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Archives for June 2019

Why You Need a Business Continuity Plan

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business continuity against disasterWhat if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.1 Having a business continuity plan can help improve your odds of recovering.

Here in the Midwest we have recently been stricken with some major weather including flooding, a multitude of tornadoes and other factors outside our control that have the potential to devastate a community including the businesses.

As auditors, part of our process is to analyze risk exposure within a Company. This includes having a plan in place in case of a disaster that would cripple the business if proper steps were not implemented in a timely fashion.

Business continuity plans can be simple and efficient or complex and costly depending on the type of organization.  Below we provide an overview of how a continuity plan works and why there should be one in place.

The Basic Plan

The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected, and identify appropriate recovery actions.

Make sure you have a list of employees ready with phone numbers, email addresses, and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers, and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.

Risk Protection

Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance, and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.

Maintaining Operations

If your building has to be evacuated or destroyed, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).

This aspect is critical to ensure you continue to operate or get back up and running quickly.  There are different tiers of disaster recover that can be utilized as part of your business continuity plan.

You’ll want to analyze the business impact to identify functions and resources that are time-sensitive. You will review what critical business functions must be recovered and what steps to take. You should consider having a continuity team in place to help devise and manage this plan. Finally, ensure the team is well-trained and worked through all procedures.

Protecting Data

A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. This could include a natural disaster or a malicious attack on your organization to get into secure data. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off site.  With today’s technology, work with your IT consultants to plan around protecting your data in the most efficient way possible.

Protecting Your Business

If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your BGMF CPA for a full review and begin mapping out a plan that makes sense for your situation and budget.

Source/Disclaimer:

1Source: U.S. Small Business Administration, www.sba.gov/content/disaster-planning.

Time to Check Your Withholding

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check tax withholdingIn light of the tax law changes made by the Tax Cuts and Jobs Act of 2017, it may be an appropriate time for taxpayers to review their withholding.

Changes to the tax rates and brackets, the removal of personal exemptions and certain other deductions, the new limit on the deduction for state and local taxes, and various other modifications may have a significant impact on personal income tax liabilities.

BGMF CPAs offers tax planning services to clients to properly strategize and save in taxes.  Like many taxpayers found out during tax filing season, their withholding was lower than expected, resulting in lower refunds or a tax bill. At a minimum we recommend reviewing your withholding to ensure you’re not surprised next tax filing season.

The IRS offers workers the opportunity to perform a quick “paycheck checkup” to make sure they have the right amount of tax withheld from their paychecks. The IRS Withholding Calculator can be found at http://irs.gov/individuals/irs-withholding-calculator.

Getting it right is important since you could face an unexpected tax bill or penalty at tax time next year if you have too little tax withheld. Or, if you have too much tax withheld, you may be eligible for a tax refund. Many people see a large tax refund as a plus — but in reality a large tax refund is effectively an interest-free loan of taxpayer money to the IRS. A better approach may be to have less tax withheld up front and receive more in your paycheck. That way, the extra money would be available to save or invest, pay down debt, or spend as you see fit.

The withholding calculator can help you figure out if you need to give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. Your results from the calculator can be used to help you fill out the form and adjust your income tax withholding.  If you prefer not to calculate this yourself we’re glad to help. Please contact us today to start that conversation.

Steps to Take

The key is to plan ahead. Before you access the calculator and start entering data, the IRS suggests that you:

  • Have your most recent pay stubs within reach.
  • Have a copy of your most recent income tax return available. A copy of your completed Form 1040 can assist you in estimating your 2019 income and identifying other items that may affect your tax.

The IRS cautions that the calculator’s results will only be as accurate as the information you enter. If there is a change to your circumstances during the year, you will have to use the calculator again to ensure that your withholding is still correct.

Moreover, the IRS withholding calculator may not work for those with more complex tax situations. Taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents, or certain other taxes, and those with long-term capital gain or qualified dividends should use the instructions in Publication 505, Tax Withholding and Estimated Tax.

If you have questions about your withholding or would like assistance with analyzing your tax situation, consult with your tax advisor.  We’re available all year around to answer your questions.

Tax Deductions When Traveling for Business and Pleasure

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business travel and taxBusiness owners who travel out of town on business sometimes like to extend their trips and take a little time to relax and see the sights. When a trip is partly for business and partly for pleasure, various expenses may still be deductible.

Domestic Travel

A self-employed individual whose trip is primarily for business may deduct the full cost of the travel itself (such as airfare or train fare) even though some of the trip is devoted to personal activities.1 Additionally, various other expenses allocable to business, such as lodging and 50% of meal costs incurred on the business days, are deductible.

There needs to be a legitimate business purpose for each person taking the trip for there to be a write-off.  For example, if your spouse or kids travel with you, the cost of their travel may not be deductible if they are not involved in the business.

In addition, you may have to allocate a portion of the trip when both business and personal activities are intertwined.How do you maximize your deductions when traveling? Easy! Turn more days into business days. Consider getting your spouse and kids involved and find ways to conduct business-related matters.  Ultimately, you’ll have to demonstrate how the activities performed helped your business.

If a trip is primarily for personal reasons, the entire cost of the travel is a nondeductible personal expense. However, expenses incurred while at the destination that are directly related to the taxpayer’s business may be deducted.

For example, if you travel to Disney with your family and set up a couple of lunch meetings with clients in the area, the cost of the meals could be deductible as a business expense. The trip to Disney would be non-deductible.

Foreign Travel

The deductibility rules for combined business/pleasure trips outside of the U.S. are a little more complicated in some respects. Even if the primary purpose of the trip is business, the cost of the travel itself generally has to be allocated, and only the business portion is deductible. However, no allocation has to be made — and the full travel cost is deductible — if:

  • The trip lasts for no more than seven consecutive days (excluding the day of departure but including the day of return); or
  • Personal days total less than 25% of the total days spent on the trip (including both the day of departure and the day of return); or
  • The taxpayer can establish that the opportunity to take a personal vacation was not a major consideration for the trip.
  • For these purposes, business days include days when business is conducted for only part of the day, days spent traveling to and from a business destination, and weekend days or holidays that fall between two business days.

As this brief overview suggests, with smart planning, self-employed business owners can maximize their write-offs for combined business/pleasure travel.

Contact us today to discuss how we can help you maximize your deductions and limit your tax liability with proper planning.

Source/Disclaimer:

1Under The Tax Cuts and Jobs Act of 2017, employees may no longer deduct unreimbursed employee business expenses as a miscellaneous deduction, effective with the 2018 tax year.