. I volunteer my time with several charities and donate blood.’”

    The job is the same whether my meal is $10 or $100. I try to pay in cash to ensure the waitstaff is promptly getting their tip, and to ensure that the money does indeed go to the wait staff. Are we expected to tip on a total that includes credit-card charges? What’s more, helping others is not always through money. I volunteer my time with several charities and donate blood.

    What troubles me is that throughout the New York City metro area, tipping recommendations in restaurants are based on faulty calculations. My friends and I all agree that tips are supposed to be based on the price of the meal — that is the subtotal or pre-tax figure. Restaurants frequently encourage people to tip on the final amount. 

    A Fair Tipper

    Related: I’m sick and tired of tipping 20% every time I eat out. Is it ever OK to tip less? Or am I a cheapskate? 

    Dear Fair,

    Yes, yes, yes, and yes. 

    Yes, wait staff in diners work as hard as any restaurant worker, and they deserve whatever your optimum tip — 15% or 20% — and as much as you would tip in a white-tablecloth restaurant. Yes, consumers should not be expected to tip in a deli — unless you have a good relationship with the staff, and you tip occasionally for goodwill. If you choose to “skip” the charity donation in a pharmacy, that’s OK too. Yes, donations and tips are increasingly being conflated, and that’s not always a good thing. We should be comfortable with the charity and 100% sure that the donation is going to the charity in question. 

    And your main point: Yes, tipping on the subtotal before tax and before credit-card charges is absolutely fair, although a lot of people — especially when calculating the tip among friends — tip on the after-tax total. Why? Perhaps we don’t want to be seen splitting hairs over the tax among friends and/or in front of a service worker who has given us exemplary service. Calculating tips is often done under pressure, and no one likes to be seen as a cheapskate. I almost always tip on the total amount, knowing that the sales tax is included, primarily because I figure that extra $1 or more is going to the person who served my table.

    My colleague, MarketWatch news editor Nicole Pesce, put together a guide for how much you should tip everyone, and who you should NOT tip. She also cited three reasons why tipping has become such a note of contention, and why it appears we are tipping more: people tipped staff more during the pandemic (they were, after all, putting their health and lives at risk with their jobs); 40-year high inflation over the last 12 months has increased the cost of everything and, as such our tips rose in tandem with prices; and, finally, digital tipping appears to be ubiquitous, and people have been suffering from tipping fatigue. 

    “‘You’re not the only one: Americans are souring on tipping.’”

    You’re not the only one with tipping fatigue, though: Americans are generally souring on tipping. A large majority (66%) of U.S. adults have a negative view about tipping, according to a poll released by the personal-finance site Bankrate last month. The bottom line: consumers feel they are being forced to compensate employees for low pay (41%) and they don’t appreciate all that digital guilt tipping (32%) and, as a result, they believe that tipping culture has gotten out of control (30%). Respondents also said they were confused about how much to tip (15%), but a small minority (a paltry 16%) said they would be willing to pay higher prices in lieu of tipping.

    People appear to be less generous with their tipping amounts, and they also appear to be tipping less often. What’s perhaps most surprising from Bankrate’s research is that only 65% of diners actually tip when they eat out (that’s down from 73% last year). After restaurants, people are most likely to tip barbers/hairdressers (53% of those polled) and food-delivery workers (50%). From thereon, only a minority of people say they tip taxi or rideshare drivers (New York City cabs, which give tipping options upon payment, may be an outlier here), hotel housekeepers, baristas and food-delivery workers.

    It’s important that we have this conversation about tipping because expectations and digital tipping methods are evolving all the time. On the one hand, people are facing higher prices and they are understandably feeling under pressure to tip. On the other hand, this conversation naturally overlaps with the working conditions and pay of service workers. Americans are tipping less than they did during the worst days of the pandemic. Service workers — along with medical personnel, bus and train drivers and first responders — were among the heroes of the pandemic. That is something I hope we never forget.

    “The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag,” the letter writer says.


    MarketWatch illustration

    Also read:

    ‘I respect every profession equally, but I feel like so many people look down on me for being a waitress’: Americans are tipping less. Should we step up to the plate? 

    ‘We’re very upset!’ We gave a friend $400 concert tickets and $2,000 Rangers seats, but weren’t invited to his wedding. Do we speak up?

    ‘All of these tips add up’: If a restaurant adds a 20% tip, am I obliged to pay? Should tipping not be optional? 

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  • ‘I was outraged’: Our restaurant bill was $35 each, but our friend wanted to pay $22 for a gluten-free dish. Who’s right?

    ‘I was outraged’: Our restaurant bill was $35 each, but our friend wanted to pay $22 for a gluten-free dish. Who’s right?

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    Dear Quentin,

    I went for dinner with six friends last weekend, and we each ordered entrees and desserts, and some side orders. One of our group only eats gluten-free food, so he ordered two starters. We split the bill, and it worked out at $36 each. But our gluten-free friend cried foul, and asked for a separate check to pay $22 for his gluten-free dish. I was outraged — and almost felt physically sick. I kicked my husband under the table, and said under my breath, “Can you believe that?’

    Can you believe it? Do you think he should have just paid the $35 instead of asking for a separate check? Adding insult to injury, he left the waiter a $10 tip. Why not just pay $35 like everyone else? I told my husband I was never going for dinner with him again. Don’t you think he should have just paid $35 like everyone else? It was a big crowd. If everyone did that, you’d need a forensic accountant to figure out how many breadsticks someone ate. 

    We otherwise had a nice evening, and it was a bring-your-own-bottle restaurant. I work as a teacher and my husband works in tech. We own a home together and have three kids. Our gluten-free friend is a freelance consultant, and is divorced with two kids. He had a very privileged upbringing. I worked hard for everything I have. I’m not saying any of us are rich, but when we go out to eat, we like to share and share alike, and split the bill down the middle. 

    When did eating out become so full of these cringeworthy moments?

    Equal Bill Splitter

    Dear Equal,

    I’m sorry to say that the most cringeworthy moment here happened when you kicked your husband under the table. I’m not a big fan of under-table communication in a group, and while we could debate the pros and cons of asking for a separate check for a $13 difference, I don’t think there’s much of a gray area when it comes to calling someone out at the dinner table, especially when your eye-rolling and disapproval could be picked up by the other guests.

    As far as your friend is concerned, $13 is a lot of money to pay when you did not eat all the food that was ordered by the table. Maybe it doesn’t seem like it to you or anyone reading this column, but your friend is divorced with two kids, and works as a freelancer — so let’s assume his income is not always stable. Could he have just split it down the middle and paid $35 and another 15% or 20% for a tip? Sure. But he has good financial boundaries. I applaud him.

    The real issue here may go back to your respective upbringings, and could explain your dramatic — and I would argue disproportionate reaction — to your friend asking for a separate $22 check. You’ve worked hard, and maybe your friend had an easier start in life, but that doesn’t mean he’s not entitled to pay for what he ate, and watch every dollar. Divorce is like a recession. You can end up struggling to get back on your financial feet for years.

    Perhaps your friend had always intended to pay $22 for his gluten-free dish, and tip the server 50%, or perhaps he has a well-trained side eye and caught your reaction to his paying for his own order, and he decided to pay closer to what everyone else had paid. But ordering separate checks, I suspect, will become more common as prices continue to rise, even at a slower pace, and people feel uncertain about spending money in restaurants. 

    You believe in equality of bill splitting. I suggest you apply that equality to all dinner guests, regardless of upbringing and dietary restrictions, and allow them to make their own choices about what they pay for at dinner. People often have problems — financial or otherwise — that we are not aware of, so try to leave space for that. And if your friend did see your eye-rolling and under-the-table antics? I’d like to think he made space for your behavior too.

    Readers write to me with all sorts of dilemmas. 

    By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

    The Moneyist regrets he cannot reply to questions individually.

