There are a few qualifications that determine if you need Employer Identification Number (EIN) from the IRS:
If you operate your business as a corporation or partnership.
If you file reports for employment taxes, excise tax, or alcohol, tobacco and firearms.
If you have one or more employees.
If you have a self-employed retirement plan.
If you operate as any of several other organizations.
Obtaining an EIN is very quick and simple. Go to http://www.irs.gov. Once there, use the search box and type in “EIN” online. You will be taken to the page that allows you to answer questions online and you will get your EIN upon validation of your answers. You will be able to download and print your confirmation notice.
If you need assistance, please contact our office. We are here to help you.
Staffing errors can spell disaster for your start-up. Here are three to watch out for.
1. Staffing the firm with friends and family. While this strategy may work in some circumstances, hiring pals and relatives often spells trouble. For one thing, friends and family members often expect – even subconsciously – to be treated differently from other employees. A double standard, whether real or perceived, can hurt morale and productivity. As a general rule, focus hiring decisions solely on the needs of your firm and applicant qualifications.
2. Trusting in a handshake. Spell out employee arrangements in writing. This can be as simple as drafting employee offer letters that cover compensation, rights to intellectual property, and bonus arrangements. Employee handbooks are also a good way to spell out the responsibilities of your firm and staff.
3. Bringing in a partner for the wrong reasons. Downside risks of bringing in a partner include surrendering a portion of your company and control over important management decisions to someone else. Before selling part of your company, ask yourself what the partner will contribute besides money. Can you find other ways to fill gaps in your team? Choosing wisely can help you avoid ending up in the business equivalent of divorce court.
For assistance with issues facing your start-up business, give us a call.
Is retention of good employees a priority for your business? Consider conducting “stay” interviews. These meetings between managers and valued employees can provide insight into why your employees like their jobs, which in turn lets you know how to retain the employees. Conducted on a regular basis, generally more than once a year, stay interviews tell employees you’re serious about accepting feedback and keeping them on the job.
Disasters, natural or otherwise, could ultimately lead to your company’s demise. Fortunately, advance planning can keep you on track. Here are seven scenarios to be prepared for.
1. A natural disaster. To paraphrase the old saying, you can talk about the weather, but there’s not much you can do about it – except have a plan in place in the event a natural disaster damages your business premises. Two tips: Maintain adequate insurance and store valuable business data at a secure off-location site.
2. A key employee quits. Cross-training can avoid business interruptions if a key employee leaves unexpectedly. You might also want to consider asking key employees to sign a reasonable non-compete agreement to protect confidential information. Typically, these agreements prohibit an employee from working for a competitor for a certain period.
3. An employee embezzles company funds. To safeguard your business assets, divide responsibilities so one person doesn’t have complete control over the books. Set up a system of checks and balances.
4. Your biggest customer leaves. To keep your business from going under, update your marketing plan, stay in touch with former customers, establish an emergency budget, and diversify your revenue stream.
5. You become disabled. “Key-person” disability insurance can provide funding to keep your business afloat. The policy may also cover employees who are vital to operations.
6. Your company or partnership splits up. Draft a buy-sell agreement to ensure a smooth transition due to the sale of a business interest, including a forced sale on the death of one of your shareholders or partners. The agreement can establish the terms of a buy-out and set a value for the respective business interests.
7. Your computer system crashes. Extra hardware, such as tablets or laptops, regular off-site backups, and cloud storage for important documents can avoid a crisis when your computer fails.
Consider an accountable plan. These arrangements let you reimburse your employees for expenses incurred on behalf of your company, such as driving to the post office or office supply store. With a properly administered plan, you can deduct the reimbursements on your business tax return, yet the payments are not considered income to your employees.
How can you make sure your plan qualifies? Here are three requirements.
● The reimbursements must be for allowable business expenses. For instance, you can repay employees for hotel and other travel expenses when traveling to a trade convention.
● Your employees need to keep records of the expenses, and provide those records to you.
● If you pay or advance your employees more than the actual amounts spent on business items, the excess must be returned to you. Amounts not returned are income to your employee, and are subject to payroll taxes.
Contact us to discuss your policies for repaying employees’ business expenses. We’ll help you make your plan accountable.
Happy employees can have a positive impact on your operations, customer support, and profit level. Here are suggestions for keeping your workforce upbeat.
Lead by example. Demonstrate the personal discipline and commitment you hope to instill in your workers by showing up every day with a positive attitude.
Emphasize the link between attendance and productivity. Absenteeism is a symptom of unhappy employees. Help your employees understand the importance of the role they play in the success of the business.
