So I want to start a business? What type of business formation should I choose? Should I be a sole proprietor, a partnership, an S corporation, or a C corporation? I’ll just set up an LLC that’s what everyone is doing now right? LOL NOOOOOOO!!!
An LLC Is a limited liability company. Basically what this means is that if someone sues you for something that you did within the business then all they can get is the total amount of money you have put into the company. They cannot go after you personally.
Did you know that when it comes to tax time there is no tax form for an LLC? Once you’ve chosen to be an LLC you have to choose how you will act. LLC owners must run their business as a sole proprietor, a partnership, or an S or C Corp. Also if you own an LLC in the state of Maryland you must file an annual report and when you file it there is a $300 fee!
When you file your annual return, they will ask you if you’re using any personal property to run your business. If you live in Frederick County, it doesn’t matter but if you live in Carroll County Maryland the county will turn around and hit you with a property tax bill. It’s not much but it adds up especially after you get my bill. LOLL
Sole proprietors are the most common and the easiest. You operate our company and at tax time you file a Schedule C with your 1040 and you will pay self-employment taxes and income taxes. If you are profitable you need to consider paying estimated taxes to the Fed and your state so you do not end up with a big tax bill come tax time.
Partnerships are great for multiple owner companies. Taxes are paid per your percentage of ownership and the profit but via a special allocation any of owners pay can be increased. Paying estimated taxes to the state and the Fed and encouraged to stay ahead of a back tax bill.
If you’re an S Corp, you will need to take a salary. The benefit of being an S Corp is that once you take a decent salary which is an expense to the business, the profit left over is taxed as a capital gain and you would not have to pay payroll taxes like social security on the profit. If you do not take a salary, then all your profit is taxed as a Sole Proprietor and this can add up. S Corps are great for single owner businesses with revenue of $50,000 and over.
C Corporations have mostly been reserved for public companies in the past but the Tax and Jobs act of 2018 offers the biggest tax break of any type of business. While all other business can receive a 20% discount on gross profit C corps can get up to 40% and this can really help you at tax time. Be careful how you select your formation and if you need help I have my calculator ready call James @ (410) 457-7331 for $FREE HELP!

James Darle Jones Sr
President, Author, Tax & Payments Specialist NetPay2K International Corp Answer Tax & Business

Its tax time. What do you need to do to get ready to get your taxes prepared? The first thing you will need if you are using a new tax preparer is last year’s tax return. Depending on how much you made last year there are penalties for not paying enough in throughout the year. The rule is that you need to pay in at least 90% of what you paid in last year if you made the same or more in advance of doing your taxes. So, if you owe more than $1000 in federal taxes this year and you paid in more than $900 for the entire year you are in the clear! If you made as much as you did last year but paid in less than 90% there could be a penalty. This rule is normally true, but the IRS actually changed it to 85% for 2018 only because so many people either didn’t change their withholding or didn’t withhold enough.

                If you’re seeing a new tax preparer this year, he or she will need to see you and your children’s Social Security cards. As a tax preparer the IRS ask’s us if we have seen it or not and if we have seen your driver’s license and I always have to answer honestly, or I could risk my ability to prepare taxes returns.

This is a short list of more things you will need

Name, Date of Birth, and Social Card

What is your current address?

What do you do for a living?

Did you live in your home state all year?

Are you single or married? Did your marital status change before December 31st of the tax year?

Were there any changes in dependents?

Did you have any child or dependent care expenses? Please include care provider’s name, address, EIN, and amount.

Did you have any Child Dependent Care for day care or summer camps that were not overnight?

W2’s and any other income from a small business or contract work that would supply you with a 1099.

Did you buy or sell stocks, bonds, mutual funds or other investment properties?

Did you buy, sell or refinance your home?

Mortgage interest you paid + escrow you earned + Property tax.

Did you donate money, household goods, cars or stock?

Did you incur any tuition or continuing education expenses?

Proof of health care in 2018 1095 A, B or C Did you have health care all year or only a portion?

Did you pay out of pocket for doctors or prescriptions? How many medical miles did you drive?

Did you receive any of the following IRS documents? Form 1095-A, 1095-B, or Form 1095-C? If so, please send.

Do you own or have a controlling interest in foreign financial institutions, businesses or investment funds?

Do you want to file your tax return electronically? Can your state either deduct the amount owed or direct deposit your refund into your bank account?

For direct deposit, please provide your bank name, routing number, and account number.

There are probably a few more things you could be asked for but this is a good start.

We wish you all the best in getting your taxes completed. Give us a call is you need help.

James Darle Jones (410) 457-7331

Believe it or not I ran into a business the other day that had decided not to accept credit cards for payment. It was a new tattoo shop in Frederick Maryland.  How could it be, in this day and age, that a business would actually consider not accepting payments in an electronic form when it makes it so easy for their customers to pay? After doing some digging it seems there are several tattoo shops in Frederick that don’t accept credit cards. These businesses are mostly comprised of a younger generation who thinks they don’t need to conform to run their business and I get it but……I don’t get it.

