A comfort level of trust, confidence with an accountant is a must

A comfort level of trust, confidence with an accountant is a must

December 21, 2014

Q: How can I find accounting help I can count on for my small business?

A: Many responsibilities come with being a small business owner, and every one is critical to maintaining profitability and promoting growth. You can't risk letting a deadline slip or overlook an administrative requirement, yet there are only so many hours in the day to get things done.

To ensure you stay focused on the most important things, it may be a good idea to transfer some routine chores. Even though accounting software programs have simplified the process of bookkeeping and tax preparation, someone well-versed in this area can spot trends or problems you might miss. And the more complex your needs - preparing financial reports, invoicing, payroll - the more time-consuming accounting becomes.

If you decide you need the skills of an accounting professional, the American Institute of Certified Public Accountants can help. The "For the Public" section of the AICPA website, www.aicpa.org,offers guidance in selecting the right CPA for your small business, including a searchable directory of AICPA member firms.

Fees vary greatly among accountants, depending on location, expertise, and services provided. Some firms will provide bundled services for a flat monthly fee, but may charge less for bookkeeping and other tasks that don't require CPA-level training. If you are considering a larger accounting firm, make sure you meet and get to know the people with whom you will be working. As with any business relationship, a comfort level of trust, confidence, and communication with an accountant is a must.

If you're not sure you need a CPA, a professional bookkeeper may be the right choice. The free online "Bookkeepers Hiring Test" from the American Institute of Professional Bookkeepers (www.aipb.org) can help you assess candidates' qualifications.

Other good sources are the membership directories of your local chambers of commerce, particularly if you need an accountant or bookkeeper within your geographic area. Most chambers have searchable directories on their websites showing their members by business category, including accounting.

Can I write off start-up costs?

Q: Can I write off the money I’ve spent to research and prepare to startup my new small business?

A: Yes, you can claim tax deductions for, i. e., “write off,” amounts incurred in connection with investigating, creating or acquiring an active trade or business before you begin operating.  But the tax and accounting rules for startup costs are complex, so you should consult with a CPA.

For tax years beginning in 2010, you can write off up to $10,000 in startup costs and another $10,000 in organizational expenses in the year that you start your business. These deductions are reduced if you have more than $60,000 of either type of expense.  Any costs over the $10,000 limits will have to be amortized, or spread out, over 15 years.

Sound like a long time to have to wait to get the full benefit of a startup deduction? It is. But most small business startups typically don’t have much more than $10,000 in total pre-opening costs and can live with these rules.

Startup and organizational costs incurred by new businesses are generally treated as capital expenses. Therefore, they need to be amortized, that is, part of the cost is “written off” in each of a number of years.

Startup expenses include such things as the cost of travel, trade shows, educational or training seminars, consulting fees, building costs, and supplies or materials needed to get your business started (not inventory or raw materials).

Organizational fees include the costs relating to forming or creating the business, such as, fees paid to obtain licenses, and accounting or attorney fees paid to form a legal entity for your company.

But, from a tax standpoint, when does your business actually begin? You can be in business if you are ready to accept customers. The actual event that triggers you being in business will vary by the type of business and your own personal way of operating.

You don't have to have customers or made a profit to be in business, but, if you don't make a profit in three out of five years you could trigger the hobby-loss rule and face restrictions on your startup tax deductions.  Review your situation with a good tax pro.

In any event, it should be clear that, for those investigating or starting up a business, it’s important to keep good records of your costs or you will have difficulty recovering all of them.