How To Reduce Your Small Business Overhead Costs

How To Reduce Your Small Business Overhead Costs

In order to run your business, you will have to spend money to make money. If you do not keep these overhead costs in check, they can be major drains to your company’s bottom line. If your indirect costs are taking an increasingly larger amount from your revenue, you may need to reevaluate them and cut them where you can. Here are 12 ways you might be able to lower these costs so that you can improve your bottom line. 

1. Conduct a thorough review

If you have an accountant, ask for the most recent list of your business’s overhead costs. If you do not have an accountant, search using your company’s bookkeeping software to review the costs. Once you have the list, review everything and highlight items that:

  • Are unnecessary
  • Too costly
  • Inefficient

This can help you to identify where you need to make changes.

2. Don’t expect immediate and substantial cost savings

It is unlikely that eliminating a single line-item expense will solve your issue, especially if you have completed cost-savings exercises in the past. Making several small changes may result in more savings than you might realize, however.

3. Brainstorming

Your employees may offer excellent advice about where you might realize savings. If your company is moderately sized or large, you may want to incentivize making cost-saving suggestions by rewarding the suggestions that realize the greatest savings.

4. Reevaluate contracts with third parties

Review all of the third-party contracts that you have for leasing equipment and retaining services. You may be able to identify some older contracts that no longer meet your needs. Your business may have outgrown an existing contract, leaving you spending more to fill in the gaps in services yourself. This may lead to an increased contract price but a more substantial decrease in costs in your ledger’s other columns.

5. Clean your storage room

If you have outdated and non-working technology cluttering your storage room, clean it out and sell the equipment. You can also donate them to a school or a charity if they are still working. Make certain to ask for a receipt so that you can write off your donations on your taxes.

6. Look at your staff

You should also assess your staff and let go those who have been consistently underperforming. Underachieving employees drain your resources and the morale of your other employees, leading to less overall productivity. Make certain that your hiring and firing decisions are done in a legal manner so that you will not be sued.

7. Leverage your current base of clients to save on promotion costs

One of the best types of referral comes from your current clients. Enlist your happy customers to be the ambassadors of your brand while reducing your marketing and advertising budget. You can ask for testimonials and offer incentives for referrals.

8. Go paperless

By greatly reducing the paper that you use, you can save on storage space, paper, toner and ink and printers. Back up your important documents to a drive or the cloud and shred unnecessary files. When you have completed the transition from paper to electronic storage, sell your filing cabinets.

9. Use the right business credit cards

Most business owners have at least one credit card that they use for business expenses. Make certain that your card offers you the most benefits. If your employees use business credit cards, consider choosing business cards that allow you to control spending to certain categories and amounts on each card to save money.

10. Control purchasing

If you can, designate a person to be responsible for handling all of the purchasing. This person should be someone who is skilled at negotiating and who is able to ask for discounts. When this person has purchasing as his or her job, he or she should also look out for the best bargains.

11. Sublease space in your office

If you own your business’s space, you may have a group of rooms or floors that are unused. Sublease out this space to other businesses and subsidize your payments with the rents that you receive.

12. Determine how much space your business needs

Some businesses may find that they do not need their office space and are able to move to a telecommuting model. Others may find that relocating their offices to new locations may offer cost savings. Think about what your office is used for and why you have it. If you do need an office, think about downsizing or office rental agreements that let you have a professional space for a minimal cost.

Cutting overhead costs is an ongoing process offering results over time. It requires a careful evaluation to determine the greatest efficiencies. Keeping your overhead costs down should involve a structured method of review. Contact Tom DiTullio Accounting today for advice about how your business might improve its bottom line through cost savings.

Can I Claim Medical Expenses on My Taxes?

Can I Claim Medical Expenses on My Taxes?

Medical bills can balloon when you have medical emergencies that your insurance does not fully cover. Fortunately, you may obtain some relief by deducting a portion of these expenses on your tax return under the Internal Revenue Code. In order to take advantage of this deduction, it is important that you understand what is considered to be a medical expense and how to correctly claim the deduction.