    More from Quentin Fottrell:

    I had a date with a great guy. I didn’t drink, but his wine added $36 to our bill. We split the check evenly. Should I have spoken up?

    ‘I’m living paycheck to paycheck and I feel drained’: My fiancé said he would pay half of the mortgage. Guess what happened next?

    ‘We live in purgatory’: My wife has a multimillion-dollar trust fund, but my mother-in-law controls it. We earn $400,000 and spend beyond our means.

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  • New Tax Credits for Small Retirement Plan Sponsors

    New Tax Credits for Small Retirement Plan Sponsors

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    One of the primary goals of the Setting Every Community Up for Retirement Enhancement Act (SECURE 2.0) is to expand access to employer provided retirement programs. In particular, smaller employers, who frequently do not offer retirement benefit plans. The SECURE Acts (1.0 and 2.0) add or expand several tax credits for smaller companies that open a retirement program, so business owners can adopt this powerful tool for attracting and retaining employees, including:

    • Tax Credit for Adding Automatic Enrollment
    • Tax Credit for Employer Contributions
    • Tax Credit for Military Spouses

    Key Takeaways: Through these credits, a small employer may be able to adopt a plan and make employer contributions for very little cost. Companies should consider how a retirement program tailored to suit their specific work force and business needs can improve their recruitment, retention and engagement with top talent.

    Complete the form below and download the latest retirement planning report.

    Gallagher Fiduciary Advisors, LLC (“GFA”) is an SEC Registered Investment Advisor that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Neither Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.

    Securities may be offered through Triad Advisors, LLC (“Triad”), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad nor their affiliates provide accounting, legal or tax advice.

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  • As food prices rise in June, analysts warn of a ‘tipping point’ for Americans

    As food prices rise in June, analysts warn of a ‘tipping point’ for Americans

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    Food prices grew at a slower pace in June, but economists remain concerned that prices will reach a level where consumers will make dramatic changes in their behavior.

    Food prices rose 3% in June compared to a year ago, according to the latest data from the Bureau of Labor Statistics. After a year of price hikes, consumers continued to see food prices rise, but at a slower rate.

    Grocery prices were 5.7% higher in June compared to a year ago, and dining out was 7.7% more expensive. That’s significantly lower than the 13.5% peak inflation for grocery prices last August and the 8.8% peak inflation for dining out.

    “Overall, there continues to be a similar narrative of extended upward pressure on food prices as we try to discern whether this stress has led to a tipping point where consumers are struggling to buy the foods that they want,” said Jayson Lusk, the head and distinguished professor of Agricultural Economics at Purdue University.

    Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to the monthly Consumer Food Insights Report from Purdue University. Although it didn’t deviate too much from the normal range — food insecurity hovered at 14% two months ago — Lusk said the increase is concerning given the amount of pressure on more financially vulnerable consumers. 

    “Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to Purdue University. ”

    The pandemic-era expansion of the Supplemental Nutrition Assistance Program ended in March, meaning SNAP recipients are now receiving $90 less on average every month, according to the Center on Budget and Policy Priorities, a progressive policy think tank based in Washington, D.C. 

    The recent rise in food insecurity could be a lag from households adjusting to the policy change, Lusk said. On average, consumers are spending about $120 per week on groceries and $70 per week on dining out or takeout, the report found. 

    Middle-income households earning $50,000 to $100,000 a year and low-income households earning less than $50,000 a year cut weekly spending on groceries and dining out by about $10 a week, Purdue found. The average weekly grocery expenditure for low-income households was $103 in June; for middle-income households, it was $118. Households earning more than $100,000 a year spent $141 a week on groceries in June.

    Around 47% of low-income households — those earning less than $50,000 a year — said they relied on SNAP benefits in May, up from roughly 40% in February, according to a recent Morning Consult report.

    For low-income households, rising food insecurity is often coupled with juggling bills such as utilities and rent, which has also led to rising eviction rates in recent months, according to Propel, an app that aims to help low-income Americans improve their financial health. Propel surveys SNAP users on insecurity around food, finance and their housing situation. 

    Nearly half of the survey respondents said they cannot afford the food they want. “We were unable to pay bills because we had to buy food. We’re about to lose our home,” a South Carolina user named Anna told the Propel survey. 

    The share of surveyed households that paid their utilities late rose 11% from May to June, and only 27% of respondents paid their utility bills on time and in full, according to Propel’s June survey.

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  • Want Taxes to Be Easy? Work on Them Year Round, Not Last Minute. | Entrepreneur

    Want Taxes to Be Easy? Work on Them Year Round, Not Last Minute. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Taxes aren’t just a once-a-year phenomenon. Filing taxes begins with a plan and a daily routine. If your goal is to learn a language so you can visit a foreign country, learning in small, easy-to-digest segments makes it easy to absorb and retain. When you finally take your trip, it’s that much more rewarding.

    The same is true of taxes. Attacking them in the handful of days before they’re due is a formula for stress, error and failure. Breaking down tax-related recordkeeping and related tasks into smaller segments, such as reviewing receipts and invoices an hour a week, makes the process more manageable and less overwhelming. Keeping taxes on your radar all year can even be good for your overall finances.

    Related: Make Tax Season As Painless as Possible by Taking These 6 Steps

    Make a regular tax thing

    Have you ever skipped mowing your lawn for a few weeks? Suddenly, it’s up to your knees, the grass gets stuck in your blades and it takes way longer than it should. The same is true of handling your tax-related finances. If you document and file your receipts and invoices when they’re fresh in your mind, they’re easy to account for properly. That’s why you should look at them regularly — how regularly will depend on how much work there is. I recommend looking at everything at least once a month, but if you’re doing a lot of business, you may want to do it every two weeks or even weekly. Just make it part of your routine.

    An excellent way to handle that is to write down an appointment in your business calendar. Writing it down will help in multiple ways. You should also physically write down what you must address at each session.

    When you do that, you can also use the information to look forward. This can be really useful if your income differs from month to month. By seeing what you brought in in the past month, you can:

    • Get a better idea of what your year-end income will be.
    • See whether you may fall short and address that before it’s a severe problem.
    • Know which clients are your best.

    When you know whether your year-end income looks like it will be much different from your previous year or what you expected, you can make plans to have money ready to pay at the end of the year or make adjustments to your estimated tax payments.

    If you find you’ll have more money than you expect, it also provides an opportunity to make investments. You can buy something that will help the business — or even take a larger share home.

    Don’t lose the paperwork

    Your routine attention to tax-related paperwork will pay off at tax time. This is true whether you’ll be doing the filing, an employee will or a tax accountant will. Record the expenses that will count as deductions at your regular session closest to when they happen. This will include regular outlays such as rent; variable outlays such as utilities or internet (note the Internal Revenue Service rules if you’re declaring the costs for a home office versus a traditional office or facility); and your business phone. One of the easiest expenses to lose track of is business mileage. Entering mileage and the reason for travel will make things easier when it’s time to file.

    This is where a document management system (DMS) will help. When your business calendar says it’s time to attend to your tax-related recordkeeping, you only need to capture all the relevant documents. Whether it’s an invoice, a checking account statement, a receipt or any other support you’ll need for the IRS, the best DMS will pull all the data in.

    Leveraging optical character reading (OCR), such a solution will work from cell phone photographs, existing computer files and email attachments. Then, once the data are stored in the cloud, you can categorize your paperwork by type and manipulate them to produce reports you can use, such as expense or income statements. These also reduce errors that make the IRS unhappy and can result in fines and penalties. And, should the IRS wish to conduct an audit, all of those data will be easily accessible and organized. The IRS even prefers electronic records.

