Getting Ready for a Financial Review or Audit for Your Small Business
August 24, 2016
Do you have a business loan, or are you looking for one in Denver? You may likely be required by the banking institution to produce yearly financial review or an audit done by an accounting firm. Like every tax audit done, the reason is to seek verification of what is being reported and to ensure that the information is correct. It can be quite a nerve-wracking experience when you have to get a financial review or audit done by an accounting firm. However, with a little planning, you may get through the process faster than you think, and also and be able to save some money while doing so.
The Expectation
You may not know what to expect from a financial review and financial audit. This may be the reason for your trepidation. Well, first, the staff at the accounting firm will evaluate the information that you have submitted to ensure that it is consistent and accurately completed. The staff will utilize an analytic process to make sure that the results make financial sense. If you are unable to explain the reason for change in balances, for example, the staff will do a thorough investigation to find the issue. You may also be asked to explain the change.
The Assessment
A financial review and audit are both similar in scope, but the accounting staff will still have an audit sample done. Specific transactions will be examined and supporting documentation requested. This is done so as to ensure that information is properly recorded. The staff will assess your operational procedure and the security standards used to store information. This is to ensure that data in the accounting process is authentic.
Reducing Costs
It can be expensive to have reviews and audits done, especially if your business has grown considerably. In fact, prices for audits can vary from $5,000 to $75,000, depending on the scope of the business. Reviews are half that cost. The cost is determined by the number of hours spent on correcting the financial details of your business. A good accounting firm will try to save money by assigning elementary tasks to entry-level staff. You could save thousands of dollars by making sure that your financial information is correct, thereby, reducing the time that accounting staff will spend on fixing errors.
Early Preparation
If you implemented good financial practice for your business throughout the year, then you will save time wasted on perusing through your financial documents. This is what would subsequently save you more money. You should be consistently reconciling your financial information on a frequent basis because if not, mistakes will compound and make it harder to locate the problem source. Most experts will recommend that you reconcile your bank accounts every month or every quarter. If you are going to be audited, be sure that all your profit and expenses are documented throughout the year. If you have to scramble to find documents, this could delay the audit.
Get your paperwork ready and seek the service of a Denver accountant for a financial review and audit. Contact Bloch, Rothman, and Associates, a Denver accounting firm for a free consultation. Call 303-321-7160 also if you have questions and concerns.
Read More...
The Expectation
You may not know what to expect from a financial review and financial audit. This may be the reason for your trepidation. Well, first, the staff at the accounting firm will evaluate the information that you have submitted to ensure that it is consistent and accurately completed. The staff will utilize an analytic process to make sure that the results make financial sense. If you are unable to explain the reason for change in balances, for example, the staff will do a thorough investigation to find the issue. You may also be asked to explain the change.
The Assessment
A financial review and audit are both similar in scope, but the accounting staff will still have an audit sample done. Specific transactions will be examined and supporting documentation requested. This is done so as to ensure that information is properly recorded. The staff will assess your operational procedure and the security standards used to store information. This is to ensure that data in the accounting process is authentic.
Reducing Costs
It can be expensive to have reviews and audits done, especially if your business has grown considerably. In fact, prices for audits can vary from $5,000 to $75,000, depending on the scope of the business. Reviews are half that cost. The cost is determined by the number of hours spent on correcting the financial details of your business. A good accounting firm will try to save money by assigning elementary tasks to entry-level staff. You could save thousands of dollars by making sure that your financial information is correct, thereby, reducing the time that accounting staff will spend on fixing errors.
Early Preparation
If you implemented good financial practice for your business throughout the year, then you will save time wasted on perusing through your financial documents. This is what would subsequently save you more money. You should be consistently reconciling your financial information on a frequent basis because if not, mistakes will compound and make it harder to locate the problem source. Most experts will recommend that you reconcile your bank accounts every month or every quarter. If you are going to be audited, be sure that all your profit and expenses are documented throughout the year. If you have to scramble to find documents, this could delay the audit.
Get your paperwork ready and seek the service of a Denver accountant for a financial review and audit. Contact Bloch, Rothman, and Associates, a Denver accounting firm for a free consultation. Call 303-321-7160 also if you have questions and concerns.
Is Your Small Business Financially Healthy?
