SR ED Financing – Factoring Your Sr Ed for Working Capital in Canada

Canadian business owners and financial managers don’t find waiting productive. So why should you have to wait to finance (in effect it’s a factoring or discounting) your SR ED claim. You shouldn’t have to and we will show you how.

To be able to finance a SR ED claim you of course have to have a SR ED; claim. That makes common sense. Canadian business owners know when they have a significant investment in their research and development and commercialization projects. That is more than intuitive, because they are spending real dollars, often considerable sums, to maintain their competitive edge in products, services, and processes. That’s of course why your firm should be finalizing a claim and filing it as soon as you can in conjunction with your fiscal year end. Naturally once you have filed the claim you can wait anywhere from 3- 12 months for the refund chq to arrive from Toronto or your provincial component from your provinces capital city.

Do you have to wait to recover those funds? Of course you can if you choose, but your claim is financeable if you seek out and talk to a trusted, credible expert in this area. Why not finance your claim, recover those funds now, and continue your investment in leading edge research den processes to maintain your competitive stance within your industry and product or service sector?

So what are the basics of financing that claim . Let’s review them in detail and ensure you have the under pinnings of a successful SR ED financing strategy.

As we mentioned you have to have filed your claim to begin financing it. In our experience the whole process, we tell our clients, takes two to three weeks if your full co operation is provided. Naturally if timing is important you could start the process a little in advance of filing your claim. Any Sr Ed calim can be financed, but those that are prepared by competent parties are in effect ‘more financeable ‘as they have a credibility and experience factor attached to them.

Does your own firm’s financial status play a part in the financing of your SR ED? We can say with assurance that 90% of the SR ED financing questions rely very specifically on using the SR ED as collateral for the financing. But naturally your firm has to be able to demonstrate some sense of on going viability with respect to sales prospects, etc. However lets be honest, many firms are using SR ED tax credits because they are in growth or start up mode, so that should not deter you from contemplating and discussing the financing of your SR ED .

A normal SR ED financing application includes the usual business info data you would submit with any business financing – i.e. info on your firm, its financials, info on the owners, etc. Loans or advances against your claim are generally made at 70% loan to value; in effect you immediately receive 70% of the total amount of your SR ED tax credit calim. The balance is remitte3d to yourself, less financing fees, when you calim is approved and funded in Ottawa.

A proper SR ED financing is structured so that you won’t make any payments while you wait, so it’s a pure cash flow and working capital strategy.

In summary, utilize your tax credits to recover significant portions of all your R D; expenses if you are a privately owned Canadian company. Ensure you consider a SR ED financing strategy if you wish to accelerate SR ED spending or simply use the funds for any general worthwhile purpose. Speak to a trusted, credible and experienced SR ED financing advisor to structure a calim that makes maximum financial sense for your firm.

Interest Rate Derivatives- A Source of Credit: The Users and Providers of Derivatives are on a Two-Way Street

The global banking crisis has been a boon for providers of interest rate derivatives as an increasing number of corporations consolidate their banking and treasury services providers to secure the credit lines they need and to protect themselves from risky counterparties. The latest research from the consulting firm Greenwich Associates indicates that over 40% of the global volume in interest rate derivatives is allocated to dealers on the basis of lending relationships.

A Financial Quid Pro Quo

In seeking out providers of credit, corporations are not only consolidating relationships with existing banks but are also seeking out secondary sources of credit as well to augment their core lenders. It is interesting to note that this is occurring at the same time as banks are taking a hard look at their existing lending relationships.

Needless to say, corporations are using their hedging needs such as interest rate derivatives, foreign exchange, capital markets functions and other treasury management services as bargaining chips for their credit needs. In this quid-pro-quo the banks are finding out that they can’t have it both ways. If they want the derivatives business they will have to provide the credit.

The flip-side is that banks are taking the posture that given the increasing amount of credit (counterparty) risk, that risk premium is being built into the price charged, resulting in wider bid-ask spreads.