Value of the medical expense deduction

Under the IRS rules, taxpayers are able to deduct the qualified medical expenses exceeding 10 percent of their adjusted gross incomes for the tax year. Your AGI is your taxable income minus such adjustments as your student loan interest, IRA contributions and your deductions. Only the portion of your medical expenses that exceed 10 percent of your AGI may be deducted.

Which medical expenses are deductible?

Only qualified medical costs are deductible. These include vision care, dental care, surgeries, treatment and preventative care. You are also allowed to deduct the costs associated with psychiatric and psychological care. You are allowed to deduct the costs of prescription medications and prostheses such as hearing aids, contact lens, glasses and false teeth. Finally, if you keep good records, you can deduct the costs of traveling for medical care, including parking fees, bus fares and vehicle mileage.

What’s not deductible?

You may not deduct any of your medical expenses for which you receive reimbursements, including from your employer or your insurance company. The IRS generally does not allow you to deduct the expenses that you incur for cosmetic procedures, non-prescription drugs or general health care products such as toothpaste or over-the-counter diet products.

Claiming the medical expenses deduction

You must itemize your deductions on your tax return to claim the deduction for medical expenses. This means that you will not take the standard deduction. You should only choose to take the medical expense deduction if the total of your itemized deductions will exceed your standard deduction. Deductions are itemized on Schedule A of your IRS Form 1040.

You will report your total medical expenses that you paid during the tax year on line one of Schedule A. Next, you will enter your AGI on line two and 10 percent of it on line three. Finally, you will enter the difference between your medical expenses and 10 percent of your AGI on line four. This amount will then be used to reduce your taxable income.

Contact us today

To learn more about the medical expense deduction and other deductions that might be available to you, contact Tom DiTullio Accounting. We are experienced local tax preparers who can advise you about the different deductions that might be appropriate for you.

Are You Considering Starting A New Business-

Are You Considering Starting A New Business?

Do you have a great new product or are you in the service industry looking to branch out on your own? Starting your own business can be an exciting but stressful time. You may be an expert in your respected field, but the business aspect of all this is overwhelming. Here at Thomas M DiTullio Accounting we understand and are here to help you on this journey.

Here are some helpful Tax Tips to get you started on the right foot . . .

  • You need to decide on your business structure. Will you be a Sole-Proprietor or an LLC? A Partnership perhaps, or a Corporation. There are tax advantages, and disadvantages, to each entity. Your choice of the formation of your company will determine which tax forms need be filed as well as the filing frequency.
  • Depending on your business structure, you will be required to file “Business Taxes”. The general types of these taxes are income tax, self-employment tax and employment tax.
  • You will need an EIN (Employer Identification Number) for your business to open your new business checking account. This will also be necessary should you have employees.
  • Your “Accounting Method” will determine which set of rules you will use to determine when, and how, to report income and expenses. The most common method is the “Cash Method”. Income and expenses are reported in the year you receive, or pay, them.
  • We can assist you in determining what is the best strategy to having a very long and profitable business.
  • Will you need payroll? Payroll can be confusing but, if done right, it should be simple. We will file your payroll taxes on a weekly or biweekly basis to make sure you don’t get behind. We can also file the Quarterly and Year End Federal and State payroll forms to keep you compliant, for example Form 941, 940, NJ927, WR-30.
  • Do you need to charge and remit sales tax? We will be able to first assist you in determining if you need to charge sales tax or not and, if so, we would be able to file State sales tax forms on your behalf, for example ST-50.

Our office can form all types of businesses. We are on your “Team”. We will work for you to make sure you and your new business are compliant with all Federal and State regulations.

Please contact Thomas M DiTullio accounting with any questions at all. We are here to help you.

What Is The Difference Between Bookkeeping and Accounting For Small Business

While some people use the terms accounting and bookkeeping interchangeably, there is a difference between these functions in your business. People confuse these important business functions because of the similarities between bookkeeping and accounting. It is important for businesses to have strong bookkeeping and accounting functions in order to have better financial management. By understanding how bookkeeping and accounting differ from each other, you will be better able to avoid financial problems.

