It’s that time of year where every business is getting update calls and questions from their tax professional. But if you’ve just recently launched your business, here are 3 items you must know and ask during Tax Season.
1. I work from home – can I use the workspace as a deduction?
According to Craig Fortin, a tax specialist for small businesses, well … maybe. “Is it exclusive use? That's the 1st question to answer. If yes, then you probably can. Don't forget to include all utilities and maintenance costs to maximize the deduction. Also if you have a direct expense such as a built in desk or bookshelf you can take 100% of that expense."
2. What is a direct expense? How is it different than a capital expense?
To answer these questions, says Fortin, you need to look at the period of time or use. “If it's copy paper it's reasonable to "expense" that directly as you would likely use that up within the tax year. Also, it's inexpensive and capitalizing it just wouldn't make sense. If it's furniture,” said Fortin, “that will not be ‘used up’ within the year so that would be capitalized or expensed over its lifetime. IRS has guidelines for these assets. Finally, capital assets often can be expensed using Section 179 of the IRS code. That means even if you would normally depreciate an asset over several years you may be able to expense it directly. This can often provide large, immediate tax savings. For instance one of my clients purchased a piece of equipment in late December for almost $50,000. He was able to deduct the full cost even though the "useful life" according to the IRS is 5 years.
3. What can I do this year to make my tax picture better next year?
Fortin recommends that you ask your accountant that question now as he or she is preparing last year's taxes. “Make sure and be upfront with your plans,” he said, “even [consider] what's going on in your industry and individual business.” He goes on to recommend that you talk about personal plans and concerns too as they are so closely intertwined with your business. “If you are having a hardship bring that up. Don't be afraid to own it. You may be surprised by the wealth of knowledge (or lack thereof) that your accountant has. I spent many years as a banker lending to small business owners before starting me tax practice so I have seen many different companies resolve their problems in ways I may not have thought of.”
If you have just recently launched your business, and you’re overwhelmed with the operational tasks – we can help. Contact us today at 619-252-6518 or click here to request more information.
At the start of 2017, employees of businesses within the San Diego city boundaries became eligible for a minimum wage increase to $11.50 per hour. In our last post, we reviewed what was required from businesses and non-profits alike to comply with the new regulations. What most of the public may have overlooked (it didn’t really get much press) were the new regulations for the Earned Sick Leave ordinance. Fortunately for business owners, this part of the regulation put forth by the successful passing of Proposition I is relatively straight-forward. So, to avoid any tragedies of Shakespearian proportions in your business, you will want to make sure you understand the new rules.
First, per San Diego law, businesses (big, small, or non-profit – no exception) are all required to provide earned sick leave for everyone; specifically this includes:
· Salaried Employees
· Part-Time or Temporary Employees
· Minors who are employed
· Employed Undocumented Workers
Businesses can use two methods to award Earned Sick Leave to their employees: the accrued method or the “front loading” method.
The Accrued Sick Leave Method
According to the San Diego city Earned Sick Leave and Minimum Wage Program, accrued sick leave occurs by:
· Employees accrue one (1) hour of sick leave for every thirty (30) hours worked.
· Unused accrued sick time must be carried over to the next benefit year
· Usage can be limited to 40 hours per benefit year
· An employer may cap an employee’s total accrual of earned sick leave at eighty (80) hours.
The “Front Loading” Sick Leave Method
The Front Loading Method seems a little easier to manage. According to the city of San Diego, “an employer may satisfy the accrual and carry over provisions of the ordinance if no less than forty (40) hours of earned sick leave are awarded to an employee at the beginning of the benefit year.”
Two additional details to consider:
· There is no pro-rating allowed for any employee who may be hired part way through the benefit year
· Carry over of unused hours is NOT required when using this method
One last word on the methods your business may use: if your business offers a Paid-Time-Off (PTO) Plan that offers a BETTER benefit to employees, than you will be considered in compliance with the new Earned Sick Leave law. This is true even if your company uses a completely different calculation method, payment of, or use of earned sick leave or other paid time off.
Using Earned Sick Leave
Of course, the guidelines don’t stop at accrual; it includes how the earned sick leave is actually used under the new ordinance:
· For an absence of more than three (3) consecutive work days, an employer may require reasonable documentation regarding use of earned sick leave.
