Small Business Profit Explosion

TEXAS SALES TAX 101: What is Taxable?

Texas sales taxes must be charged if you 1) sell tangible personal property in Texas, 2) lease tangible personal property in Texas or 3) sell taxable services in Texas.

Tangible personal property is defined as items that can be seen, measure, felt, or touched.

Services are exempt unless listed as a taxable service. The list is always changing so you should check the Texas State web site (http://www.window.state.tx.us/taxinfo/sales/). The following is a list of the main taxable services:

• Amusement services
• Cable television services
• Personal Services
• Motor vehicle parking & storage
• Repairs to tangible personal property
• Telecommunication services
• Credit reporting services
• Debt collection services
• Insurance services
• Information services
• Real property services
• Data processing services
• Security services
• Real property repair and remodeling
• Telephone answering services
• Internet access services

If you’re not sure you fall into one of these areas, you should call your local Texas State sales tax office or your CPA in order to ensure that you are charging sales tax correctly.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Tax Tip of the Week - Having Incomplete Substantiation of Donations When Filing Nixes a Deduction

For contributions, according to the Tax Court, a couple made regular gifts of $250 or more to the church that they belonged to. However, the acknowledgment from the church failed to state that no goods or services were given for the donations. After the Service denied their write-off because of the faulty acknowledgment, they got a letter from the church saying they received no benefits for the contributions.

But that came far too late. The deduction was properly denied because the donors didn’t have valid substantiation in hand before filing the tax return.

From:

The Kiplinger Tax Letter

1100 13th Street NW, Washington, DC 20005 • kiplinger.com • Vol. 87, No. 11

 

A hierarchy of business to business needs

If you're selling a product or service to a business--to a non-owner--consider this hierarchy, from primary needs on down:

via sethgodin.typepad.com

I found this article interesting.

If your not following Seth Godin, you should!

Marketing Tip of the Week- Never Take a Sale for Granted!

I’ve been looking at cars recently, and marketing is constantly running through my minds. Car dealerships spend tons of money on advertising, leads, and internet marketing, but it really comes down to the sales person. If you think about it, this is true in most sale transactions.

As I visited different dealers I met many different salespeople. Each had their own personality and style to getting you to their sales milestones (engage, test drive, and financing). There was one that stood out the most, not because he was particularly good sales man, but because once we started to talk numbers he assumed I was going to buy the car. He was so confident he even had the staff prepare the car I was looking at for the purchase. He was very surprised to see that I walked away from the deal because the numbers didn’t work out. It reminded me of the saying “Don’t count your chickens before they hatch.”

In marketing, nothing is ever a sure thing. Never assume that your sale is done until you receive payment and your customer has left with the product. Even then, any good business person knows this is just the beginning of a long term business relationship.

 

Client Question: Can Those Companies That Advertise on Cable TV Really Eliminate My tax Problems?

Every year I hear this question many times from taxpayers who are behind in their taxes. It’s understandable, the IRS has scared them and they are looking for a quick and easy way out.

The problem is that many of these tax problem resolution companies have been found guilty of deceptive trade policies where they overpromised, collected tons of money upfront and then failed to perform. In fact, many of their customers had bigger problems after they were hired then they did before.

Checkout this link to an article written by David Leeper (an excellent tax attorney if you ever need one) for the El Paso Times that goes into more detail specifically on this point. http://bit.ly/JP0sME

 

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

MYTH VS TRUTH: Is Receivables an Asset?

The myth most business owners believe: Just about all business owners consider it an asset. Why not? Their bankers and their CPA’s tell them it is.

Why this myth causes a problem: In a word – you can’t spend receivables! (Yes, I know you can borrow against it. But, that is getting very hard to do.) In truth – trade receivables is really potential future cash in the bank.

The truth successful business owners learn the hard way! The best sale is a cash sale. Better yet, the best sale is a sale where you get prepaid all or a part of it in advance. You have to pay your staff and your vendors. And, they want CASH!

But, business owners also know they will sell more if they can offer payment terms. In many industries this is what the customer has come to expect. So, what do you do if you must sell on terms?

