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A colleague of mine, Michelle Long, recently sent me an invitation to join Google+.  While I could make the argument that I don’t need another social media site to manage and monitor, curiosity definitely killed this cat and I jumped at the chance to test Google’s latest offering, and the internet’s newest social networking site.

My quick assessment: Google+ is Facebook meets Twitter, backed by the power of an 800-pound-gorilla-of-a-search-engine called Google.  If you have a Google account, you might as well give Google+ a try.  It has features that Facebook doesn’t have, and some of them are pretty cool.  If you need an invitation, contact me and I’ll send you one.

The one feature that really sticks out is the “+1” you can give to posts, websites, and seemingly any other content posted by a Google+ user.  This is the equivalent of a “Like” on Facebook.  But it matters more than a “Like” on Facebook, pretty much because Google says it does (see Wired Magazine’s article on the topic: http://www.wired.com/epicenter/2011/08/google-studying-re-ranking-search-results-using-1-button-data-but-its-touchy/).

I’d venture to say the +1 is here to stay.  But are we stuck with such a dumb way to indicate that we “Like” something?  Am I really supposed to say, “Great website, Michelle.  I +1’ed it last night”?  No offense to a company that could squash my online presence with the click of a mouse, but I can do better than that.  So starting now, I will no longer +1 a website, I will be “One-Upping” it.

 

The way I see it, why not nickname Google’s latest offering?  You have to admit it needs one, and “One Upping” explains the situation pretty well: by giving a site or post a +1, you’re giving it a leg up in the competition against similar sites and posts.

So what do you think?  Am I on to something?  If you’re a Google+ user, “One Up” this blog to show your support. 

How do you +1 this blog?  Google “Balance Books Blog” and click on the +1 next to the entry on the search results page.

I'm not going to lie, I was demoralized after doing the research for this post.  After being infected by all of the "back to school" buzz in the air these days, I was motivated to write about saving for college.  But after taking a fresh look into 529 plans, Coverdell Education Savings Accounts, and almost everything else I could think of, my conclusion seems woefully simplistic, and potentially risky.  But it's risky for a reason you wouldn't immediately expect.

A brief summary of of college savings accounts is discussed below, but the full details on the options available are best found at http://investor.gov/life-events/birth/saving-your-childs-education-529-plans and http://www.irs.gov/newsroom/article/0,,id=107636,00.html. 


529 Plans

This type of college savings account is offered by your state, and allows anyone - a parent, family member, or friend - to set up an account for a prospective college student.  Assuming the student uses the funds on qualified educational expenses, you can save and the student can spend the funds tax-free.  If you set up a particular type of 529 plan, the college student you are saving for can even be yourself or your spouse.

The downsides of 529 Plans are a little less straight forward.  There are 2 types of 529 Plans with very different rules and implications: the pre-paid tuition plan, and the college savings plan.  I strongly recommend you review the information provided on the SEC's page to determine which type of account may be right for you: www.sec.gov/investor/pubs/intro529.htm . 

Coverdell ESAs 

A Coverdell ESA is a custodial account set up solely for the purposes of paying qualified educational expenses for the beneficiary of the account.  There are adjusted gross income requirements that apply to the custodian of the account, and the designated beneficiary must be under 18 when the account is established.

A few of the drawbacks of a Coverdell ESA account include: 1) total yearly contributions to a beneficiary cannot exceed $2,000; 2) contributions are not tax deductible; and, 3) the funds held in the account must be distributed by the time the beneficiary reaches age 30.  


My conclusion seems so simplistic after all these specifics, and should certainly not be taken as tax planning advice applicable to your particular financial situation, but here it is in a nutshell: save for your student's college education in the highest interest bearing account you can find.  You will only have to pay income tax on the interest earned on these accounts, so the impact on your tax bill is likely to be minimal, and you maintain access and control over the funds while your future-college-student grows up.

But that plan is inherently risky.  If you have the willpower to maintain a savings account for 10-20 years that's solely dedicated to paying for your child's educational expenses, you're fine.  But if you, or your spouse, would be tempted to deplete the funds for other purposes, you're better off establishing an account that can only be used for qualifying educational expenses.  The average cost of a college education has skyrocketed in the past 30 years, so the need to save early and intentionally is more pressing than ever.

