Understanding Tax Terms: Structuring |Bookkeeping services NJ

If someone manipulates cash transactions to avoid required bank reporting to the Treasury Department, they are using the technique of structuring their transactions. Knowing what is reported and the power given to the IRS to seize related assets can be important.

Background

To identify questionable illegal transactions, financial institutions are required to report any monetary amounts over $10,000 to the Treasury Department. If someone knowingly structures their transactions to avoid this reporting, the Bank Secrecy Act allows the IRS to legally seize these assets. The old rules provide broad discretion in this area and many innocent taxpayers not only had assets frozen but found it virtually impossible to get their funds returned to them.

Example: Vocatura’s Bakery in Norwich, CT did most of their bakery trade in cash. To help their local banker not have to fill out required federal forms when they deposited $10,000 or more, they tried to make lower deposits. One day the IRS showed up at their business and seized over $65,000 of their deposits suspecting illegal activity through use of this structuring activity. Using civil forfeiture rules, the IRS permanently seized this small business’ assets. Three years and lots of legal fighting later, the business finally got their money back. Here is a link to their story; IRS Returns Bakery’s Money After 3 Years.

What you should know

Be aware of the rule. As more small businesses try to avoid the high charges associated with credit cards, they must also be aware of the Bank Secrecy Act rules. Establish a good relationship with your banker and have them understand your business to help create a potential ally if needed. Do not knowingly try to avoid the $10,000 reporting rule.

Consistent numbers. Create a regular routine of sales deposits. Do not save up deposits and then deposit similar amounts. This could raise red flags.

The rules are changing. In a recent change, the IRS will still pursue structuring violations, but will try to more closely align action taken with knowledge of criminal activity. The government must show that the taxpayer knows of the rules and knowingly structures their transactions to avoid the reporting.

There are bad guys. Money laundering is a big problem. Whether it be drug money, terrorist fund raising, bootlegging or other illegal activity, excess cash deposits will raise suspicions. So,while the IRS uses their tools to catch these crooks, they are making an active attempt to keep innocent taxpayers out of their net.

If you need further clarification or have questions about structuring transactions, we’d be happy to help. Don’t hesitate to schedule time with our team today: https://www.bas-pc.com/appointment-center/

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Lost Pet? Don’t Become a Fraud Target

When a pet disappears, owners can become distraught, calling animal shelters, advertising in local papers, posting photos on every telephone pole and fence post all in the hope of hearing news of their lost animal. At such times, pet owners are also more vulnerable to fraud. Consider the following scenarios:

• The truck passerby: You get a call from a truck driver who says they’re calling from another state. Seeing your flyers, they recognized the cat (or dog) as yours. A few days ago, when delivering goods in your area, the animal somehow stowed away on the truck.

Before becoming aware of the animal, the truck driver says they’d driven through two states. Unfortunately, the pet also had some (unspecified) health problems, so they paid a visit to a veterinarian. If you want your pet returned, you’re told, several hundred dollars must be transferred to the truck driver’s account to cover the vet costs.
Only one problem is that the truck driver doesn’t have your pet, and never did. They found the description of your animal and are using that information to exploit you.

• The tag team: Again, someone responds to your lost pet ad. The caller sympathizes with you, then pumps you for descriptive details about your lost pet. In this scenario, the caller reluctantly informs you that they don’t have the pet you’re describing. After hanging up, the caller shares unadvertised details about the pet (details that you provided) with their partner. The partner then contacts you and provides such a convincing description that you’re persuaded. By the way, they say, please transfer the reward money to my account.

How can you protect yourself against such scams? 

• Provide only partial information in advertisements and flyers. Then, when someone responds to an ad, ask open-ended questions such as, “Please describe the cat to me,” instead of yes/no questions such as, “Does Fluffy have two gray spots on his back?”
• Beware of callers who appear to be fishing for information.
• Be suspicious of callers from other states or countries.
• If you’re offering a reward, don’t let money change hands until the lost pet is in your possession.

If you need help protecting your information and identity or have questions about ensuring your financial information is secure, we’re here to help. Schedule an appointment with one of our team members here: https://www.bas-pc.com/appointment-center/
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Where to get money for a growing business

The following sequence of events is common to many new and expanding businesses.

