Six ways for your business to go green

July 29, 2011

We see, hear, and read every day that the world is becoming more environmentally conscious and taking steps to “go green.” While many of these may be out of reach for smaller businesses, there are several things that even small businesses can do to head toward going green.

 * Recycling. Most communities these days provide recycling centers. Therefore, businesses should find it fairly easy to provide internal receptacles and to transport or purchase recycling pick-up services for such recyclables as paper (including shredded), newspapers and magazines, aluminum cans, and plastic bottles.

 * Installing energy-efficient light bulbs. Compact fluorescent light bulbs are more energy-efficient than incandescent bulbs, offering a greener alternative. Also, watch for the next generation of commercial-use energy-efficient LED (light-emitting diode) bulbs. While LED pricing currently is rather high, LED bulbs typically use one-tenth the power of traditional light bulbs and last up to 20 times longer. Also, as volumes increase, prices should fall.

 * Going smoke-free (or tobacco-free). One way for businesses to create a cleaner, healthier environment is to go smoke-free. This might involve eliminating smoking indoors, while providing limited smoking areas outside; or a business might go totally smoke-free, prohibiting smoking anywhere on the premises –  indoors or outdoors. Further, a business might offer its employees complimentary or discounted programs to assist them in their efforts to quit smoking.

 * Providing favored parking spaces. Businesses might consider offering special parking spaces for hybrid vehicles and transportation forms that use lesser amounts of fuel (e.g., motorcycles, scooters). The provision of easily accessible bicycle racks also is important.

 * Going “paperless.” While most would agree that going totally paperless probably is unachievable, many companies already have begun to make progress in decreasing the amount of paper they use. To reduce paper, consider offering electronic portals to clients or utilizing other electronic means of sharing and working with data.

 * Offering “green” shopping bags. Many stores are selling reusable shopping bags. Consider distributing to your customers, clients, and prospects a green shopping bag with your business logo. You take a step toward environmental consciousness, while garnering some publicity at the same time.

 These are just a few of the steps a small business can take toward “going green.” The benefit to your business includes energy cost savings and maybe a bit of positive publicity, plus making a contribution to a healthier environment.

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Other business expenses

July 26, 2011

 While there’s no hard and fast rule, examples include insurance premiums, legal and professional fees, supplies you use in your business, utilities, auto expenses, and the deduction for certain energy-efficient commercial building property.

 Here’s a guide for less obvious items.

 * Like all costs you incur in your business, “other” expenses must be ordinary and necessary in order to be deductible.  In tax law, “ordinary” means normal, usual, or customary in the context of your business.

 For example, if you’re a commercial fisherman, boat insurance is an ordinary expense. Other business owners may have a harder time justifying a deduction for boat expenses.

 * An expense is necessary if it is appropriate and helpful to the operation of your business.

 * Some expenses are only partially deductible. For instance, the cost of meals and entertainment must have a direct business purpose before you can claim a deduction. Even then, your deduction is generally limited to 50% of your cost.

 * Certain expenses are specifically identified as nondeductible. Personal, living, or family expenses fit into this category, as do fines, penalties, political contributions, commuting to and from your job, and most lobbying costs.

 Contact us any time you have a question about the deductibility of a business expense. We’ll help you get the greatest tax benefit.

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The “saver’s credit” could cut your tax bill

July 22, 2011

Would you like to shave $1,000 off your income tax bill? Would your spouse like to join in the tax savings of up to $2,000 on a joint return? This potential savings comes in the form of a tax credit called the “retirement savings contributions credit” or “saver’s credit.” Unlike a tax deduction, a tax credit is a dollar for dollar reduction of the taxes you owe.

 How do you qualify for this credit? By contributing to a retirement plan, you could be eligible for the saver’s credit. This includes contributions to both Roth and traditional IRAs. It also includes salary deferrals into SEP, SIMPLE, 401(k), 403(b), and 457 plans.

 How much is the credit? The credit ranges from 10% to 50% of the first $2,000 contributed to a retirement plan. In other words, the maximum credit is $1,000 for an individual. If you and your spouse both contribute at least $2,000 to your retirement accounts, you could qualify for up to a $2,000 credit on a joint return.

 Are there limitations? Like many tax breaks, this credit decreases or phases out entirely once your income reaches certain levels. The credit is not available if 2011 income exceeds $28,250 for individuals, $42,375 for heads of household, and $56,500 for married couples filing a joint return. In addition, you cannot take the credit if you are under age 18, a full-time student, or someone else’s dependent.

 Here’s an example. Say you put $3,000 into an IRA and you qualify for the maximum $1,000 saver’s credit. You can deduct your $3,000 contribution for a tax savings of $450 ($3,000 x 15% tax rate). Add this $450 tax savings to the $1,000 saver’s credit, and your total tax savings equals $1,450.