Bookkeeping vs Accounting

Bookkeeping involves keeping the books of a business. Bookkeepers record all of the financial transactions and financial documents of the business. Commonly, bookkeepers use software programs to assist them with recording the businesses’ financial affairs. They may also summarize and classify financial data. The importance of bookkeeping is that it helps to keep the records that businesses need. A bookkeeper’s job may include the following:

  • Recording debits, payments and credits
  • Reconciling all of the accounts
  • Receiving and sending invoices
  • Payroll tasks
  • Mantaining historical accounts and ledgers
  • Preparing internal reports

Accounting involves collecting, classifying and manipulating financial information for individuals and organizations. While accountants may perform some bookkeeping tasks, their jobs involve much more detailed work in analysis, reporting and advising. A business’s financial data will be analyzed, classified and interpreted for the benefit of the business. The importance of accounting to a business is getting insight into the business’s finances, making financial projections and making certain that the business complies with tax laws. An accountant may do the following:

  • Preparing statements
  • Completing the business’s tax returns
  • Analyzing operational costs
  • Giving business owners information so that they can understand the
  • business’s finances and make financial decisions
  • Establishing accounting functions
  • Customizing reports and statements
  • Creating budgets
  • Making financial and cash projections
  • Managing end-of-the-year finances

Bookkeepers record financial data, which is one component of accounting. Bookkeepers follow the orders that are given by accountants. Because these roles overlap, it is sometimes difficult for people to understand how the difference between bookkeeping and accounting. Many accountants complete bookkeeping tasks, and many bookkeepers go on to become accountants. The team at Thomas M. DiTullio Accounting offers a full suite of bookkeeping and accounting services.

To learn more about how we can help your business with its financial needs, call us today to schedule your consultation.

Who Can Claim Head Of Household?

Who Can Claim Head Of Household?

Many taxpayers are confused about what filing as a head of household requires. The IRS has some guidelines in place to assist taxpayers with figuring out whether or not they can file with this status. Filing as head of household may offer you the benefits of having a lower taxable income and a larger refund than filing as single. In order to qualify, you must meet the eligibility requirements. The accounting team at Thomas M. DiTullio Accounting can assist you with determining your appropriate filing status.

The criteria for this filing status include the following:

  • You must pay for more than 50 percent of your household expenses;
  • You must be considered to be unmarried for the tax year; and
  • You must have a child or dependent who qualifies.

Because some of the terms that are used are confusing, the IRS has some guidelines to help.

What is the IRS definition of head of household, and what is the difference between single and head of household on taxes?

The IRS defines head of household as a tax-filing status that can be used by unmarried or single taxpayers who keep homes for qualifying persons. This status offers some advantages over filing as a single person. You may enjoy a lower tax rate, a higher standard deduction and a potentially larger refund with this status.

Who can file as head of household?

You are eligible to claim head of household status if the following applies:

  • You were not married or you were considered to be unmarried on the last day of the tax year.
  • You paid more than 50 percent of your household costs during the year.
  • A qualifying person lived with you for more than six months other than temporary absences.

Maintaining a household

You must have paid more than 50 percent of the expenses required to maintain your home during the year. This includes paying more than half of your total household bills. If you receive some financial help for your household expenses from another person, you may still qualify as long as you used your own earnings to pay at least 50 percent of the expenses.

Considered unmarried

You must also be considered to be unmarried on the last day of the tax year. This means that you have either never been married, are legally separated or divorced, lived away from your spouse for six months or more of the second part of the tax year or you have a nonresident alien spouse and a child who qualifies and who lived with you for more than six months. You will still be considered to be married if the absence from your spouse was because of a temporary reason such as military service, college attendance, medical treatment or business trips.

Qualifying child

A qualifying child is one who meets the following criteria:

  • Is your biological, step or foster child, or he or she is your half sibling, step sibling, sibling or a descendant
  • Lived with you for more than six months
  • Is younger than you
  • Is younger than 19 by the end of the year or under 24 if he or she is a full-time student in college
  • Did not pay more than 50 percent of his or her own living expenses

Qualifying dependent

If you do not have a qualifying child, you can still file as head of household if you have a qualifying dependent:

  • Step, foster or biological children or half siblings, step siblings, siblings or descendants who are older than the age requirements but who are permanently and totally disabled
  • Your parent
  • Your sister-, brother-, mother-, father-, daughter- or son-in-law, or your nephew, niece, uncle, aunt, stepmother or stepfather

You must have paid for more than 50 percent of a qualifying dependent’s expenses during the tax year.

