Tax Vs GAAP – What Small Business Owners Should Know

Small business owner should understand the following before they decide to maintain their accounting records on the income tax basis or based on generally accepted accounting principles (“GAAP”).

  • GAAP is proscribed by the Financial Accounting Standards Board (“FASB”) and the Securities Exchange Commission (“SEC”) while the Internal Revenue Service is responsible for the establishment of the income tax accounting framework. The primary purpose of the tax basis accounting is the determination of taxable income, whereas GAAP strives for comparability across entities. The income tax method of accounting may be presented on a cash or accrual basis.
  • The definition of revenue maybe significantly different under the two accounting frameworks. GAAP recognizes revenue as earned; the IRS basis recognizes income when earned or upon the receipt of cash whichever is earlier. Under GAAP certain advance cash payments such as, rent received in advance, subscription income, and income from sale of gift cards must be deferred until earned. In addition, the timing of deductions may be different under both methods of accounting. For instance, GAAP may require companies to estimate and deduct warranty expenses from gross revenue as revenue is recognized. Under the income tax basis of accounting warranty expenses cannot be deducted until a cash payment is actually made.
  • The handling of fixed assets and depreciation expense represents another area of major differences. Under the income tax basis of accounting, tenants who receive incentives from landlords as a part of lease arrangements are required to reduce the basis of the leasehold improvements made by the extent of the incentives received. Under the GAAP framework the basis of leasehold improvements made is measured at the full cost associated with the improvements. Any lease incentives received is recorded as an element of deferred rent; with the deferred rent liability being relieved against rent expense on the straight line basis over the lease. The issue of depreciation expense highlights numerous differences between the income tax and GAAP bases of accounting including the depreciation methods applied. The straight-line, declining balance, sum of digits and activity based methods are among the most common methods used to estimate depreciation expense under GAAP. Tax accounting commonly uses the modified accelerated cost recovery system (“MACRS”). In addition the IRS also allows section 179 expense and bonus depreciation. Both provisions allow taxpayers to expense certain fixed assets up to a specific amount in the year of purchase.
  • Other common differences between the income tax and GAAP bases of accounting also include the treatment of goodwill, allowance for bad debt and inventory. The income tax basis of accounting provides for the amortization of goodwill over a period of 15 years. Under the income tax rules a bad debt expense may only be recognized at the time the debt is actually written off. On the other hand under the GAAP basis of accounting business owners may record an expense for allowance for bad debt. GAAP does not allow amortization of goodwill. Instead goodwill must be reviewed regularly to determine whether the amount at which it is carried is recoverable, and any unrecoverable amounts written off as an impairment charge. Start-up and organization cost are currently expensable for GAAP purpose while they are capitalized and amortized over 15 years for tax basis accounting purposes. Accounting for inventory is substantially the same under both bases of presentation, however, if certain thresholds are met, certain indirect expenses must be capitalized under section 263A of the income tax regulations.. Also, inventory valuation allowance is currently expensable for GAAP purpose but can only be deducted for tax purpose when the inventory is actually written off.

Source by Debra C Findlay

Benefits of Tax Preparation Services

The process of preparing for tax filing and clearance is very cumbersome, which is one reason a lot of business owners consider tax preparation services. There are a number of service providers accessible these days. Conventional methods are no longer being used to prepare for tax, as the protocol is now redundant and takes up a lot of time. With sophisticated software and easier methods of calculations, it is now easy to get your taxation procedures completed within a very short span of time. Earlier it was a practice to get the work done in-house itself, but now taxation work is being outsourced, which means that another company does the job of preparing documentation and verifying figures for your tax payments and rebates, instead of you.

If as a business owner, you are looking towards maximizing profits of the company and want to maintain efficiency, then the best thing to do is to outsource services for tax preparation. Operation costs can be minimized by outsourcing these services. The best software for preparing tax is used by most of the offshore companies, and they guarantee accurate calculations arrived at efficiently and quick. The methodologies deployed are the finest in the industry, with no room for miscalculation. These companies meet the deadlines specified, which is why they are banked upon heavily. They are reliable and efficient and offer the services of well experienced staff. The services are accessible 24×7, for you to scrutinize and be a part of when and as you wish.

A good taxation service company provides proper feedback and reports erroneous entries so that you get an opportunity make necessary changes and developments for the future progress of the organization. Many organizations make an effort to train their staff on the job, but a whole new department and recruits take up precious business time and money in the bargain. The employees already present may not be able to handle all the complexities of such a job hence it is best if necessary steps are taken or to hire taxation preparation services in time. Experts, who are well-trained in the field of taxation, are on the job to help the company come through the taxation process effortlessly, year after year. Though, this may cost the company some amount, every dollar is worth it, especially when you have hired the best professional services available. All it takes is scouting the market and identifying the right offshore outsourcing service provider.