    Related: 3 Ways to Save Money on Taxes That Most Entrepreneurs Miss

    Just a little bit goes a long way

    Productivity experts from David Allen to Tony Robbins and publications like Harvard Business Review and Psychology Today have pointed out that the best way to accomplish a large task is to break it down into smaller ones. Short, productive bursts of time will move you inexorably to the finish line as the year progresses. Visual cues, like a Post-It note on your computer, can help you make year-round tax record management a habit. Be specific about your tasks. Mnemonics help; maybe “Taco Tuesday” becomes “Tax Record Tuesday.” With almost no pain, you’ll be prepared when tax season begins. While the procrastinators around you are pulling at their hair and biting their nails, you’ll be doing things directly relevant to your business — with every hair in place and nails intact.

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    Jim Conroy

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  • How AI Is Transforming the Accounting Industry | Entrepreneur

    How AI Is Transforming the Accounting Industry | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    You can’t survive in a fast-paced environment without financial management — there is no argument with that. Bookkeeping is the key to surviving that environment. Historically, bookkeeping has been a labor-intensive and time-consuming process.

    We are going to see a sweeping shift in how our early adopters in this industry leveraged AI effectively: increased specialized roles, brand distinction across the board and a shift for the better in employee sentiment, to name a few.

    All of our repetitive tasks and automation will now serve as an intuitive function for the business. With a clear head and focused direction, you will be able to easily mitigate any common human errors.

    Addressing the elephant in the room: No, robots are not taking our jobs, but new technology may help us do them better! AI is going to be like QuickBooks on steroids.

    It is still too early to consider AI a replacement, however, we can look to it for assistance in different ways.

    Related: 3 Ways Artificial Intelligence Will Transform The World in 2023

    Data entry

    In this industry, you know how monotonous data entry can be, no exaggeration. Thankfully, AI-powered systems can handle the mind-numbing work of data entry and reduce manual effort, time and the risk of human error.

    Optical character recognition (OCR) technology allows AI algorithms to accurately extract relevant information from invoices, receipts and other financial documents, which then eliminates the need for manual input.

    We save time, assure accuracy down to the smallest number, and we bookkeepers can outsource our efforts to more important matters.

    Real-time data processing

    This can be the most time-consuming because you have to interpret financial data in a broad context and consider external factors, market trends and business strategies. So, we can say the time can range from hours to days.

    AI-powered bookkeeping systems can now integrate with various data sources, such as bank feeds and payment gateways, enabling real-time processing and analysis of financial data in a matter of seconds.

    What this means is businesses will get instant access to up-to-date insights into their financial health, allowing them to make informed decisions promptly.

    Immediate access to financial information means businesses can monitor cash flow, identify potential risks and respond swiftly to market changes.

    Intelligent financial analysis

    Intelligent financial analysis is a key strength of AI in the bookkeeping field. We can’t make the decisions we do without analyzing day-to-day trends.

    AI algorithms can analyze large volumes of financial data, identify patterns, trends, and anomalies, and provide valuable insights.

    These insights enable businesses to gain a deeper understanding of their financial performance, make data-driven decisions and optimize their financial strategies.

    These systems can assist in cash flow forecasting, profitability analysis, budget optimization and trend identification, empowering organizations to maximize profitability and identify areas for improvement, completely error-free and in the snap of your fingers.

    Related: Smart Money: How Artificial Intelligence Will Transform Wealth Management

    Enhanced security and compliance

    Merging AI into bookkeeping processes also enhances security and compliance measures.

    These systems can detect irregularities, anomalies and potentially fraudulent activities within financial data. By continuously monitoring transactions and patterns, AI algorithms can identify potential risks and alert businesses in real-time.

    As a result, we see strengthened security measures and reduced risks of financial fraud. This AI-powered bookkeeping simultaneously also helps ensure compliance with accounting regulations and standards, reducing the likelihood of errors and penalties.

    Scalability and cost-efficiency

    Scalability and cost-efficiency are one of the most pioneering steps in this growing integration. As businesses grow, the volume and complexity of financial data increases.

    AI automation allows businesses to handle more significant amounts of data without compromising accuracy or efficiency. This scalability enables organizations to streamline their bookkeeping processes, reducing costs and improving operational efficiency.

    The best part is that there are no restrictions. AI-powered bookkeeping systems are accessible to businesses of all sizes, leveling the playing field and democratizing financial management capabilities.

    Personalized financial guidance

    This was a surprise to me, but AI can also bring personalized insights and guidance to the table.

    By analyzing historical data, industry benchmarks and market trends, AI-powered systems can offer tailored recommendations and insights based on a business’s specific goals and objectives.

    This personalized guidance empowers businesses to optimize their financial performance, identify growth opportunities and navigate challenges more effectively.

    However, this is all the more reason that AI should be viewed as a tool that complements and enhances the capabilities of human bookkeepers rather than replacing them. Human professionals bring critical judgment, interpret complex financial situations and provide context for decision-making, ensuring ethical considerations and strategic perspectives are taken into account.

    Related: Can Computers Replace Human Accountants? We Doubt They Can

    What’s the future looking like?

    The big question in all our minds is: Will AI replace human bookkeepers entirely?

    As I mentioned earlier, it’s too early to say.

    What we need to do is recognize that AI is a powerful tool but not a substitute for human expertise.

    Yes, it can automate repetitive tasks and provide valuable insights, but human bookkeepers bring a unique set of skills and expertise that go beyond the capabilities of AI. Human bookkeepers also possess a deep understanding of financial principles, industry nuances and the ability to exercise judgment in complex situations that AI can’t replicate.

    Moreover, human bookkeepers can interpret financial data in a broader context, considering the impact of external factors, market trends and business strategies. We provide personalized advice, taking into account the specific needs and goals of the organization.

    Humans are essential in maintaining the ethical integrity of financial practices, ensuring compliance with regulations and making decisions with a human touch.

    We need to look at AI not as a replacement but as a transformer.

    AI-powered bookkeeping systems enable professionals to streamline their workflows, freeing up time for more strategic tasks that require human judgment and creativity. What we are on the path to is, literally, more time for us, more sophisticated applications and innovation.

    We do need to remember that there are always risks. Data privacy and security are critical aspects that need to be addressed. Businesses must ensure that AI-powered systems comply with data protection regulations and employ robust security measures to safeguard sensitive financial information.

    What we are witnessing is a transformation in financial management practices. AI is going to serve as a collaborative asset, leveraging the strengths of both AI and human professionals to drive financial success and organizational growth.

    The way I see it, we are controlling the robots, not the other way around.

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    Matt Bontrager

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  • Mike Pence classified-documents investigation closed by Justice Department with no criminal charges

    Mike Pence classified-documents investigation closed by Justice Department with no criminal charges

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    NEW YORK (AP) — The Department of Justice has informed former Vice President Mike Pence ‘s legal team that it will not pursue criminal charges related to the discovery of classified documents at his Indiana home.

    The department sent a letter to Pence’s attorney on Thursday informing him that, after an investigation into the potential mishandling of classified information, no criminal charges will be sought.

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  • 6 Common Scenarios When You Might Need a Tax Attorney | Entrepreneur

    6 Common Scenarios When You Might Need a Tax Attorney | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Tax attorneys specialize in matters of tax law. These laws continually evolve and change, often making compliance a challenge. If you find yourself or your business up against complex tax challenges, facing issues with the IRS or simply want tax time to go a little smoother, a tax attorney can often be a powerful resource of expertise.

    Here are a few notable reasons you might consider the help of a tax attorney in the months ahead.

    Related: Why Business Lawyers Are a Necessary Expense

    1. You are starting a business

    If you’re launching a business but are also new to the process, hiring a tax attorney can provide the guidance needed to navigate the tax obligations that come with it. This includes ensuring compliance with federal tax laws and any state and local tax requirements likely to impact your enterprise. Having an advocate in your corner can provide the insight and support needed to understand your options while avoiding costly mistakes throughout each phase of the rollout.

