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When Phoenix Businesses Accidently Collect (or Miss) TPT

Fri, 06 Mar 2026 19:03:45 GMT

Sales tax confusion is common for Phoenix small business owners. Maybe one of the biggest sources of confusion is that Arizona doesn’t have a sales tax in the traditional sense. Instead, the state imposes a Transaction Privilege Tax, or TPT.

Unlike traditional sales tax, TPT is a tax on the vendor for the privilege of doing business in the state. Most Phoenix businesses pass that cost on to customers, but they technically don’t have to.

In most states, sales tax is owed by the buyer, and the seller acts as the tax collector. In Arizona, the seller is liable for both paying and collecting.

That distinction matters.

Many businesses either charge TPT on transactions that are not taxable, fail to account for taxable revenue properly or misclassify income under the wrong business code.

If you are unsure whether you are handling TPT correctly, here are some of the most common problem areas to review.

Misclassifying Your Business Activity Code

Arizona’s TPT system is based on business classifications. Retail, contracting, rental, restaurant, personal services and other categories are taxed differently.

A common mistake is registering under the wrong classification or reporting income under the wrong category.

For example:

A contractor reporting under retail instead of prime contracting
A service-based business charging TPT when the service is not taxable
A retailer failing to separate taxable goods from non-taxable services

Misclassification can cause you to overpay or underpay TPT. Over time, that adds up. If you are underpaying, the Arizona Department of Revenue can assess back taxes, penalties and interest. If you are overpaying, you are unnecessarily cutting into your profit margin.

If your revenue streams have changed since you first registered for TPT, your classifications may need to be updated.

Charging TPT on Non-Taxable Services

Not all services in Arizona are taxable. However, many business owners assume they must charge TPT on everything.

Professional services such as consulting, certain repair services and some digital offerings may not be subject to TPT depending on how they are structured. On the other hand, tangible goods and specific categories like restaurant sales are clearly taxable.

If you are separately charging TPT on services that are not taxable under Arizona law, you may be misapplying the tax. That can lead to customer disputes, reporting errors, and audit exposure.

On the flip side, if you assume your services are exempt without verifying, you may fail to account for TPT owed and end up paying the tax out of pocket later.

The key is understanding exactly how your specific business activity fits into Arizona’s tax structure.

Marketplace Facilitator Confusion

Arizona requires marketplace facilitators, such as platforms that process payments and facilitate sales, to collect and remit TPT on behalf of sellers in many situations. If you sell through an online marketplace, you might assume either:

The platform collects everything
You still need to collect separately
You do not need a TPT license

The truth depends on how you sell.

For example:

If all your sales go through a marketplace facilitator that collects and remits TPT, you generally should not collect TPT again.
If you also sell directly through your own website, those direct sales may still require you to collect and remit TPT yourself.

Double collecting TPT or failing to collect on direct sales are both common mistakes. Many Arizona businesses using marketplace facilitators discover discrepancies only after reconciling gross receipts against marketplace reports.

Carefully review your platform agreements and monthly statements to ensure collections align with state requirements.

City Rate and Location Code Issues

Arizona’s TPT system includes state, county, and city components. Cities can have different rates and different taxability rules. If your business operates in multiple cities or delivers products across city lines, you must apply the correct location rate.

Common errors include:

Using the rates applied at your business address rate for all transactions
Failing to update rates when cities make changes
Misreporting revenue under the wrong location code

Even small rate differences can become significant over a quarter or a year. If you are charging the wrong rate, you may either owe additional tax or need to correct over-collections.

For businesses that ship products, determining sourcing rules can be especially confusing. Is the sale sourced to the origin city or the destination city? The answer depends on the type of transaction.

Without proper review, it is easy to make consistent reporting errors month after month.

Not Reconciling TPT to Revenue

One of the simplest but most overlooked steps is reconciling your TPT liability account to your reported gross revenue. Your accounting software should show:

Total taxable sales
TPT collected
Payments remitted

If your reported TPT does not align with your revenue reports, something is off. That discrepancy is often the first sign of misclassification or rate issues.

Quarterly review is especially important because waiting until year-end can make corrections much more complicated.

What Happens If You Get It Wrong?

Arizona takes TPT compliance seriously. If you are under-reporting taxable revenue or under-remitting TPT, you may face:

Back tax assessments
Penalties
Interest
Audit scrutiny

If you are over-collecting, customers may request refunds and you will still need to reconcile the overpayment with the state.

Either scenario creates unnecessary stress and financial disruption.

When Businesses Should Seek Professional Guidance on TPT in Phoenix, AZ

If any of these situations sound familiar, or you just have questions, it may be time to discuss TPT with a local CPA. Whether you suspect you are accidentally collecting too much or missing required TPT entirely, a proactive review can save significant time and money.