Source by Benjamin Friedman

Employer Identification Numbers Explained

In the United States and Employer Identification Number (or EIN) is the corporate version of a social security number. Also known as a FEIN or Federal Employer Identification Number (and sometimes known as a TIN when used for identification) it will be issued to anyone (and that included individuals) who has to pay employees withholding taxes.

The EIN is a nine digit number assigned by the IRS and used by business entities, government agencies, trusts and estates, partnerships, non-profit organizations, sole proprietors and employers. The IRS uses the EIN to record those taxpayers who need to file a number of different tax returns for their businesses. Those individuals who are classed as employers can opt to either use their social security number or obtain an EIN when it comes to reporting taxes withheld for their employees. Credit bureaus and credit issuers are able to tell the difference between SSN and EIN numbers, contrary to popular belief.

Employer Identification Numbers were created by the IRS in 1974 in order to ‘require taxpayer identification for the purpose of payment of employment taxes.’ The relevant provision was first adopted as part of the Tax Code Revision in 1954 and then broadened in 1961. It was agreed that the EIN would take the form 00-0000000 whilst Social Security Numbers are written as form 000-00-0000. Thus it is easy to differentiate between the two. Similarly, there are now EIN decoders on the internet that can detect which state a company has been registered in, simply by typing in the EIN.

Businesses need Employer Identification Numbers to be able to pay their employees and to be able to file business tax returns. It is essential to obtain a Employer Identification Number if the business is to be considered a LLC, Partnership, Corporation or S Corporation or a Non-Profit. Any business that does not obtain an Employer Identification Number will be classed as a proprietorship and the Operator or Owner’s Social Security Number will be used on any relevant tax documents.

Source by Alex Simmonds

Effective Search Engine Optimization Techniques

Image result for seoSоmе реорlе whine about lіfе, оthеrѕ actually do ѕоmеthіng tо bеttеr іt. If you are a tаkе-сhаrgе реrѕоn, thеѕе SEO ѕtrаtеgіеѕ were mеаnt for уоu.

Dо thіngѕ thаt саn орtіmіzе уоur site аnd mаkе іt easy fоr thе ѕеаrсh еngіnеѕ tо find it. Sріdеrѕ hаvе to bе able tо еаѕіlу nаvіgаtе your site before they саn рrореrlу іndеx іt. Crеаtе a ѕіtе mар that сlеаrlу іndісаtеѕ a hіеrаrсhу оf раgеѕ, ѕо that thе ѕріdеr wіll bе аblе to іndеx уоur ѕіtе mоrе accurately.

Thе wау to dо this is tо сrеаtе a rоbоt text file аnd thеn рlасе it іn your site’s rооt dіrесtоrу. txt fіlе аnd аddіng іt tо your rооt directory. Thіѕ method hіdеѕ сеrtаіn fіlеѕ from bеіng ассеѕѕеd on уоur wеbѕіtе.

Yоu dо nоt nееd tо hіrе an еxреrt tо орtіmіzе уоur ѕіtе fоr ѕеаrсh еngіnеѕ. Thеrе аrе mаnу rеѕоurсеѕ аvаіlаblе. Bеtwееn bооkѕ, websites, аnd blogs, you саn lеаrn аll уоu nееd to knоw tо орtіmіzе уоur ѕіtе.

Inсludіng transcripts for any video content, оr соntеnt wіth аudіо, іѕ a great wау tо kеер уоur соntеnt mоrе accessible fоr сuѕtоmеrѕ аnd ѕеаrсh еngіnеѕ. When уоu gіvе a trаnѕсrірt, the ѕеаrсh engine will fіnd it as wеll.

Sоmе people bеlіеvе thаt аddіng kеуwоrdѕ to the соmmеnt tags оf a wеbѕіtе will іnсrеаѕе thеіr vіѕіbіlіtу. Yоu ѕhоuld fосuѕ оn thе thіngѕ уоu роѕt оn your site.

Mаnу tіmеѕ website owners fоrgоt to proofread thеіr sites, аnd that іѕ a hugе mistake. Take thе tіmе tо ѕее that visitors аnd the search еngіnеѕ can comprehend thе information оn уоur site. Mаkе ѕurе thаt уоu рrооfrеаd аll оf уоur work, аѕ a mіѕѕреllеd keyword іѕ useless.

Refresh аnd uрdаtе your соntеnt often with nеw іnfоrmаtіоn. Set a ѕсhеdulе fоr releasing соntеnt аnd stick wіth it, whether іt’ѕ daily, a fеw tіmеѕ a wееk, оr juѕt оnсе a wееk. Sеаrсh еngіnеѕ rесоgnіzе websites thаt constantly uрdаtе thеіr соntеnt as bеіng more іnfоrmаtіvе аnd uр-tо-dаtе than thоѕе who don’t. Aѕ a rеѕult, thеѕе ѕіtеѕ аrе indexed mоrе often. Sіtеѕ wіth a rеgulаr stream of nеw соntеnt gаrnеr hіghеr раgе rаnkіngѕ.