    Protecting your business, finances and assets requires preparation and adequate structuring. Some business transactions carry sizable tax consequences — and without knowing the potential implications, you could find yourself owning the IRS and state agencies more than you realize.

    With the help of the right tax attorney, you’re often much better equipped to:

    • Structure your company as a corporation, partnership or limited liability company
    • Handle capital gains and losses
    • Deduct off non-performing assets
    • Structure profit-sharing or constructing pension plans

    Regardless of the size or scope of your new business, how you approach tax management is key to avoiding problems and maximizing opportunity. An experienced tax attorney can help refine that approach and design a plan that positions you for success.

    2. You are facing an IRS audit

    Business owners aren’t the only people who can benefit from the help of a tax lawyer. While corporate partners or business owners are sometimes forced to undergo an IRS audit, anyone at nearly anytime is susceptible to audit notification. If this is your situation, you may hire an attorney to communicate with the agency and auditors on your behalf. You may use IRS Form 2848 to provide the tax lawyer power of attorney and represent you before the IRS.

    Your legal representative has the power to receive tax information for the matter in question and the current tax year, though you can extend their access to additional reporting periods by listing them on the form. The right attorney can also help appeal some of the actions taken by the IRS after an audit and help you settle a debt or make an offer in compromise with the IRS.

    Please note that a CPA is not the same as a tax attorney. While certified professional accountants generally help with such tasks as initial tax preparation and minimizing the risk of an audit, such professionals typically aren’t certified legal professionals and, therefore, can’t represent you in court. Tax attorneys help you with tax compliance and defense.

    Related: What I Learned From a Two-Year IRS Audit

    3. You are seeking tax-exempt status

    A Section 501©(3) status is for non-profit organizations like charities, private schools, churches and private foundations. Not every organization is eligible for this tax exemption status, and a tax attorney can guide you through the IRS application process for nonprofit status. Depending on the nature of your organization, there are different forms to complete and an attorney can help determine your eligibility for a particular sector.

    4. You are handling estate taxes or probate matters

    Tax attorneys can handle estate planning and the taxes related to decisions before or after an individual passes away. If your plan is to leave your business or related assets to a spouse or children, there are tax laws that could take a sizable portion of their funds away. Estate taxes are a concern that a tax attorney can address when you are estate planning.

    If you are the recipient of an inheritance, you may have additional tax liabilities. If you don’t know where you may be liable, hiring a tax attorney can provide the expertise to understand and navigate those obligations without running afoul of the IRS. It’s common for people to utilize both a CPA and a tax attorney throughout such a process.

    5. You are facing a tax-related investigation

    If you’ve been charged with tax fraud and are under criminal investigation by the IRS, it may be best to consider the help of a professional. Convictions of tax fraud often come with hefty fines and sometimes even significant prison time, making it important to have the best representation possible. Additionally, tax attorneys don’t have to testify against their clients, something that can’t be said about a CPA. Tax attorneys can also help fight a tax lien and work out tax debt payment options.

    6. You are unable to meet your tax burden

    Owing money to the IRS can put you and your business in a difficult position, especially when the IRS demands payment terms you can’t meet. Falling behind on your tax burden complicates the problem, but a tax attorney can help. Your attorney can help gather evidence to build a case for a smaller payment or debt plan, potentially negotiating lower payments and a more reasonable period of time for debt repayment.

    Related: All Business Entities Are Not Created Equal: Finding the Perfect One for You

    Facing your tax concerns with a tax attorney

    Tax attorneys can help you find relief from legal action taken by the IRS. They can also work with you to proactively prevent tax law issues. But no matter your situation or needs, working with a tax attorney can help ensure you and your business are prepared for any tax-related challenges that lie ahead.

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    Anthony Cavaluzzi

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  • 7 Deadly Sins of the Self-Employed | Entrepreneur

    7 Deadly Sins of the Self-Employed | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The realm of self-employment presents a tantalizing prospect: the freedom to pursue your passions, set your schedule and be your boss. But it also comes with the responsibility of managing your finances — effectively.

    After meeting with thousands of self-employed professionals over the years, I’ve seen the same seven costly mistakes committed time and time again. And in pursuing your entrepreneurial dreams, it’s essential to be aware of these common pitfalls many self-employed people encounter.

    Whether you’re just starting your self-employment journey or you’ve been rocking the 1099 life for a while, these are the mistakes you must avoid.

    1. Confusing income with profit

    Do not let the allure of high revenue cloud your judgment. Learn the importance of distinguishing between income and profit to accurately assess your business’s health.

    To do this, subtract your total expenses from your total revenue for a given period (usually a month, quarter or year).

    The resulting number is your net profit, which represents the money you have left over after all expenses have been paid. And keep in mind that since you’re self-employed, you also need to factor in your self-employment tax liability payments that should be made quarterly.

    Remember, it’s not just about increasing your top line – it’s about improving your bottom line.

    Related: 5 Reasons Why Employees Prefer Self-Employment, and Why You Should Use This to Your Advantage

    2. Prioritizing short-term gains over long-term success

    While it’s natural to be cautious with spending, it’s essential to strike a balance between short-term gains and long-term success and sustainable and scalable revenue growth often requires investments in your business.

    Explore the concept of profit first and learn how prioritizing profit over expenses can help you build a sustainable business. You must be familiar with the importance of strategic investments, proactive budgeting and scalable revenue growth for long-term financial stability.

    Think of it like the toothpaste theory: When you possess an abundant supply of toothpaste, you tend to use it more liberally. Conversely, when the tube nears depletion, you painstakingly extract every last drop.

    By proactively budgeting and prioritizing profit, you can set your business up for sustainable and scalable growth.

    3. Selling yourself short

    Avoid undervaluing your skills and expertise, as it can hinder your long-term career prospects. Embrace a vision for your business and price your products or services accordingly. Learn the art of building rock-solid relationships, delivering undeniable value and creating a reputation hotter than the newest TikTok dance trend to build a sustainable pipeline.

    Related: Don’t Sell Yourself Short in the Gig Economy

    4. Focusing on metrics that don’t matter

    Shift your focus from vanity metrics to meaningful data that truly impact your business.

    One common mistake is looking only at your profit without factoring in tax liability. If you don’t account for taxes, you may be overestimating your actual profit and underestimating the amount you’ll owe to the government, creating a cash flow problem for your business in the future.

    Spend time defining the metrics that align with your business strategy and goals.

    Related: The 4 Deadly Sins Sabotaging Your Business

    5. Not letting your money make you money

    Inflation is constantly eroding the value of our money, which means that the longer you keep your cash sitting in a bank account, the less it’s worth. So, it’s critical to make your money work for you.

    Try exploring various investment options, such as reinvesting in your business, investing in real estate, stocks, mutual funds, retirement accounts, peer-to-peer lending, and cryptocurrencies. Gain insights into making your money work for you and use compound interest.

    6. Avoiding smart debt

    Debt can be a useful tool when leveraged responsibly.

    One type of debt to consider is short-term debt. This can be useful for covering expenses that come up unexpectedly or for taking advantage of opportunities that require immediate capital.

    Long-term debt, on the other hand, is typically used for larger investments in your business, such as purchasing equipment or expanding your operations. For both types, it’s important to carefully consider the terms and interest rates, as this will impact your bottom line over time.

    It’s also worth considering other types of debt, such as lines of credit. These can be especially useful for businesses with fluctuating cash flow, as they allow you to borrow money when you need it and pay it back when your cash flow improves.

    Related: Self-Employed With No Employees? You Can Still Get a PPP Loan

    7. Ignoring your business’s seasonality

    Understanding your business’s seasonality is crucial to its success. It can help you predict cash flow, inventory needs, and staffing requirements throughout the year. It’s essential to recognize the trends in your business and be prepared for the fluctuations that come with it.