So back to my original emotion after conducting the research for this post: demoralization.  While I do appreciate that these type of college savings vehicles exist for the right investors, the investment vehicles available should incentivize working class Americans to save for educational expenses, either for themselves or their children and grandchildren.  If we want to encourage saving and education in America, we have to start by catering the savings tools to the needs of every day Americans.

As always, this post doesn't exist in a vacuum.  If you agree, disagree, or have any questions about the content of this post, we encourage you to post a thoughtful reply!

I would venture to say most of you maintain a LinkedIn page, and most of you would agree that the site is a useful tool for business owners, employees, and job seekers alike.  But did you know that LinkedIn was liberally sharing your profile information to promote products and services for a short while last week? An uproar over privacy concerns forced LinkedIn to make an immediate policy change, but the issue once again reminds users of social media that they are responsible for locking down their profiles as they deem fit.

The issue at stake in last week's user protest was a new feature called "social ads".  Social ads are essentially a new form of advertising that turns LinkedIn users into advocates of the products and services offered by the companies they follow.  The site went as far as to use individual's name and photos to promote the products and services, so some users protested that LinkedIn had automatically given third parties the right to use their names and photos in ads unless they specifically opted out.  As a result of last week's abrupt policy change, LinkedIn now indicates that "people" in your network (not particular individuals) recommend a company, product or service.

If you prefer to maintain a higher level of control over how your information in used by LinkedIn, the good news is that they have made the process of changing your settings pretty straight forward.

To opt out of social ads:

1. Click on your name in the the upper-right-hand corner of the screen.  Select "Settings" from the drop-down menu.
2. Click on "Account" then "Manage Social Advertising."
3. Uncheck the box next to "LinkedIn may user my name, photo in social advertising" and then click on "Save."

You can also opt out and/or limit LinkedIn's use of other data from the Settings page.  Take a minute to review your settings for "Partner InMail" and "Groups, Companies, and Applications" to make sure you want to participate in these features.  As helpful as social networking sites can be for our businesses and careers, remaining aware of how your information is being used is also an important part of the equation.

Do you use independent contractors to run your business?  Are you an independent contractor that works for others?  San Francisco tax attorney Robert Wood offered advice on how to manage relationships with independent contractors in a recent article of Tax Notes Today. 

The top ten mistakes businesses make when classifying workers as independent contractors are:

1. Lacking a written contract.  The responsibilities of each party should be spelled out before work commences.  Without one, you are likely to lose a dispute over a worker's status.

2. Treating similar workers differently. An independent contractor should not have similar responsibilities as an employee of your company.

3. Providing tools and equipment.  True independent contractors typically cover these expenses on their own behalf.  Providing a worker with office space, a desk and PC, and/or other supplies jeopardizes the workers classification as an independent contractor.

4. Reimbursing an independent contractor for expenses.   There is a similar logic between #3 and #4 on the list.  As a general rule, the more expenses you reimburse, the less likely the IRS is to view that worker as an independent contractor.

5. Paying by the hour.  While is is common to pay by the hour for certain services - such as attorneys - it is better to pay independent contractors by the project or piece.  Wood believes paying by the hour is a sign that a worker is an employee rather than an independent contractor.

6. Requiring time cards.  Independent contractors should submit invoices, not time cards.  Additionally, independent contractors are not subject to the terms of employee manuals, and they must provide a completed W9 before the first payment for services is rendered so a 1099 can be issued at the end of the calendar year.

7. Oversupervising a worker's duties.  A business owner can set quality standards and guidelines, but the independent contractor is ultimately responsible for how and when the work is performed.

8. Setting a work schedule.  This is a tell-tale sign that a worker is an employee mis-classified as an independent contractor.  Don't do it.

9. Prohibiting work with other companies.  A business owner can require a certain level of output - or sales - per month, but if you prohibit an independent contractor from working for other companies, you're asking for trouble.

10. Trying to control too much of the worker's output.  Surrendering a measure of control is the price you pay for using independent contractors over employees.  But keep in mind that the expertise an independent contractor brings to the table is generally worth the sacrifice.

Starting in 2012, you and the IRS will receive Form 1099-K reporting all revenues received through your credit card processing company.  The 1099-K will summarize your company's gross aggregate reportable payment transactions for each month of 2011. Functionally, this means the funds you collect through your credit card processor will be compared to the company's tax return.

