At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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WORLD NEWS
Oakland-area small business owners rally in support of the suspended police chief… after accusations of favoritism in doling out discipline to officers. Chief LeRonne Armstrong was praised by local entrepreneurs for his response to an increase in assaults, robberies, and thefts aimed at Asian Americans during the pandemic. LeRonne added to the number of police officers on foot and in vehicles, as well as offering his support to a citizen patrol group called the Blue Angels. A series of recent break-ins have exacerbated the community’s desire to resolve the question of who will head up Oakland’s police force.
The National Federation of Independent Business released its new numbers… for the monthly optimism index. In January, the index rose 0.5 to 90.3, up from 89.8 in December. These readings are still both below average for the past 49 years. Analysts found that small business owners have remained cynical about labor and inflation—26% of owners count inflation as the number one obstacle to managing their business, and 91% of owners looking to fill an open role reported dealing with unqualified applicants.
U.S. NEWS
Amazon’s average cut of small business sales surpasses 50%
Marketplace Pulse conducted a study of seller transactions dating back to 2016 to calculate the total cost of selling goods on Amazon. Almost 2 million small businesses sell their wares on Amazon.com. Researchers totaled the commission on each sale, fees for warehouse storage, packing and delivery, and advertising for better positioning on such a popular platform.
Last year, as Amazon saw its slowest sales growth in history, the company also took its largest cut of sales, rising to over 50% in 2022. For the past six years, sellers have seen increases in the amount paid to Amazon, but before the pandemic, this was offset by a steady stream of new customers and booming sales. After lockdown regulations were lifted, online shopping saw a decline, consumers became more thrifty as inflation rose, and therefore merchants became hesitant to raise prices.
Given the lower sales and increased fees, many sellers are now struggling to make a profit. Amazon also benefits from the number of small businesses that rely on its logistics services, which cost an average of 30% less than other shipping companies. The same is true for Amazon’s advertising services, which are optional but considered by many to be essential for drawing in customers.
Last year, Amazon’s profits were owed thanks to their cloud computing business, Amazon Web Services—without this income, Amazon would have posted a $10-billion operating loss. In an attempt to improve business, Amazon cut 18,000 corporate jobs, raised the price of Prime subscriptions, and plans to charge a fee for online grocery orders of less than $150.
Still, increasing costs to merchants—who may make 90% of their income through Amazon—is less risky than charging customers more. Costs of Amazon logistics are expected to go up by as much as 8% due to a new fee structure and other upcoming changes. While sellers cannot scale back on all costs, they can reduce their advertising spend, reflected in the lower numbers this year. Amazon has opted to set aside more space for advertising, which conversely also makes each spot less valuable.
As the cost of doing business rises, business owners will find it especially valuable to reduce their tax liability. For expert assistance in increasing your tax savings, reach out to a Certified Tax Planner.
STATE NEWS
Iowa small business owners join the Small Business Voices to petition Congress… and demand that legislators reauthorize the Small Business Administration (SBA). Fifty local businesses joined a coalition of 3,000 businesses nationwide seeking greater government support and updated tools and programs. Congress has not reauthorized the SBA fully since 2000, according to a record by the Bipartisan Policy Center.
A survey conducted by the Goldman Sachs 10,000 Small Businesses Voices found that 96% of small business owners believe that federal government programs do not yet sufficiently reflect and serve small businesses’ needs. Of the businesses surveyed, 68% were financially optimistic in 2023 and 60% expect profits to increase this year. At the same time, 72% of business owners have felt an increase in pressure due to inflation over the past three months. 61% report a negative impact from higher interest rates, and 35% cite finding and retaining qualified employees as their top business challenge. Iowa’s labor force has decreased by 35,000 people since spring of 2022.
The Connecticut Community Outreach Revitalization Program celebrated $1 million in funding for small business owners… to boost the local economy. Known as ConnCORP, the program provides grants to small, minority-owned businesses. The grant will be meted out over five years. The incubator focuses on uplifting those within the Newhallville neighborhood in New Haven, one of the most poverty stricken areas in Connecticut. By supporting entrepreneurship, the program hopes to create opportunities for low and moderate-income underserved populations.
The incubator currently engages with 9 Black-owned businesses, out of 11 businesses total. The program supports entrepreneurs as they turn their ideas into businesses and navigate basic logistics like paperwork. ConnCORP’s aim is to strengthen the businesses already in the community and avoid contributing to gentrification.
ConnCAT, a job training and educational program for youth, is also planning to erect the Dixwell development, which will include 184 housing units, a supermarket, restaurants, retail spaces, a Performing Arts Center, an office tower, townhouses, greenhouses, and a community plaza. ConnCAT anticipates that the property will bring $1 billion to New Haven, in addition to 600 jobs and 700 construction jobs.
TAX PLANNING
Intuit purchases $1 million in goods from local small businesses to be donated to nonprofits. The financial technology company took this step in honor of its first “Small Business Big Impact Day.” Intuit QuickBooks and Mailchimp are leading the charge in applying their parent company’s core value of “We Care & Give Back” which encourages employees to invest in improving their local communities.