· Employers may also require reasonable notice of the need to use earned sick leave
· Employees may use earned sick leave for a variety of reasons including:
o Physical or mental illness
o Injury or medical condition for self or family member
o Safe time
The new Earned Sick Leave and Minimum Wage Ordinance requires a great deal of attention, monitoring, and administration. If not implemented and administered correctly, it could become a drain on your small, mid-, or large business, or non-profit. It is absolutely critical to create and install the proper systems and processes so that your business remains in compliance.
If you’re having a difficult time establishing a system or process around the new ordinance, contact Business Bridging Solutions today.
Complete the form on this page, or contact us at 619-252-6518.
Demystifying San Diego’s Minimum Wage and Earned Sick Leave Ordinance
Over the past 12 months, the issue of minimum wage rates has dominated local, state and national headlines. While the national debate continues, California was ahead of the curve with Senate Bill 3 (SB3) in April 2016. San Diego wasn’t too far behind, with their version of minimum wage rate increases passing in June 2016. This puts San Diego and its surrounding areas in a little bit of a conundrum: Which guidelines does a business have to follow – city or state? How does it affect businesses with multiple locations both inside and outside of the San Diego city boundaries? And what is the deal with the Earned Sick Leave portion of this San Diego ordinance?
Not to worry – BBS is going to clear up some of the confusion in a two-part blog post. In Part 1 (this post), we will take a look at the competing minimum wage rules between the city of San Diego and state of California, answering some of the more pertinent questions that businesses might have. In Part 2 (our next post), we will tackle the Earned Sick Leave rules.
It’s difficult to know how to start this whole conversation, so we are going with a chronological approach as it seems to be the easiest way to determine how it might affect businesses. In April 2016, Governor Jerry Brown signed Senate Bill 3 into law, which is designed to increase the state minimum wage each year so it hits $15 per hour by 2022. The state did take into consideration small businesses, including a provision that if your business employs 25 workers or less, you could delay the scheduled minimum wage increases by one year.
Soon after, on June 7, 2016, San Diegans adopted Proposition I, the Earned Sick Leave and Minimum Wage Ordinance. It officially became effective on July 11, 2016, raising minimum wage to $10.50 per hour. This requires any business in the San Diego city boundaries to adopt these minimum wage increases. As of the beginning of 2017, San Diego businesses must increase the wage to $11.50 per hour. Future increases won’t take place until 2019, and more than likely mirror that of the state’s timeline for increases. (Be sure to request a copy of the minimum wage reference card at the end of the post.)
HOW IT ALL WORKS
First, the easy part of the equation: if you are outside of the San Diego city boundaries, you follow the CA minimum wage increase schedule. Remember, if your business employs 25 workers or less, than you can delay these increases by a year.
If your business location resides inside the city boundaries, then you must comply with the new Earned Sick Leave and Minimum Wage Ordinance.
If you have multiple business locations (maybe you’re a restaurant chain for example) within the region – some inside, some outside of the city boundaries, then you get to have all the fun. For those locations outside the city boundaries, you must comply with CA wage increase guidelines; for those location inside the city boundaries, you must follow San Diego city minimum wage laws.
WE KNOW WHAT YOU’RE THINKING…
(AKA, the “Don’t Kill the Messenger” portion of our post)
Q. What if my business has its headquarters in South Bay, and another location inside the city boundaries? Aren’t I exempt from the city ordinance?
A. No. You’d be required to pay minimum wage workers in the headquarters at the state mandated wage of $10.50 per hour, and the workers at the location inside city boundaries at the mandated $11.50 per hour rate.
Q. What if my business is located in Solana Beach, but I have employees who make deliveries and do other tasks inside of San Diego city boundaries?
A. For any task performed inside of city boundaries, regardless of business location, employees must be paid at the San Diego city mandated rate of $11.50 per hour.
Q. REALLY??! How am I supposed to keep track of that???!!!
A. The city really doesn’t offer much in the way of guidance here, only that you comply. Our recommendation: document, document, document. When in doubt, confirm to employees and obtain confirmation from employees via email the task being performed and the expected amount of time it would take to complete the task being performed inside San Diego city boundaries.
Q. How can I confirm if my business is within the San Diego city boundaries?
A. The city has provided a way to verify if your business is inside the boundaries. Just enter your address on THIS PAGE, and if your business falls within the highlighted city boundaries, congrats, you’re within city boundaries.