Lesson learned: The following are many of the ways that smart business owners control their receivables:

1. Don’t let it become a receivable in the first place! Give a discount for prepayment. On large jobs, especially from new customers, take a substantial down payment.
2. Know your customers. Do a credit check if they are new. Or, trust them and start them off with a small credit line and let them “earn” their way to a larger credit line. This is what I did when I was the Controller for Magnolia Coca-Cola back. We often provided credit for a startup where our competitors wouldn’t. But we paid particular attention to these and called them quickly if they were late on a payment. As these customers grew they were very loyal Coke customers because we trusted them when no one else would.
3. Be upfront with your customers about your payment expectations. Don’t be afraid to discuss payment with them.
4. When possible, don’t deliver the product to the client until the bill is paid. We implemented this on tax returns a few years back and it greatly reduced our receivables.
5. Don’t hesitate to collect. The longer a balance is outstanding the higher the chance of it becoming non-collectable. Assign smaller ones to your staff. But, the owners and the sales staff should be involved in the larger balances due.
6. When a balance becomes seriously past due and there is doubt about collecting it, you should call the customer and offer a deep discount to the customer if they pay by a certain date.
7. As a last resort, have an attorney send a collection letter. I am not really a fan of suing for receivables. This often leads to a countersuit. Plus, your time is better spent getting a new good paying customer. But, a collection letter from an attorney often is enough to shake loose a payment.

Thank you for your continued support and let’s make this year our most profitable year ever!

 

Tax Tip of the Week- IRS Kicks Off Random Corporate Audits

 An IRS official says, about 2,500 small corporations (those with assets of less than $250,000) will be audited as part of the IRS national research program. Starting in April, tax returns from 2010 will be reviewed. The IRS will use the results of these exams to update its return audit selection formulas.

Adding these random audits to the increase in audits due to the massive increase in the number of IRS auditors since 2007, greatly increases the odds that your small corporation may be audited.

This may be a good time for you to meet with your tax preparer and discuss any potential exposure you may have.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

TEXAS SALES TAX 101: Collect Taxes on Items Sold “In Texas”

If you are selling a taxable product to a non-exempt customer you must collect sales tax on items sold in Texas. This means that, normally, a Texas retailer does not have to collect Texas sales tax on items shipped to buyers located in other states or to a foreign country.

Be sure that your accounting program is setup correctly in order to track sales made to other states. You should keep delivery receipts in order to prove that the product was delivered to a customer in another state in case you are audited.

If a customer from another state or country comes to your store, located in Texas, and buys the product you must charge and collect sales tax.

You may be liable for collecting the destination state’s taxes. Be sure to review the facts of your business with your tax advisor.  

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Focus Your Time on the Work That Increases Profits, Sales and Cash Flow

(Growing Your Business Series: Part 4)

 

This is number two on my top ten ways to increase your business profits, sales and cash flow. But, I find it is almost always the hardest thing for any business owner to accomplish. Even when a business owner is highly motivated to increase sales and profits, they never seem to get around to it. Why?

Well the reason I hear most is that they are so busy running their business and putting out fires that they never seem to get around to it. I also run into this. I start off the day with great plans on getting things done and by the end of the day nothing has happened due to client and employee interruptions.

But, that is the easy answer. The truth is we all like doing things we do well. And many of us are very good at making the product and satisfying the customer. So – that’s where we spend all our time.

That is why I almost always tell a business owner that they are 100% responsible for keeping their business from growing! Please don’t think I am telling you not to produce a quality product! What I’m saying is that this may not be the best use of your time. If you had the money you could hire someone to do the technical work that is required to produce the end product for the customer.

But, like Dan Kennedy has said countless times, every business is in the business of getting and keeping as many profitable customers as possible! That is where the majority of business owner’s time should be concentrated on. That means I am not really in the CPA business – I am in the business of getting more profitable, paying customers for my CPA business. The same applies to any business. Once you start looking at your business that way it will quickly change how you allocate your time.

What I am leading to is the following: The business owner’s time is the most valuable resource in the business! You can buy everything else except more hours in the day.

In part 5 next week I will discuss some methods for increasing the amount of time the business owner has to work on their real job of increasing their sales, cash balances and profits.

Until then, thank you for your continued support and let’s make this year our most profitable year ever!