The new requirements have a particular impact on retailers.  If your company has both cash and credit card revenues - most retailers fall into this category - the IRS will evaluate your company's total revenues versus industry averages to evaluate the reporting accuracy of cash sales.  Big Brother is certainly watching.

However, a business environment marked by the interconnectivity of data is does not need to be a burden on business owners.  Most business owners spend more than they think in the process of running a business.  Good record keeping is a great way to ensure that expenses are efficiently recorded to counterbalance the new income reporting requirements.

The first step in avoiding future headaches is to ensure that your credit card processor has your Tax Identification Number.  If you fail to provide this information, the credit card processor is required to withhold income tax from reportable transactions in 2012.  The current backup withholding rate is currently 28%, and these taxes will be withheld from your company's daily credit card deposits, so noncompliance is costly.  The States of New York, California, and Hawaii have announced similar requirements; visit www.irs.gov for more detailed information and to see a draft of Form 1099-K.  Search for "1099-K".

Balance Books strives to help business owners make the right decisions from the outset.  If you need to get your accounting processes and records put into order once and for all, contact us at info@balancebooksonline.com for a complimentary evaluation.  It's never too late to systemize your accounting processes.

The Intuit Payroll team recently issued a few critical notices to subscribers that are worth mentioning.  One discusses fees for Assisted Payroll Subscribers, and the other is a reminder for all Intuit Payroll users.

Assisted Payroll Users: Fee Update

Effective August 8, 2011, the fee per employee per paycheck will increase to $2.  The monthly subscription fee remains unchanged.  Even considering this increase, the Intuit Assisted Payroll service remains competitively priced versus other payroll providers offering similar services.  However, if the change affects your business adversely and you would like to discuss the issue with an Intuit representative, the number to call is 888-712-9702.

Payroll Critical Notices: Heed Them

All Intuit Payroll subscribers should ensure that the complete contents of Payroll Update 21113 has been received into the company QuickBooks file.  Installation of this critical update ensures compliance with current legislation affecting payroll tax calculations.  Note to Balance Books customers: we handle all payroll updates for our payroll clients, so you do not need to manually update your software.

To ensure that your QuickBooks file contains the most recent tax tables, go to the Employees > Get Payroll Updates.  If your software is up-to-date, you will see a message that says, "You are using tax table version 21113."

If you need to install this update manually, click here for instructions: http://payroll.intuit.com/support/kb/1001166.html

Balance Books highly recommends turning on Automatic Updates to ensure you receive all payroll updates automatically when they are released (assuming the computer hosting your QuickBooks file is connected to the internet).  

To turn on Automatic Updates:

1. Choose Help > Update QuickBooks
2. On the Options tab, select "Yes" to enable Automatic Updates.

Failure to ensure that the available updates are received into the QuickBooks file can lead to inaccurate payroll filings, and that may result in costly amendments to your payroll tax returns.  When it comes to payroll issues, an ounce of prevention is truly worth a pound of cure, so take the time today to make sure you're set up to receive Automatic Updates.

I recently read a very scary article in The Wall Street Journal.  It was about companies that hire out-of-state employees that telecommute.  It concluded that hiring this type of employee created a “nexus” that warrants imposing income tax on the out-of-state employer.  As far as I can tell, that means 35 states and the District of Columbia think business owners should pay income tax to every state from which they have an employee working remotely.

It may sound a bit confusing at first, but the implications of these new state rules extend beyond the here and now, so it’s an issue worthy of discussion.  For now, the solution for employers hiring out-of-state telecommuters is simple: if the worker lives in a state other than one in which the employer has a physical presence, hire the worker as an independent contractor.  This assumes, of course, that the telecommuter’s job description complies with the IRS definition of an independent contractor. 

However, the nation is expected to see a rise in telecommuting in the coming years as more and more companies move day-to-day operations to the cloud.  As a result, the impact of these new state tax rules will extend to cover more businesses.  I find three potential impacts of these new state taxation rules on business owners particularly troubling:

1) Businesses would be expected to pay income tax to every state in which they have a telecommuting employee

2) Businesses would be expected to file income tax returns in every state in which they have a telecommuting employee

3) Employers will be tempted to favor in-state candidates for telecommuting positions over out-of-state candidates

The first two potential impacts tend to catch a business owner’s attention right away.  Paying more income taxes and filing more state tax returns just creates more expenses and more record-keeping tasks.  Also, the argument that a company is “doing business” in a state just because they employ a telecommuter in that state seems unfair to most small business owners.  Most agree that paying income tax makes sense if a company solicits customers or makes sales in a state, but there is a general agreement that a company shouldn't have to pay state income tax “when the only connection to that state was that they had an employee telecommuting in that state.”

