As of July 1, 2010, any business caught without the required coverage can be “closed immediately” and the penalties will increase from the current $150 a day rate to the new and tougher $250 a day penalty for every day the business is out of compliance.  OUCH! 

Okay - I agree that it sounds harsh, but the alternative can be even harsher.  A business owner without this insurance could find himself responsible for medical and financial costs if an employee becoming injured or disabled from a work-related injury or accident.  I have heard employers say it’s too expensive, or that their employees don’t do risky work so why bother - but considering that anyone can have an accident no matter how careful the employer is, it’s really not worth the risk of going without this coverage.

One way businesses try to get around the insurance and tax costs of hiring employees is to hire people as subcontractors.  The construction industry is notorious for this.  Often their workers have no other clients and in effect, since they only work for one contractor, they are being misclassified and should really be treated as employees.  As of July 1st, The penalty for this kind of misclassification can be as much as $5,000 for each “employee”.  OUCH again!

It’s recommend that you review your use of subcontractors to determine if you fall into this trap.  If your subcontractor has other clients, has business cards, carries business liability and workers compensation insurance (ask them for a binder or a copy of their policies), if they have and maintain their own tools and vehicles, and if they can hire their own workers to perform the job, then they are a true subcontractor.  If the above does NOT apply to your subcontractors, you may find yourself at odds with the State.

Refer to the VT Department of Labor site for additional information as it pertains to your business practices: http://labor.vermont.gov/InfoCenter/june2004/tabid/292/Default.aspx

•   QuickBooks has dozens of different versions and each year the program changes - it will help your advisor to know ahead of time the year and version of your program        

  Let your advisor know if you are running QuickBooks on more than one computer and if they are networked.

•  When you run your accounting files on more than one computer you can sometimes end up with multiple copies of the file. This can potentially cause a variety of problems so it’s important to know if this issue needs to be addressed.     

• If you are new to the program your advisor will know to work more slowly and explain every move. If you are a longtime user you can skip over the basics and get right to the problem at hand, saving both of you time, and saving you money.

How knowledgeable are you about the bookkeeping and accounting pieces of your business - do you understand the jargon?

• It helps if you know some basic bookkeeping terms and using the program will be much easier with this knowledge. Let your advisor know if you don’t understand the words being used or the terms that appear in QuickBooks. A quick bookkeeping lesson will go a long way in helping you better understand what you are doing and why.

Have a list of specific questions to ask, and be prepared to explain any problems you need to resolve.

• As you discover problems in your QuickBooks work file, or as questions come up during the course of your business day, jot them down in a Word file or on a note pad. The more prepared you are the faster your problems can be solved.

Let your advisor know how much you want done for you vs. how much you want to do yourself.

• If you have a big cleanup let her know if you want to learn how to find and fix the problems yourself; if you want her to find the problems but you’ll fix them; if you want her to find and fix the problems but with you watching; or if you just want to give her the whole file and return it to you when it’s clean and accurate.

Do you have a budget and do you need to work out a schedule to make the training or clean-up fit into your budget?

• See the previous entry - the more work you do yourself and the more you are willing to learn, the less it will cost you in the long run. Scheduling two-hour blocks of time for intense training, and doing so on a regular basis every 2-4 weeks, is the best way to learn the program and to discover ways to effectively use it to manage and grow your business.

Working with a QuickBooks ProAdvisor can not only save you time, money, and aggravation, but it can also significantly increase your overall knowledge of this powerful and effective business tool.

How does this work?  When you call or e-mail me with a request for QuickBooks help we start by scheduling in a time to “meet” online.  I then send you an e-mail with a link to the “GoToAssist” website where you will type in an access code.  As soon as this code is entered, our two computers will be able to communicate with each other.  This is soooooo cool…and you won’t believe how easy it is!

This connection allows me to see YOUR computer screen on MY computer screen.  It also allows me to run your QuickBooks program with you watching my every move.  However, even though I have full control of your program, you can take back that control at any time by simply moving your mouse.  This system allows me to show you what I’m doing and to explain things as we go along, and you can show me areas that need attention.  Anything that we can do in person in QuickBooks can now be done without leaving the comforts of your office.

A few things to consider: 

• This works best if you have a high-speed internet connection
• It’s advisable to have a headset or speaker phone for sessions lasting more than 15-minutes (to save on neck cramps…)
• The more prepared you are with your questions, the more focused and successful the session
• Planning regular monthly or quarterly sessions will enhance your QuickBooks knowledge and make year-end cleanup easier and less time consuming - and your tax preparer will love you!