Quarterly Close Checklist for Arizona Small Businesses: What to Reconcile Before You Hand Anything to Your CPA

Fri, 06 Mar 2026 18:58:26 GMT

Quarter-end can come up fast. Between serving customers, managing employees and keeping up with daily operations, bookkeeping tasks can easily fall behind. But if you want clean financials and fewer surprises at tax time, your first quarter close matters.

Before you hand anything to your CPA, take time to reconcile, review and clean up key accounts. A solid quarter close gives you accurate numbers, helps you spot issues early and makes the rest of the year smoother.

Reconcile All Bank Accounts

Start with your business checking and savings accounts. Every transaction in your accounting software should match your bank statements exactly.

That means:

No missing deposits
No duplicated expenses
No unexplained transfers
No lingering unreconciled items

Look closely at:

Outstanding checks that have not cleared
Deposits in transit
Automatic withdrawals or subscriptions

If something does not match, fix it now. Small discrepancies in early in the year can turn into major confusion by year's end. Clean reconciliations ensure your cash balance is accurate, which is critical for budgeting and forecasting.

Reconcile Credit Card Accounts

Credit card errors are one of the most common bookkeeping issues for small businesses. Review each business credit card statement and confirm:

Every charge is recorded
Charges are categorized correctly
Personal expenses are not mixed in
Interest and fees are properly accounted for

If owners occasionally use a business card for personal expenses, those should be recorded clearly as owner draws, not business expenses.

Accurate credit card reconciliations protect you in case of an audit and ensure your expense reports reflect reality.

Review Accounts Receivable Aging

Your A/R aging report shows who owes you money and how long invoices have been outstanding. Before sending records to your CPA:

Review invoices over 30, 60 and 90 days
Follow up on overdue accounts
Write off uncollectible balances if necessary
Confirm customer payments were applied correctly

Old unpaid invoices inflate your income on paper while hurting your cash flow in real life. Cleaning up A/R gives you a more realistic financial picture and improves collections going forward.

Verify Payroll Reports

Payroll errors can create tax headaches quickly. Pull your quarterly payroll reports and confirm:

Gross wages match your payroll system
Payroll taxes were withheld correctly
Employer tax payments were submitted
Contractor payments were properly classified

Make sure your W-2 employees and 1099 contractors are correctly categorized. Misclassification can lead to penalties and back taxes.

If you use a payroll provider, compare their reports to your accounting software to make sure everything is syncing correctly.

Clean payroll records make your CPA’s job easier and reduce the risk of compliance issues.

Review Merchant Processing Fees

If your business accepts credit cards, you are paying merchant processing fees. Many business owners record deposits but forget to account for the processing fees that are deducted before funds hit their bank account.

Check:

That gross sales match your POS reports
That processing fees are recorded as expenses
That net deposits reconcile with your bank statements

If fees are not recorded properly, your revenue and expense totals will be inaccurate. Over time, that distorts profitability.

Confirm Owner Draws and Contributions

For S corporations, LLCs and sole proprietors, owner draws often get miscoded. Review your books and confirm:

Personal withdrawals are recorded as owner draws, not expenses
Capital contributions are properly categorized
Distributions align with your tax strategy

Incorrectly labeling owner draws as business expenses can distort profit and trigger issues during tax preparation.

Clean separation between personal and business finances is essential, especially in Arizona, where many small businesses are family-owned and closely held.

Check TPT Payable

Arizona businesses must also stay on top of Transaction Privilege Tax reporting. Before closing a quarter:

Reconcile taxable gross receipts by business classification
Confirm TPT filings and payments were submitted
Verify your TPT liability account reflects amounts owed versus amounts remitted

TPT errors can lead to notices, penalties, and interest. Make sure your records clearly tie reported revenue to payments made.

Review Profit and Loss and Balance Sheet

After completing reconciliations, run your quarterly Profit and Loss statement and Balance Sheet. Look for:

Negative account balances that do not make sense
Large unexplained expense spikes
Revenue inconsistencies
Uncategorized transactions

Your financial reports should tell a clear story. If they look messy, your CPA will spend more time cleaning them up, which can increase fees and delay tax strategy conversations.

Why a Clean Quarterly Close Matters

A thorough quarterly close does more than prepare you for tax season. It helps you:

Make informed decisions
Catch problems early
Improve cash flow
Plan for growth

Need Help Getting Your Books Ready for the End of a Quarter?

The team at H&H Accounting Services works with small businesses across the Valley to clean up books, reconcile accounts and prepare accurate financials. Whether you need quarterly bookkeeping support or a full financial review from a CPA , professional guidance can save you time and money.

Give us a call at (480) 561-5805 to make sure your quarterly close is accurate, organized and ready for whatever comes next.

How Phoenix Business Owners Should Set Up Withholding and Transfers After a Strong Quarter

Fri, 06 Mar 2026 18:52:18 GMT

For many Phoenix business owners, a profitable quarter quietly creates a new risk: the tax surprise.