August 10, 2016
It is rather easy to determine when your small business is doing well and when it is not. When you are operating from behind, you will know. When you are able to make your weekly employee payroll and easily take care of your monthly expenses, it puts a positive light on your financial state. However, are there perceptible levels or discernible distinctions to consistently suggest whether your small business is financially healthy or not? Or are there definitive ways to establish how well your business is doing away from the norm?
The Signs
There are several ways to do just that, some of which might be fitting to your business than others. When you think about this, you need to also consider the signs to look for that will indicate if your business is in good financial health or the opposite. Let’s take a look.
Growing Revenue
When you think about profit and loss statement in any small business, it is important to see a steady revenue increase each month and each year. You don’t need a huge profitability spike, but it should be a stable increase that exemplifies upward movement and a strong outlook financially.
Flat Expenses
In combination with the revenue increase, you also should have expenses remain flat. Your expenses may increase if you see a significant growth surge in your small business. However, generally, the expense increase should remain in line with the revenue increase. Let’s say you notice a revenue increase of three percent each year, your expenses should not increase more than three percent during the same period.
Cash Balance
Even though, your revenue may be increasing, if you invest that money back into your business, you may become cash poor and asset wealthy, which is not a balance to your financial health. A low cash balance or a stagnant cash balance may mean that your business is unsustainable. So, to combat this problem, keep a specific amount of cash in your local bank for business emergencies. This will prevent you from incurring more business debt from unexpected expenses.
Low Debt Ratios
Pay special attention to two of the most significant debt ratios, namely debt-to-equity and debt-to-asset. These are your solvency ratios as a Denver accountant may explain. These formulas or calculations are specific to measuring the amount of money your business owes in comparison to how much the business is actually worth. It is best to keep this number as low as possible. It will be more ideal to maintain good financial health for your business.
Profitability Ratio
When it comes to profitability ratio, you should use one that measures your sales returns and your investment returns. One of the ideal ratios for measuring profitability is your profit margin. This entails a calculation that divides the annual sales into the yearly net profits. Even when making sales, you must ensure that your profit margin remains low. It will depend on a lot of factors such as startup costs and pricing structure. When your profitability ratio is high, you can tell that your business is financially healthy.
To simplify the process of measuring your business’s financial health, review the profit and loss statement and analyze various components of the business. In the end, it will be up to you to decide the importance of your financial health. Don’t wait until it gets bad. Contact the Bloch, Rothman, and Associates, an accounting firm in Denver with the experience and knowledge of determining the real financial health of your company. Call 303-321-7160 to schedule a free consultation.
Read More...
The Signs
There are several ways to do just that, some of which might be fitting to your business than others. When you think about this, you need to also consider the signs to look for that will indicate if your business is in good financial health or the opposite. Let’s take a look.
Growing Revenue
When you think about profit and loss statement in any small business, it is important to see a steady revenue increase each month and each year. You don’t need a huge profitability spike, but it should be a stable increase that exemplifies upward movement and a strong outlook financially.
Flat Expenses
In combination with the revenue increase, you also should have expenses remain flat. Your expenses may increase if you see a significant growth surge in your small business. However, generally, the expense increase should remain in line with the revenue increase. Let’s say you notice a revenue increase of three percent each year, your expenses should not increase more than three percent during the same period.
Cash Balance
Even though, your revenue may be increasing, if you invest that money back into your business, you may become cash poor and asset wealthy, which is not a balance to your financial health. A low cash balance or a stagnant cash balance may mean that your business is unsustainable. So, to combat this problem, keep a specific amount of cash in your local bank for business emergencies. This will prevent you from incurring more business debt from unexpected expenses.
Low Debt Ratios
Pay special attention to two of the most significant debt ratios, namely debt-to-equity and debt-to-asset. These are your solvency ratios as a Denver accountant may explain. These formulas or calculations are specific to measuring the amount of money your business owes in comparison to how much the business is actually worth. It is best to keep this number as low as possible. It will be more ideal to maintain good financial health for your business.
Profitability Ratio
When it comes to profitability ratio, you should use one that measures your sales returns and your investment returns. One of the ideal ratios for measuring profitability is your profit margin. This entails a calculation that divides the annual sales into the yearly net profits. Even when making sales, you must ensure that your profit margin remains low. It will depend on a lot of factors such as startup costs and pricing structure. When your profitability ratio is high, you can tell that your business is financially healthy.
