'Tis the Season to Give ... Wisely!

volunteer group hands together showing unity

December is a great time of the year for your company to make a donation to a nonprofit in need or a charity of your choice. Not only will your company get a tax write-off; your employees will also share your spirit of kindness and generosity.

It’s always a good idea to familiarize yourself with IRS guidelines for year-end gifts to charity. Here are the highlights that apply to individuals and businesses:

Clothing and Household Items: At this time of the year, many companies hold coat drives and/or organized efforts to give to nonprofits. According to the IRS, clothing and household items donated to charity generally must be in good used condition, or better, to be tax-deductible. If you claim a deduction of over $500, it does not matter what kind of condition the goods are in, as long as you include a qualified appraisal of the items with your tax return.

Donors must get a written acknowledgement from the charity for anything worth $250 or more, with a description of the items contributed.

Monetary Donations: The IRS is very specific about cash contributions with regard to bank records and payroll deductions. The most important requirement is to obtain an acknowledgment from a charity for each deductible donation – money or property – of $250 or more.

  • A taxpayer must have a bank record or a written statement from the charity to deduct any donation of money, regardless of the amount. The record must show the name of the charity, and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date and the amount paid. Credit card statements should show the name of the charity, the date and the transaction posting date.
  • Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or another document furnished by the employer, showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

Beware of Scams

This may be a charitable time of the year, but it’s also the time of the year to watch out for scams. You may, for example, get a phone call or email from a charity that appears to be legitimate, yet may not be. The best advice I can give is to thoroughly check out every charity before you contribute. For example, ask the caller for the phone number and call the charity back to ensure it actually exists. If the caller refuses to give you a phone number, then you probably will know that there is something not right about the call.

If you have a specific question on charitable donations or other bookkeeping matters, call us at Sound Business Services for advice. We’re here to help!

SBS Client Profile: Terry Phillips

Terry Phillips

Terry Phillips

In the first of a series of client profiles, I recently sat down with Terry Phillips who has his own firm in Atlanta, Terry Phillips Firm Inc. Here is what Terry had to say about his background, business focus and what he gets out of the SBS relationship.

Jonathan Bill: What is the name of your company or organization?
Terry Phillips: Terry Phillips Firm Inc. is our official name. We do business as Phillips-Firm.

JB: Do you have a website?
TP: No, we don’t. All of my work comes from referrals, rather than the Internet, but I may get one at some point.

JB: What does your firm focus on?
TP: We offer state and local tax consulting.

JB: What is your target client or target market?
TP: My target market is the Fortune 1000. I currently only have 6 clients, and they are all top Fortune companies.

JB: Are you currently accepting new clients?
TP: Yes.

JB: What sets you apart from your competition?
TP:
I’d say two things. First, experience. I’ve been doing this since 1982. Second, the references I can pull out. A lot of very large companies in the U.S. know me. I have had engagements over the last 30 years with probably 80% of the Fortune 500. You meet a lot of people along the way and get to know them. I have one client that’s been a client since 1992, and another since 2002. In today’s world, that’s a long time.

JB: When did you first engage Sound Business Services (SBS)?
TP: We started around November 2010. I found you on the Internet. We basically interviewed each other to see if the client relationship would work.

JB: Why did you engage us?
TP: To keep our books in order. I understand now how very important it is to keep timely books and records. It saves me a lot of money on taxes, and gives me the ability to see the areas in which I’m spending too much, all for a reasonable price. Because of that, I don’t have to hire an employee.

JB: What services does SBS currently provide for your company?
TP:
You basically do my books once a month. It really means so much. I can go in there and see how much I’ve billed and collected, my costs of goods sold, and what my profits are at any time of the year. Overall, it’s just like renting a bookkeeper. You do my W-2s, a P&L, payroll, a detailed general ledger and more. I send my files over to my tax accountant, and boom, my returns are done. It’s really nice at year-end to be able to have all of my records completed and up-to-date at the time I need them.

JB: Please explain the difference that SBS has made in your company.
TP: Jonathan – you have been a godsend for what you do for me, which allows me to do my job. Before you, I was spending the majority of my time keeping up with my books and learning QuickBooks. Now, it’s automatic. The fees for your services are very reasonable. Even with my business one-third of what it used to be, I would use you every time. It’s helped me that much.

JB: Thanks Terry!

 

5 Year-End Must-Dos by December 31

It’s that time of year when most of us are focused on the holidays … office parties, wrapping gifts and getting ready for a joyful season. That’s great, but you also should devote some of your time to what I call several year-end “Must-Dos” that will help you wrap up 2015 and get you ready to meet with your accountant.

In no particular order, here are my 5 recommendations:

  1. Have W-9s on file for all potentially eligible 1099 vendors. The W-9 helps you determine whether you need to send your vendors a 1099 in January, but it will also provide the information you will need to prepare your own 1099s, if it is determined that your vendors are eligible. Not sure which ones are eligible? Let Sound Business Services file your 1099s for you. We have been preparing and filing 1099s for 9 years and are up to speed on all the latest laws, such as the new 1099-MISC filing requirements.
  1. Account for health insurance premiums. If you have an S corporation and are a shareholder of 2% or more, make sure that any health insurance premiums for you and your family that your corporation has paid for directly, or reimbursed you for personally in 2015, will be included on your W-2 for 2015. If these premiums have not been included in your payroll up to this point, you will want to include them before the end of the year. Not sure how to do this? We would love to help. Give us a call today and we will help you learn how to do this. Sound Business Services provides top-notch payroll services and would love to talk with you about the difference we can make by processing your payroll in 2016.
  1. Count your inventory. If you have inventory as a company – even if it is only a small portion of your business – do a physical count of that inventory on or around 12/31 so that your book balance can be adjusted to actual.
  1. Make large purchases. If you are considering making a large purchase, such as buying computers, office furniture or other assets – especially if you expect to have a large tax liability for 2015 – you may want to consider making that purchase before year end. However, before you do, be sure to check with your accountant to see how much of the purchase, if any, can be deducted on your 2015 tax return.
  1. Record your ending mileage. Although it seems like a small thing, be sure to record your ending vehicle mileage for 2015 on or around 12/31/15. This will help you properly calculate your personal and business mileage for 2015. Now is also the perfect time to make sure that your business mileage log for 2015 is up to date in preparation for your 2015 tax return.

Bonus Tip: Make sure that your books are up to date and accurate. Unfortunately, most people think about their books only when they go to file their tax return, but at that point, most bookkeepers and accountants have very little availability to review your books. Now is the time to make sure your books are up-to-date and accurate. Sound Business Services has provided bookkeeping services for almost a decade and would love to help you and your organization be ready before tax season hits.

Have a safe and happy holiday!