The Short-Term Squeeze

You start your business with a limited amount of capital and an abundance of good ideas and ambition. The sales activity has been adequate to produce a net profit. Your inventory is about twice as large as you intended. Your accounts payable are past due to the point where some creditors want to ship C.O.D. only. To keep your creditors happy, you have been overdrawing your checking account to the dissatisfaction of your banker. You have a short-term note past due at the bank.

These are all symptoms of a very common business ailment -too much short-term debt.

This type of cash squeeze can be avoided if you confine your company’s growth to that which can be handled from retained earnings. If thecash retained in the business from last year’s profits is $25,000 and inventory grows by twice that amount, somebody (you, your banker, or a new partner) has to fund the expansion that cannot be funded by the retained earnings.

Long-Term Funding

If you can’t provide additional capital and you don’t want a partner, you need to look for long-term funding from one of the following sources:

• Funds from Owner- Studies indicate that as much as 60% of all small business funding comes directly from the owner or his/her immediate family. Outside of your immediate family or friends, you may find funding from other private parties or from financial institutions.

• Private Lenders- There are some problems with outside private lenders. First, they are few and far between. Second, they generally demand a higher rate of interest and/or want to own a percentage of the business.

• Financial Institutions- The main problem in using financial institutions for small businesses is that banks are not in the “risk” business. Although you may be very optimistic about your company’s future and have a glowing cash flow projection, the banker is not likely to rely on it for loan purposes. You may have adequate collateral in terms of inventory, real estate, etc., but if the banker feels that you will not have adequate after-tax net profits to service a loan, he/she is not likely to lend you money. Bankers do not want to liquidate your assets in satisfaction of their loan.

• Small Business Administration- If financing is not otherwise available on reasonable terms, the Small Business Administration may be available to assist with its various loan programs.

• Money Brokers- There are “money brokers” who advertise in various newspapers and business publications. Many of these brokers want to be paid in advance to locate possible lenders for you. Be very cautious of any broker and ask for references and credentials. Any proposal by such brokers should be reviewed by both your attorney and your accountant before you sign anything.

If you would like more information on the business funding options available in your situation, please feel free to call: Contact us | Accounting Services New Jersey | Payroll services New

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Conquer Student Loan Debt | Payroll services New Jersey

Obtaining a legitimate college degree is an expensive proposition. Many will be paying off student loans —month after month, year after year —for decades.
With smart financial management, graduates can liquidate their college debt in a reasonable time, freeing up cash for other priorities. Here are four tips for paying off loans quickly and efficiently:

• Build a budget. Get a handle on where money is going. A budget can help prioritize, enabling you or your child to whittle down student loans more quickly. Several online tools are available. You can even use a simple spreadsheet listing monthly income and expenses.

• Talk to your employer. Your company or your child’s company may offer one-time loan payoffs in exchange for a lower starting wage or other concessions. Negotiate when interviewing. After taking a job, check with the human resources department about options.

• Use autopay. Reducing payment steps makes it less likely to divert those funds to lesser priorities. As an added bonus, you or your child may develop the discipline to live on less while loans are being paid off.

• Reduce your other bills. Talk to your cell phone provider. Consider dropping cable. Postpone that expensive vacation. Hold off on expensive purchases that aren’t necessary at the moment.

It all goes back to prioritizing student loan payments. It’ll be worth it when you can enjoy the benefits of a rising salary, increased cash flow and a stellar credit score in a few years from now. And don’t forget to take advantage of possible education tax credits and deductions.

If you have questions about student loans or need help determining what tax breaks are right for you, don’t hesitate to reach out. Our team of financial professionals are here to assist and answer any questions you may have: https://www.bas-pc.com/appointment-center/

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2020 Health Savings Account Limits

The savings limits for the ever-popular health savings accounts (HSA) are now set for 2020. The new limits are outlined here with current year amounts noted for comparison.

What is an HSA?

An HSA is a tax-advantaged savings account whose funds can be used to pay qualified health care costs for you, your spouse and your dependents. The account is a great way to pay for qualified health care costs with pre-tax dollars. In fact,any investment gains on your funds are also tax-free as long as they are used to pay for qualified medical, dental or vision expenses. Unused funds may be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a high-deductible health plan (HDHP).

The Limits


 Note: An HDHP plan has minimum deductible requirements that are typically higher than traditional health insurance. To qualify for an HSA, your coverage must have out-of-pocket payment limits in line with the maximums noted above.

Not sure what an HSA is all about? Our team is available to discuss whether an HSA is right for you. Please schedule time here: https://www.bas-pc.com/appointment-center/

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