    When you start tracking the seasonality, you’ll learn how to predict cash flow better, be able to forecast inventory needs and plan staffing requirements based on seasonal fluctuations. It also helps avoid unexpected expenses and maintain profitability throughout the year.

    You possess the remarkable ability to shape your future, and by steering clear of these financial sins, you can set yourself up for extraordinary success in self-employment.

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    Shahar Plinner

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  • Most Americans aren’t happy with how much income tax they paid this year

    Most Americans aren’t happy with how much income tax they paid this year

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    Americans’ discontent with the size of their federal income-tax bill is at a two-decade high, according to a new poll — even though Congress hasn’t passed any direct income-tax increases in recent years.

    One month after the 2023 tax season’s conclusion, 51% of respondents in a newly released Gallup poll said their income taxes were not fair. That’s up from 44% last year and marks a record high since 1997, when Gallup’s pollsters started asking how people felt about their income-tax bills.

    Meanwhile, 46% of people said they were paying a fair amount of income tax. That basically matched the dim mood over two decades ago, in in 1999, when 45% said that they were paying a fair amount.

    Six in 10 poll participants said their federal income taxes were “too high,” pollsters said. 2001 was the last time that share of people felt the same way, Gallup said.

    Feeling the squeeze: Grocery prices are rising more slowly, but food insecurity is surging among low-income Americans

    Gallup pollsters spoke with more than 1,000 people, doing their field work through most of April.

    The poll comes during a fierce debate about whether the wealthiest taxpayers, as well as corporations, are paying enough in taxes. The Biden administration has been pressing for higher tax rates on high earners. A Democratic-controlled Congress last year passed a law with an $80 billion funding infusion for the IRS over a 10-year span in part to launch more audits of rich individuals and corporations.

    Many Americans walked away from tax season with income-tax refunds that were smaller than a year ago. That’s due, at least in part, to the end of pandemic-era boosts to certain credits, tax experts have previously told MarketWatch.

    Both backdrops might be at play in the public mood on taxes, observers noted, and political affiliation could have something to do with these changes, Gallup said. Only one-third of Republicans said their income taxes this year were fair, for example — that’s down from 63% in 2020, the last full year of the Trump administration.

    The change in Republican sentiment could be why there was a heavy swing since 2020, when 59% said their taxes represented a fair number. In 2020, 56% of political independents said their taxes were fair, and that percentage fell to 45% a few years later. Among Democrats, meanwhile, the 63% saying their taxes were fair was virtually unchanged over that span.

    Republicans “are certainly more frustrated now with Biden in office,” said Jeff Jones, senior editor of the Gallup poll. “But they are even more frustrated than they were when Obama was in office.”

    Democrat Joe Biden campaigned in 2020 on pledges to raise taxes on corporations and households earning over $400,000 a year and not on those making less than that. So far, the president has not been able to turn proposals like a billionaire’s minimum tax or a higher top tax rate into law.

    The real tax-policy fight brewing in the background is the 2025 expiration of Trump-era tax cuts, experts have said.

    In the sweeping 2017 tax-code overhaul, Congress reduced five of seven income-tax brackets and boosted commonly used features of the tax code, including payouts for the child tax credit and the standard deduction. But some of those tax cuts were scheduled to sunset, while others were permanent.

    Another potential shaping the mood on taxes is the broader economy and recent tax season, Jones said. One possibility, he noted, is that some people are getting pushed to higher tax brackets with pay raises meant to keep up with inflation. (Tax brackets are adjusted annually to account for inflation.)

    While inflation is still pinching wallets, tax refunds are lower than they were a year ago.

    Refunds averaged just over $2,800, and that’s down more than 7% from a year earlier, according to IRS data through May 12.

    So you know: What happens if you can’t pay your taxes? IRS has a payment plan — but read this before you sign up.

    For his part, Lawrence Zelenak, who teaches tax law at Duke University, thinks the current darkening public mood “is largely a response to the disappearance of all the temporary pandemic-related tax relief,” he said.

    In 2020 an estimated 60% of households ended up with no federal income-tax liability because they were making less and bringing in more through direct cash assistance from the federal government, according to Tax Policy Center estimates.

    By 2022, an estimated 40% of households wouldn’t face any federal income tax, according to the nonpartisan think tank — which is more in line with levels seen before the pandemic.

    Keep in mind: IRS will launch free tax-filing pilot in 2024. TurboTax, H&R Block and Republicans are opposed.

    Refunds during 2022 got a kick from extragenerous payouts including the child tax credit, the child- and dependent-care credit and the earned-income tax credit.

    Most taxpayers also got a chance to shave their tax bill with a temporary change that let them take the standard deduction and also write off a portion of their charitable donations. But the credits reverted to their prepandemic size, and the deduction on cash donations subsequently went away.

    “With the end of the pandemic tax relief, many people have seen their income-tax liabilities go up, and it’s not surprising they see that as unfair,” Zelenak said. “So it may be the change more than the absolute level of tax.”

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  • Carl Icahn admits he was wrong to take a huge short position on the market that lost $9 billion

    Carl Icahn admits he was wrong to take a huge short position on the market that lost $9 billion

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    “‘I’ve always told people there is nobody who can really pick the market on a short-term or an intermediate-term basis. Maybe I made the mistake of not adhering to my own advice in recent years.’”


    — Carl Icahn, activist investor

    That’s Carl Icahn, legendary activist investor and billionaire, admitting in a Financial Times interview that he was wrong when he made a massive bet that the stock market would crash.

    In 2017, his bet lost about $1.8 billion on hedging positions, according to FT calculations, that would have made money if asset prices had fallen. The trade lost another $7 billion between 2018 and the first quarter of 2023, according to the paper.

    Icahn’s investing arm Icahn Enterprises LP
    IEP,
    +0.06%
    started to short the market after the 2008 financial crisis, and became more aggressive in subsequent years. The company used a strategy of shorting broad market indexes, individual companies, commercial mortgages and debt securities.

    “You never get the perfect hedge, but if I kept the parameters I always believed in . . . I would have been fine,” he said. “But I didn’t.”

    Instead, regulatory filings show that IEP lost $4.3 billion on short positions in 2020 and 2021 as the market rallied off the pandemic slump, buoyed by the Federal Reserve’s massive stimulus.

    “I obviously believed the market was in for great trouble,” Icahn said. “[But] the Fed injected trillions of dollars into the market to fight COVID and the old saying is true: ‘Don’t fight the Fed.’”

    Icahn also explained what exactly he did with margin loans he borrowed from IEP that were recently highlighted by short-seller Hindenburg Research in a stinging report.

    Also read: What we know about Carl Icahn’s margin loan

    The loans were disclosed in regulatory filings in early 2022, but few seemed to notice at the time.

    The Hindenburg report accused the company of inflating asset values and quested whether a margin call would send the company into a spiral if the stock price were to fall.

    IEP’s stock did fall after that report — at the cost of about $6 billion of market cap.

    For more, see: Carl Icahn rebuts short seller Hindenburg Research’s report. It’s already cost his company $6 billion in market cap.

    Icahn addressed the report on the day it was released and offered an update on IEP’s recent earnings, saying he was fully in compliance with loan terms.

    He told the FT he had used the money borrowed from IEP to make additional investments outside of his publicly traded vehicle.

    “Over the years I have made a great deal of money with money,” he said. “I like to have a war chest and doing that gave me more of a war chest,” he added, referring to the margin loan.

    Earlier this month, IEP disclosed a federal probe into its corporate governance and other issues. It’s not clear if that was related to the Hindenburg report.

    That same day, it posted earnings showing it swung to a loss in the first quarter from a profit a year ago, missing consensus estimates by a wide margin.

    IEP shares have fallen 32% in the year to date, while the S&P 500
    SPX,
    +0.94%
    has gained 9%.

