Tax

May 14, 2014 by Eric Butts 1 Comment

Accounting Is The Language of Business and Every Entrepreneur Needs to Learn to Speak It

Every startup needs good accounting! — photo credit: dierken via photopin cc

I live in the San Francisco bay area, land of the start-up, the place where people quit full-time jobs to chase the dream of being bought out by Facebook and never working again. Who can blame these budding entrepreneurs? Every time you turn your tv on, Facebook is either buying or trying to buy some young, unproven company for billions of dollars. Consistently seeing such a lack of buyer’s discretion from cash-heavy potential suitors just makes the dream seem all the more plausible.

So where do you start on this journey to Escape From Cubicle Nation?

First, you need to understand it takes more than just a good idea to run a successful business. No matter what kind of entrepreneur you are, there are some basic accounting things you or someone you hire needs to know to keep your business from imploding.

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January 21, 2013 by Eric Butts Leave a Comment

Married Filing Jointly vs. Separately

Someone asked me a tax question recently about how married couples can determine if they’re better off filing jointly or separately. I’ve yet to encounter a couple that’s benefited from filing separately. To that point, the IRS provides a host of reasons (you can see them here) that filing separately as a married couple can work against you.
The short of it is you lose eligibility to take quite a few tax benefits when you make the decision to file separately. Still, the “best practice” is for you (or your fancy tax software) to calculate which filing status provides the lower tax liability.

So when would a couple actually file separately?

It is possible that filling separately could result in lower tax liability as explained here, but I suspect that this status is more commonly used under a couple of scenarios:

Couples that don’t want to share financial information for whatever reason (hollywood types, perhaps?) may choose to file separately as their privacy may be worth whatever the difference is in tax that Uncle Sam will collect
Couples trying to protect one of the parties from sharing joint liability of the taxes owed as a result of one of the parties’ income/actions*

As always, if you have any doubts about what makes the most sense, you should consult a professional (CPA, tax attorney, etc).

*You can request relief from joint liability when you file a joint return but the process is much more involved.
photo credit: rachel_titiriga via photopin cc

December 19, 2012 by Eric Butts Leave a Comment

No Such Thing as a Free Gift Card From Work

NYC welcomes Santa like only NYC can

Tis the season for many organizations to be clearing out their stash of “just in time” rewards (e.g. performance points, recognition points, award points, etc.) that can’t be carried over into the new calendar year. Receiving these points gives you the right to exchange the points for some type of gift card or other good worth a dollar value equal to the number of points you have available to redeem.That sounds great, right? Who doesn’t love getting free stuff? The problem is that these rewards aren’t exactly free, and by that I mean they get taxed just like all of your other paychecks.

Once you redeem points for reward points that triggers a transaction that allocates additional taxable income to you and withholds taxes at the appropriate level from your next paycheck. For example, if you are in the 30% income bracket (for simplicity we’ll assume this is how much tax is withheld also) and you redeem points for a $100 gift card, your next pay advice will show $100 in additional income and $30 in payroll tax withholding (and your check will be $30 less than usual). In other words, you only net $70 on the deal. The same is should be true if your boss hands you a gift card purchased by the company. Generally, as in this example, the dollar amounts are negligible but, in theory, if someone collected enough points (I don’t have that kind of discipline) and redeemed them for a larger gift that costs thousands of dollars, the tax repercussions could be significant. I hate to be the bearer of bad news, but wouldn’t you rather now how than when your paycheck comes up a little bit short?

I guess you can say that Uncle Sam is Mr. Grinch’s silent partner that you don’t hear about until January (April for us who like to procrastinate) rolls around…but he’s always there.

December 6, 2012 by Eric Butts Leave a Comment

Politicans May Actually Compromise to Avoid the Fiscal Cliff


Photo Credit: Scarto via Flickr Creative Commons

It’s a long way down to fall off a cliff, and it looks like some of our elected politicians in Washington are slowly starting to realize that this game of chicken that they’re playing won’t benefit the general public. In fact, it’s gotten to the politicians are starting to think of crazy, outside-the-box strategies like comprising to avoid the consequences of a perfect storm of tax increases and public spending that will certainly push us back into a recession.

Forbes has the story on how the proverbial dominoes are starting to fall. All it takes is one person to stand up in the name of common sense to get meaningful discussions started. If I were a gambling man, my money would be on congress reaching a retroactive agreement sometime early 2013. What do you think?

November 3, 2012 by Eric Butts Leave a Comment

How to Decrease Your Tax Liability At Year-End

*Originally published for LessAccounting.com

Year after year it never fails that the age-old misconception about tax preparation rears its ugly head in the form of comments like “I want you to get me back as much as possible” or “Last year my tax guy let me deduct my dry cleaning expenses for my suits.” The misconception I’m talking about is that tax preparation is some sort of black magic whereby CPAs have conspired against the general public to keep people from getting money back. WRONG. CPAs do not have it out for you, but we are bound to abide by certain rules and ….Read the rest here.