Reasons for Using Derivatives

The most popular reasons for the strategic use of derivatives are managing debt capacity and balance sheet restructuring or rebalancing. Following that is merger and acquisition transactions, managing credit risk and tax or accounting reasons. A small number of uses are hedging exposure to stock option plans and managing pension plan risks.


Cheers and Jeers

Regardless of where one happens to be, it seems the fear of counterparty risk is second only to pricing in the derivatives market. For example, in the same Greenwich Associates research, not quite 30% of derivative users in the United Kingdom have cut back on the volume they execute through a single dealer. In the United States, counterparty risk ranks ahead of historical measures such as speed of quoting and quality of sales coverage.

The major players in this market vary somewhat by geography but tend to be the world class commercial banks in their particular venue; North American banks in North America, German, British and French banks in Europe, Japanese banks in Japan and so forth. However, here are some banks that transcend borders and are active and effective in whatever location they have a presence.

After the number of dealer banks had shrunk due to narrow spreads and overly competitive pricing, the list is once again expanding, reflecting wider spreads and better economic potential.

Bankruptcy Laws in History

Many people see being bankrupt as a sign of someone’s financial failure. It is, however, the only option for many people to save some of their property. The problem that a lot of people face when they are filing for such a credit solution is the shame and humiliation that comes with it. Although this is perfectly understandable, the truth is, one should not feel ashamed of taking what might be their only option to save whatever they can from their property or relieving themselves of dire financial stress.

Bankruptcy Laws in Ancient Times

Upon doing some research on the practice of filing for bankruptcy, one will find that it can be traced all the way back to the Old Testament. That long ago, there were already laws the specifically stated that all debt should be eliminated after fifty years. The concepts of debt and debt elimination already existed. In fact, the Hebrew Law of Forgiveness states that all debt should be eliminated after seven years.

In more modern times, bankruptcy law was first enacted in England during the year 1542. At that time, however, the law was developed as a financial remedy for creditors and not debtors. Collusive bankruptcy did not exist and laws gave creditors the right to seize the assets of debtors who could not meet their financial obligations. Seized assets did not serve to cover existing debt. In fact, upon being stripped of all assets, debtors were imprisoned until such time that their families were able to pay their debts.

 Over time, laws in England improved but remained, for a number of years, in favor of creditors. By 1825, such a financial taking become something that was agreed upon by both debtors and creditors. Then, by 1849, voluntary bankruptcy was authorized by lawmakers.

Bankruptcy in the United States

In the United States, the subject of bankruptcy made its way to federal laws only in 1800 but it was not until the development of the Bankruptcy Code or the Bankruptcy Reform Act of 1978 did laws become what it is today. Although many changes have been made to the code since it was first enacted, it remains to be the country’s statute law that governs this legal declaration.

Among the most substantial amendments to the Bankruptcy Code is the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which was made effective in 2005. That amendment made it more difficult for debtors to qualify for debt relief and, therefore, also made it more difficult for people to game the system. Furthermore, it has made the code fair to both debtors and creditors.

Bankruptcy laws have existed around the world for centuries. While it is perfectly normal for those who have used this process as a credit solution to feel ashamed of their situation, they should also understand that laws are there to, somehow, protect them.

Benefits of a Joint Bank Account: How Shared Accounts Can Help with Family Finances

There are several benefits associated with joint bank accounts that cannot be found with other regular savings or checking accounts. As long as there is good communication and trust between joint bank account holders, family finances can be managed more easily.

Here’s a rundown on the benefits of opening a joint bank account.

Shared Bank Accounts Ease Family Budgeting

Income earners in a family can combine a certain amount of money from their salaries each month in a joint account for various purposes. Be sure of what the money is for – utility bills, school fees, rent or mortgage, car loans, etc – and agree to stick to that.

A couple may also want to set up a shared account solely for entertainment purposes such as a holiday during Christmas or huge social events. When all parties have clear goals and set aside a certain amount of money in specific joint accounts for those goals, family budgeting is more manageable.