This system is fast, easy, and convenient - I encourage you to give it a try!

When paying a sub-contractor, it is extremely important that you receive all the information you will need for issuing a 1099-misc form at year-end.  That means you should NOT pay any sub-contractor until you have received the following information:

·         Legal name (This would be their first and last name if they are a sole-proprietor.)

·         Business name (This could also be their “legal” name if they are an LLC, Partnership, or a Corporation.)

·         Mailing address (This is the address they use when filing their business tax returns.)

·         Social Security number or Federal Employer Identification number, whichever applies

This information can be legally obtained by using the IRS Form W-9 which the sub-contractor is obligated to complete and return to you prior to receiving payment.  Without it, you are required to withhold 28% from their check to cover any potential tax liability, and will be required to submit that money to the IRS on behalf of the sub-contractor. 

Most small business owners are not aware of this requirement and continue to pay sub-contractors and then try to get the information the following year when the 1099 forms are being completed.  This not only delays the filing process, it can also cause the business owner to be financially responsible for any unpaid taxes.

Go to the IRS website (www.irs.gov) to their “Forms & Instructions” section to download the instructions and forms for the W-9.  The site also has instructions about reporting your sub-contractors on the 1099-misc form and details about the requirements for filing this form each year.  

Your tax preparer should be able to answer your questions about these filing requirements, and copies of these forms should be filed with your year-end business documents.

The easiest way to track your mileage is to keep a list of where you regularly travel for business and the round-trip mileage associated with each trip.  Your list should include trips to client locations, vendors, office supply store, post office, your attorney or accountant’s office, and networking meetings.  With this list and your business schedule, you can reconstruct your business travel on a weekly or monthly basis.  The more often you update the vehicle mileage record the easier it is to remember where you went and to capture all your allowed business travel.  Absent an odometer reading, you can use the internet to map out your trips and reconstruct the mileage.  MapQuest does this quite accurately and is easy to use.

There are formal mileage logs and pre-printed forms available at office supply stores which allow you to track the date, time, starting and ending odometer reading, and the business purpose of each trip.  However, most people have a hard time remembering to use these log books, or have gaps in the records where they forgot to note the odometer readings.  Also, most small-business owners are constantly “on the run” with a million things on their mind and this is just one more detail that is easily forgotten.  The trick is to come up with a simple system that works for you and that fits into your busy business schedule.  Don’t make it more complicated than it needs to be, and don’t beat yourself up if you miss a few of the details.  It’s better to have “most” of the information than to have no mileage information at all.

Remember, the vehicle deduction is a major business write-off and can save you thousands of dollars in both income taxes and self-employment taxes each year.  Don’t put this valuable deduction at risk – track your vehicle mileage! 

It may still be easy for many small business owners to obtain credit using this method, but now this quick credit comes with a very big risk.  The credit card companies are no longer following the old rules of operation.  Typically the old rules said that if you kept within your credit limit, paid your credit card payments on time, and weren’t overloaded with debt, your credit limit would increase annually and your interest rate would remain relatively stable.  You could often renegotiate that rate to get a more favorable lower rate after proving your credit worthiness.

This is no longer true.  Because the rules are changing, and because you are often notified in a document that requires a magnifying glass to read, you may find yourself strapped with a high interest rate when you can least afford to pay that rate.  Card holders are being told their interest rates are doubling or tripling and the card companies aren’t saying how they decide who gets the higher rates or when they will increase.

To survive this tight credit period and uncertain credit card rates, business owners will be smart to nurture a relationship with their local bank or credit union.  Having a good handle on your spending and knowing how to present your business’ financial picture to your lender will help you obtain a credit-line now, before you need it. 

• Learn how to read and understand your balance sheet and income statement
• Ask your tax preparer to explain any differences between your profit & loss statement and your tax return - the lender will want to know
• Be prepared to fully describe your business to the lender and show your knowledge and expertise in your field to reassure the lender that you know your business and are good at what you do.
• Prepare a two-year budget that corresponds to your profit & loss statement
• Be prepared to show how you intend to repay the loan

By working closely with your local lenders you will not only have fewer surprises, you will also have a financial partner who is interested in you and in your success.  That’s something you can never get from a large credit card company.

We welcome your comments and your suggestions and hope you enjoy the site.

Thanks Terry!

Randy Smith
Synchronicity Web Designs