Deducting Business Website Costs
Aug 13, 2014
Businesses often set up websites to sell their products and attract new customers. The proper method for deducting website development costs depends on several factors, including how the website was created and whether the website was part of the company’s “start-up” costs.
Software costs. Website designs produced with sophisticated programming languages generally can qualify as software. The IRS has safe harbor rules for deducting software costs. These rules distinguish between software produced by independent contractors and software produced by in-house employees.
Generally, if the design was “purchased” from an outside contractor who remains at economic risk for performance of the software, the deduction for the design costs must be spread over a three-year period. However, if the website design is “developed” in-house — or by an independent contractor who does not remain at risk for performance — the company has more flexibility. One option available in this situation is to deduct the costs in the year they are either paid or accrued (depending on the company’s accounting method).
Other costs. Website design costs that don’t qualify as software are deducted over their expected useful life. The costs of producing website content that is “advertising” are generally deductible in the year paid or accrued.
Start-up costs. Website costs incurred before a business begins may be considered start-up costs. A business may elect to deduct up to $5,000 of start-up costs in the year the business begins operations and deduct the remaining costs ratably over 180 months. (The $5,000 deduction is reduced where total start-up expenses exceed $50,000.) Alternatively, a business may capitalize its start-up costs.
Categories: Uncategorized
IRS Scams & Phishing
Aug 07, 2014
What to do if you get a call or email from someone claiming to be the IRS?
The IRS has seen a recent increase in local phone scams and phishing across the country. (Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate to lure in potential victims and prompt them to provide valuable personal and financial information).
These scams include many variations including callers saying that their victims owe money or are entitled to a huge refund.
Characteristics of these scams can include:
- Scammers use fake names and IRS badge numbers. Generally common names and surnames are used to identify themselves.
- Scammers may be able to recite the last four digits of a victim’s Social Security Number.
- Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
- Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above) then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” on their website. Please add “IRS Telephone Scam” to the comments of your complaint.
If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.
It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.
By: Jenny Furey, CPA
Categories: Uncategorized
Dental Financial Wellbeing
Aug 06, 2014
Are you a dentist just out of dental school with a practice to run and you’re not prepared for the business aspects? You might be making financial mistakes every day and not even know it. You could have major financial problems coming your way and won’t know it until it’s too late.
Across the country dentists are struggling. The percentage of dentists who describe themselves as “not busy enough” is increasing all because of a growing supply of working dentists and shrinking demand. If you find yourself with more time than patients, you could be in trouble. With dental care among adults decreasing and the continuing changes in dental insurance, it’s harder and more important than ever to get control of your finances.
Financial decisions – For some dentists, every financial decision causes panic, even the routine ones. If you don’t have sufficient cash flow, you won’t have the money to confidently spend on the things you need to grow your practice. Some of this can come from poor management of overhead. As a percentage of your revenue, you should be running your practice at about 55% to 60% overhead. Anything higher than 60% can mean you are heading for disaster.
Debt – If you’re afraid of debt, this can only make the problem worse. When you try to pay cash for everything, it means you don’t have cash things that come up, and this puts you in a position where your problems feed one another and send your finances into oblivion.
Retirement – Poor cash flow also leads to poor long-term savings, which can delay and dramatically reduce the quality of your retirement. If your money is sunk into overhead costs and tax bills, you won’t be able to adequately save for retirement. To maintain your current lifestyle after retirement, you need to manage your money intelligently today.
Are you spending more time managing your practice than seeing patients? If so, you need help, before it’s too late. Seek financial guidance now, and get your practice back on track.
Categories: Healthcare & Dentistry
Accountability Leads to Accurate Costing
Aug 06, 2014
There is a multitude of useful information that can be collected from reports that help determine costs. Reports like those that provide the of number of widgets produced, the number of people on a line, the time spent for maintenance, or time spent for set-up, etc. But, what do you do if you cannot get this information?
I was actually at one of my service clients the other day who bills differently based on a particular service being provided and time spent, etc. Their biggest issue was they could not get their people that were performing the tasks to properly record what they were doing. Even worse, they relied on the manager of each department and location to reconcile the reports and make sure they were accurate. They even set up bonus incentive plans to encourage these managers to get accurate reports. Their biggest issue was they could not accurately bill for services and customers were complaining because they were being charged for activities that did not even occur.
My client asked me what he could do. I told him this reminded me of manufacturing and trying to collect data on the shop floor. What have you done that works?
I told him that relying on a manager and holding them accountable can be enough. However, in this case it was obvious it was not enough. You can do your best to hold others accountable and then it comes down to either they do it or they do not and then consequences occur. There are other more full-proof methods that often require capital. An example would be a barcode system. This is where the employee has to scan what process they are doing or what part they are using before they can begin the operation. This still is not full-proof though, as they may still do it without scanning what is being done.
In the end, you need to get the best information you can get to make the best decisions possible. I would love to hear what you have tried and successes and learning experiences you have had.
Categories: Cost Accounting
Don’t Let Taxes Trip You Up
Aug 05, 2014
The last thing you need as a small business owner is to have to spend time unraveling tax problems you could have avoided. There are many tax issues that can trip up small business owners — here are a few.
Mixing Business and Personal
Keeping your personal bank and credit card accounts separate from your business accounts isn’t always easy. But “commingling” business and personal accounts creates a recordkeeping nightmare. When it’s tax time, you may not be able to identify all the appropriate business expenses. As a result, it could be difficult to accurately determine your business income and you might lose deductions.
Not Keeping Track
Keeping track of business expenses can be a challenge. However, you’ll need proof of purchase for any expenses you plan to deduct. Proof can be a canceled check (or legible image of the check) or a credit card, debit card, or electronic funds transfer (EFT) statement showing the payee, the amount of the purchase or transfer, and the transaction date.
You’ll also need an invoice or a receipt identifying the purchase. If the business purpose for the purchase isn’t immediately obvious, attaching a note of explanation or writing directly on the invoice or receipt can save time later should questions arise. There are specific substantiation requirements for business travel and entertainment expenses. Check with us if you have questions.
Making the IRS Wait
Employment taxes you collect should always be remitted to the IRS in a timely manner — without exception. As an employer, you’re responsible for withholding federal income tax and FICA (Social Security and Medicare) taxes from your employees’ wages and remitting them, along with your company’s FICA contributions, to the IRS. Penalties for noncompliance can be harsh.
Misclassifying Workers
Misclassifying workers as independent contractors when they are actually employees can be a thorny issue because they are treated differently for income-tax withholding and employment-tax purposes.
> Employees: You must withhold federal income tax and FICA taxes, pay your share of FICA taxes, and pay unemployment taxes.
> Independent contractors: You’re not required to withhold income tax, and the worker is fully liable for his or her own self-employment taxes. FICA and unemployment taxes do not apply.
It’s important to get it right to avoid penalties. Generally, the more control you have, the more likely it is that the worker is an employee.
Categories: Uncategorized