Over 10,000 employees from 17 different Intuit sites participated in this initiative from offices across the Americas, Australia, Europe, and Asia. More than 200 small businesses benefited, and 40 nonprofits received donations of items like hygiene kits, pantry food bags, and blankets. Employees also contributed an estimated 10,000 volunteer hours to sort, package, and deliver these products. Intuit will also offer a virtual experience for remote workers to participate in Small Business Big Impact Day.
The U.S.-based small businesses and nonprofits involved are located in Atlanta, Georgia; Boise, Idaho; Fredericksburg, Virginia; Los Angeles, California; New York, New York; Plano, Texas; Reno, Nevada; San Diego, California; the San Francisco Bay area; and Tucson, Arizona.
59% of small businesses are struggling with income due to late payments, according to a survey by market research and data analytics firm YouGov. Additionally, almost one-third of small businesses say that receiving payments 20 to 30 days after their due date is putting them at risk for closure.
Experts recommend taking these four steps for dealing with late payments. First, optimize your cash flow by collecting a deposit before a job, invoicing in advance, drafting a contract that stipulates terms of payment, doing a credit check of the business or individual paying you, and digitally tracking your invoices. Second, be prompt with following up on late payments. Reach out to the customer via email, attach a copy of the invoice, and remind them of their options for payment method. Next, if a month has passed with no email response, call the customer. Identify the correct person to speak with about payment and focus on the agreement made.
Lastly, if the customer fails to take steps toward payment, you have three final courses of action. You can refuse to complete further work and restrict access to any shared documents or brand assets. You can also go to a collection agency that will follow up with the customer in exchange for 20% to 35% of the payment collected. If necessary, you can take legal action if the damage is substantial and worth the investment of time and money.
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Building a Strong Personal Brand as an Accountant: Strategies for Success
What is a personal brand?
If you asked me that question in 2018, I would not know how to answer it.
As I embarked on my journey to entrepreneurship, I took on any accounting-related project that came my way. I had yet to learn about the meaning of a personal brand. Fast forward to 2020, I launched my CPA firm just before the COVID shutdown. While established CPA firms could sustain or pivot to new services, I still had to figure out how to get clients, build my online presence, and establish trust to create my brand.
I learned on my journey that in today’s competitive landscape, a personal brand has become more critical than ever. Professional success is directly related to one’s brand, especially in service-based industries such as accounting. Surveys show that more business owners and young entrepreneurs are looking for accountants they can rely on for not only their technical skills and qualifications but also for a personal connection. Therefore, creating a solid personal brand distinguishes accountants from the rest of the crowd, enhances their credibility, fosters loyalty, and opens doors for new opportunities.
I will share my experience, dive into the significance of a personal brand for accountants, and provide actionable strategies to help you build a solid personal brand that resonates with your target audience.
Salt Miner’s Run for the Roses Ends with a Big Tax Bill
Judge Mark Holmes of the United States Tax Court expressed admiration for the achievements of Joseph G. Bucci Sr. whose American Rock Salt provides the salt to keep many of the streets in the Northeast passable in the winter. You can learn a bit about that from an interview in New York by Adriane Quinlan . The positive remarks were no help in the ultimate result. Judge Holmes agreed with the IRS that Bucci’s three side hustles — a real estate enterprise, a farm, and some racing horses — were “Activities not engaged in for profit” making losses unallowable. The total tab including accuracy penalties for 2016 and 2017 was $711,980. Judge Holmes explained the result in a bench opinion, which is less formal than a memo decision. The trial began in Buffalo on June 14, 2023.
Injured Spouse Relief
“It feels like a sucker punch to the gut.”
I was on the phone with a client who was a newlywed and filing with their new spouse for the first time. They kept their paycheck withholding as single. So, they were anticipating a larger than usual tax refund.
Like a lot of taxpayers, they spent their refund before they even received it. Each day, they were checking “Where is My Refund ?” and even their IRS account. Then, it happened.
Code 898: Refund applied to non-IRS debt .
It looked as if they wouldn’t receive that refund they already spent. Now, my client did not know what to do. Before getting married, my client’s spouse told them, “I never get a tax refund.”
But they failed to mention why they never got a refund. Honestly, they did not know what their refund was paying for. We later found out that each year the Treasury Department garnished the refund for back child support. My client knew their spouse had child support but did not know they were behind on it.
If you have a client in this situation, all hope is not gone. I could help my client find out what offset the tax refund. We could also get a portion of the refund back.
You can do the same thing for your client. That is assuming that one spouse is not liable for the debt that offset the tax refund. The IRS calls this injured spouse relief.
I’ll walk you through how you can help your client with their refund garnishment sucker punch. Yes, you can help them get their part of the refund back. Let’s start with what injured spouse relief is. Then we’ll look at who qualifies as an injured spouse and how to request injured spouse relief.