Let me tell you why they’re missing the boat. As a retail or service business, you need to make it as easy as possible for people to buy your product or service and in this case it’s both! Say a new client comes in and looks at some designs and says ok I’ll take it. Instantly your creating a barrier to your sale when you either have a sign that says cash only or you have to say we only accept cash or worse yet you create the tattoo and when they go to pay with plastic you say “sorry cash only.” First if you have the sign it’s also a red flag that says there is an extra step to buy from me. Second if you say cash only before they buy it makes the customer decide again whether they wish to do business with you. Sure, times are good but no-one with any sense would make a potential customer think twice about their purchase. If you were to spring it on them after the tattoo was completed what are you going to do follow them to the bank? Anyone who says they always get it anyway is lying to themselves and I’m not LOL. What about those tattoos that cost $4-5-$600.00 or more? I’m sorry but not many people have that kind of cash to drop on a tattoo, but they might have that much in credit.

Ahhhh…Do you see all of the problems you are solving when you accept credit and debit cards for that matter? By accepting credit cards, you have a built-in financing program with no risk as long as you dip the card into the reader and get a signature for the cards that do require one now. By accepting credit cards you’re also giving your clients a level of security. Think about it, it’s a risk for you just to go to an ATM and withdraw money. Years ago, when I was living in Baltimore I was robbed at an ATM, the guy got $300 and wanted more before I ran off and yes, he had a gun Clint Eastwood would be proud to holster. I had an insurance agent complain once because I paid a large some of cash for my car insurance and she didn’t like making cash deposits at the bank. If your potential customer must get a cash advance from a credit card it’s another fee or should I say obstacle for them to buy from you. Let’s say you wanted to get a cash advance from your credit card, but you don’t know the pin #? You’re not waiting a week or more to get the pin # in the mail. You’re going to a tattoo shop that accepts credit cards. It’s that simple

By accepting credit cards, you are making it easy for your customer to pay and in the back of their head they will always know it’s easy to buy from you. You get a built-in financing program and you don’t have to make as many cash deposits at the bank either. Most of your would-be clients might be able to get the cash but it’s a hassle and no-one likes a hassle especially when your customers are buying something like a tattoo that is supposed to make them happy. In the long run not accepting credit and debit card will cost your business customers and it will cost you money.

If you’re worried about the fee, then increase your pricing 4% to 5% but whatever you do don’t make them pay a surcharge for many of the same reasons!

For more information about the solutions we offer to help your business accept electronic payments in your store, in the field, or online Call James @ (410) 457-7331 or complete our contact page https://atb.tax/contact/ and we will be in touch. Good luck with your business and keep in mind “The Key to Profitability is making it Easy for Your Customers to PAY!” We make it Affordable!

3 Tax Deductions Available Only to Startup Businesses

If you started a business last year and incurred some expenses before you officially opened your doors, you may be entitled to deduct certain startup and organizational costs on your tax return this year. But the IRS has strict guidelines you must follow to claim them. Here’s a look at the rules.

The Allowable Deductions

According to the IRS, there are three categories of startup costs eligible for tax deductions, and you can only deduct them if you actually opened the business. The startup costs must be related to:

1. Creating a trade or business or investigating the creation or acquisition of an active trade or business. Some of these costs might include surveying markets, analyzing products or the labor supply, visiting potential business locations, and any other costs associated with creating or investigating a new or existing business.
2. Preparing the business to open. Any costs you incurred before opening your doors and begin to generate income are included in this category, with the exception of equipment, which will have to be depreciated. Eligible expenses could include employee training and wages, travel costs to locate suppliers and distributors, advertising, and consultant fees such as attorneys and accountants.
3. Organizational costs. If you legally set up your business as a partnership or corporation before the end of your first year in business, you can deduct these costs as well. The expenses typically associated with incorporating are legal fees, state organization fees, salaries for temporary directors, and organizational meetings. Expenses to set up a partnership agreement include legal expenses and filing and accounting fees.

Chapters 7 and 8 of IRS Publication 535 outline these deductions in full detail.

How to Take the Deductions

The IRS allows you to deduct $5,000 in business startup costs and $5,000 in organizational costs, but only if your total startup costs are $50,000 or less. If your startup costs for either area are in excess of $50,000, the amount of your allowable deduction will be reduced by that amount. And if your startup costs are more than $55,000, the deduction is completely eliminated. For instance, if your start up costs are $53,000, you would not be able to deduct $3,000 of the expense, and would only be allowed to deduct $2,000. And if your start up costs were $55,000 or more, you don’t qualify for the deduction at all. The costs remaining after your deduction should be amortized annually in equal portions over the next 15 years. If have questions about a startup business, taxes, or merchant services we can help. We offer $FREE consulting!
Call James @ (410) 457-7331