 If you haven’t been contributing to a retirement plan, this tax credit adds yet another incentive to do so. You have until April 16, 2012, to make a 2011 IRA contribution that could reduce your 2011 taxes. For more information about the saver’s credit or about retirement accounts, contact our office.

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Check these tax breaks

July 19, 2011

If you’re job hunting, be aware of the potential tax breaks. You can deduct the costs of looking for a new job in your present line of work, even if you don’t get the job. Typical expenses include travel to job interviews, resume costs, and employment agency fees. You must itemize your deductions to benefit, and your total miscellaneous deductions must exceed 2% of your adjusted gross income.

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Three habits can keep you out of debt

July 15, 2011

Staying out of debt is simple, but it’s not easy. It requires fortitude. It means foregoing impulsive purchases in exchange for long-term financial freedom. Staying out of debt requires that you deny cravings, at least temporarily, for the “must-have” stuff that beckons from every mall, television advertisement, and magazine.

 Personal debt can be categorized as necessary or unnecessary. Necessary debt can generally be linked to assets such as your home mortgage, a basic car for getting to work, or a college degree. Unnecessary debt, on the other hand, might include routine credit card charges or installment loans for items that rapidly decline in value.

 If your goal is long-term financial freedom, avoiding unnecessary debt is crucial. Three simple habits can help you achieve this goal.

 1. Live below your means. Much of the stuff that seems so essential today will, in fact, grow less desirable over time. Of course, living below your means requires that you discover what those “means” are. For many people, this means tracking your income and expenses over a period of time  -  a month or more  -  to learn where your money comes from and how it’s spent. You might be surprised. That cup of gourmet coffee on the way to work, that weekly meal at the fine dining establishment, that car payment for the latest sedan  -  all cut into your disposable income. By spending less on such items, you’ll be able to save for the future and develop long-term wealth.

 2. Save for emergencies. By setting aside money in easily accessible accounts, you avoid racking up credit card bills when unexpected expenses occur. Such expenses could include trips to the emergency room, replacing the water pump on the family car, or patching a hole in the roof. A reserve fund can also help you survive periods of unemployment without incurring additional debt.

 3. Use debt wisely. If you decide to incur debt, know what you’re doing. Slow down, take a deep breath, think about how valuable this item will seem three months from today. Also ask yourself whether you can pay off these new charges out of next month’s income.

 Staying out of debt isn’t glamorous, and it requires more than a little self discipline. But the long-term benefits are substantial. If you’d like additional suggestions for developing habits of financial discipline, give us a call.

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Don’t overlook this deduction

July 12, 2011

The option of deducting state and local sales taxes in lieu of deducting state and local income taxes is still available for 2011. The sales tax deduction may be based on amounts in an IRS table, plus actual amounts paid for certain big-ticket items like cars. Or you can take the deduction based on actual receipts for sales taxes paid in 2011.

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Taxes and your child’s summer job

July 8, 2011

Here’s an overview of three common concerns:

 * Is a tax return required? The answer depends on several factors, including the total amount of income received. For instance, if wages are the only source of income, your child can generally earn up to $5,800 during 2011 before a federal tax return is necessary.

 However, unless your child can claim an exemption from withholding, a return may be required even when wages earned are lower than the filing requirement. That’s because filing is the only way to claim a refund of overpaid taxes. In addition, self-employment income, tips, and interest, dividends, and stock sales can affect the filing requirement.

 * Can my child open an IRA? Anyone under age 70½ who has earned income can contribute to a traditional IRA. There’s no age restriction for Roth accounts, though the amount of the contribution phases out at higher income levels (starting at $107,000 for single individuals in 2011).

 If your child will receive a federal income tax refund, you could choose to have it deposited directly into an IRA account. As an alternative, you can provide the funds for an IRA and let your child keep the refund. The maximum standard contribution for 2011 is $5,000.

 * Are there any tax breaks if my child works for me? You can take a business tax deduction when you pay a reasonable wage for work your child performs in your sole proprietorship or a partnership you and your spouse operate. In addition, as long as your child is under age 18, you don’t have to pay social security, Medicare or federal unemployment taxes. The wages are subject to income taxes.

 If you have other questions about the tax implications of a summer job, give us a call. We’re happy to help.

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IRS raises mileage rates effective July 1, 2011

July 5, 2011

The IRS announced an increase in the standard mileage rates for computing the deductible costs of operating a car for business or for medical or moving purposes. The new rates will apply to driving from July 1, 2011, through December 31, 2011. The revised rates are 55.5 cents per mile for business driving and 23.5 cents for medical and moving driving. The rate for charitable driving is fixed by law and remains at 14 cents per mile.

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