Monthly Archives: September 2013

Why You Shouldn’t Become An Entreprenuer

poor-entrepreneur-ceo

Many of us dream of having our own company or at least working for ourselves.  Let’s face it, how liberating would it be to not have to report to the “man” day in and day out?  Well, while that might sound all fine and dandy, it’s quite another thing in practice.  We’re in the fortunate business that we get to counsel many aspiring entrepreneurs before they take the big leap.  Our advice?  Simple; don’t do it.  Well, don’t do it for the wrong reasons at least.

Outlined below are five reasons you should NOT become an entrepreneur; which account for 90% of the reasons people want to become one.  However, we then follow this up with five reasons you should take the plunge.  Ready?  Let’s get started.

Reasons against becoming an entrepreneur

You want to be rich. Going into business because you want to make loads of money is just a bad idea.  Truth be told, making money on your own is an extremely hard and volatile venture.  And if you think it’s a good return on investment, that’s just bad math.  Most businesses fail within a few years and those that do make it often take years to become profitable.  Plus, for the first few years don’t expect to take a check.  Total up all of the above and the phrases “starving artist” and “struggling musician” start to make sense.  So if you’re motivated by money, you’re far better off being a banker, investor or consultant or something.

You hate your boss. If you think that getting rid of your boss frees you up from having to report to anyone, think again.  Every CEO of a major company still has a boss.  They are called the Board of Directors, shareholders and customers.  So when you become the CEO, all you really do is just trade one boss for thousands more (e.g. customers).  And guess what?  Customers are some pretty demanding folk.

You want to work less.  People often tell us that they want to work for themselves because they want to spend more time with their kids or family.  Okay.  Unfortunately that’s not how it works.  In reality you will get “flex time” but in the form of you picking any 24 hours of the day to work your tail off.  Over time a successful entrepreneur may work less than they did in Corporate America, but this often takes many years to accomplish.  In the beginning, you will be responsible for making everything happen.

You like the idea of control. Some individuals are enamored with power.  Titles, money, expensive toys etc. exemplify this for these individuals.  What it’s really like: everyone else is your boss – all of your employees, customers, partners, users, media are your boss.   On top of that, there is very little control in a business.  Things are constantly happening and needing to be addressed.  What’s worse is that if you’re one who likes predictability, you will soon find yourself pulling your hair out.  Entrepreneurship is far from predictable.

You want to get rid of the stress of corporate life.  Sure, reporting to a demanding boss is stressful.  So is figuring out how your going to negotiate a line of credit to keep the company open 20 more weeks while you wait on that Federal Government vendor payment to come in.  The reality is that we make our own stresses and they follow us.  Building a business is cool but it involves a lot of work.  So if you’re trying to escape for stress reasons, you may want to reconsider.

Okay, so now that we’ve got that covered, why should you take the plunge to head up your own endeavor?  Follow us please.

Reasons for becoming an entrepreneur

You’ve identified an unfulfilled market space.  Most ideas that come to market tend to be slight modifications of existing concepts.  This is not to say that we don’t derive benefit from what they provide, it’s just that it’s not earth shattering (e.g. ATMs vs. a personal banker).  However, if you have figured out a new concept that isn’t being used by your competitors and can truly cause a paradigm shift, therein lies a market opportunity (think Segway).  And where opportunity and demand intersect, money is often made.

You are passionate about something.  A good friend of ours always says that you shouldn’t go to college to major in what you love, but what you can find a job in.  While that is good financial advice, it’s not the best advice for those seeking to run their own show.  You see, we’re big believers that passion carries a lot of weight and can take you places that “doing a good job” simply can’t.

Take Tony Robbins for example.  While many will say that Tony isn’t extremely talented and he didn’t go to college, few will argue that he hasn’t made himself a household name.  How did he do it?  By taking the bull by the horns so to speak and forging his own way.  That takes a lot of guts giving how hard this entrepreneurship journey tends to be.  But if you have passion, good things tend to follow; which is typically a result of how hard you are willing to work and the lengths which you are will to strive to make your dream a reality.

You’ve figured out a better way to do something. Capitalistic societies are cool in the sense that if you have an idea that can improve life in some fashion, you can probably do well financially.  Thus, if you have a concept or product that will truly change the way things are done (e.g. powering cars off water vs. gasoline); you should by all means go for it.

You want to make a difference in society.  This world is full of individuals and companies that just want to make a quick buck.  The ones that are truly great are those that want to make things better.  Back in the day Ben & Jerry’s was one of the pioneers of the now common “Corporate Responsibility” movement.  But some companies such as One Laptop Per Child (see them in this article) take it a step further in trying to improve situations, people, socioeconomic groups and the like.  So if you are trying to make things better and you can make a little coin in the process, by all means be our guest.

