A few tax tips for entrepreneurs from yfsentrepreneur.com.

Did you recently start a new business? If so, then you absolutely realize by now that starting a new business is an exciting and hectic time. It’s tempting to put other things on hold while you concentrate on getting your business off the ground. However, one issue that shouldn’t be left until later is how you will handle the taxes for your small business.

The tax law offers you some options for organizing your business, accounting for its income and deductions, and writing off your outlays for start-up costs and new equipment purchases. The choices you make can contribute to the success of your business—or put a drag on its bottom line.

For example, one of their first choices you must make is how to organize your business. Depending on your situation, you may have the option of operating as a sole proprietorship, a partnership, a corporation, or a limited liability company. Too often, however, new business owners make this important choice by default. If an individual starts a business and does not make an affirmative choice, the business will be treated as a sole proprietorship for both legal and tax purposes. But is that the right choice for you and your business? It depends.

 Other important choices include:

• Your Tax Year —Will you run your business and report its income on a calendar year basis, or does your business have a natural business cycle that lends itself to another accounting period?
• Your Accounting Method —Many small businesses use the cash method of accounting, which requires income to be reported when it is received and expenses deducted when paid. On the other hand, the accrual method may be more appropriate for some businesses. Under that method, income is reported when earned and expenses are generally deducted when they are incurred, even if the income is not received or the expenses are not paid until a later year. Businesses that produce, purchase or sell merchandise are generally required to maintain an inventory and use the accrual method for purchases and sales. However, here again, you may have a choice. A special exception permits certain small businesses to dispense with inventories and use the cash method of accounting.
• Your Start-Up Expenses —Certain expenses of starting a business are not treated as ordinary business expenses. These expenses can be written off over a period of years—or they may be treated as nondeductible capital expenses that are added to the cost of your business. As a general rule, claiming the writeoffs will benefit your business’s bottom line. But you will have to make that choice—and take action to inform the IRS of your election.
• Your Equipment Purchases—The cost of equipment you buy for your business is generally recovered through annual depreciation deductions over a period of years. Alternatively, you may have the option of claiming an upfront “expensing” deduction for your costs. However, the right choice for your business will depend on a number of factors, including the size of your purchases, your business income, and your plans for further purchases.

Bear in mind that making the right tax choices is only the beginning. You must be able back up those choices with adequate tax records. Tax questions will inevitably crop up as you organize and run your business. So, it is important to set up a tax record-keeping system and add a Certified Public Accountant (CPA) to your dream team. The right accountant can be a tremendous benefit to your growing business and assist with full-service tax and accounting needs to help you maximize profit and preclude financial headaches.

At Herrman and Associates is a full-service tax and accounting firm that goes beyond basic client services to offer you complete solutions that fuel the success of your small business. Our professionals work in partnership with you to build a service package that supports your personalized business needs, all with a personal touch.

If you have any questions contact us: http://www.grhcpa.com/

It's already March and we at Herrman and Associates would like to remind you its time to get serious about filing your 2010 Form 1040 -- especially if you expect a refund. Here are a few overlooked tax-saving tips by Market Watch that could make your refund bigger or cut what you owe.

1. Claim Making Work Pay Credit

All but forgotten is President Obama's signature making work pay credit (MWPC), which was considered a key part of the much-criticized Stimulus Act. You could claim the MWPC on your 2009 return, but few seem to remember you can also claim it on your 2010 return. The credit can be as much as $400 for an unmarried worker or as much as $800 for a married couple. It is phased out starting at adjusted gross income (AGI) of $75,000 or $150,000 if you're a married joint-filer. To claim the MWPC, complete Schedule M (Making Work Pay Credit) and include it with your 2010 Form 1040. Enter the credit amount on line 63 of Form 1040. Since the MWPC is a "refundable" credit, you can collect the full amount even if it exceeds your federal income tax bill. Note that self-employed individuals can qualify for the MWPC too.

2. Claim Breaks for Supporting Struggling Relative

If you helped out a financially struggling relative last year, you may be eligible for some unexpected tax breaks. They canrange from being able to use favorable head-of-household filing status (if you're unmarried) to claiming a $3,650 dependent exemption deduction to bagging a medical expense write-off.

3. Deduct Job Search Expenses

If you itemize deductions on Schedule A, you may be able to write off last year'sexpenses to hunt for a new job on your 2010 Form 1040.

4. Deduct Medicare Insurance and Long-Term Care Premiums

You can only claim a Schedule A itemized deduction for unreimbursed medical expenses, including health insurance premiums, to the extent they exceed 7.5% of your AGI. That may seem like an insurmountable hurdle, but seniors can often clear it, especially if they remember to include the following:

* Premiums for Medicare Part B coverage, which for 2010 ranged from $1,157 to $4,243 per covered person -- depending on your income level.

* Premiums for Medicare Part C coverage (so-called Medicare Advantage HMO-type coverage).

* Premiums for Medicare Part D coverage (prescription drugs).

* Premiums for Medicare supplemental insurance (so-called Medigap coverage).

* Premiums for qualified long-term care insurance, subject to the 2010 age-based limits per covered person shown below.