A profitable quarter often exposes weaknesses in an existing tax plan . If income increases and estimated payments are not adjusted, the year-end can bring an unpleasant surprise. The solution is simple but strategic. After a strong quarter, it is time to build a Tax Surprise Prevention Plan.

Step 1: Shift From Revenue Thinking to Profit Thinking

Many owners base their tax set-asides on revenue, despite taxes being based on profit, not gross sales. If your revenue increased in a quarter but expenses stayed relatively flat, your taxable income likely increased faster than you expected.

Start by reviewing:

Quarterly net profit
Owner distributions taken
Payroll levels
Estimated quarterly tax payments already made

If profit margins improved, your tax liability likely grew as well. This is especially important for S corporations and LLCs where income passes through to the owner’s personal return.

A strong quarter often means your safe harbor estimates from last year may no longer be sufficient.

Step 2: Create a Separate Tax Account

One of the most effective prevention tools is a dedicated tax savings account separate from your operating, payroll and general savings accounts.

Every time you transfer funds into this account, you are removing the temptation to spend money that technically belongs to the IRS or Arizona Department of Revenue.

For Phoenix businesses with fluctuating cash flow , this separation is critical. When tax funds sit in your primary account, they feel available. When they are moved immediately, you adjust your spending to what is truly usable.

Step 3: Use Profit-Based Set-Asides

Instead of guessing what to transfer, build a percentage-based rule tied to profit. For example:

Calculate your effective federal and Arizona tax rate from last year
Adjust for projected growth
Apply that percentage to net profit each month

If your combined effective rate is 25 to 35 percent, that becomes your benchmark for set-asides on net income.

For pass-through entities, remember that payroll withholding alone may not cover your full personal tax obligation. Distributions taken during a strong quarter increase your personal taxable income.

Profit-based set-asides prevent the common mistake of distributing too much too early.

Step 4: Establish Cadence Rules

Strong quarterly results can create overconfidence. Owners may assume the pace will continue and delay tax transfers until later quarters. Instead, build cadence rules. For example:

Transfer tax set-asides twice per month
Move a percentage immediately after major client payments clear
Review and adjust percentages at the end of each quarter

The goal is consistency. When transfers happen automatically and on schedule, you remove emotion from the process.

Quarterly check-ins are especially important in Phoenix, where industries such as construction, hospitality and professional services can experience seasonal swings.

If the next quarter slows down, you will want to reassess projections early rather than react in December.

Step 5: Align Owner Distributions With Tax Planning

After a strong quarter, many owners increase distributions. That is understandable, but it should be strategic. Before taking additional draws:

Confirm tax reserves are fully funded
Confirm quarterly estimated payments are accurate
Confirm payroll withholding is sufficient

If you operate as an S corporation, make sure reasonable compensation rules are being followed. Distributions should not replace proper payroll structure .

Strong early profits are an opportunity to build stability, not just increase personal spending.

Step 6: Reevaluate Estimated Payments

If your quarterly numbers significantly exceed projections, your quarterly estimated payments may need adjustment.

The IRS and Arizona expect payments throughout the year, and underpayment penalties can apply even if you eventually pay in full at year's end.

A mid-year projection based on actual quarterly results gives you a clearer picture of what your total annual liability may look like.

Waiting until Q4 to catch up often means writing a large check all at once.

The Real Risk of a Strong Quarter

When business owners see strong cash flow, they invest, expand or increase spending. Without a structured withholding system, tax obligations can potentially grow quietly in the background.

By the time year-end arrives, the numbers may feel overwhelming.

A Tax Surprise Prevention Plan built or modified after a strong quarter ensures that growth works for you, not against you.

Build Your Plan With Confidence

H&H Accounting Services works with Phoenix business owners to create customized tax set-aside strategies, profit-based transfer systems and quarterly projection reviews. Whether you operate as an LLC, S corporation or are a sole proprietor, proactive planning can prevent penalties and eliminate year-end stress.

If you had a strong quarter and want to make sure it stays strong all year, contact H&H Accounting Services today at (480) 561-5805.

Short-Term Rental Income Tax Considerations

Tue, 03 Feb 2026 23:08:20 GMT

Short-term rental ownership can look deceptively simple from the outside. A property is listed, guests book stays and platforms handle payments. From a tax perspective, however, short-term rental income sits in a gray area that blends elements of real estate, hospitality and small business activity. That combination creates tax treatment differences that often surprise owners, especially as income increases.

Income classification, the balance between deductions and depreciation and Arizona state and city transaction privilege tax obligations all play a role in determining whether a short-term rental is tax-efficient or quietly accumulating risk.