To simplify the process of measuring your business’s financial health, review the profit and loss statement and analyze various components of the business. In the end, it will be up to you to decide the importance of your financial health. Don’t wait until it gets bad. Contact the Bloch, Rothman, and Associates, an accounting firm in Denver with the experience and knowledge of determining the real financial health of your company. Call 303-321-7160 to schedule a free consultation.
Strategic Steps in Reducing Your Estate Taxes
August 3, 2016
This year, not many Americans have to be concerned about their federal gift tax or estate tax. According to the new 2016 estate tax laws, deaths that occurred during this period allowed for exemptions of $5.45 million. This means that you can give or leave up to this amount for your loved ones without incurring federal taxes. Every year, the amount increases as an adjustment to inflation. Married couples are allowed to leave a combined amount, while still being able to avoid federal estate tax. However, check carefully because estate taxes could be imposed on smaller estates in some states.
The Tax Bill
If you think that you may owe estate taxes and want to reduce your tax bill or avoid it, then many accounting experts may recommend giving away as many properties owned while you are alive. And even if you don’t care about how much estate tax you have to pay, giving offers its own benefits because while you are alive, you will be able to see how those receiving your gifts will enjoy it.
Cash Gifts
In the year 2016, Americans can give away unrestricted amounts of $14,000 in cash or other property – without having to pay taxes on it. To make sure that you are entitled to these savings, bear in mind that no single cash recipient can get more than $14,000 in one year. There is a yearly exclusion to consider.
The Yearly Exclusion
The exception rule for giving $14,000 in one year to one individual is straightforward. For example, if you were to give $25,000 to one person, then $14,000 out of that amount is exempt because the federal government sees this as an amount that the law allows you to give. However, be aware that you would have to pay the gift tax on the remaining amount of $11,000. The federal government does factor in cost of living and inflation. Therefore, the amount will increase in increments of $1,000 each year.
Married Couples
For married couples, this rule allows them to double the amount that they can give. For married couples, the gift amount would be $28,000 for the first year. In the example above, the married couple would not owe any gift tax. According to the IRS Code § 2513, whether one person or other gives $28,000 in cash gift, it still counts as both consenting to the gift. Let’s say that Janet and Jeff are an older married couple and they decided to give their daughter and her husband some money for making a down payment on their first home. They can take advantage of the exemption rule for a married couple by giving their daughter and her husband $28,000 for the down payment instead of $14,000. As soon as the first year ends, they can give away an additional $56,000.
The gifting rule for other recipients such as one spouse or child is intricate and may need to be explained by an accountant that knows the laws. For that reason, contact Bloch, Rothman and Associates at 303-321-7160 for a free consultation on estate tax or gift tax procedures allowed by the federal government.
Read More...
The Tax Bill
If you think that you may owe estate taxes and want to reduce your tax bill or avoid it, then many accounting experts may recommend giving away as many properties owned while you are alive. And even if you don’t care about how much estate tax you have to pay, giving offers its own benefits because while you are alive, you will be able to see how those receiving your gifts will enjoy it.
Cash Gifts
In the year 2016, Americans can give away unrestricted amounts of $14,000 in cash or other property – without having to pay taxes on it. To make sure that you are entitled to these savings, bear in mind that no single cash recipient can get more than $14,000 in one year. There is a yearly exclusion to consider.
The Yearly Exclusion
The exception rule for giving $14,000 in one year to one individual is straightforward. For example, if you were to give $25,000 to one person, then $14,000 out of that amount is exempt because the federal government sees this as an amount that the law allows you to give. However, be aware that you would have to pay the gift tax on the remaining amount of $11,000. The federal government does factor in cost of living and inflation. Therefore, the amount will increase in increments of $1,000 each year.
Married Couples
For married couples, this rule allows them to double the amount that they can give. For married couples, the gift amount would be $28,000 for the first year. In the example above, the married couple would not owe any gift tax. According to the IRS Code § 2513, whether one person or other gives $28,000 in cash gift, it still counts as both consenting to the gift. Let’s say that Janet and Jeff are an older married couple and they decided to give their daughter and her husband some money for making a down payment on their first home. They can take advantage of the exemption rule for a married couple by giving their daughter and her husband $28,000 for the down payment instead of $14,000. As soon as the first year ends, they can give away an additional $56,000.
The gifting rule for other recipients such as one spouse or child is intricate and may need to be explained by an accountant that knows the laws. For that reason, contact Bloch, Rothman and Associates at 303-321-7160 for a free consultation on estate tax or gift tax procedures allowed by the federal government.
