Archive for January, 2013

Above & Below the Line Tax Deductions for the Self-Employed

Thursday, January 31st, 2013

If you are a self-employed business owner you are entitled to the choice of taking a standard deduction that regular W-2 employees receive or the choice of itemizing your tax return.

Itemizing a tax return may or may not be the way to go for some that are self-employed taxpayers, as it isn’t a guarantee that this route will yield the lower taxes of the two options. Not to mention it’s a lot more work to prepare an itemized return.

1040 u.s. individual income tax return form and fountain penBoth of these options are known as ‘below-the-line’ deductions because the amounts are listed below and subtracted from the ‘adjusted gross income’.

Above-the-line deductions are subtracted from ‘gross income’, which is entered on the top line of the 2nd page of a tax return. These deductions lower the gross income that is to be taxed, and the resulting number is known as the ‘adjusted gross income’.

There are limitations to amounts in below-the-line deductions, and therefore above-the-line deductions are more advantageous deductions to taxpayers. Above-the-line deductions are available for all taxpayers.  Self-employed business owners should include all applicable above-the-line deductions in their tax returns, regardless of whether they opt for the standard or itemized below-the-line deduction.

All business expenses are above-the-line deductions that can adjust gross income to a point that the self-employed taxpayer is entitled to additional below-the-line benefits.

Just about any expense incurred by a sole proprietorship or self-employed taxpayer qualifies as deductible. These expenses can include rent, utilities, office supplies and equipment, insurance, and legal fees.

While any self-employed taxpayer can fill out the Schedule C to take advantage of all above-the-line deductions on their own, simple mistakes draw red flags from the IRS. It’s advised that self-employed taxpayers seek the assistance of a CPA with above-the-line deductions as well as itemized below-the-line deductions.

If you require the assistance of an accountant, give us a call. We have a network of accountants that would be happy to ensure that your taxes are prepared and filed accurately.


Small Business Tax Savings – Commonly Overlooked Deductions

Tuesday, January 29th, 2013

If you own a small business you are well aware of the effect of taxes on your bottom line. Unfortunately, there’s no getting out of paying taxes, but there are ways to take advantage of commonly overlooked deductions in order to pay less small business taxes.

So, are you taking full advantage of your small business tax deductions?
Here are some areas that some small business owners overlook when it comes to small business tax savings:

Vehicle expenses. The IRS offers a standard deduction in regard to vehicle expenses for small business owners. Opting for the standard deduction may save you time and energy going through the monotony of calculating mileage and gas, but it can cost you a lot in potential tax savings. Of course you’ll have to be very careful about business vs. personal mileage and gas declarations and keeping records is important in the event of an audit. Did you know you can also write off the depreciation of your vehicle? This amount can be significant if your vehicle is new.

Health insurance. Yes, your health insurance is a business expense too. As expensive as health insurance is, especially to those self-employed, it can add up to a nice sized deduction. If you are a small business owner, you can write off health insurance for yourself as well as your spouse and children. This applies if you are self-employed as long as do not have another full-time job that offers insurance, or your spouse’s employer offers insurance to cover the family.

Kids. The IRS gives you a break for the number of dependants, and also gives you a break for hiring your kids for your business. As a small business owner, your children are allowed to earn as much as $5,700/yr untaxed, and you can write that amount off. If you are going to take advantage of this deduction, it’s very important that each has a W2 on file.
Home office. If you work out of a home office, you’re incurring expenses that are eligible for deduction. Phone, internet, and utilities are perfectly reasonable deductions. As with vehicle expenses, it’s necessary to differentiate between business and personal use for these home office deductions.

If you own a small business and need assistance with your small business taxes, allow us to recommend an accountant. We have partners that are accounting professionals, offering a variety of tax and financial services at competitive rates. From business planning to tax preparation to payroll, they will deliver company specific tax savings for your small business. Our accounting partners have helped thousands of small businesses with small business finances and tax filings, ensuring that those businesses get to keep more of what they earn.

Merchant Account Myths – Cash Only is a Thing of the Past

Friday, January 25th, 2013

It wasn’t that long ago that paying by cash and check was the preferred method of payment by most business owners, especially small businesses. Progressive larger businesses, such as department stores, were setting up merchant accounts to make credit card payment options available to their customers as an added service.

However, the credit card processing costs typically outweighed the benefits for business owners that elected to implement solutions other than cash only. Although well received, this service was merely a convenience to their customers and it failed to deliver much value in return.

The times have certainly changed, yet some businesses are still hesitant about setting up credit card processing services. Business owners may have different reasons for continuing to operate as cash only, but here are some common myths and truths regarding merchant accounts:

High Rates & Fees

Myth. As previously stated, this was a concern in the past, but shouldn’t be anymore. For standard low-risk merchants, whether in a brick-and-mortar establishment or online store, rates are very low. Monthly fees are minimal and reasonable.

Expensive Equipment

Myth. Some business owners see fancy, hi-tech equipment that other businesses are using and immediately see dollar signs. Sure, this equipment is a far cry from the old carbon copy machines that take an imprint of the card, but these days technology is cheap. Credit card processing terminals can be purchased for under $300 or leased on a monthly basis. Some merchant account providers will even give away terminals or POS (point of sale) systems to merchants that sign an annual agreement.

Security Risks Too Great

Myth. Of course the Internet and technology increases the risk of credit card fraud, but processing companies have tighter security measures than ever. The latest encryption technology makes it impossible for a thief to intercept and read information in a transaction without the unique decryption key.

