Sunday, 27 January 2013

Regulatory changes for small business in 2013

The calendar won't be the only thing changing for small businesses this New Year. Small businesses will have to look out for regulatory changes in 2013 that will change the way they operate. These potential regulatory norms would require significant adjustments to the way the businesses operate.
Changes in Tax Rates
A majority of small businesses are organized in such a way that revenues are taxed at the individual rate instead of the corporate rate. Without action from the federal government, the expiring tax cuts will increase individual tax rates in 2013, resulting in a tax rate hike for many small businesses. In addition, the capital gains rate would also increase. Gains on assets held longer than a year would be taxed at 20 percent instead of the present 15 percent for middle-income and upper-income taxpayers. The rate for lower income taxpayers would rise to ten percent from zero.
If the current tax cuts are allowed to expire, businesses will also face a decrease in allowable expenses and real property will no longer be included. The start-up deduction for businesses will also be reduced from $10,000 to $5,000. For business owners looking to leave their business assets to their heirs, or for those who may inherit assets, the maximum estate tax rate would increase from 35 percent to 55 percent. At the same time, the maximum exemption  would decrease to $1 million from $5 million.
In addition to these, the steady increase in cyber frauds, impending immigration and healthcare reforms make it imperative for small businesses to have adequate checks and balances in place.
How to reduce taxes?
The easiest way to reduce income taxes is to either increase deductions or defer income. Small business owners can increase deductions in a variety of ways, including purchasing supplies and equipment before the end of the year to be used in the future. Paying bills early, prepaying for maintenance and subscription plans and making charitable donations can prove significant if done before the end of the year. On the basis of accounting method used, business owners can also depreciate assets to create additional deductions.
Small business owners can defer income by contributing to qualified retirement plans such as 401(k), IRA & SEP accounts before the end of the year. Some types of investments, like annuities, also allow investors to defer taxes. Investors avoid paying federal income taxes on the principle and interest until they withdraw the money.
A sound business recovery and continuity program is a must. Emphasis must be laid on key vendors having adequate processes to ensure uninterrupted service in the event of extreme weather or other unforeseen circumstances. Critical documents like tax returns and other financial documents must be maintained at alternative locations for protection and adherence to retention guidelines.
Professional help can help facilitate these proceedings
A certified tax & accounts outsourcing service provider can be a valuable professional resource, particularly when it comes to helping business owners identify and take advantage of opportunities to reduce their income tax burden. In addition to providing guidance and expertise regarding qualified retirement accounts and strategies for deferring income, they can help small business owners manage cash flow, plan for growth, and mitigate risk.
How are you preparing your small business for the looming tax changes? Have you considered outsourcing solutions to help your small business get through with minimal financial losses?
A professional outsourcing company like GKM can help you make sound decisions that benefit both your business and personal interests.

Unconventional funding avenues for small business

Acquiring capital is a challenge that virtually every small business faces at some point or another. Financing a startup is not always easy, but, traditionally, entrepreneurs have relied upon small business loans to get their new companies up and running. Today, however, securing such capital is not an easy task. Ask any small business owner how they would obtain capital for operations or growth - chances are they would reply through a bank loan, or debt. Unfortunately this traditional avenue of capital has been, and continues to be largely unavailable for small businesses. A glance at the numbers from a recent study shows that: 

·         78% of small businesses call it "difficult" to raise debt financing
·         56% of small businesses are denied bank loans; and
·         45% of small businesses were forced to transfer personal assets to their business
Obtaining financing for a small business even in a healthy economy can be challenging, since many business owners lack operating experience and solid credit history. Today's tight lending environment is making it even tougher for entrepreneurs to raise money to operate and grow their businesses.
Both entrepreneurs and funding providers realize that the lack of available credit is hampering their ability to make this happen. Solutions exist, but they often require some out-of-the-box thinking and aggressive efforts on everyone's part.
If a traditional loan is not secured, small business owners may also be able to access alternative sources of capital with some aggressive efforts and out-of-the-box thinking. Listed are a few to get started on:
Local Communities:
One of the most widely overlooked sources for small business capital is the local community. In recent years, there has been a unified push for consumers to support local small businesses and to 'buy local'. There's no reason why people shouldn't be able to easily 'invest local' as well. Statistics show that 7 in 10 small businesses that raise money from their community are successful.  
City & State Resources:
There are lots of government agencies and non-profit organizations that financially support small businesses. You can check with the respective city and state economic development agency to see if there are specific programs or grants associated with your particular industry cluster. 
Funding Matchmakers:
The landscape of small business capital is quickly expanding. This has spawned a new breed of companies focused entirely on helping you get matched with the best type of funding for your business. Companies like FundWell, Lendio and Multifunding are dedicated to advising you on all of the options on the spectrum.
Although bank lending to small businesses is on the wane, new and innovative alternatives have surfaced to the mainstream. They are readily available to those open to doing things a little differently.

IRS loses lawsuit challenging authority to regulate tax preparers

Last year, three independent tax preparers, Sabina Loving of Chicago, Illinois, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wisconsin, took on the IRS, accusing it among other things, of lacking the authority to license tax preparers. The three retained lead attorney Dan Alban of the Institute for Justice, a libertarian public interest law firm, in filing suit against the IRS in the U.S. District Court for the District of Columbia. 
U.S. District Court Judge James E. Boasberg issued an opinion that would bar the IRS from regulating tax preparers – all just days before the new tax season officially opens for business. (Jan 30, 2013)
The scheme to regulate tax preparers was a top priority for the IRS which felt that requiring tax preparers to register with the IRS, pass a competency test and take continuing education classes would protect taxpayers from potentially fraudulent preparers. The new system required registration (along with a fee), a competency exam and annual requirements to take at least 15 continuing education credits. In exchange for compliance, beginning in 2011, the IRS began issuing PTINs (Preparer Tax Identification Numbers) which must be included on paid returns; a public database of those tax preparers with valid PTINs was expected to be posted on the IRS web site.
But not everyone thought that regulation was a good idea: Under the new rules, attorneys, CPAs and enrolled agents (EAs) are exempt from the competency testing and continuing education requirements. That means that the real burden of complying with the new regulations tends to hit independent tax preparers and small businesses disproportionately – those who, under the new rules, must meet the criteria to be called a Registered Tax Return Preparer (RTRP). Without that designation, unless a preparer meets an exemption or exception, he or she may not work. Loving – and other tax preparers – thought those rules were unfair. That's how the matter ended up in district court.
Generally, a final ruling by a district court can be appealed to the United States court of appeals in the federal judicial circuit in which the district court is located. In this case, the matter would be appealed to the United States Court of Appeals for the District of Columbia Circuit – we can expect an appeal from the IRS.
But while all that gets sorted out, tax preparers wonder: what does this all mean for the upcoming tax season? That's not exactly clear. In theory, the decision should allow unregulated and unregistered tax preparers to file tax returns when the season opens on January 30. However, that's just days away – and the IRS has a system in place already predicated on the idea that preparers have to be registered with a valid PTIN. Whether a return submitted by an unregistered preparer will bounce because of the IRS system is yet to be determined. The IRS has not yet issued a statement about the ruling.