Monthly Archives: December 2014

More than 1200 New Women-Owned Businesses Are Started Per Day

According to a report commissioned by American Express OPEN, women are starting businesses at a rate that outpaces that of 3 years ago by more than double.  And, over the last 17 years, it has increased at 1.5 times the national average according to data from the U.S. Census Bureau.

The numbers are staggering.  Women entrepreneurs are certainly influencing the economy with $1.4 trillion in revenue, employing 7.9 million people and accounting for 30% of all enterprises, with women-owned businesses numbering more than 9.1 million in 2014.  Being second only to publicly traded companies in job growth since the recession began in 2007, demonstrates that this is a powerful emerging force in the economy.

There are tremendous opportunities for women-owned businesses to compete for Federal contracts.  Quotas have to be met.  One in three firms is now owned by women of color (African American, Latina, Asian American, and Native American), an increase from one in six in 1997.  This is THE fastest growing segment of women-owned business.  Women owned firms are starting and growing businesses in all industries, venturing into non-traditional sectors for women including construction and transportation.

With changes and shifts in the business environment, internal organizational structures are changing as well. There is also a measurable changing consumer dynamic.

Since 2008 70% of the new entrants into the workforce have been women and minorities. With this change, organizations need to develop a clearly defined strategy or vision for developing women leaders.  Most firms don’t make it a conscious or a strategic priority.  Some may still resist it while some take a passive stance assuming it will just happen in the natural course of events. What is required and what business leaders should make their priority is a focused and proactive strategic plan that supports women already on a leadership path which also attracts and encourages more women towards business leadership.

The economy is also changing rapidly.  It used to be that only men bought cars.  Now more women are buying cars than men.  It’s a shift and it is being felt everywhere.  Ford introduced a car that is geared to solving the problems of women – one can now wave one’s foot under trunk to open it.  It’s proof that engineering is keeping up with women as consumers and their importance in society – the changing paradigm.  Organizations need to get ahead of that and focus on that.  Businesses need to learn to focus on who their consumer is.  The face of business is changing.

We have arrived!

–Tracy L. Badgley, Partner,CPA, CGMA, CDFA™

You Get What You Pay For

Whenever I go to a social gathering and meet a person for the first time, usually the first question I am asked is “You are an accountant?  May I ask you a personal tax question?”  It seems everyone has a tax question for accountants.  The questions range from asking how many exemptions they should put on their W-4 form for withholding taxes on their paycheck, to asking what expenses are deductible on their tax return. I was at a party and was introduced to a person who immediately began telling me of a tax problem he had which was affecting his ability to qualify for a mortgage to purchase a house.  His previous tax returns were prepared by a tax preparation service not a CPA firm.  During this conversation, I discovered he had additional tax problems that would need to be addressed.  He instantly wanted our firm to prepare amended tax returns for him and get his business and individual income taxes and finances straightened out.  The tax preparation service did not ask the client the proper questions to put the correct information on his tax returns.

As I was having this conversation with this potential client, I kept thinking of the saying, “You get what you pay for.”  For many people, it is cheaper and more convenient to walk into a tax preparation service, have your tax return prepared with no questions asked in twenty minutes and not think about your taxes until next year.  It is worth paying the extra cost now to a CPA firm to prepare your tax returns rather than paying the IRS later for back taxes, interest and penalties.

-Brian Reilly, Manager

Tax Extenders

Each December CPAs frantically try and assist their clients with year-end tax advice that will hopefully save tax dollars come the following April. At the same time, Congress makes the job more difficult by not finalizing tax law until right before their holiday recess. December of 2014 is no different.

A package of special tax breaks, also known as tax extenders, expired at the end of 2013. Every year or two for the last decade, the tax extenders expire, and every year or two Congress votes to extend them retroactive to the beginning of the year. The American Tax Relief Act of 2012, which was signed into law on January 2, 2013, extended these provisions which expired on December 31, 2011, retroactive to January 1, 2012 through December 31, 2013. (Confused?) So here we are again, with expired tax provisions which will most likely be extended once again back to the beginning of the year.

On December 2nd, the House of Representatives, passed a bill to extend the provisions and then went on vacation. The Senate departs this week on their vacation and expects to pass the law before the winter recess. All indications are that the President will sign the bill this week as well. So if all goes as planned, we will have these extenders in place for 2014. This also means that these provisions will expire on December 31, 2014, and we could be discussing this topic again in December 2015.

There are over 50 tax provisions included in the tax extender bill. For many businesses or property owners, the key extender with relation to tax planning has to do with tax depreciation. Under the bill, taxpayers will be able to expense 50% of new fixed assets (assets having a life of greater than one year) that are placed in service during 2014. The remaining cost is then depreciated over its useful life.  This provision known as bonus depreciation isn’t the only item impacting depreciation. For business owners, the Section 179 deduction may permit up to $500,000 of expensing for capital expenditures.  If the tax extenders were not in place, there would be no bonus depreciation and the maximum Section 179 deduction would be $25,000.