Bill Payment is Easier with Joint Accounts

Couples who pool their income into a shared account can pay bills easily using that account. If the account holders have opted for the “either to sign” signatory option, either party can withdraw money or sign checks independently of each other. This is especially useful when one of the account holders is away from home for an extended period of time.
Senior citizens or disabled people may find having joint accounts with trusted relatives convenient too as the relatives can pay their bills or write their checks for them easily.

Reduced Bank Charges and Fees

If there is only joint bank account instead of multiple accounts, there is only one set of bank charges and fees to pay. It’s a good solution for low income families who rely heavily on their overdraft to pay for routine expenses. By putting all incomes in a common account, they can avoid excessive overdraft charges.

Avoid Probate Court Complications

One indisputable benefit of having a joint bank account is that it can help avoid probate court complications if one of the account holders dies. Instead of having the money going through the red tape of a probate court as it would be in the case of regular bank accounts, all the remaining balance of the joint account will automatically go to the surviving account holder. That’s why joint accounts are favored by many older people who have children or relatives they can trust completely.

While having a joint bank account can be risky, it offers a lot of convenience. It eases family budgeting and bill payments as well as reduces bank charges and fees. Additionally, a shared account can help avoid probate court complications if one of the account holders dies unexpectedly.

Bankruptcy and the Recession: Lessons of Risk Management and Self-Sufficiency

One of today’s most important skills is also one that is not taught in schools. Financial illiteracy is responsible for millions of debt-fueled lifestyles every year, from out of control personal spending habits to investments and property purchases that lose grasp of reality. As the last two years have proven, massive debt and the lack of risk management seem to be no foreign concept for lenders and investors, with the two groups of people embracing risk as if it is not even there at all.

Of course, everyone knows how that turned out. What could have been an ultra-profitable exercise in investment, turned out to be possibly the biggest financial meltdown in history. The result of 20 years of overconfidence and lack of risk management came crashing down and left the world in a financial position that is incredibly difficult to escape from. Major investments, once the driving force behind the global economy, dried up, and people were left looking at bankruptcy solutions and restructured payment plans.

Risk Management and the Current Recession Period

What was missing in this great recession was a sense of risk management. The last two years of economic activity were the result of risk running too far, sense running too thin, and the management of investments running too high on the greed scale. Rather than creating a healthy profit, investors depended far too much on ultra-high returns. Where are many of them today? Sitting in courts, waiting for their turn to process and relieve those debts. While many of the debts will undoubtedly go unpaid, the amount of assets being turned over to lenders is astronomical, with many businesses completely transformed in the recession.

The lesson of the last two years is not to time investments to avoid situations like these, but to strategically structure them so that personal or business bankruptcy simply is not the next step in the logical progression. When looking from afar, it is relatively easy to see failure coming. But, when people are wrapped up in an investment, it seems like a completely foreign concept. While bankruptcy courts go through thousands of cases every month, each one has the same sense of misunderstanding and uncertainty surrounding each case. Investors walk in expecting to succeed, without even thinking to prepare for the worst possible scenario.

The Key to Avoiding Bankruptcy During Recession

The key is to always minimize debts, and practice the ultimate form of self-sufficiency. Of course, in a global economic sense, self-sufficiency has proved disastrous and unobtainable. But, on a personal or corporate level, it is a very powerful solution. When people or businesses are entirely financially self-sufficient, the market changes don’t affect them, the crashing of loans and easy credit is entirely in their periphery, and the potential personal or business bankruptcy crises are things that simply do not enter their minds.

When they control every single aspect of their cash flow, outside factors (other than currency and property value) simply do not touch them, and the possibility of personal or business bankruptcy is placed entirely on themselves, not on the position of outside investors and the banks.

Simply put, the entire recession of the last two years can be put down to overspending. Not overspending, while seemingly unknown to the investors of 2008, is the key to avoid personal or business bankruptcy.

