In anticipation of tax time MyCity4Her Media caught up with a busy Tammy Schneider, CPA and head of the Women in Business practice at Glass Jacobson and asked her to share some “Straight Tax Talk & Accounting Need to Know for Women in Business”. To listen to Tammy on MyCity4HerRadio click here.
Complex terminology and a plethora of different statements make accounting appear incredibly difficult, at face value. Below Tammy breaks down some of the basics for women in business, female entrepreneurs and decision makers should be aware of, in the hopes of helping them feel more comfortable with accounting tasks at hand. She discusses tax planning, double taxation, auditing, and financial reporting.
- Tax Planning: The most important thing in regard to tax planning is to plan ahead. Proactively review the financial situation, make plans for projected balances and taxes, and find ways to minimize tax liability ahead. If a business or individual is facing capital losses, selling stocks or other things of value can minimize liability. Planning early also allows for time to communicate changes—a change of job, new real estate, additional dependents, and more that may qualify for tax breaks. The benefits of planning early, beyond time to ask questions and make helpful projections, also fall on the side of the accountant. If you submit paperwork early on, it is more likely that your review will be completed with time, care and effort.
- Double Taxation: Many business owners are confused by the concept of double taxation—why am I being taxed twice? C corporation’s themselves are taxable entities, making double taxation possible, as the individual who receives the money is then taxed again.
- Auditing: What happens when a company or individual is audited? What prompts an audit? An audit begins with a letter of notification in the mail, generally based on red flags like a significant increase or decrease of cash flow, or on largeness of a business. The two types of audits are:
- Internal Revenue Service (IRS): The IRS audits less than two percent of individual taxpayers, which are usually prompted by unusual red flags in tax returns.
- Financial Statement Audit: As a business grows, it is more likely to be audited. The main sources of concern for business audits are lenders and contracted work. CPAs go through financial records and test them to confirm that they are materially correct and that no contractors should actually be listed as additional employees.
- Financial Reporting: Financial reporting is important to understand so that it can be utilized in management decisions. The two most popular, easiest to put together, and most useful reports are as follows:
- Profit/Loss Statement (Income Statement): This helps determine if a revenue stream actually generates money, is losing money, or if too much is being spent on a given stream. This statement covers a period of time.
- Balance Sheet: A balance sheet is a snapshot of a business at one specific period in time. It lists what is owned, what is owed, and what is the difference between the two through lists of assets, liabilities, and equity.
It is important for individuals and business owners to understand these basic concepts and reports to manage finances wisely. Projecting cash flows and measuring against these statements can be extremely useful in making management decisions.
QuickBooks Pro
QuickBooks Pro is a program that helps track financial history in the most efficient way possible. It can be utilized on the computer or in the cloud, which each have individual benefits. The computer offers a few capabilities that are minimized in the cloud, while the cloud offers the flexibility to use online from any location. It is important to be a little numbers savvy to use QuickBooks Pro most effectively, so if you are uncomfortable with numbers, it is wise to outsource to a bookkeeper to ensure things are done properly.
About Tammy Schneider & Glass Jacobson
Tammy Schneider is currently the Senior Manager of the Director of the Women in Business Practice at Glass Jacobson, where she joined in September 2007. She has worked in public accounting since 1996, with a focus on business management. She received her BA in Computer Accounting at Stevenson University, is a certified QuickBooks Pro advisor, and is a member of the AICPA and MACPA.
Glass Jacobson’s team of financial experts can help you determine what these ratios mean to the future of your business, and point you in the right direction when it comes to decisions that will affect the outcome of these ratios and your bottom line. Meet our team, check out what services we offer, and contact us for more information.
If you would like more information, or to work with Tammy in the future, please visit her website at www.glassjacobson.com.