Newsletter Volume 8, Number 7. Fall, 2008

Greening up Your Business

With the upcoming Federal and State elections in the US, and many Provincial elections in Canada, the environment and environmental issues are being pushed to the forefront. The power of the internet has spawned new applications that not only help make your professional services practice more efficient, they help make your practice more "green". Two examples are fax over the Internet and Secure Portals.

Fax over the internet is utilizing your PC to act as a receiver and sender of your fax messages. No longer do you need to have a second piece of office equipment that eats into your bottom line by requiring you to pay for paper, toner, and power to drive it. When your client faxes to your internet fax, the transmission shows up in the inbox of your email! If it is a document that you merely need to file, then you can assign it to the appropriate electronic file cabinet and you are finished. No more getting up from your desk to get to the fax machine, no more security issues with wandering eyes seeing what they shouldn't and no more paper to file. To send a document, you can attach a document that you have in your electronic folders or you can scan one into your scanner, which you may need to get, put it into a file cabinet and then fax.

Secure Portals allow small businesses to work with vendors, clients, and other partners electronically, and in a collaborative manner. These secure portals eliminate the need for faxing, mailing, couriering, or delivering in person invoices, bills, month-end statements etc. These are all needless costs to endure in addition to the fact that they require the burning of fossil fuels, use to much paper, are inefficient in the time that it takes to do business this way. Accountants are rapidly adopting client portals. " I want to do my part in reducing my ecological footprint." says Mr. Penny, a partner in a prominent accounting firm. "The least I can do is go paperless and help my clients do the same."

For more information, please give us a call and we will be happy to help you!

Record Keeping

Everyone in business must keep records. Keeping good records is very important to your business. Good records will help you do the following:

1. Monitor the progress of your business: You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success.
    
2. Prepare your financial statements: You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. An income statement shows the income and expenses of the business for a given period of time. A balance sheet shows the assets, liabilities, and your equity in the business on a given date.
    
3. Identify source of receipts: You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from non-business receipts and taxable from nontaxable income.
    
4. Keep track of deductible expenses: You may forget expenses when you prepare your tax return, unless you record them when they occur.
    
5. Prepare your tax return: You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business and prepare your financial statement.
    
6. Support items reported on tax returns: You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.
    

Please contact us for more information or on how we can help you in these matters.

Pensions and Annuities

If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, the amounts you receive may be fully taxable, or partially taxable. Social security and equivalent railroad retirement benefits are not discussed here. For more information about these benefits, please give us a call and we can run the numbers.

Your pension or annuity payments are usually fully taxable if your employer contributed all of the cost without including the cost in your taxable wages, or if you got back all your previously taxed contributions tax free in previous years. If you contributed after-tax dollars to your pension or annuity, your pension payments are partially taxable. You will not pay tax on the part of the payment that represents a return of the after-tax amount you paid. This amount is your cost in the plan or investment, and includes the amounts your employer contributed that were taxable to you when contributed. Partly taxable pensions are taxed under either the General Rule or the Simplified Method. Please contact us for additional details on this method.

If the starting date of your pension or annuity payments is after November 18, 1996, you generally must use the Simplified Method to determine how much of your annuity payments is taxable and how much is tax free. If you receive pension or annuity payments before age 59 1/2, you may be subject to an additional 10% tax on early distributions. However, this additional tax will not apply if the payments are made after your separation from service in or after the year you reached age 55, or if the payments are part of a series of substantially equal payments that are paid over your life.

The taxable part of your pension or annuity payments is generally subject to federal income tax withholding. You may choose not to have income tax withheld from your pension or annuity payments (unless they are eligible rollover distributions) or want to specify how tax is withheld. Withholding from periodic payments of a pension or annuity is generally figured the same way as for salaries and wages. If you do not submit the withholding certificate, the payer must withhold tax as if you were married and claiming three withholding allowances. If you do not provide the payer with your correct social security number, tax will be withheld as if you were single and claiming no withholding allowances.

Please contact us for more information or on how we can help you in these matters.