KEEPING SAN DIEGO BUSINESSES IN COMPLIANCE
In a meeting last week, we were able to get clarification around a number of items related to this new ordinance. San Diego city representatives are spending a lot of time reaching out to business owners in an effort to educate them on these new changes. We learned, for example, that enforcement efforts would be passive…meaning, it would take a complaint to initiate any sort of formal investigation. We learned that this new office of Earned Sick Leave and Minimum Wage has no revenue goals (at least not yet), and that they would give business owners ample time to correct any errors to get into compliance should any mistakes take place. This would happen before any official actions take place.
The second part of this meeting provided us with more information on the Earned Sick Leave provisions of Proposition I. We will share our breakdown of this element in our next post.
TO REQUEST YOUR COPY OF THE
MINIMUM WAGE REFERENCE CARD,
There is a scene in an early part of the film Swingers where the two main characters played by actors Vince Vaughn and Jon Favreau argue while one plays a hand of black jack. Favreau was just dealt an 11, and Vaughn is urging him to double down (double your bet) because, “you always double down on an 11.” Sure enough, Favreau loses the hand. The scene is a metaphor for where Favreau’s character is at this point in life … even though things weren’t going so well, he went all in … showed signs of confidence that it would all work out. And even though the hand was a bust, by the end of the film (Spoiler Alert), he got the girl, and things were looking alright for him.
It was the spring of 2010, and the country was still caught in the downward spiral of the economic recession. For us, it began to hit on the home-front. Elisa had been working in the healthcare industry, and each week her department was receiving orders to make cuts. In other words, layoffs. It was a crazy time that saw her having to deliver bad news to employees through three rounds of layoffs. And then it happened.
One late Thursday afternoon, her supervisor called her into his office. After a three week period of having to tell employees they no longer had a job, she received the very same news about her own position.
We both have had to lay-off or fire people in our career and to be blunt, it always sucks. But to let a handful of people go only to be told you’re out of a job too – it’s a sickening feeling.
“I want to make the decisions; I want to make the calls in my career from now on,” Elisa said later that evening. “I can help other people, and have a little more security. No one is hiring right now any way.”
Defiantly, Elisa put some thoughts together and came up with a game plan. But initially, a name for the business still eluded her. It needed to be simple, catchy and explain a little of what and why the business existed. She wanted to help business owners bridge the gaps in their business models, examining the day-to-day operations to help them improve and become more profitable.
We batted around this idea for days. Then early (reeaallly early) one morning, she sprang up in bed and excitedly proclaimed "Business Bridging Solutions!" Despite the early time (it was before 5 a.m. folks), the name was indeed a winner.
And Business Bridging Solutions, which we lovingly call BBS, was born: a consulting firm that helps small businesses build a bridge from one milestone to the next.
Fast-forward six years later (almost to the week), and I receive an announcement that is sure to shape the next 6 years of our business, and our family life. My fulltime position, along with many others, at a local college is gone. The school – a victim of increased regulatory burdens and decreasing enrollments – is closing its doors for good. History eerily repeating itself. Deja vu all over again.
It wasn’t even a conversation – I had been working in/on BBS with her in my spare time for a number of years. Now, after a brief 30-minute chat, we knew in our heart what was the only choice for us: this was now our reality...time to fully embrace our skills, our plan and our vision.
Which brings us to our why:
Elisa has been working directly with small business owners for over 5 years now. And I have been teaching small business courses, having written much of the curriculum for an Associate Degree program over the past two years. Small Business represents a significant contribution to the U.S. economy. Despite the well published fail-rate of small businesses, we are in the midst of a blossoming independent or gig-economy. According to a recent post on political blog The Hill, “the United States has 30.2 million full- and part-time independent professionals who contribute $1.15 trillion in revenue to the economy each year—a figure equivalent in size to the GDP of Mexico. Self-employed professionals work in a wide variety of industries—nearly every field available—they are everything from doctors and lawyers to real estate agents, business consultants, graphic designers and other creative professionals, and more.”
We believe that these professionals are vastly underserved, and that we could help them navigate the waters of small business ownership. Simply put – we strive to be advocates for our clients, helping them build a bridge from one milestone to the next.
In reviewing the last six years, we realize we are doing the same things for ourselves too. Like the two characters in Swingers, we are pushing our chips to the center of the proverbial table: it is time to double-down on BBS. It’s exciting. And nerve-wracking. And strangely calming.
The funny thing is, we know we aren’t doing it alone – perhaps that’s why we both feel so amazingly at peace about this step. We know we are going to have a lot of help.
So let’s build this bridge together.
If you are a small business and looking for help in achieving your next milestone, please contact us for a free consultation - we'd love to help.
Simply fill out the 'Request Information' form in the right column!