Also, major credit card companies like Visa have programs available that will protect merchants in the event  of credit card fraud, limiting the merchant’s  overall liability.

Getting Approved & Set Up is a Hassle

Myth. In the online age, it’s not uncommon for a business owner to forward required documents to a processor and receive approval that same day. Set up is relatively easy and most processors will handle all the major things, such as integrating an online shopping cart. If a business needs a terminal to swipe cards it can be programmed and sent overnight to a business.

Customers Prefer Cards

Truth. Just as it was a convenience to customers in the past, it’s even more so now. People tend to carry less cash and love the simplicity of paying with debit and credit cards. Studies also show that consumers spend more when a credit card payment option is available.

Statistics show that businesses that have implemented merchant accounts on average yield a 30% increase in sales in the first month. If you are a business owner and are still operating as a cash only business, it’s time to set up a merchant account.

If you have questions or concerns, give us a call. We are well versed in the credit card processing industry and help businesses like yours to find the best merchant account solutions for their needs every day.

What to Do if Your Merchant Account Gets Shut Down

Wednesday, January 23rd, 2013

When a business relies solely on a merchant account to process customer payments, having the merchant account shut down can be financially painful. If a business’ account has been shut down, it’s critical to get up and running as quickly as possible to prevent total devastation to the business.

merchant account shut down

Credit card processors have reasons for terminating merchant accounts, and usually do it with little or no warning.

For some businesses, getting shut down isn’t a complete surprise. With excessive charge backs and a failure to settle with customers, it’s rather easy to get terminated. In these cases, businesses may land on the TMF (terminated merchant file) or MATCH list, which can prevent them from being approved for a new merchant account with other providers.

Sometimes a merchant’s business practices will lead to termination. If a merchant does not carry enough funds in their bank account to cover credit card processing fees, the bank immediately questions the financial viability of the business. In other cases, a merchant’s failure to adhere to guidelines, such as maximum monthly processing volume, may be a reason for termination.

In recent cases, some processing companies have simply done a reassessment of the risk involved with certain industries – and then chosen to no longer service those businesses that are part of that ‘high risk’ industry. This has happened to travel service businesses, electronic cigarette retailers and several other industries.

If your merchant account has been shut down, contact your credit card processing provider and request an explanation. Depending on the circumstances, there’s a possibility it can be reinstated quickly.

But if the processor is unwilling to reinstate your account, you’ll need to find another merchant account as soon as possible. Simply being terminated does not mean that you are a high risk merchant and you should be able to get approval from another provider. Collect the past six months of processing statements so that you’re ready to present them to a new processor upon request.

If you’ve been terminated based on risk but do not have excessive charge backs, you should be clear from the TMF. As a merchant selling products classified as higher risk, you will need to find a high risk provider. Getting approved is not that difficult, but as a high risk merchant, you can expect to pay slightly higher rates.

If your merchant account has been shut down and you need some advice, contact The Transaction Group (TTG). At TTG, we find merchant account solutions for all types of businesses throughout the world.


Online Card Processing Tips & Advice

Wednesday, January 16th, 2013

The Internet has made it easy for businesses to set up and offer products and services for sale in a virtually global market. Through an Internet search, customers can find the specific products or services they’re looking for, and then purchase and make fast and secure payments all from the comfort of their homes.

If you own or manage an ecommerce business, your sales potential is limitless. You must, however, have the right credit card processing solution in place. Here are some things you need to know about an online merchant account:

online credit card processingOnline credit card processing differs from that of in-store processing for  one obvious reason; transactions online are non-card present. When a merchant processes a transaction from a customer without seeing the physical card, the transaction immediately carries a higher risk. This is due to the potential for fraud, in which the online purchases can possibly be made with stolen credit card numbers. For this reason, banks mitigate their risks by charging slightly higher processing rates for online credit card processing.

Rates will differ from merchant to merchant based on the products or services that the online business is offering. Businesses in what is known as the high-risk category, such as travel services or adult related services, will pay higher rates simply due to the nature of their business and risk of charge backs by customers.

Rates are different than fees. When setting up the merchant account for your ecommerce business, it’s also very important to be aware of all the fees associated with your account. While some processing companies advertise what appear to be the lowest rates, they more than make up for it with hidden fees.

Typical fees for ecommerce merchant accounts typically include a one-time set up fee, monthly statement fee, a monthly gateway fee, and per-transactions fees. Some other fees to be wary of are “maintenance fees” also know as “merchant support fees” or “customer services fees”. Also, “early termination fees” can prevent a merchant from getting out of a contract without paying a hefty penalty. (Learn about merchant account pricing here)

Setting up the shopping cart and payment gateway is rather simple. The processing company will help you handle this. For the checkout procedure, the processor will typically route your customers from the shopping cart to a secure payment gateway hosted elsewhere.

When a transaction takes place, the payment gateway will encrypt all data, ensuring that the transaction is secure. The merchant can take additional steps, however, to be sure that the card number being used in the transaction is not a stolen number. An excellent security measure that can be taken is matching the location of the IP address to the billing address. It should be a huge red flag if a merchant sees a transaction from an IP address in a different country than the billing address.

It has been estimated that as much as 20% of all ecommerce takes place on mobile devices. This percentage is likely to continue to rise. It’s therefore critical that all ecommerce businesses have websites that are optimized for mobile. Sites that are not optimized run a great risk of losing the sale.

If you have an online business and have credit card processing questions, we’d be happy to answer them. If you’re shopping for rates, give The Transaction Group the opportunity to earn your business.  Chances are we can save you as much as 25% over other processing providers.

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