Learn what motivates your employees. Conduct an online survey to learn if money, recognition, promotion, or time off drives your employees.
Enrich skillsets. Cross-training and job rotation can improve appreciation for overall business operations and mitigate boredom and dissatisfaction.
Create a time-off bank. Modify the traditional offering of vacation, personal, and sick days. Give your employees the responsibility and ability to balance work and home obligations by empowering them to manage total available paid time off.
Other suggestions for a healthy working environment and happy employees include celebrations and team building. While these “soft” methods may seem a distraction from everyday business, your employees will appreciate the effort and your business will profit from the resulting improvements in performance.
Many businesses host a picnic for employees in the summer. It’s a fun activity for your staff and you may be able to take a larger deduction for the cost than you would on other meal and entertainment expenses.
Generally, businesses are limited to deducting 50% of allowable meal and entertainment expenses. But certain expenses are 100% deductible, including expenses:
• For recreational or social activities for employees, such as summer picnics and holiday parties,
• For food and beverages furnished at the workplace primarily for employees, and
• That are excludable from employees’ income as de minimis fringe benefits.
There is one caveat for a 100% deduction: The entire staff must be invited. Otherwise, expenses are deductible under the regular business entertainment rules.
Whether you deduct 50% or 100% of allowable expenses, there are a number of requirements, including certain records you must keep to prove your expenses.
If your company has substantial meal and entertainment expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of meal and entertainment expenses that are fully deductible.
For more information about deducting business meals and entertainment, including how to take advantage of the 100% deduction, please contact us.
It seems like a simple question: How many full-time workers does your business employ? But, when it comes to the Affordable Care Act (ACA), the answer can be complicated.
The number of workers you employ determines whether your organization is an applicable large employer (ALE). Just because your business isn’t an ALE one year doesn’t mean it won’t be the next year.
50 is the magic number
Your business is an ALE if you had an average of 50 or more full time employees — including full-time equivalent employees — during the prior calendar year. Therefore, you’ll count the number of full time employees you have during 2016 to determine if you’re an ALE for 2017.
Under the law, an ALE:
• Is subject to the employer shared responsibility provisions with their potential penalties, and
• Must comply with certain information reporting requirements.
A full-timer is generally an employee who works on average at least 30 hours per week, or at least 130 hours in a calendar month.
A full-time equivalent involves more than one employee, each of whom individually isn’t a full-timer, but who, in combination, are equivalent to a full-time employee.
If you’re hiring employees for summer positions, you may wonder how to count them. There’s an exception for workers who perform labor or services on a seasonal basis. An employer isn’t considered an ALE if its workforce exceeds 50 or more full-time employees in a calendar year because it employed seasonal workers for 120 days or less.
However, while the IRS states that retail workers employed exclusively for the holiday season are considered seasonal workers, the situation isn’t so clear cut when it comes to summer help. It depends on a number of factors.
We can help
Contact us for help calculating your full-time employees, including how to handle summer hires. We can help ensure your business complies with the ACA.
Although the kids might still be in school for a few more weeks, summer day camp is rapidly approaching for many families. If yours is among them, did you know that sending your child to day camp might make you eligible for a tax credit?
The power of tax credits
Day camp (but not overnight camp) is a qualified expense under the child and dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2016, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more.
Remember that tax credits are particularly valuable because they reduce your tax liability dollar-for-dollar — $1 of tax credit saves you $1 of taxes. This differs from deductions, which simply reduce the amount of income subject to tax. For example, if you’re in the 28% tax bracket, $1 of deduction saves you only $0.28 of taxes. So it’s important to take maximum advantage of the tax credits available to you.
Rules to be aware of
A qualifying child is generally a dependent under age 13. (There’s no age limit if the dependent child is unable physically or mentally to care for him- or herself.) Special rules apply if the child’s parents are divorced or separated or if the parents live apart.
Eligible costs for care must be work-related, which means that the child care is needed so that you can work or, if you’re currently unemployed, look for work. However, if your employer offers a child and dependent care Flexible Spending Account (FSA) that you participate in, you can’t use expenses paid from or reimbursed by the FSA to claim the credit.
Count employees to avoid ACA penalties!
The IRS recently updated a web page explaining how to figure out if you’re an “applicable large employer,” or ALE. If you are, you may have to pay a penalty for not providing health insurance to your employees. For 2016, your business will generally meet the definition of an ALE if you employed an average of at least 50 full-time employees (including full-time equivalent employees) during 2015. A full-time employee for any calendar month is one who averages at least 30 hours of service per week or at least 130 hours of service during the month.