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  • IRS commissioner admits Black taxpayers appear to be audited at outsized rates

    IRS commissioner admits Black taxpayers appear to be audited at outsized rates

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    The head of the Internal Revenue Service acknowledged Monday that Black taxpayers appear to be audited at outsized rates, months after a study pointed at disparities and the prospect that audit-selection algorithms could be at fault.

    “While there is a need for further research, our initial findings support the conclusion that Black taxpayers may be audited at higher rates than would be expected given their share of the population,” IRS Commissioner Danny Werfel said in a letter.

    As an IRS review continues, Werfel said he’s “laser-focused” on making changes before the start of the 2024 tax-filing season.

    Black taxpayers were audited at roughly three to five times the rate of other taxpayers, according to a January study from researchers at Stanford University and economists at the Treasury Department’s Office of Tax Analysis.

    The IRS doesn’t collect information about race on tax forms — and it doesn’t consider race as a factor on which cases it picks for audits, Werfel emphasized Monday.

    But researchers turned their focus on the algorithms helping the IRS pick cases for review when tax returns claim the Earned Income Tax Credit. The credit is a long-standing provision aimed at low- and moderate-income working households.

    The IRS has come into $80 billion in funding over a decade due to the Inflation Reduction Act, and more than half the money is dedicated to more tax enforcement for rich taxpayers and corporations. Audits for households making under $400,000 will increase compared to recent levels, Werfel and other Biden administration officials have said.

    “The ongoing evaluation of our EITC audit selection algorithms is the topmost priority” in a review to spot uneven treatment in how the IRS administers the tax code, Werfel said in his letter to Sen. Ron Wyden, D-Ore., who chairs the Senate Finance Committee.

    Werfel said he’s “committed to transparency” as the research continues.

    Certain conclusions were already clear for Wyden.

    “The racial discrimination that has plagued American society for centuries routinely shows up in algorithms that governments and private organizations put in place, even when those algorithms are intended to be race-neutral,” he said in a statement.

    Wyden said he’ll be re-introducing legislation that would require reviews of private-sector algorithms to spot racial bias. “And I’m interested in requiring similar protections against bias in government systems,” he added.

    Werfel’s letter was “an important step,” according to a statement from Chye-Ching Huang, executive director of New York University Law School’s Tax Law Center. But there are other questions that still have to be answered, she said.

    “The IRS should shed more light on these issues in future updates, and Congress should continue pressing it to do so,” Huang said.

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  • Employee Expenses Need to Be Reimbursed Quickly. Here’s Why. | Entrepreneur

    Employee Expenses Need to Be Reimbursed Quickly. Here’s Why. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    You may have heard this story (or one like it) before: Imagine this: A top sales executive, Lee, undertakes a sales trip to woo a potential client. The trip successfully bumps your expected revenues for the coming year and beyond quite nicely. Naturally, Lee incurred numerous expenses during the trip — airfare, hotels, rental car, meals and other incidentals. Lee paid these with the understanding the company would reimburse them.

    But the expenses aren’t reimbursed quickly, and Lee’s personal savings and credit cards reflect that. As days turn to weeks and months, interest mounts and late fees are incurred, affecting Lee’s personal financial history. Lee becomes disenchanted and frustrated, which is followed by job dissatisfaction and diminished performance. Quiet quitting becomes real resignation, with your Lee’s valuable skills and connections now working for a competitor that reimburses their employees on time. That lucrative business deal is likely to go with Lee.

    Related: 5 Simple Steps to Prevent Expense Fraud

    What you can do — and what you should do

    A wide range of business expenses allowed by the IRS often need to be paid by employees. Those that cannot be covered in advance can include unplanned flights, cab or rideshare trips, meals or hotel stays. Other times, employees may be traveling on business with their own vehicle, in which case you should, of course, reimburse them for their mileage and vehicular wear and tear. Other common categories of reimbursable expenses may include training, professional dues, supplies, tools and parts and entertainment (note, while you may elect to reimburse employees for expenses such as taking a customer to a sporting event, those costs are not deductible for you and haven’t been since the 2017 Tax Cut and Jobs Act).

    The importance of being timely and accurate

    Accuracy in tracking your business expenses is important because most, if not all, purchases made by an employee on behalf of your company are for items and services that can be deducted against your taxes.

    Some businesses often re-bill expenses to a customer. Examples might be a plumbing or electrical contractor whose employee may need to pick up a plumbing or electrical fixture at a hardware or building supply store.

    Employees who lay out their own funds on behalf of your business deserve to be repaid straightaway for myriad reasons. First, the business — and the risks and expenses — is yours and not theirs. You may pay them a salary, but it’s not up to them to carry cash or expenses to earn you a profit or secure future business. Don’t leave them on the hook for doing you a favor any longer than necessary. Prompt payment also underscores your commitment to them as valued employees.

    Related: Don’t Throw Money Away By Not Monitoring Expense Reports

    Rules are needed

    It also helps when employees understand what they’re expected to do on your behalf. Give guidelines to employees asked to spend their money on your behalf. That would start with your budget for certain expenses. Establish this in advance. And while the annual list of crazy expense report submissions is amusing to read — from helicopter rides to work to hang gliders “to avoid a divorce” — you don’t want your business to show up on that list. Often a budget solves this problem, with the added benefit that you don’t have to approve every two-dollar purchase.

    As reimbursable expenses are realized, they should be recorded promptly using your preferred system. This may be a spreadsheet, but many small and medium-sized businesses (SMBs) use contract bookkeepers or bookkeeping platforms. More often, they rely on document management systems with expense-tracking features that use optical character reading (OCR) to input data such as receipts and invoices. These documents can be captured in multiple ways, including photographing them, emailing them directly to a cloud server, importing them directly from a computer or scanning them.

    Once converted by OCR technology, the data can be manipulated in pretty much any method that makes sense. For instance, you may track them for each salesperson you have, you may track them by which department puts in the request or you can track them by client or project. Your employee can do the entry, too.

    Using a cloud-based system that will let you capture receipts in this way means you can avoid the complexity — and errors — of re-keying information and managing spreadsheets. You can sort the data by category, by vendor or by date. Compare that with spreadsheets, where remembering which tab your expense belongs on and ensuring each cell has the proper equations make it that much harder to reimburse your employees promptly. Paper files have similar flaws. Plus, paper can be lost, misfiled or damaged in tragic coffee-spill accidents.

    These platforms are also more efficient, which goes hand-in-hand with saving time and money. They make review and control simple, too. Pay your employees back quickly, while gaining insight into what’s being spent and for what purpose. You can then make any spending adjustments needed and please your employees.

    Related: This One Thing Can Make Managing Your Company’s Expenses Super Easy

    What’s in it for you?

    Doing your reimbursements quickly avoids both errors and fraud. It’s a risk that’s twice as high in SMBs and more damaging to them.

    But paying back your employees without delay provides key benefits to you. It improves employee morale and job satisfaction, which makes them better employees. Being anxious when your expenses damage their own finances can also hurt their on-the-job performance and spark resentment. And suppose your reimbursement practices become a problem for employees. In that case, it can also make it difficult to recruit new, high-performing employees.

    But when you give employees their money back promptly, everyone will be happy, resulting in time and resources spent on growing the business.

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    Jim Conroy

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  • Foreign businesses in China fear they’re being targeted in a ‘campaign’ of government crackdowns. It’s probably not that simple.

    Foreign businesses in China fear they’re being targeted in a ‘campaign’ of government crackdowns. It’s probably not that simple.

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    Foreign investors and businesspeople with exposure to China are becoming increasingly unnerved. And for good reason.

    In March, Chinese authorities detained an employee of Japanese drug manufacturer Astellas Pharma JP:4503 ALPMY for alleged espionage violations. The Chinese seem confident in their case. Beijing’s ambassador to Japan said there was ample evidence of wrongdoing, and, despite the uproar, the Astellas employee remains detained.