However, I find the third potential impact the most troubling.  At a time when small business owners are being asked to innovate and hire in the name of national recovery, state governments are widening the income tax net around out-of-state businesses.  I find it hard to formulate a legitimate argument for assessing income tax on a business just because it employs a telecommuter from that state.  At its most extreme, this policy could compel workers to leave their home state in favor of the employer’s state, ultimately creating a negative impact on the employee’s original home state’s tax revenues.

This policy also threatens to encourage discrimination against the best candidate for a telecommuting position based on his/her home state.  Balance Books is a cloud-based business that holds hiring the best employees, regardless of location, as a business principle precisely because of the benefits telecommuting provides to both employees and employers.  Telecommuting is already a key component of many successful small business operations, and anything that discourages companies from hiring the best available help seems counterproductive, if not discriminatory.

While these new state taxation rules may have a minimal impact on employers in the West where employees are more likely to telecommute within their home state, I worry about employers in areas of the nation where employees frequently live and work in one state for a company that conducts normal business operations in another state.  I have several clients on the East Coast with out-of-state employees that telecommute, and I can already forecast the additional time and expense it will take to comply with the new rules.  At this point, I’m hoping this issue will be addressed on the national level.  Businesses, regardless of their home state, deserve a static definition of how “doing business” in a state is defined so they can prepare for the financial and operational implications of a widening definition.  Or fight back.

If you want to read The Washington Post article, click here: http://online.wsj.com/article/SB10001424052702304066504576345782284098222.html

If you want to call your national representatives and register your opposition to these new state income tax rules, click here: http://www.usa.gov/Contact/Elected.shtml

SmartVault has added the ability to send email notifications to users after uploading documents to the Inbox, once again making the product faster and easier to use.

The email notification feature has three key benefits:

1. It rolls two tasks into one.  Previously, users uploaded documents to the SmartVault Inbox, and then emailed the bookkeeper about the newly uploaded information.  Now, users can upload documents and send notification of the upload without opening an Inbox.  I am also hopeful that streamlining the notification process may encourage forgetful clients to send an email after each upload.  We'll see how that goes...
2. The sooner a SmartVault notification is sent, the sooner the information is entered into QuickBooks.  At Balance Books, we monitor client Inboxes daily to ensure that bills, payments, etc. are entered as soon as possible.  However, if you are using SmartVault in-house, your bookkeeper may check less frequently.  In this case, the email notification feature serves as a reminder to the bookkeeper to check and enter the latest information.
3. The notification feature can be used to communicate status among users of the accounting data.  Most of my clients approve the bills, but then give them to someone else to scan.  Requiring the person scanning documents to send a notification email to the person approving bills and the bookkeeper leads to more timely and coordinated accounting practices.

If you aren't familiar with SmartVault and find yourself interested in knowing more, go to www.smartvault.com for more information.  Using Smart Vault is an easy and afforable way to create a  paperless document management system for your business.

The statewide sales and use tax rate dropped to 7.25% on July 1, 2011, and the change has prompted a lot of questions from our clients.  The Board of Equalization recently released a notice explaining all of the details (available at http://boe.ca.gov/news/pdf/l285.pdf), but here are the highlights for all you busy retailers out there:

• The current rate for your area can be found at http://www.boe.ca.gov/cgi-bin/rates.cgi. If you are using QuickBooks Point-of-Sale software, make sure to change the rate on the Company Settings screen of the Headquarters store to ensure that taxes are properly collected
• If you collected taxes at an incorrect rate, you must either refund the monies to the overcharged customers, or pay the overcollected taxes to the State of California.
• If an item was purchased before 7/1/11 and is returned, you should refund the tax to the customer based on the rate in effect at the time of the original sale.
  

If you are still corresponding with the Board of Equalization via regular mail, take a minute to register as an eClient by visiting http://boe.ca.gov.  Just click on the eServices tab to get started.  The Board of Equalization will send you notices via email, and you can file returns and make payments online.  Once your done registering, consider yourself one step closer to that virtual, paperless office you imagine!