ACCOUNTING FIRMS COME TO THE AID OF SMALL BUSINESSES

Small businesses are turning to accounting firms to take over some of the more technical aspects of running a business, leaving the owner more time to concentrate on making a profit.

Today, CPAs are much more than places to have your taxes done or have your payroll taken care of. Most firms offer a wide range of services that include financial consulting, investment counseling, marketing and implementation of long-range business plans. Many small businesses turn to CPAs for help when purchasing computer hardware and software.

Small business owners who use the services CPAs offer find plenty of time to concentrate on their bottom line. A CPA keeps them abreast of tax deadlines and possible changes in the tax code can help manage cash flow procedures and can help with their business plan. Instead of seeing a CPA once a year during tax season, a regular review of the books and records of the business provides the business owner independent feedback on the financial health of the business.

Now you can go to class and get two kinds of credit – one for the class you are taking and one for your taxes.

Two tax credits to help with college expenses passed as part of the Taxpayer Relief Act of 1997. This comes as good news for those who have children in college or for those who are pursing a degree themselves. These two separate credits help offset the high cost of higher education.

The first credit, called the Hope credit, will be available for tax years after 1997 to families with children in college. Families will be allowed a credit for the first $1,000 of tuition and fees and 50 percent of the next $1,000. The maximum credit for the first two years of school is $1,500 annually. Eventually, the tax credit will be $2,000 annually for the second two years of college.

For those who are attending college themselves, the second credit, the Lifetime Learning credit, is available after June 20, 1998. This applies to any student taking undergraduate, graduate or classes at an eligible institution. The credit is equal to 20 percent of up to $5,000 in tuition and fees. This credit can be claimed once for an unlimited number of years.

You may not take both credits for the same student in the same year and the amounts of both credits begin to phase out for single taxpayers with adjusted gross incomes at $40,000 and for those filing a joint return, at $80,000. The phase-outs get a little confusing, so this may be a good time to come discuss the possible tax savings.

Under the new law, you can even save money for college in an educational IRA. You may contribute up to $500 a year to the IRA for the benefit of anyone under the age of 18. Money withdrawn from the account is tax-free to the student that year and can be used to pay for qualified higher education expenses. If the money is excluded from income, the Hope and Lifetime Learning credits cannot be taken that year.

No one can predict the stock market or what it will do. History may have taught us a few lessons, but you need to understand and employ a few simple concepts to ensure long-term success.

Diversify your investments. You should try to have a conservative mix of attractive assets. When a stock climbs, you will realize a profit. When it falls, only a portion of your portfolio will be effected. You may take an occasional loss, but overall you will maintain a steady return from your total investments.

Don’t react to the market after a trend has developed and don’t buy stocks or invest based on a trend. You’ll end up selling after the value has diminished and buying after the gains have been realized. Stocks are down about one out of every three years making fluctuations normal, but not predictable. Stocks and bonds will have their ups and downs, but they consistently outperform most other types of investments. If the market has taken a downturn, wait. It should go back up.

Invest the same amount of money at consistent intervals – called dollar-cost averaging. By doing this, you will stay invested no matter what the market is doing. This will help your portfolio overall and keep you on an even keel.

More and more people are making a break from traditional employment and starting home-based businesses to branch out into a new venue or make use of a talent they already have.

Venturing out onto their own, these entrepreneurs are taking charge of the future by basing their success on what they can do to make it happen. They no longer rely solely on a corporate bottom line for financial stability.

Current statistics show that more than 27 million Americans run an enterprise out of their home. More than 14 million of those are full-time businesses, though most started as part-time ventures while the owner was still drawing a paycheck from another job.

Experts advise to begin with a part-time undertaking. Not only will you find out very quickly whether you enjoy running your own business, it also keeps money coming in while you get your business off the ground. To get it going as quickly as possible, develop a plan with clear financial and strategic goals. Include projections on overhead, marketing the product or service, expected revenue and how to cover the costs until your income meets your expectations.

Starting out slowly while continuing to draw a paycheck from your current employer will allow you the luxury of making – and learning from – mistakes. However, make sure you check your company’s policies to ensure you are not in conflict of interest.

Be sure to check with us to determine the specific tax, accounting and record keeping requirements of your venture. It’s never too early to plan.

When you started investing in your IRA, you were wisely planning for your financial future. Putting money aside for your retirement was and still is a great idea. Now you can plan for taking some of the money out without giving a huge chunk to the IRS.

If the following statements are true and apply to your situation, you can take advantage of a procedure that will make your IRA last longer.

1. You own a large IRA and are approaching the date (April 1 of the year after you turn 70 ½) you are required to begin taking payouts.
2. You are the same age or older than your spouse and likely to die younger.
3. You want your spouse to inherit your IRA after your death.
4. You want to minimize mandatory payouts and want to outlive your IRA.
5. Neither you nor your spouse has any medical condition that would lead you to believe one of you will predecease the other.

If the above applies to you, it might be advantageous to set up your payouts on a hybrid life. The owner of the IRA should have the payments based on a life expectancy that is recalculated annually. The spouse should have the payments based on a life expectancy that is fixed by actuarial tables. That way if the owner dies first, the spouse can claim the IRA and name new beneficiaries and begin payments based on his or her joint life expectancy with them. After the spouse’s death, the heirs can receive IRA payouts for many more years. If the spouse dies first, the IRA can live on for the rest of his or her fixed term.

Those of you who are wisely saving for retirement now have a new option. You now have a new type of IRA in which to save your hard-earned dollars.

You may now choose to invest your money in a Roth IRA, named after its creator, Senator William Roth. It has also been called the American Dream Retirement Account. Regardless of its name, it is still a place to invest money and have it grow tax-free. What makes this account different is that the withdrawals are tax-free, too.

So, you ask, what is the catch? You can’t deduct the contributions. The money contributed to the account after taxes is allowed to grow tax-free. It will not be taxed at withdrawal as long as you are age 59 ½ and have had the account for at least five years. You can contribute up to $2,000 a year and couples – even those with spouses who are not employed – can contribute $4,000. The phase out begins at an adjusted gross income (AGI) of $150,000 for couples and $95,000 for single filers.

Regular IRAs can be converted to Roth accounts, but taxes will be owed on the contributions and the earnings in the account. Congress will allow some sort of time period to pay the taxes on a converted account. Most experts agree it will be about four years.