If you need help with your taxes and your filing status, contact the professionals at Thomas M. DiTullio Accounting today.

How to know if it’s REALLY the IRS contacting you and not a scam

How to know if it’s REALLY the IRS contacting you and not a scam

There are so many “scams” out there it can be difficult to know if the IRS is really on the other end of the phone line or outside knocking at your door.

 

The IRS may call a taxpayer AFTER mailing a notice or to confirm an appointment.

If you DO receive a legitimate phone call from the IRS:

 

  • They will NEVER ask for a specific payment method like pre-paid debit cards or store gift cards.
  • They will NEVER threaten lawsuits, arrest, deportation or other action for nonpayment.
  • They will NEVER ask for credit or debit card numbers over the phone.

If you get a visit from an IRS Revenue Officer:

 

They may ask for payment for taxes owed, delinquent tax returns, or businesses falling behind on payroll taxes.  Payment will never be requested to a source other than the US Treasury.

 

If you get a visit from an IRS Criminal Investigator:

 

They are investigating and as such, will NOT demand any sort of payment.

 

No matter HOW you are contacted always, ALWAYS ASK FOR CREDENTIALS.

 

Over the telephone they will provide their name and badge number.

 

In person, they will provide their Personal Identity Verification Credentials or, as in the case of the investigators, they will provide their badge and law enforcement credentials.

 

PAYING TAXES

 

You should NEVER use a preloaded debit card or wire transfer to make a payment.  All payments made for taxes will be to “US Treasury”.  You can also use “Internal Revenue Service” as the payee.

 

If you have any questions or concerns about this issue please contact Thomas M DiTullio Accounting where “Numbers Matter – People Count”.

Selling Your Home In 2017? Here’s What You Need To Know.

The GOOD NEWS:

If you sell your primary residence and the GAIN from the sale is NOT more than $250,000 (or $500,000 if married-filing-joint) then you may be able to exclude all or part of the gain from your income.

 

As always, there are tests and exceptions to determine if you qualify for any exclusions.

 

  • You must pass the “ownership and use” test. For the 5-year period ending on the date of the sale, you must have owned and lived in the home as your primary residence for at least two years.
  • If all or part of the gain is not excludable or If you receive form 1099S – Proceeds from Real Estate Transactions – or you choose not to claim the exclusion, then you must report the sale of the home on your tax return.
  • If you sell your “2nd Home” (i.e. vacation property) you MUST report the gain as it IS NOT excludable.

 

There are exceptions to the rules including, but not limited to, those with disabilities and certain members of the military.

The BAD NEWS:

If you have a LOSS on the sale of your primary residence, or your 2nd home (i.e. vacation property) it is NOT deductible.

 

For more information, or if you have any questions at all, please contact us here at Thomas M DiTullio Accounting.

 

AVOID SCAMS – The IRS will not initiate contact with you via social media or text.

Do you like a big refund or do you prefer to “break even”?

Do you like a big refund or do you prefer to “break even”?

Every client is different. Some like a big refund with their tax return as a “forced savings” for that family vacation or home improvements. Some like to “break even” and get their money during the year for monthly expenses. Whichever you are NOW is the time to review your tax withholding.

If you are a W2 employee, look at your 2016 tax return (form 1040) page 2, line 63. This was your “total tax” for the year. If all things remain the same, for example wages, interest income, dividends, etc., then you will have a pretty good idea of your 2017 tax liability. Now look at your last paycheck stub under “federal withholding”. Do the math.

If you think you will need more withheld from your paycheck each pay period, then go to your employer and get form W4. If you want MORE withheld, DECREASE the number of your allowances (line 5). For example, if you claim Married with 4 allowances, decrease that to 3. More money will be withheld each pay period.

On the other hand, if you feel that too much is being withheld, INCREASE the number of your allowances.

If you do not claim any allowances (Married 0, or Single 0) and you want more money withheld from your paycheck, use line 6 “Additional Amount Withheld”. Enter $10, $20 or whatever amount you feel you will need and your employer WILL withhold that amount from each paycheck. Keeping in mind that your take home pay will be less but the year-end benefit will be greater.

