Three Tax Breaks if your in your 20’s

The tax breaks below apply to everyone but if your in your 20’s you are in a stage of your life where one of them will likely apply to you.  Lets face it, you are probably not married, you don’t own a home and you don’t have kids so you do not get any of the traditional tax advantages however there are some great tax credits and deductions that can work for you.

The first thing to check is to see if your parents are claiming you as a dependent on their tax return.  If they are still paying your bills and giving you a place to live they probably are.  But it might make more sense if they don’t.

If you are out on your own and making your own income, you should not be a dependent on your parents tax return.  Have a talk with Mom and Dad to make sure you are all selecting the most tax beneficial situation.

On to the three big tax breaks.

AMERICAN OPPORTUNITY CREDIT – If you are going to college, this applies.  Basically you can get up to a $2,500 tax credit per year for higher education expenses.  So if you paid more than $2,500 in higher education expenses, those can be a tax credit for you.  This is a tax credit, not a deduction so the $2,500 goes directly back into your pocket.  But it is not available if you are a dependent on your parents return or make over $80,000 a year.  Ask your school for form 1098-T and give that to your tax professional.  NOTE: If you are past your first 4 years, there is a lifetime learning credit which gives you back 20% of higher education expenses.

STUDENT LOAN INTEREST DEDUCTION – If you went to college it is likely you have student loans.  You can also deduct up to $2,500 of student loan interest from your Taxable Income.  This is an above the line deduction meaning you get to take it regardless of if you itemize your deductions or take the standard deduction.  Ask the company you have your student loans with to provide you with a 1098-E and give that to your tax professional.

MOVING EXPENSES DEDUCTION – Many people in their 20’s are moving to find a good job.  They might have went to school in a certain area but needed to move for a good job somewhere else.  If you move more than 50 miles from your home, you qualify for this.  Make sure to keep good records of all moving expenses including miles driven, lodging, and transportation of household goods.  All of these can be an above the line deduction.

Have fun this tax season trying to ensure you are getting the maximum tax refund possible.

 

Freshbooks – Bookkeeping for the non-beancounter

Freshbooks stands out as accounting software for the business who has no interest in accounting.  It makes accounting easy.  Although it lacks some transitional small business accounting software features that accounts love.  It is very easy to use.

The most powerful feature of Freshbooks is its Accounts Receivable features.  It is easy to create simple invoices that look professional and can be paid easily.  You can setup credit card payments in order to get paid faster and not have to record checks.  You can even view when the invoice was viewed by your client so you can make sure they received it.  If none of that works, the system will even send out late payment reminders to your clients.  Freshbooks is built around collecting money and making it easy for the business owner.

Freshbooks also handles payables in a very simple way.  Leveraging the smartphone, they allow the user to take picture of receipts and classify them into the software.  All expenses can be associated to a customer for reimbursement.  The system can also pull transactions directly from the bank account so there is less data entry involved and it makes the dreaded bank rec a heck of a lot easier.

The last feature that is really useful for the business professional who bills by the hour is the ability to track your time.  Not only can you track your own time and bill it, you can see how the rest of you team is spending their time on the various projects your organization is working on.

Freshbooks is a feature rich bookkeeping tool that is powerful for the business owner who does not have the time to maintain a full small business accounting software.  It also integrates with more reporting rich accounting software like Quickbooks and Xero.  This is an excellent piece of software to use in conjunction with a more traditional software managed by an accounting professional.

Small Business Moving Accounting to the cloud

Ten years ago the accounting landscape was completely different than it is today.  With the advent of the CLOUD, there has been a complete change in the way micro and small business think about handling their bookkeeping and accounting needs.  What has probably changed how business’ operate even more are smart phones and tables.  These portable devices are letting more and more business owners operate their business from anywhere they are at.

Many business are used to the traditional accounting practices.  They look like this:

1) They have in house software installed on a local machines connected thru a LAN and possibly on services.  The initial investment in this technology was significant and the ongoing maintenance costs are high.

2) There is a paper based office. Information transfer between small business and any outside accountant is cumbersome.  Files are put on thumb drives and mailed, accounts have to go onsite, reports are emailed and all records are on paper.

3) Communication is slow and during business hours.  It is mostly in person or by phone.  Email is also used.

4) The primary utility of the accountant is to prepare taxes year end.  The small business is typically responsible for the bookkeeping and they analyze the financial reports to varying degrees of competence.

It is time to change.  With the 100’s of SAAS Cloud based software options available to small businesses, every small business should be looking for a more efficient accounting partner.  While tax mater proficiency is still important, knowing how to integrate financial technology to enhance a business’ efficiency is far more important.  Lets take a look at what a modern technology firm can do for your small business.