Money Management for Parents: Managing the Costs of Raising Children

While generally considered a worthwhile undertaking, having children comes with a big price, quite literally. And without proper preparation and care, managing the costs of raising children is almost impossible.

Here are some money management ideas for parents to ease the financial pinch and help ensure the family’s future.

Plan Household Budget

The best way to plan and keep track of family expenses is by planning a household budget. List the family income, expenses for essential items and extras and see if what is earned is more than what is spent and vice versa. If there is more spending than income, make the effort to cut down on expenses and pay off as many debts as possible.

These days, the practice of doing household budgets is made easier through many free and user-friendly online budgeting tools designed to help people start and stick to their budgets. Check out bank websites or try the Understanding Money Budget Planner.

Invest Wisely for Children

As kids grow older, the costs of taking care of them rise, especially if parents are planning to support them through to university. Saving for children’s education does have to start early. While opening a junior savings account is a good start, parents should also look into non-cash investments such as bank shares or managed funds for the children’s future.

Investing in quality shares for the long term actually smooths over losses that may have occurred over the years. So it’s sound investment when it comes to children’s education, which can take years to complete. Talk to a financial planner about investing for children if possible.

Choose Flexible Investments and Loans

Families with children are bound to be hit by unexpected expenses from time to time. So do choose investments and loans that offer flexibility and allow their investors or borrowers to access them during emergencies. For instance, invest in shares instead of an investment property so that the investments can be sold quickly in a financial emergency or choose a home loan with a redraw facility when there is an urgent need to access the surplus payments.

Have Right and Adequate Insurance Cover

Young families with financial commitments and dependants should always have the right and adequate insurance cover. Important insurance covers include life insurance, which gives the beneficiary a lump sum payment upon the death of the insurance policy holder, and income protection insurance, which can protect a certain amount of the policy holder’s income if he is unable to continue working due to illness or injury. Other insurance policies to consider are private health insurance and trauma insurance.

It’s a challenge managing the costs of raising children. To ease the financial stress, some basic money management skills for parents will help. These include acquiring the knowledge to plan a household budget, invest wisely for children, choose flexible investments and loans as well as have the right and adequate insurance.

Dropshipping and eBay Selling: Sell on eBay With the Help of a Dropship Company

Dropshipping is a way to sell on eBay without having to buy and store inventory. With dropshipping, many of the eBay selling duties, such as shipping, are done by someone else while the profits go to the eBay seller.

Sell on eBay With a Dropshipper

To sell on eBay, some sellers sign up with a dropship company to handle the inventory storage and shipping aspects of eBay selling. A dropship company stores a high volume of retail items in warehouses. The organization of inventory and the packaging of the sold items are the duties of the company rather than the eBay seller.

When an eBay seller signs up with a dropship company, that seller gets access to the dropshipping catalog of items. Those are the items that the seller will then sell on eBay without ever coming into contact with the actual items.

The retail items are listed on eBay by the eBay seller. The description may come from the dropship company’s description if the company allows reproductions of the product descriptions. Most companies also allow members to reproduce their product photos in eBay listings.

Dropshipping for Convenience

Using an dropshipper to sell on eBay means that a seller doesn’t need to purchase a large store of inventory to ship out to customers. Buying an inventory upfront can be prohibitively expensive for many sellers. Many dropshipping companies do, however, require a membership fee to have access to the dropshipping services.

eBay selling with a dropshipper does not require the listing to reveal that the item is being packaged and mailed by a a dropshipping company. However, if the item is backordered and will not be available for 30 days or more, that is required to be included in the listing.

Some eBay sellers choose to disclose the dropshipping situation in case there is a problem with getting the item. Some dropshippers do run out of items periodically, resulting in canceled or delayed sales. This situation can lower a seller’s feedback score because of complaints about late and missing items. For this reason, many sellers choose not to use dropshippers at all.

eBay Selling

Choosing from among the many dropshippers can be difficult because of the glut of competition on eBay. Some dropshippers have so many of their products being sold on eBay that the price competition has eliminated any profit from the sale of the items.