Other provisions that have been around for years that are part of the tax extenders include the research and development credit and the deduction for teachers who spend their own money on school supplies. For taxpayers underwater on their home mortgage, a tax provision to allow individuals to write off forgiven mortgage debt expired at the end of 2013. This provision is included as an extender for 2014, and so is the provision to deduct sales tax paid and college tuition.

Knowing how these deductions and credits will impact any tax plan becomes that much more difficult when the tax law is uncertain. For some reason Congress seems to enjoy putting accountants in this position and accountants seem to enjoy the process. If you have any questions concerning Congress’s action on the tax extenders, feel free to contact me at jrosenberger@gkgcpa.com

–John Rosenberger, CPA Sr. Tax Acct

Why the Entrepreneurs of Yesterday Should Get to Know a Good Business Appraiser

By now, we’ve all heard that the U.S. population, on average, is aging and that a large portion of it is getting closer and closer to retirement.  This fact has repercussions far beyond its effects on social security, the health care industry, the national workforce, and shifting geographic dimensions.   What has gone largely unnoticed but is finally gaining attention is that one of the largest transfers of wealth anyone has ever seen will likely occur over the next 15 years as the Baby Boomers all move into their Golden Age and beyond.  For each individual, this wealth transfer should happen according to a structured personalized plan which involves consideration of all forms of net worth, including interests in businesses.

Over the years, I’ve had clients and even business partners who said they plan on working until they can’t work anymore.  Whether it’s because of financial necessity, the need to stay active or the enjoyment they receive from working, these entrepreneurs of yesterday deserve being given the opportunity to make their own exit strategies.  After all, they are the ones who built the businesses that opened doors for so many others to gain employment and to save toward their own dreams!  With a plan in place to gift or sell ownership in such businesses, owners create a viable way to transfer wealth to their kids, trusts or others or to realize the years of sweat equity by cashing out on the measurable value that has accumulated.

A transfer of a business interest should not happen in a reactive fashion to life-altering events that can be tragic in nature.  It should happen according to a scheduled and structured plan that considers tax implications for both the donor and the recipient(s).  Ultimately, part of the process of transferring the interest involves appraising the business interest.  Often, an initial appraisal is done long before the actual transfer occurs so that an estimated value for the interest can be included in the planning itself.  This is similar to an appraisal used for the purpose of determining the price to sell an interest, if the owner decides to cash out instead of transfer the value.

With an increase in the population reaching the age where unexpected events affecting health are more likely to occur, such aging business owners should be taking steps to put a plan in place, if they haven’t already, to transfer wealth or sell their interests from a position of strength.  Among others, get to know a business appraiser – that person will play a vital role in helping you accomplish this.  Feel free to contact me at sfultonberg@gkgcpa.com if you want to get the process started or if you just have general questions.

-Steven Fultonberg, CPA, CVA, Partner

 

Fantasy Sports & Serious Business

I confess to having been an impassioned fantasy sports player for many years, mostly baseball. I collected my share of trophies and other prizes, even some nice cash winnings on occasion. I was pretty good at the game. By studying the numbers I often spotted trends that allowed me to see when a player was ready to break out, meaning they were primed to have their first really big season.

A few of my success stories included drafting Mark Prior before his big season with the Cubs when he struck out 245 batters, and drafting Cecil Fielder for my 1990 team after he returned from Japan. He slugged 51 home runs that year after never hitting more than 14 in his major league career, up to that point. Perhaps my best move of all time was drafting a big hulking first baseman named Frank Thomas in 1991. Thomas had his first great season that year and went on to a Hall of Fame career.

Naturally  I had to be focused  on what I thought was going to happen in the upcoming  season, but the data I had to work with,  historical statistics, was all about what had happened in the past. This was all that anyone had to work with.

Business statistics can also be fun to analyze, especially if it’s your business. Here the prizes for making the right decisions are serious cash, net bottom line profits that belong to you. Just as in sports, much can be learned about future potential by studying historical data and spotting trends.

I recommend lining up your last 5 years income statements side by side, and doing a financial evaluation.  These income statements can easily be printed from Quick Books if you don’t have them from your accountant. After studying the stats for a while you may be able to see some things that are going on in your business that you did not realize. Are certain overhead costs creeping upwards as a percentage of your sales? This can be eating into your profits.

Identifying the problem areas and taking corrective actions could have a huge impact on your net income next year.  Has your gross profit percentage been shrinking?  Finding a way to lower your unit costs may improve your gross profit percentage dramatically. Or it may be necessary to increase your prices if market conditions allow for that.

Comparing your company’s historical performance against other companies in your same industry is another great way to see how your company is really performing. While you may have been satisfied with your company’s earnings last year you may be surprised to learn that your percentages are lagging when compared to others in your industry.

Not everyone has a passion or the knack for analyzing financial statistics.  It could well be worth the investment to sit with your accountant for a while and go over the figures together. A trained eye is likely to spot trends that you might otherwise miss.

Your company may be primed for its breakout season in 2015. You don’t want to miss it!

-Donald R. Karlewicz, CPA, Managing Partner