1) Host all accounting records securely in the CLOUD accessible from smartphones, tables and any computer with an internet connection.  Say goodbye to paper.

2) Give their clients a real time portal with a dashboard so they can get the information they need when they need it from the location they are at.

3) Not just provide tax services.  Include bookkeeping, technology integration, virtual CFO, payroll, financial analysis, and consulting services.  Really partner with their clients to provide value which will effect the bottom line.

4) Invest heavily in knowing and learning cloud based technologies.

Change is coming to small business accounting.  Are you ready for it?

Xero

Inuit finally has a real competitor in the small business accounting software space.  Peachtree/Sage never became a household name and Intuit always had market share.  With the advent of SAAS software becoming commonplace, Xero has put together a great piece of accounting software suited for the small business.  Its goal, to keep professional doing what they do best and automate much of the account for them.

Xero’s feature set comes with everything you would expect out of a small business accounting software.  It handles invoicing, inventory, bill payment, asset depreciation and financial reporting.  One of the key ways they differentiate themselves is that Xero plugs into a large amount of 3rd party applications.  At the time of writing this, over 350.  You can plug in anything from time-tracking software to payment platforms to payroll.

Xero also has a simple pricing model.  It starts at $9, has a $30 option and a $70 option.  From first look on their website, the differences are that that $9 has transaction limits and the $70 has multi-currency support.  Most business are going to need to use the $30 option and then get the corresponding add ons that make sense.

With over 350 add ons, it can get confusing which ones hold their weight.  In future editions we will be looking into the most popular add ons to give insight as to what they actually do and solve for.

Competition is exciting.  Xero and Inuit are going to push each other and this is only going to benefit the end user with more features and better business tools.

Quickbooks Online

Quickbooks online has been around for a long time but it hasn’t been until recently that Intuit has made an effort to make this software something accountants and business will actually use.  I think with the advent of Xero and their quick entry to market has made them have to get serious about having a SAAS product.

Quickbooks online + their online payroll solution is going to be part of the service package I will be providing.  I am going to create a Xero center package as well as a Quickbooks Centered offering.  One of the main advantages of the Quickbooks offering is that everything seems to be integrated.

Quickbooks has integrated payroll as well as an integrated payments platform.  In terms of user experience that will be much better for the user.  Also, the Plus version allows for more complicated functionality like job costing, categorizing into classes, vendor 1099 prep, inventory tracking, etc.  A lot of functionality that Xero would have to include thru a 3rd party add on.

The Quickbooks offering starts at $13 per month, has a $27 level and a $40 level.  Each offering offers more services.  The $27 will be the most common level and I will probably be able to build the bookkeping services around the three levels and include each one with the corresponding level of service.  I am thinking I will offer a Xero track as well as a Quickbooks track.  That way we can keep pricing different and the client experience different however there might be an opportunity to keep pricing the same, just the software different depending on client preference.  Onward to exploring more software.

For more on the Quickbooks online offering, click here 

Build a website

My number one focus right now is building a website.  I am looking to build a draft.  Something sufficient enough to build on.  Reason I am starting on the website is because it will allow me to start telling the story of the company.  Who are we and why do we exist on this earth.  I am not looking to make it more than a handful of pages and it will be built to capture leads interested in the services we will offer.

I envision the website to be the place where I can put together to services offering that we will be providing to our clients.  Come up with a pricing model and then work on the specific services that will be provided in each model.  Once this is put together it should translate well into a proposal to give to prospective clients, etc.

The other section on the website I was to build out are all the 3rd party tools I will use to pull off the services.  I think a dedicated page for each tool would be great.  A short description of what it is and how it will help add value to the business.

Once the website is built I still will need to put together a contract, develop a way to charge clients, learn the software I will be using to execute the services and finally, start my soft launch to close friends.

Starting…

I decided to start a new business last week.  I have been dreaming about doing something for some time now and just decided what I want to do.  It is a great feeling.  For some people they express their creativity in traditional ways like art, music and dancing.  My creativity is with business.  I love creating, helping and being around businesses.  Especially small business.

So, I am starting a bookkeeping company.  Accounting is something that I have grown to love.  In school I always loved complicated Math problems until I got to calculus.  For me, Accounting is that algebra class that I loved.  Until recently I have not taken any formal accounting classes.  But I found my love for accounting years ago when I started my first business.  I learned how good accounting tells a story to the business and gives a pointed plan of action.

What makes me the most excited about this company is that I will get to really gain an understanding of how my clients business operates.  This will give me the ability to create even more value for my client in the long run.

Real excited