When looking at the inventory that a dropship company has available, look at the eBay competition for the items before signing up with an eye toward eBay selling. If there are dozens of each of the items already on eBay, a seller can easily pay more in eBay listing fees than would be made on the sale of the item.

Balance the Art of Writing With the Business: Leading Agent Tells You How to Combine the Two

Meet the agent

Ion Trewin has viewed the world of publishing from multiple angles. He started his career as a journalist, first on local papers and then with The Times (as literary editor), then moved into book publishing some 30 years ago. He started with Hodder & Stoughton where he signed Thomas Kenneally’s Schindler’s Ark then moved to Weidenfeld & Nicolson to become publishing director. Here he added Alan Clark’s diaries to his list. Recently retired from W&N, he still assists on a consultancy basis but is otherwise preoccupied with writing Alan Clark’s biography and managing the Man Booker Prize in his role as administrator, which he adopted in 2006.

Ion’s Top Tips

This wealth of experience has left Ion in a strong position to determine what makes a book tick, but he is quick to add that there is no winning formula. “There are certain strands that help – it needs to be well written, have good characterisation and a great story, but, honestly? I think there is also an incalculable element of good fortune. I mean, dammit, if we knew what made a bestseller, we’d only publish those and we’d only write them!”

Think Like Your Reader

Ion encourages writers to think of themselves as readers. Why do you pick a book up? What makes you buy it? What makes you want to read more? And also as editors. “You are asking a company to risk their capital on something so for them to take this ‘gamble’ they need to know it will sell.”

Aspiring authors may glean some tips by calling on previous bestselling authors and genres. “Take Graham Greene and John Le Carre, for example, or the Whodunnits? written by Oxford dons,” says Ion. “All are highly intelligent books that respect the intellect of their reader and so there is enjoyment in their delivery, as well as in their content. They make your mind work a little harder and you enjoy them all the more for doing so.”

Diarise?

Ion is also attracted to the diary format. Aside from Alan Clark, he previously worked with James Lees-Milne’s diaries and John Colville’s Fringes of Power. “Diaries are a very English form and I was intrigued by the technical aspects involved in editing them. I grew a confidence in the genre so that by the time I came to bid for Alan’s memoirs I didn’t have the slightest doubt that they were going to be a success – although the level may have been greater than what I’d anticipated. They were well written, revealing, and there was an interesting character in the author. I couldn’t think of any ingredients that they failed on.”

Plus, there was that certain something. “Within publishing we are trying to take the art of writing and commerce and centrifuge them,” says Ion. “Sometimes it is oil and water but every now and then you get the emulsion you are looking for and it works – it’s like a chemical reaction.”

Diaries also offer a practical advantage in that they are based on non-fiction. “The strong factual background gives the future interviewer something to talk about,” explains Ion. “This commercial angle is always at the back of my mind.” Indeed, this marketing hook was one of strengths he also recognised in Thomas Kenneally’s novels. Before Schindler’s Ark, Thomas had written Confederates about the American civil war; Gossip from the Forest about the armistice that ended the first world war; and Blood Red ,Sister Rose a novel based loosely on the young Joan of Arc.

Think of the Marketing Plan

Once the first book is a success, the commercial path for subsequent novels is often easier. “If it is an author that wants to write popular fiction, ie, produce more of the same, then you have the basis of a brand,” Ion explains. “If it is a literary novelist they may write a totally different novel the second time round, but you may choose to read it simply because of who they are. But to succeed first time round; you need the reader to feel that excitement, to make their hairs raise on the back of your neck. That’s magical.”

Do you Really Need An Agent?

And of course you need an agent, and subsequently a publisher and sourcing these is no mean feat. Ion stresses that signing with the right agent and editor are crucial elements for a writer. “You’ve just got to get on with somebody. These are the people you will talk to when you are stuck over something. These are the people who will sell your book. Of course, relationships can break down in both directions; they are not finite, but the more you can limit this through your initial choice, the better.”