CLIENT QUESTION: Can I Still Claim my Married Child if They Live With Me?

Answer: No. Once your child can file married filing jointly you no longer can claim them – even if you support them 100% and they have no income.

But, if your child has a dependent (your grandchild) that also lives with you and you support them; then, you may claim the grandchild. This also should allow you to qualify for the child tax credit and education credits for the grandchild.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Marketing Tip of the Week – Are You Using Facebook Ads?

If you have a Facebook business page, you really should try adding a Facebook ad to your marketing. Facebook ads are an inexpensive way to reach a very targeted audience.

When you create a Facebook ad, you first set your daily budget and when you want to start your campaign. Don’t worry if you want to spend only $5 a day, you can. Then you will choose “Pay for Impressions (CPC)” or “Pay for Clicks (CPC)”. Pay for impressions means you will expose your ad to your desired audience. You will be paying for exposure and how often your ad is displayed is dependent on your daily budget. Pay for Clicks means Facebook will display your ad to your desired audience, but you will not pay for anything until people start clicking on your ad. Once your daily budget is reached you ad will no longer be shown.

After you have decided on how much you want to spend, you will choose who you want to see your ad. I feel this is the best feature of Facebook ads. Facebook acts like a database of people’s personal information. If you wanted to target a narrow group of people, you have that option. Facebook also makes this easy for you. 

Now all you have left is your message.  You will have limited words and space restraints; so, get right to the point. Make your message as alluring and eye catching as possible. This will be the hardest part of the whole process.

Now get to it! But your business’s face out there and make the most out of your social media. 

 

Tax Tip of the Week- IRS Introduces Fresh Start for Back Taxes

The IRS has created a new program for people who owe back taxes. There are forms of changes that may help you if you the IRS money.

The first part of the Fresh Start program pertains to taxpayers that owe for tax year 2011. If you were unemployed for 30 days or more in 2011 to April 17, 2012, the IRS will waive their late payment penalty for 6 months. You will need to file the Form 1127-A to apply for the waiver. If you decide to do this, you will have to pay the full amount plus interest and any other penalties you may have accrued by Oct. 15, 2012. There are some income exclusions and caps on this waiver.

The second part to the Fresh Start program is related to the installment agreements. Before, if you owed $25,000 or less to the IRS you would automatically approve a payment plan and you were not required to provide your financial information to the IRS for approval. They have increased the debt amount to $50,000. This is the only part that changed when asking for an installment agreement. You will still pay for an installment agreement fee, if not done online, and interest and penalties still apply.

If you would like to learn more about this, click on this link to learn more.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Client Question: I Won A Lawsuit – Will I Be Taxed On All Of It?

Answer: It depends. Generally, lawsuit awards and settlements for physical injury or sickness are exempt from federal income tax, but awards and settlements for other torts (such as, age discrimination cases, sexual harassment cases, etc.) and settlements for punitive damages are taxable. Compensation for emotional distress, above actual medical expenses, is taxable unless they are related to a physical injury or sickness settlement.

Tip: be sure to review your case with a tax expert.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

 

Marketing Tip of the Week - Successful Business Owners Don’t Follow The Herd

In fact, the most successful business owners see what other business owners are doing and do the opposite!

Why? Well consider that according to the Small Business Administration (SBA), over 50% of small businesses fail in the first year and 95% are out of business in the first five years. Of the ones that survive past five years, less than 1% reaches a level that allows the business to survive the retirement or death of the founder.

So why then do most new business owners study what other business owners are doing and then just copy them? This almost assures that they will become one of the 95% who either fail or are just getting by.

If you truly want to succeed you should instead see what the “herd” is ignoring.

• Is there a niche where your product or service can be sold that the herd is currently ignoring?
• Is there a new way to use your product or service that the herd doesn’t see?
• Is there a new product or service that you could be offering that the herd is not offering? (Think Apple iPads.)
• Is there an add-on product that you can offer that the herd isn’t offering?
• Is there a more efficient way to produce or deliver your product?
• Is there a different price (either higher or lower) that your product or service can be offered at?
• Is there a way to increase customer satisfaction when using your product or service?

Sounds like a lot of trouble and work. But, so is failure!