You just can’t live your life any other way.  Sometimes you will hear people say that they weren’t meant to go to college, or work inside an office, or work for someone else.  If you truly thrive in working in an entrepreneurial environment, then it’s probably best that you become one.  Yet, the keyword here is thrive.  Whenever you find a situation that lets you be the best that you can be, you should embrace it.  Whether it’s your job, hobbies or love interest; when you find something that fits perfectly, don’t attempt to resist it.  Often times, you will regret it if you do.

"Do what you love. The money will follow!"

“Do what you love. The money will follow!”

Ensuring You Don’t Miss Business Expense Deductions

When you run a small business, saving money on your tax return sometimes comes down to little more than keeping good records.   Unfortunately that means tracking all those little expenses, because they can add up throughout the year.  The question is, are you capturing all those small expenses?  If not, here are some tips on how to ensure you’re not leaving money on the table.

Frequently Forgotten Expenses

It’s staggering how much goes into running a small business, and how quickly things can become tangled between business and personal accounts – especially for sole proprietors.  Think about it.  You’re doing your grocery shopping and remember you need a new desk calendar, so you toss one in your cart.  Or you’re Christmas shopping on Amazon and see a good deal on printer ink, so you stock up.  Or maybe you’re meeting a potential client for breakfast and while you remembered to deduct your meal, you forgot about the mileage to get there.

These types of common, but small, expenses can quickly add up to a major tax deduction.  The trick is remembering to deduct them.  Some of the most common (and often overlooked) business expenses include:

  • PayPal and other payment processing fees.  If you get paid via PayPal, then you know they charge around 3% of each transaction for the service.  These fees quickly add up so make sure you’re keeping track and adding them to your tax return as “bank fees.”
  • Dues and subscriptions.  Do you belong to paid forums or membership sites related to your business? These charges are deductible as well.
  • Small Office supplies.  This includes the stuff like paper, pencils, staples, etc.  It’s not uncommon to forget that you bought these things or to purchase them during a trip where you’re also buying personal items.
  • Domain names and hosting.  Your Hostgator bill, GoDaddy purchases, etc.
  • Advertising.  Whether you do pay-per-click via Google or Facebook, buy mailing lists, or pay for ad placement on other websites, it’s all deductible.
  • Commissions.  Do you have sales staff? Deduct those payments!
  • Business Mileage.  Remember that trip to get the office supplies above?  You did deduct the mileage right?  Is tracking your miles too hard?  Consider getting an app for your phone like Tap2Track Mileage which uses GPS to do all the calculating.
  • Depreciation.  Most of the time your accountant will do this without any input from you.  But if you use equipment or a vehicle in your business, you should check that deprecation is being calculated and included on your return.

Keeping Good Records

So once you know what expenses to track, the key to getting the biggest tax deductions lies in keeping good records.  For most small businesses, the simplest solution is to use a software program set up specifically for this purpose, such as Quickbooks or Peachtree.  However, if you’re not that disciplined then make sure you charge your business expenses only to your business credit or bank card.  That way, they are at least in one place.  And if you’re not that disciplined?  Heck, just throw all the receipts in a box and give them to your accountant at the end of the year.

No matter what solution you choose, though, make sure you consistently record your expenses.  The last thing you want to do is scramble at the end of the year to find receipts and enter data.  That would be a nightmare.  Instead, set aside time each week (or more often, if necessary) to update your books.  If you find it overwhelming and you tend to put it off, consider hiring someone to maintain your accounts for you.  Remember – what you pay him or her is deductible as well!

Finding all those overlooked expenses can mean the difference between a huge tax bill and one that is more manageable.  While the things listed here will get you started, it’s a good idea to also speak with a tax professional.  Make sure he or she fully understands the nature of your business, so he or she can ask the right questions and make appropriate recommendations for your business write-offs.

How To Get IRS Currently Not Collectible Status

If you are facing IRS debt issues, a great tool for getting them momentarily off your back is a status known as Currently Not Collectible (CNC).   The IRS recognizes that you may be in a financial condition that renders you unable to pay anything on your taxes.  When we represent taxpayers that are either insolvent or are having major cash flow issues, the Currently Not Collectible Status is the option that we attempt to obtain most often.

If you have negligible assets (e.g. bank accounts, home, cars) that the IRS can seize, and you have no income beyond what is absolutely necessary for you to live, the IRS may determine that your liability is currently uncollectible.  CNC status defers collection action under the undue hardship rule.  If you are one of these uncollectible cases, the Revenue Officer assigned to your case will remove your case from active inventory until your financial condition improves.  CNC status is generally maintained for about one year. Keep in mind that if you are in CNC status, penalties and interest will continue to accrue on your tax liabilities.