    That…

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  • 3 Ways to Shore Up Your Business Finances in a Tight Economy | Entrepreneur

    3 Ways to Shore Up Your Business Finances in a Tight Economy | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Around the country, many small businesses are feeling the burden of inflation. Increased costs on everything from raw supplies and shipping to labor and utilities are cutting into the already razor-thin margins that many of them operate with. Add to this the threat of a looming recession and other macroeconomic headwinds, and it’s easy to see why entrepreneurs are looking for ways to shore up their finances and save money.

    Recently, I joined Intuit QuickBooks, specifically because I wanted to help small businesses better manage their finances amid these challenges. Based on what I’ve seen, the good news is that despite these challenges, there are many ways that businesses can improve holistic cash flow — often with some easy operational changes and simple-to-use tools and platforms.

    Here are three strategies for shoring up finances that I recommend to entrepreneurs to best position themselves for success.

    Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns

    1. Assess your inventory

    One of the first things I recommend for product-based businesses looking to improve their finances is to critically analyze your sales and inventory to better understand your customer base as well as what’s driving expenses and profits.

    For example, soon after joining QuickBooks, I heard the story of our customer, Jessica Spaulding, the founder of Harlem Chocolate Factory. While many of us may not realize it, chocolate is both a capital- and time-intensive business, with high overhead in the form of quality, fair trade ingredients and talented chocolatiers who develop recipes and even individual treats by hand. Soaring prices of raw ingredients as well as supply chain issues threatened to disrupt the business Spaulding worked so hard to build — a message many small business owners can relate to.

    To combat this and move forward strategically, Spaulding took a step back and looked at what her books were telling her. What products were selling the most? What wasn’t selling? Using these insights, she redirected her team to be laser-focused on the products and flavors that were driving the most business and profit. She was also able to decrease her overhead in the short term, as she cut back on the ingredients needed to create less popular flavors.

    As I mentioned, closely examining your inventory and sales history is something that all product-based businesses can do. Use your bookkeeping solution to analyze the sales of individual SKUs and look for any trends in your sales — whether it be seasonal, channel-based, location-based or influenced by another factor. You can also work with your accountant or bookkeeper to better understand where you may be able to trim costs or double down to boost profits. Finally, once you’re armed with these insights, put them into action like Spaulding did — honing in on the products that are resonating most with customers.

    Related: 6 Key Tips for Leading Transparently in Economic Uncertainty

    2. Secure working capital

    It’s often been said that it “takes money to make money.” The more I talk to entrepreneurs, the more I think that’s true. The importance of working capital for businesses that are growing or getting off the ground cannot be understated. Unfortunately, the traditional lending system — with long, drawn-out processes and an emphasis on past business credit — is not designed to support many fledgling businesses.

    The good news is that now more than ever there are alternatives for business owners to explore when it comes to securing funding. One option is crowdfunding through websites like GoFundMe and Kickstarter, which allow businesses to launch digital fundraisers. Peer-to-peer or marketplace lending via platforms like Lending Club or Prosper that connect borrowers and lenders online are another avenue to explore. There’s also a multitude of small business grants out there — from federal and regional-based programs, those sponsored by corporations, or some specifically designed for members of certain communities like veterans or women. Be sure to store your applications in a Word or Google document to reference later, rather than just submitting via the online form. This will save you some leg work when filling out future applications.

    Another path I learned about recently was that of QuickBooks customer, Grace+Love Candle Co., who secured funding through us when they were originally denied by traditional banks. Unlike a bank loan, QuickBooks Capital doesn’t require an extensive application process. Rather, it determines creditworthiness by analyzing the company’s history as shown by the data in their books.

    The most important thing to remember when working to secure capital is not to get discouraged. While you may hear many “nos,” during your journey, it only takes one “yes,” — and as I’ve outlined, there are a myriad of different options available to explore.

    Related: 3 Steps to Effectively Lead Through Uncertain Financial Times or Company Restructuring

    3. Speed up and diversify payments

    Now more than ever, consumers (and even businesses) expect to be able to pay seamlessly in a variety of ways — from credit cards to PayPal, Venmo, ACH and more. This means businesses need to embrace and diversify integrated payment systems, allowing customers to pay across multiple channels (i.e. mobile, online, etc.) and accept multiple forms of payment. In addition to meeting customer expectations and helping to increase sales conversion, digital payments also mean money hits a business’s bank account faster.

    While it may not seem significant, the impact of real-time payments can be tremendous. For example, instant payments — rather than a delay of a few days — may help a small business owner who needs to make payroll, pay rent or place an order for supplies. Take a look at how quickly your payments are currently processed. If it’s longer than a day, there are likely options you can look into that are faster.

    Entrepreneurs have shown their resiliency in spades the past several years. While we may be entering a difficult economic climate, I have no doubt they will continue to overcome these challenges. The more small businesses can do now to shore up their finances — from strategically evaluating their inventory and analyzing sales to understanding the funding sources available and embracing integrated payments, the better positioned they’ll be in to succeed despite looming challenges.

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    Rich Rao

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  • Americans’ personal savings just hit $1 trillion. What’s the best place to store your cash — I-bonds, CDs or online savings accounts?

    Americans’ personal savings just hit $1 trillion. What’s the best place to store your cash — I-bonds, CDs or online savings accounts?

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    People are saving more these days. Where’s the best place to put your cash?

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  • 4 Signs That Your Small Business Needs Funding | Entrepreneur

    4 Signs That Your Small Business Needs Funding | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Every small business can agree that securing funding is vital for a small business to grow. Whether you are a fledgling start-up business launching a new product or service, or an established small business striving to maintain profitability, cash is king when it comes to driving the progress of operations.

    Every day, small businesses face unforeseen challenges, with shrinking margins and economic competition making it crucial to allocate sufficient cash flow for a business’s financial health. According to a study by U.S. Bank, 82% of all failed businesses are due to poor cash flow management or a lack of a grasp of cash flow and its importance to its business.

    As a business owner, how do you avoid these catastrophes? With a staggering 90% of all start-ups failing, how can you proactively identify the signs that indicate the need for funding and stay ahead of these warning signals? Here are four signs indicating that it’s time your small business needs funding.

    Related: 10 Expert Tips on Managing Cash Flow as a New Business

    Experiencing gaps in cash flow

    A cash flow gap clearly indicates that your small business requires a funding boost, which occurs when a business pays out cash for expenses but does not receive the expected inflow of money within a reasonable timeframe.

    A prime example of a cash flow gap is a business that needs to purchase supplies to create its products to generate an inventory. After spending the cash on supplies, there is a delay in receiving payment from customers, creating a gap between the outflow and inflow of cash. For instance, if customers pay for the inventory after 30 days (or even worst late payments), the period between the purchase of supplies and the receipt of payment creates the cash flow gap. Consistent widening cash flow gaps can leave your business strapped financially, potentially putting it in a dangerous position if not addressed.

    Related: 80% of Businesses Fail Due To a Lack of Cash. Here are 4 Reasons Why Cash Flow Forecasting Is So Important

    Seasonal downturns in the business

    Seasonal fluctuations pose significant cashflow challenges for many businesses. A typical example is a restaurant operating on a beach in Cape Cod, Massachusetts. During the summer peak months from Memorial Day through Labor Day in September, the restaurant can encounter an endless stream of customers fleeing to the restaurant. Despite an influx of cash coming in, your business could face cash flow challenges between a surge in profits during peak seasons but struggle to maintain financial stability during off-seasons.

    With seasonal downturns and limited cash flow, the challenges of paying overhead costs with employees, rent, utility costs, etc., can create financial instability. Without proper cash flow forecasting, how can your business maintain operations and overcome these financial challenges during the off-season?

    Related: 3 Cash Flow Mistakes to Avoid at All Costs

    The business needs to change

    Every business needs to evolve and adapt to new challenges, as they cannot continue to operate with the same employees and equipment indefinitely. At some point, you need to invest back into the business to promote growth and development.