Should a Small Business Owner Secure an Accountant?
July 27, 2016
There are several reasons why a small business owner would hire the services of a tax accountant. This is especially essential as the small business goes through various stages of development. The small business owner may need help with business planning, bookkeeping, and tax audits. In comparison to the peace of mind that this provides, the extra expense to having a tax accountant is worth it in the long run.
The Affordability
Some business owners may shy away from using a tax accountant. It is possible that the expense may be their primary reason. However, it is important to have a tax accountant handy because you never know when you will need one. If you are working on a tight budget, you can hire a Denver accountant for a specific task as opposed to full time service. Many of them will work within your budget, providing the necessary services that will get you by.
The Benefits
However, when considering whether you should use the services of a tax specialist, you should bear in mind the value that you will receive. There are several benefits such as:
Other Services
As mentioned, some accountants offer other services such as writing your business plan and doing your bookkeeping. These days, accounting software is used to accomplish the task of keeping your books accurate. You can ask for financial projections and estimated tax payments from your accountant. A business plan provides a blueprint to where you would like to see the growth of your business in future years. The estimated tax payments gives you an idea of how much taxes you will owe at any given period. Both of these services will save you time and money, both long term and short term.
The Business Structure
An accountant will assist you in choosing and filing the kind of structure you want for your business. This could include:
Financial Direction
If you took on your own business accounting, it could really get out of control, especially if you do not have the kind of extensive knowledge that is required. When it takes time to file your taxes, you may get into a panic of whether you are doing it the right way or not. In addition, the tax laws change every year and most accountants stay abreast of these things. When you give this responsibility to a tax accountant, it relieves you of the burden and it gives you more confidence. Your revenue will be monitored on a continuous basis so that you are aware of your financial standing at all times.
If you are looking for a relief from handling your own taxes, it is time to consider a Denver tax specialist like Bloch, Rothman and Associates. Contact us at 303-321-7160 today.
Read More...
The Affordability
Some business owners may shy away from using a tax accountant. It is possible that the expense may be their primary reason. However, it is important to have a tax accountant handy because you never know when you will need one. If you are working on a tight budget, you can hire a Denver accountant for a specific task as opposed to full time service. Many of them will work within your budget, providing the necessary services that will get you by.
The Benefits
However, when considering whether you should use the services of a tax specialist, you should bear in mind the value that you will receive. There are several benefits such as:
- The time you will save
- Peace of mind
- Work that is free of errors
- Other services that you can take advantage of
Other Services
As mentioned, some accountants offer other services such as writing your business plan and doing your bookkeeping. These days, accounting software is used to accomplish the task of keeping your books accurate. You can ask for financial projections and estimated tax payments from your accountant. A business plan provides a blueprint to where you would like to see the growth of your business in future years. The estimated tax payments gives you an idea of how much taxes you will owe at any given period. Both of these services will save you time and money, both long term and short term.
The Business Structure
An accountant will assist you in choosing and filing the kind of structure you want for your business. This could include:
- Sole Proprietorship
- Limited Liability
- Corporation
- Partnership
Financial Direction
If you took on your own business accounting, it could really get out of control, especially if you do not have the kind of extensive knowledge that is required. When it takes time to file your taxes, you may get into a panic of whether you are doing it the right way or not. In addition, the tax laws change every year and most accountants stay abreast of these things. When you give this responsibility to a tax accountant, it relieves you of the burden and it gives you more confidence. Your revenue will be monitored on a continuous basis so that you are aware of your financial standing at all times.
If you are looking for a relief from handling your own taxes, it is time to consider a Denver tax specialist like Bloch, Rothman and Associates. Contact us at 303-321-7160 today.
Understanding Estate and Gift Tax Exemptions for Your Denver Taxes
July 13, 2016
When it comes to tax planning, relatively few people know about, or need to know about, the federal estate tax and the federal gift tax. If you are fortunate enough to be able to give large monetary and property gifts over the course of your life, then these taxes can have an impact on your overall tax liability. Due to the American Taxpayer Relief Act (ATRA) of 2012, the estate tax is part of the Internal Revenue Code, which is the domestic federal tax law in the US. ATRA increased the amount of an estate’s estate and gift exemption to $5.45 million, meaning that an individual can give away that much in gifts throughout their lifetime without having to pay a federal tax. However, there are more nuances to the law than just the overall dollar amount donated, so you may need a local Denver accountant or tax professional to help you understand these taxes.