There are many reasons the IRS may consider your case as uncollectible.  These include:

  1. The creation of undo hardship for you, leaving you unable to meet necessary living expenses
  2. The inability to locate any of your assets
  3. The inability to contact you
  4. You die with no significant estate left behind
  5. Bankruptcy or suspension of business activities with no remaining assets
  6. Special circumstances such as tax accounts of military personnel serving in a combat zone

Before closing your case for the reason of undue hardship, we can guarantee that the IRS will request a financial statement from you so that they can review your finances.  The review is similar to the review for an Installment Agreement request; both of which are similar to a mortgage application.  You will be required to provide financial documentation such as bank statements, copies of mortgage statements, car payments, pay stubs, etc.  If your assets are negligible and your net disposable income is negligible, you’ll most likely to be able to obtain CNC status.

The IRS will periodically re-examine your finances to see if your financial condition has improved to the point that some payment can be demanded.  This financial review will occur about once a year and you must then complete a new financial statement.  The IRS may question you by phone or in person about your updated financial information or they may simply send you the form and request that you return it by mail.

As with all information you give the IRS, make sure that what you say is absolutely truthful.  The IRS may also monitor your financial condition by computerized review of your tax returns.  For example, the IRS computers may flag your return if your reported gross income exceeds some pre-established amount.  Remember, the IRS only has 10 years from the date of assessment to collect delinquent taxes; once the statute expires, so does your liability.

Millions of Americans have remained in CNC for years and completely avoided having to pay their back taxes.  Obviously, these folks could not title assets in their own name or have significant income available for IRS levy.  Still, many of these uncollectible cases enjoyed relatively comfortable lifestyles.  If you maintain no assets in your own name, you have a small income, and expect your financial situation to continue as it currently stands, then remaining in CNC status may be your most practical remedy.

However, if you do not intend on remaining uncollectible until the statute of limitations expires or you don’t want the tax liability hanging over your head, then you may want to consider an Offer in Compromise while your financial situation isn’t so great.

Do YOU Need Help With Your IRS Debt?
This post (the one you’r reading) is one of the most viewed on our site.  Why?  Because many people have tax issues that they want to resolve.  If you have old tax returns that need to be filed or want to learn how a professional can help you with your situation, why not visit our sister site File Old Tax Returns?  You might be surprised to learn that we may be able to help you out for less than you are thinking.  Plus, hear some valuable information on your taxpayer rights from the IRS Commissioner himself!

Remove Wage Garnishments With The Help of The Taxpayer Advocate Service

wage-garnishment

The IRS is the only collections authority that can take significant actions that will make it hard for you to live.  One such situation is when they start to garnish your paychecks. A wage garnishment is one of the most-feared IRS collections tactics, and rightly so. Your employer is legally obligated to implement it.  If they don’t, they can face stiff penalties themselves.

The bright side in these situations is that an IRS wage garnishment does NOT follow you to another job. So, if you have a wage levy in place and decide to quit your job in order to get out of it, we would encourage you to seek employment to get back on your feet. The IRS won’t know where to send another wage levy to an employer until some sort of tax return information gets filed. For example, when your employer issues you a W-2 after the end of the year, they are required to file a copy of it with the IRS.  When this happens the IRS will then know where you work and may file a new wage levy at your new employer.

So, if an IRS wage levy or wage garnishment is creating a significant economic hardship for you, you are encouraged to do one of two things. One is to seek professional tax representation to assist you in resolving the matter. If your tax situation is fairly complex, you’re going to want to hire professional tax representation to resolve your situation. If your tax situation is otherwise simple, or you simply cannot afford to hire professional tax relief assistance, then by all means contact your Local Taxpayer Advocate.

There is a Local Taxpayer Advocate (LTA) office in all 50 states and very large cities will have a dedicated office (ex. Cleveland and Cincinnati OH). Contact these folks and tell them your situation; it’s their job to help out folks such as yourself, and it’s a service already paid for by your tax dollars (nice how that works, right?). The nice thing about the Taxpayer Advocate service is that they are an independent arm of the IRS, and they function OUTSIDE of the normal bureaucracy of that agency. In fact, the Taxpayer Advocate service reports directly to Congress, NOT to the Commissioner of the Internal Revenue Service.

If you’re seeking assistance from the LTA, you will most likely want to file the following form, which is IRS Form 911, Request for Taxpayer Advocate Assistance. Your LTA can provide you with this form.

So, again, don’t let an IRS wage garnishment make you think that you can’t go get a job. The wage levy from your previous job does NOT automatically follow you over. Also, either seek professional tax resolution assistance from a reputable firm, or contact your local Taxpayer Advocate office to get help.

As always, ignoring your IRS problem does NOT make it go away. It is always best to confront the problem head on, get it resolved, and then move on with your life.  If you would like us to help you with your situation, please give us a call at 773.239.8850.