How do you Get Signed?

Before presenting your work to an agent, Ion advises you to be extremely tough on yourself. Write a proposal and give it to a few people who don’t know anything about the subject. If they are not excited ask them why. “Don’t be proud,” he says. “You want the opening page to sing to you. That’s the kind of thing that matters. If it doesn’t it is probably going to fail.”

After decades of nipping and tucking, Ion has now embarked on his own writing project, namely Alan Clark’s biography. The idea grew out of Ion’s continued work on the politician’s diaries following his death in 1999. Having spent years selling and editing books, Ion is understandably tough on himself: “You don’t realise when you are tackling a life how many by-ways there are and you can’t tackle everything. There are the diaries, which cover the last 37 years of his life, and then there are 40 years before that. I needed to make decisions about how to cover both. To not only choose what to include, but – often more importantly – what to leave out. It’s fun to tell what you think will be a familiar story, then write ‘Actually, reader, it happened like this…’

Great Colleges for Business: Five Schools That Offer Outstanding Programs for BBA or BBS

A major in business will consist of multiple branches. Students will usually have the option of majoring in business with an emphasis in a specific field. Examples of fields include accounting, finance, international business, management, administration, and marketing.

This article will focus on undergraduate programs that have excellent programming in the broad perspective of business degrees.

The University of Texas at Austin-McCombs School of Business

Rated number six by U.S. News and World Report and number ten by Business Week, the McCombs School of Business excels in delivering an outstanding business program. Students have an opportunity to major with an emphasis in accounting, engineering route to business, finance, international business, management, management information systems, marketing, or supply chain management.

Besides offering excellent faculty the college also provides students with activities to heighten their college experience. Each student must complete at least one internship to graduate, which may include working with some of the largest and well-known businesses in the United States. Other activities include 33 business related student organizations, leadership program, Brass Ring Program, competitions, and study abroad programming for business specific majors.

Case Western Reserve University-Weatherhead School of Management

Considered a David among the Goliath business colleges, Weatherhead provides an intimate setting for students. Five hundred students make up the school with each studying either accounting, management or economics. Minors are available in accounting, economics, entrepreneurship, finance, and marketing.

The school has developed partnerships with companies such as GE, IBM, Intel, JPMorganChase, and Rosetta for student internships. Additionally, students can participate in competitions, conferences, student associations, and five different study abroad opportunities.

Wake Forest University-Schools of Business

Wake Forest provides students an opportunity to major in accounting, business and enterprise management, finance, and mathematical business. The school’s site boasts that 90% of the business faculty holds a PhD or doctoral degree, 35% of business faculty serves on a company board of directors, and 38% of business faculty have experience running their own company.

The school emphasizes a global perspective, so students are provide opportunities to study abroad in Beijing, Nepal, and Moscow. Around 40% of undergrads study abroad. Additionally, students who study on campus can expect a class size of 24, internship placements, and competitions like the Elevator Competition.

William & Mary-Mason School of Business

Mason appears to be just one of the top business schools for undergraduates; however, the school offers student something special. The school allows student to create an Individual Program of Study (IPS). Aspects of the program include:

  • Opportunity to study more than one business discipline
  • Combine a business degree with another type of major
  • Participation on a study abroad program
  • Inclusion of internship(s)
  • Research participation
  • Additional leadership experiences

The IPS program allow student to design a business major according to their own needs. Instead of following a pre-existing business major curriculum, the student creates their own using available classes, mentors, research, and outside opportunities.

Northeastern University-College of Business Administration

Northeastern provides students an amazing opportunity called the Co-op program. Undergraduates study in the traditional sense of the classroom. They are then given the opportunity to leave the classroom for a time and enter into employment to practice what they have learned. This occurs continuously throughout the undergraduate experience. Students switch employment to observe and learn multiple aspects of the business sector.