There are more ways you can change your W4 withholding to optimize your tax benefit at the end of the year.

Please contact Thomas M DiTullio Accounting so we may discuss your personal tax situation. We will be happy to assist you.

Quick Guide to the Child and Dependent Care Tax Credit

Quick Guide to the Child and Dependent Care Tax Credit

Do you send your children to Summer Camp because you must work or look for a job?

 

Do you care for your disabled Spouse or other dependent?

 

If so, you may be eligible to deduct Dependent Care Expenses on your 2017 income tax return.

There are certain eligibility requirements to take advantage of this deduction.  The requirements include, but are not limited to:

 

  • The person for which you are claiming the deduction must be “Qualified”. (i.e. your child under the age of 13, disabled spouse or other dependent that lived with you more than half of the year)
  • The expenses incurred must have been necessary so the taxpayer could work or look for work.
  • The taxpayer must have earned income.

 

Since every family is different, special circumstances may apply.

 

Please contact Thomas M DiTullio Accounting so we may discuss your situation and, if eligible, take advantage of this Tax Credit in the upcoming 2017 tax year.

 

Please keep in mind the Internal Revenue Service will never initiate contact with you via Social Media or Text Message. 
What Is Payroll?

What Is Payroll?

A company’s employee payroll might be the largest single expense of a small business. It is comprised of the total wages paid to employees and other workers such as independent contractors. Processing payroll is also very complex, involving making deductions, collecting insurance premiums, collecting retirement contributions and calculating tax withholdings.

If mistakes are made with payroll, your business may face substantial penalties from the IRS and be subject to litigation from employees. This makes it extremely important for you to ensure that your payroll is completed properly. When you outsource your payroll to the accountants at Tom DiTullio Accounting, you may gain more confidence that it will be completed accurately and on time.

What makes up payroll

Payroll is divided into four main parts, including the gross wages, benefits and Social Security and Medicare withholdings and taxes. What your employees receive after the deductions have been made are their net incomes.

Independent contractors and freelancers are treated differently. Since they are not employees, they receive their gross pay without deductions. They are then individually responsible for paying their own taxes and purchasing their own benefits.

Why payroll processing is complex

One of the reasons that it is difficult to manage payroll is the required tax calculations and payments. Employers have to calculate the state and federal income taxes and then send the payments to the government. They must also submit withholding reports along with the payments that they send. Employees fill out IRS Form W-4 in order to specify their number of dependents so that withholding allowances can be calculated.

After calculating the allowances, the federal income taxes are calculated from the tax tables in Publication 15. These taxes are reported on IRS Form 941 and are paid at the same time that your company makes its Medicare and Social Security payments.

Payroll taxes must also be calculated for both the state and federal governments. Payroll taxes were the second largest type of revenue that the federal government had in 2015. In addition, employers are also required to submit 6 percent of their gross wages up to $7,000 per worker to fund the federal unemployment taxes for each worker. This is a business expense only and is not paid for from the employees’ pay. States also have their own unemployment plans, and if you have employees in multiple states, you will have to comply with each of their individual unemployment requirements.

Running payroll

While some small businesses run their own payrolls using accounting software, it is not advisable. When you try to complete your payroll on your own, you run the risk of making costly errors. It is also a very time-consuming task and takes away from your ability to attend to the other needs of your business. You would need to be able to set up new employees and to process the paperwork for different types of benefits such as health insurance plans. You would also need to withhold the proper amounts of state and federal income taxes, determine gross pay rates and collect all of the needed paperwork. Finally, you would then need to pay your employees their net pay amounts and send in the taxes and other withholdings on time and to the right recipients.

Get help from Tom DiTullio Accounting

When you choose to outsource your small business payroll to Tom DiTullio Accounting, you can remove the hassle of having to complete it yourself. Our experienced accountants understand the requirements and how to make the calculations accurately. We can pay your employees by paper checks that we deliver to your business in sealed envelopes or by direct deposit into their bank accounts. To learn more about how we can help, call Tom DiTullio Accounting today.

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