Adwоrdѕ is a grеаt tооl fоr уоu to uѕе. It’ll hеlр уоu wіth уоur trаffіс and also уоur SEO, аnd that’s a big bооn tо thоѕе thаt gо after do-it-yourself SEO. Advеrtіѕеrѕ work ѕресіfісаllу in increasing hits. Uѕіng a product frоm search еngіnеѕ fоr advertising can hеlр уоur wеbѕіtе оut a lot.

For proper search еngіnе орtіmіzаtіоn, be ѕurе tо avoid uѕіng іmаgе lіnkѕ. Image links оnlу will rеfеr back tо thе direct lіnk or hоѕt оf thаt іmаgе fіlе.

Oрtіmіzіng уоur SEO wіll optimize your business. Mаnу соmраnіеѕ are unaware of thіѕ.

Bе sure the fіrѕt couple оf sentences іn уоur ѕіtе’ѕ fіrѕt paragraph саn be used аѕ уоur HTML’ѕ meta description tаg. Thіѕ іѕ bесаuѕе thеrе аrе certain ѕеаrсh еngіnеѕ that will mаkе uѕе оf thе text itself as thе site description blurb shown in thе ѕеаrсh engine that Internet ѕеаrсhеrѕ ѕее. Bаd content can hurt уоur еffоrtѕ.

Eаrn mоrе search hіtѕ bу using lоngеr or рlurаl vеrѕіоnѕ оf kеуwоrdѕ. Kеуwоrd stemming іѕ utilized bу many ѕеаrсh еngіnеѕ. Fоr іnѕtаnсе, сhооѕіng “ассоuntаnt” as оnе оf уоur kеуwоrdѕ mеаnѕ thаt реорlе whо tуре іn “accountants” or “ассоuntіng” mау nоt bе dіrесtеd tо уоur website. Uѕе keyword stemming bу using a lоngеr vеrѕіоn of a word, ѕuсh аѕ “ассоuntіng” to gеt rеѕultѕ fоr “ассоuntаnt.”

Sоmе реорlе bеlіеvе thаt wеаlth оught tо bе ѕhаrеd еԛuаllу, but thаt wау of thіnkіng wоn’t hеlр wіth thе bіllѕ. Yоu’vе got to bе a реrѕоn who gеtѕ оut thеrе tо really mаkе уоur business grеаt. Mаkе this tips your own so уоu саn еnѕurе thе success оf your SEO strategies.

If you are considering an NJ SEO agency, Samson Media located in Montclair New Jersey offers highly effective SEO strategies for companies of all sizes.

CPA, ABA, CFP – Which Credentials Matter?

Image result for taxesWhen choosing a professional to help you file your income taxes – whether you are an individual or are running a small business – choosing the tax accountant with the right credentials is key. Flipping through the phone book or browsing through online business listings, you’ll likely encounter a veritable alphabet soup of acronyms such as CPA, CFA, CFP, CMA, ABA and others. In fact, there are upwards of 46 different acronyms that relate to certifications in accounting, finance and business. Of these accountant credentials, you’re most likely to retain a CPA, ABA or CFP. Here’s what each means:

Certified Public Accountants (CPA)

CPAs are most well known for preparing taxes, but they can also advise you on how to structure your small business and setup a bookkeeping system as well as help you plan for retirement, college and organizing your estate. CPAs must undergo rigorous testing and continuing education to maintain their licenses. This means accountants who are CPAs are highly qualified with up-to-date knowledge of the latest tax laws in their local area. That means a CPA operating in Seattle or Bellevue is required to be well-versed in both federal tax law and Washington state tax law.

Accredited Business Accountant (ABA)

An ABA is an accountant who has undergone additional training and has passed the Accreditation Council for Accountancy and Taxation (ACAT) exam. This is a voluntary accreditation and is meant to signify that this accountant specializes in accounting services for individuals and small- to medium-sized businesses.

Certified Financial Planner (CFP)

A CFP can help you with your investment goals. CFPs are a good choice if you are planning for the future, as they can offer a broad range of financial advice. So,which financial professional should you choose? That all depends. Are you looking to file your individual income taxes? Are you starting a small business? Or are you trying to build a reliable investment portfolio for the next 30 years? Different professionals serve different needs.

The best way to determine whether a financial advisor is a good fit for your needs is to schedule an interview or consultation. Many accounting firms have multiple specialties that work in conjunction to serve your needs. For example, some CPA firms also offer business consulting for small businesses and can help you set up a QuickBooks accounting system or provide advice on how to incorporate your independently owned business. So, take your time and interview at least three different accountants before deciding which one works best for you.