Overall, a business major can consist of multiple aspects. Students who wish to pursue this major should look for a college that meets the student’s expectation of what business means to them. Each college has unique programming outside of the classroom, so students can easily find a college that offers individualized or multiple opportunities to learn facets of business.

Tracking Business Expenses: Organizing Yourself to Survive IRS Audits

Taxpayers should claim every deduction to which they are legally entitled when they complete their tax returns every winter. As keeping up with the tax law changes can be almost a full-time job, many taxpayers rely on their tax professionals to notify them of what is and is not deductible. Sometimes, due to the timing of communications, things get lost. However, if taxpayers keep good records, isolate the way in which they pay their business expenses, and record their business income, they will not only get all their deductions, but will have written their own IRS Audit Survival Guide.

This article is designed to provide self-employed taxpayers a general structure for organizing their records. Future articles will provide examples and explanations of expenses of which self-employed taxpayers should be aware.

Tracking Business Expenses—Keep Those Receipts!

It is important to know which expenses are deductible for business purposes and/or personal purposes (such as real estate taxes—but not on the same property) and which are deductible only for business purposes, such as non-mortgage loan interest. The second part of tracking business expenses is knowing what type of documentation (receipts) the Internal Revenue Service believes supports a specific type of deduction. The first line of defense is always, practically speaking, receipts, receipts, receipts.

However, an IRS examiner may accept canceled checks or a debit card transaction as proof of a business expenditure, particularly if the taxpayer keeps the business account separate from the personal bank account. The taxpayer may have to point out to the IRS examiner that the account is used only for business, but that is a minor effort.

Keeping only the business transactions does require transferring funds to one’s personal bank account to pay the rent or mortgage and making sure neither account overdrafts. But it is a small inconvenience if it allows a taxpayer to sail through an examination with no change to the tax return. Credit cards used in the business should be treated the same as bank accounts, restricted to business use.

Smaller, easily faded receipts can be grouped by vendor and purpose, placed in date order, and then totaled. The adding machine tape should be stapled to them and should have written on it, in ink, the year, the dollars spent total and the expense category (or purpose).

Maintain a Separate Bank Account for the Business!

And keep those bank statements! The IRS also looks at the bank account for income verification and reviews deposit slips for cash back. If the deposits total more than the income reported on Schedule C, they will ask why. Well-documented deposit slips with, or detailed logs of, the source of all funds deposited work well. “Cash back” entries are added to the total deposits less loan proceeds, transfers, and cash infusions from one’s personal bank account to determine income. If everyting is well-documented or listed somewhere, the sailing should be good.

Keep a Long-Term File

Some business expenses span over more than one tax year (e.g., loans, mortgages, vehicles, office furniture). The acquisition, repayment for (if a loan is involved in the acquisition) and disposal of these items are relevant not only to the tax return prepared at the time purchased, but subsequent tax returns also.

Taxpayers should keep a separate “semi-permanent” file for vehicle, equipment and office furniture purchases, as well as loans on the business side of their finances and for home purchases and stock transactions on the personal side. This separate file should contain all the purchase agreements, bills of sales, UCC financing statements, all other loan documents, and all titles and registrations showing legal proof of ownership. Keeping a separate file for these items is an administratively effective way of having the information readily accessible for each of the years it may be needed.

Contracts with contractors often span more than one year and these also should be kept in a separate, always easily accessible, file at tax time. Home and mortgage papers, along with property tax records, and stock transactions should be kept in a personal file, again, always easily accessible at tax time.

Consider Scanning Documentation—Avoiding Faded Receipts

With today’s technology, taxpayers can scan their receipts and well-notated deposit slips—because they often fade and are also easy to lose or misplace. Scanning is wonderful! A flash drive with the entire year’s documentation can be safely stored in a safe deposit box or other place of a taxpayer’s choosing. With today’s technology, a taxpayer can organize its tax documentation easily by type: Expenses, Income, Long-Term Items.