    For instance, a landscaping company has an initial upfront cost of purchasing equipment before it can hit the ground running. As the company progresses, the equipment may deteriorate and require upgrading to continue serving existing customers or expanding into new areas. Hiring skilled employees or investing in new equipment upgrades will be needed to help expand your capacities. In order for your business to meet these needs, It’s essential to reserve sufficient funds to meet these necessary investments.

    Opportunities happen

    Expecting the unexpected and be ready no matter what is the heartstring of all business owners. It’s unclear what the next card in the deck will reveal, especially when exciting opportunities arise. Hence the need for agility despite the size of your businesses. Small business owners must be particularly vigilant about having enough capital to invest in new opportunities that arise.

    In this constantly changing landscape, your business needs to be in a strong financial position to take advantage of opportunities as they arise. Whether it’s purchasing another business, opening a new location, launching a new product or the immediate need for available capital investment, the ability to act quickly can make all the difference. Without sufficient cash, your businesses can struggle to capitalize on these exciting opportunities, resulting in missed opportunities or financial losses.

    Related: How This New Accounting Feature Can Save Businesses From Fraud and Financial Mishap

    A loan is not the only answer

    The immediate response of a business owner is to reach for a loan application to obtain an injection of cash. However, a business loan isn’t always the best or only solution. One approach to improving your business’s financial situation and reducing the reliance on loans is to implement effective cash flow management tools.

    Cash flow tools can help small business owners track their cash flow, identify high-risk indicators and accurately forecast future financial health. These tools can determine precisely how much capital is needed and how an influx of cash would impact the overall health of your business. By maintaining a healthy cash reserve and minimizing unnecessary expenses, small business owners can make smarter financial decisions, reduce their reliance on loans and improve your business’s financial stability.

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  • Worried the IRS is going to audit your tax return? If you earn less than $400,000, you can probably relax.

    Worried the IRS is going to audit your tax return? If you earn less than $400,000, you can probably relax.

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    Some clarity is emerging regarding statements from Biden administration officials that no one making less than $400,000 will see higher audit rates by the Internal Revenue Service, which is about to step up its scrutiny of wealthy taxpayers.

    The Inflation Reduction Act — the tax and climate package enacted last summer — earmarked $80 billion for the IRS over the next decade and a half. The money is intended in part to facilitate more audits of corporations and wealthier individuals.

    Ahead of the bill’s passage, Treasury Secretary Janet Yellen pledged that there would be no increase in the audit rate for households and small businesses with annual incomes below $400,000 “relative to historical levels.”

    But Republican critics and other observers have asked what “historical levels” might actually mean.

    The audit rate on returns for tax year 2018 is the reference point to keep in mind, IRS Commissioner Danny Werfel told senators on Wednesday. He emphasized that “there’s no surge coming for workers, retirees and others.”

    The IRS audited fewer than 1% of 2018 returns with total positive incomes — the sum of all positive amounts shown for various sources of income reported on an individual income-tax return, which excludes losses — of between $1 and $500,000, according to statistics that the tax agency released last week.

    The agency has three years to start an audit from the time it receives a return.

    Also read: The IRS wants more people working in tax enforcement. Now it has to find them.

    The numbers show that 0.4% of returns for taxpayers earning up to $25,000 were audited. That figure was 0.3% for returns between $200,000 and $500,000 and more than 9% for returns over $10 million, the IRS data show. Six years earlier, more than 13% of returns over $10 million were scrutinized, according to the IRS.

    “Help us with understanding what the words ‘historic level’ means,” Sen. James Lankford, a Republican from Oklahoma, asked Werfel during a Wednesday budget hearing.

    “We will take the most recent final audit rate, and it’s historically low … and we allow that to be the marker for least several years, and then we’re revisit it,” Werfel said. The 2018 audit rates were the newest final rates, he added.

    “So the 2018 number is what it’s going to be?” Lankford asked.

    “Yes,” Werfel replied.

    “Werfel’s explanation that 2018 audit levels will be the reference point is the most detail I’ve heard so far,” Erica York, s senior economist at the Tax Foundation, told MarketWatch. “He did seem to leave open the possibility of revisiting the reference year for ‘historical’ in the future,” she added.

    Another open question has been how the $400,000 income threshold will be determined. Months after the Inflation Reduction Act passed, IRS and Treasury officials still hadn’t finalized what counted as $400,000 in income, according to a January Treasury Department watchdog report.

    “How are you arriving at this number?” asked Sen. Marsha Blackburn, a Republican from Tennessee. Blackburn’s state has many self-employed entrepreneurs who might appear richer on paper than they actually are, she said. “While they may have a higher gross, their net is very low,” she added.

    “We’re going to look at total positive income as our metric,” Werfel said. He later added that “there would be no increased likelihood of an audit if they have less than $400,000 in total positive income.”

    The IRS description of total positive income as “the sum of all positive amounts shown for the various sources of income reported on an individual income tax return and, thus, excludes losses” represents, effectively, a tally of income before taxpayers subtract their losses.

    Total positive income is a metric the IRS usually applies to categorize audits, the Tax Foundation’s York noted. But one challenge of strict thresholds for more audits, she said, “is that it creates incentives for underreporting income” to stay under the line.

    Compared with recent years, there are now more specifics about how the IRS will implement additional audits of higher-income taxpayers, said Janet Holtzblatt, a senior fellow at the Tax Policy Center.

    “But still there are questions,” she noted, about how the agency will treat situations when taxpayers don’t provide full picture of their income.

    Read on: Make sure the tax breaks you’re taking now won’t hammer you in retirement

    Also: ‘This was a test’: IRS has handled more than 100 million returns already — Tax Day by the numbers

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  • Let Robots Help You With Your Taxes For Just $17 This Year With This App | Entrepreneur

    Let Robots Help You With Your Taxes For Just $17 This Year With This App | Entrepreneur

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    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    Most freelancers dread tax season more than regular folk, with multiple streams of income to account for and mysterious deductions to hunt down. If you loathe tax season as an entrepreneur, there’s now an app that has set out to change that.

    FlyFin AI Tax App is the ideal tax software for entrepreneurs and freelancers alike, letting the power of AI seek out all of your potential deductions and ensure you’re getting the most money back possible. And you can score a three-year exclusive subscription at the best price online, just $49.99 for a limited time.

    This handy app is built to take away 95% of the effort filing your taxes, helping you discover even the tiniest write-offs and ensuring you can file your taxes online in as little as five minutes, the company says.

    A quarterly tax calculator provides accurate estimates for your quarterly payments, allowing you to conveniently pay directly from the app, the company says. If you tend to be forgetful when it comes to tax filing, there’s also an automatic reminder option so you don’t miss any deadlines. And thanks to the AI-powered component, it can even tackle complicated tax filings that include crypto.

    Aside from taking advantage of AI-powered technology, FlyFin AI Tax App also gives you unlimited access to real-life CPAs to ask any tax questions you might have, providing the best of both worlds. It’s been rated the number one AI Tax Engine for Freelancers and the Best AI Product of the Year by AITECH.

    Take the headache out of doing your taxes with a 3-year exclusive subscription to FlyFin AI Tax App for just $49.99 (reg. $252).

    Prices subject to change.

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    Entrepreneur Store

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  • With the unemployment rate now at 3.5%, is this your last chance to jump ship?

    With the unemployment rate now at 3.5%, is this your last chance to jump ship?

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    Have you got itchy feet?

    The U.S. economy added 236,000 jobs in March, just shy of the 238,000 forecast by economists polled by the Wall Street Journal. The unemployment rate declined to 3.5% in March from 3.6% in February.

    The latest data was calculated before the collapse of Silicon Valley Bank and Signature Bank last month, an event that…

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