Estate Tax
The estate tax is a tax on the transfer of your property at death. Your gross estate is evaluated, in an accounting of everything you own or have interests in. This includes all of your assets, such as cash, securities, real estate, insurance, trusts, business interests, and so on. There are certain deductions made in the process of calculating your taxable estate, such as mortgages, other debts, and property that is given to heirs or charities. The net total is then federally taxed. There has recently been a fair amount of public debate over the estate tax and we highly recommend speaking with an estate planning or tax professional if the estate tax is something that may affect you or your loved ones in the future.
Gift Tax
The gift tax is a tax on the transfer of money or property from one individual to another, without receiving anything in return or accepting significantly less than what the property is worth. The donor usually has to file and pay for the tax, although exceptions can be made. There is often also a dollar amount limit on what can be gifted tax-free, so it is important to speak with a tax professional to plan ahead if you intend to keep your gift donations under the tax-free threshold.
Annual Exclusion
Currently, you can give $14,000, the annual exclusion amount, to as many individuals as you want without having to pay the estate or gift tax. Spouses can combine their annual exclusions and give $28,000 without having to pay taxesYou can donate to charities, to a spouse, or to a political organization; you can also pay for tuition at an educational institution or medical expenses at a medical facility in unlimited amounts, as long as you make payment directly to the institution or organization. Gifting stocks and real estate, either physical or percentages of ownership, are other gift options. Spouses can combine their annual exclusions and give $28,000 without having to pay taxes. This annual exclusion occurs on a yearly basis, so it’s important to time your donations accordingly. Your accountant can help you with important filing dates and deadlines.
While crafting your estate plan, bear in mind the unified credit, which occurs when the federal gift tax and estate tax are integrated into one. This is the credit for the portion of estate tax due on taxable estates. If you exceed the annual gift tax exclusion amount, you can either pay the tax on the excess, or avoid paying the tax by using the unified credit.
Donating your assets during your lifetime is beneficial for you and your loved ones, although filing these types of returns can be a complicated process. Schedule a free estate and gift tax return consultation with Bloch, Rothman, & Associates at 303-321-7160 to help determine your needs and for professional assistance with estate and gift tax filings and exemptions.
Read More...
Estate Tax
The estate tax is a tax on the transfer of your property at death. Your gross estate is evaluated, in an accounting of everything you own or have interests in. This includes all of your assets, such as cash, securities, real estate, insurance, trusts, business interests, and so on. There are certain deductions made in the process of calculating your taxable estate, such as mortgages, other debts, and property that is given to heirs or charities. The net total is then federally taxed. There has recently been a fair amount of public debate over the estate tax and we highly recommend speaking with an estate planning or tax professional if the estate tax is something that may affect you or your loved ones in the future.
Gift Tax
The gift tax is a tax on the transfer of money or property from one individual to another, without receiving anything in return or accepting significantly less than what the property is worth. The donor usually has to file and pay for the tax, although exceptions can be made. There is often also a dollar amount limit on what can be gifted tax-free, so it is important to speak with a tax professional to plan ahead if you intend to keep your gift donations under the tax-free threshold.
Annual Exclusion
Currently, you can give $14,000, the annual exclusion amount, to as many individuals as you want without having to pay the estate or gift tax. Spouses can combine their annual exclusions and give $28,000 without having to pay taxesYou can donate to charities, to a spouse, or to a political organization; you can also pay for tuition at an educational institution or medical expenses at a medical facility in unlimited amounts, as long as you make payment directly to the institution or organization. Gifting stocks and real estate, either physical or percentages of ownership, are other gift options. Spouses can combine their annual exclusions and give $28,000 without having to pay taxes. This annual exclusion occurs on a yearly basis, so it’s important to time your donations accordingly. Your accountant can help you with important filing dates and deadlines.
While crafting your estate plan, bear in mind the unified credit, which occurs when the federal gift tax and estate tax are integrated into one. This is the credit for the portion of estate tax due on taxable estates. If you exceed the annual gift tax exclusion amount, you can either pay the tax on the excess, or avoid paying the tax by using the unified credit.
Donating your assets during your lifetime is beneficial for you and your loved ones, although filing these types of returns can be a complicated process. Schedule a free estate and gift tax return consultation with Bloch, Rothman, & Associates at 303-321-7160 to help determine your needs and for professional assistance with estate and gift tax filings and exemptions.