5. Deduct Fees to Charge Taxes to Your Credit Card

Surprisingly enough, the IRS says you can treat credit card convenience fees paid to charge personal federal income tax bills (including estimated tax payments) as miscellaneous itemized deductions. However, you only get a write-off to the extent your total miscellaneous itemized deductions exceed 2% of AGI (other miscellaneous expenses include union dues, the aforementioned job hunting expenses, fees for tax preparation and advice and investment expenses). Fill out lines 21-27 of Schedule A to see if you can benefit.

6. Small Business Owners: Include Medicare Part B Premiums in Self-Employed Health Insurance Deduction

Sole proprietors, partners, limited liability company (LLC) members and S corporation shareholders can deduct qualified health insurance premiums paid to cover themselves and eligible family members. This is the so-called self-employed health insurance deduction. For 2010, you claim it on Line 29 on Page 1 of Form 1040. Because it is an above-the-line deduction (meaning a deduction claimed on Page 1), you don't need to itemize to benefit. The favorable news is that the IRS now admits you can include Medicare Part B premiums as part of your Line 29 write-off. Make sure you (or your tax preparer) take the new taxpayer-friendly IRS attitude into account when putting together your return, because Medicare Part B premiums for 2010 ranged from $1,157 to $4,243 per covered person. The additional Line 29 write-off from these premiums could lower your 2010 federal income tax bill by hundreds of dollars or more.

7. Self-Employed Individuals: Subtract Health Insurance Deduction in Calculating Self-Employment Tax

For 2010 only, a self-employed person is allowed to subtract the aforementioned Line 29 write-off for self-employed health insurance premiums (including Medicare Part B premiums) when calculating his or her self-employment tax liability on Schedule SE. Specifically, subtract the self-employed health insurance deduction in arriving at the amount you enter on Line 3 in Section A of Schedule SE. This little subtraction can be a big tax-saver if you pay the maximum 15.3% self-employment tax rate. (For 2010, the maximum 15.3% rate applies to the first $106,800 of self-employment income

Our Tax Specialists are at Your Service

Get Off to a Good Start with These Valuable Tools

Prepare for tax season...Organize! 

Tax season is much easier for you ( and me ), if you are organized & prepared! 

Beginning in January, you will start to receive lots of little envelopes that look very 

important (& they are!) - keep these and any other tax related material (some common 

ones are listed below) in one file.  Also collect your receipts from the previous year & gather 

all of your investment info. 

W-2s 

You should receive one from each employer you worked for over the last year              

1099-B 

You'll receive one from your broker or mutual fund company if you sold stocks, bonds or 

mutual funds during the year.  If you receive one of these, make sure you know the original 

purchase price & purchase date of the stock, bond or mutual fund.                               

1099-DIV 

This form reports the dividends that individual stocks in your portfolio earned & the 

dividends and capital gains distributed from your mutual funds.                                           

1099-G 

You'll receive one of these if you had a state refund from last year or if you had gambling 

winnings.                                                                                                                 

1099-INT 

Your bank will send one of these if you earned more than $10 in interest on a bank account 

or CD, or if you cashed in savings bonds last year.                                                      

1099-MISC 

If you were self-employed & received more that $600, you will receive one of these from 

the company or individual for whom you worked.                                                              

1099-R 

If you received a distribution from a pension, retirement plan or an IRA, converted a 

traditional IRA to a Roth IRA or rolled over money from a 401(k) to an IRA, you will receive 

a 1099-R.                                                                                                            

Childcare Records 

If you paid a babysitter or daycare center, you will need the name, address, amount paid 

and social security number or employer identification number for each provider.                      

Medical Expense Records 

Collect all your receipts and cancelled checks to see if you qualify for a deduction.                    

Mortgage/Closing Documents 

In most cases, money spent on mortgage interest, points (aka "loan origination fees"), real 

estate taxes and prepayment penalties qualify for tax deductions.  When you buy, sell or 

refinance a home, collect all related documents & store them in a file.                         

Proof of Charitable Contributions 

For donations of $250 or less, gather your cancelled checks or receipts.  For donations 

greater than $250, you'll need a written acknowledgement from the organization to receive 

a deduction.  For Salvation Army or Goodwill donations, ask them to issue a list of thrift 

store values for the donated items when you drop them off.                                    

Receipts for non-reimbursed business expenses 

Examples of these items are money spent on uniforms, travel, business-required education 

or dues that are not reimbursed by your employer.                                                                    

Self-employment Income/Expenses Documentation 

Gather & organize your receipts, or if you track such expenses on your computer, print out 

a year-end report. 

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Accounting - Our Accounting services are intertwined with technology to enable today's business owner to work securely from wherever they choose to work. Bills, receivables and payroll process can be accessed remotely and securely allowing today's business owner the freedom build their business.

Tax - Herrman and Associates is a full-service tax and accounting firm that goes beyond basic client services to offer you complete solutions that fuel the success of your small business. Our professionals work in partnership with you to build a service package that supports your personalized business needs, all with a personal touch.

Technology - Combining Professional Accounting Services and Technology…
Taking it one step further, Herrman and Associates incorporates the latest technologies into their client services to provide you with maximum convenience. Offering personalized, secure web portals, you will enjoy:

Access - Anywhere Anytime access to your financial documents. Review and print docs whenever needed.

Real-Time - Remote access to your QuickBooks software. Rest assured you are always using the most current version of the software because we update it on our end.

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