How Short-Term Rental Income Is Classified

The first issue most owners encounter is how short-term rental income is classified. Unlike traditional long-term rentals, short-term rentals may be treated as either rental income or business income depending on how the property is operated. Key factors include:

Average length of stay
Level of services provided to guests
Owner participation in daily operations

When the average stay is fewer than seven days, or when substantial services are provided, the activity often falls outside standard passive rental treatment. In those cases, income may be considered active business income rather than passive rental income.

This distinction matters because it affects:

Whether losses can offset other income
Exposure to self-employment tax
Application of passive activity rules

Deductions vs Depreciation: What Actually Reduces Tax

Expense deductions are usually the most visible tax benefit of short-term rentals. Cleaning, supplies, platform fees, utilities, insurance and repairs are common and straightforward. Tax efficiency is often reduced when owners focus only on deductions and overlook depreciation.

Depreciation allows owners to recover the cost of the property and certain improvements over time. For short-term rentals, depreciation can represent one of the largest non-cash tax benefits available. However, it requires careful allocation between land and building, as well as proper tracking of capital improvements.

Short-term rental owners who self-prepare returns often underutilize depreciation or apply it inconsistently.

Over time, that can mean paying significantly more tax than necessary or creating problems when the property is sold.

Material Participation and Loss Treatment

Material participation depends on hours spent managing the property, handling bookings, coordinating cleaning and overseeing maintenance. When properly documented, this participation can allow losses to offset other active income.

The IRS places a heavy burden on taxpayers to substantiate hours and involvement. Without documentation, losses that were previously claimed may be reclassified during an audit.

Platform Reporting Does Not Equal Tax Compliance

Booking platforms simplify payments, but they do not simplify tax compliance. Forms such as 1099-K report gross receipts, not taxable income. That figure often includes cleaning fees, taxes collected and platform charges that do not represent true profit.

Owners who report platform totals without proper reconciliation may:

Overstate income
Understate expenses
Miss deductible items
Trigger unnecessary notices due to mismatches

Transaction Privilege Tax Creates Local Surprises

One of the most common and costly surprises for Arizona short-term rental owners comes from state and local transaction privilege taxes (TPT). These taxes function similarly to sales tax but are applied to the privilege of doing business within a jurisdiction. Arizona allows both the state and individual cities to impose their own TPT components.

Many Arizona owners assume short-term rental platforms handle all applicable TPT. While some platforms collect and remit certain Arizona or city taxes, coverage varies by municipality and tax classification, and gaps are common. Owners remain responsible for understanding what is collected on their behalf and what is not.

In the Phoenix metro area and surrounding Arizona cities, TPT issues often arise when:

Owners fail to register with state or city agencies
Tax is collected but not remitted correctly
Multiple jurisdictions impose layered taxes
Reporting requirements differ from platform summaries

When Short-Term Rentals Begin to Resemble Businesses

As bookings increase, many short-term rentals begin to resemble operating businesses more than passive investments. Multiple properties, cleaning crews, pricing strategies and guest management all point toward business-level complexity. At that stage, owners often need to consider:

Entity structure
Estimated tax payments
Payroll or contractor compliance
More formal accounting systems
Long-term exit planning

Work With a CPA and Tax Preparer Who Understands Short-Terms Rental Taxation in the Greater Phoenix Area

H&H Accounting Services works with short-term rental owners to identify tax exposure, optimize deductions and depreciation and address tax obligations before they become costly surprises. Contact us at (480) 561-5805 to review your tax position and make sure your reporting aligns with how your operation actually runs.

When a Side Hustle Quietly Becomes a Business

Tue, 03 Feb 2026 23:03:34 GMT

Many side hustles do not begin with a business plan. They start with extra freelance work, online sales, consulting favors or a skill that happens to generate income. At some point, however, the IRS stops viewing that activity as casual. The shift from hobby or supplemental income to business activity often happens quietly, and taxpayers usually realize it only after a tax notice, audit question or unexpected liability.

Hobby vs Business

The IRS does not define a side hustle by hours worked or income earned alone. Instead, it looks at intent and behavior. The hobby-loss rules focus on whether the activity is conducted with a genuine profit motive.

Several factors influence this determination:

Consistency of income over time
Efforts to operate in a businesslike manner
Recordkeeping and financial controls
Time and effort invested
Reliance on the income for living expenses
History of profits or losses

A common misconception is that low income automatically qualifies an activity as a hobby. That is not the case. A small operation with proper records, pricing strategy and profit intent can still be a business.

Conversely, an activity generating modest revenue but producing losses year after year without adjustments raises hobby-loss concerns.

Deductions are limited if an activity is classified as a hobby. Expenses can no longer be used to offset other income, which often leads to higher taxable income and surprise balances due.

Material Participation and Why It Matters

Material participation becomes relevant once an activity is treated as a business, particularly for pass-through entities or Schedule C filers. The IRS uses material participation tests to determine whether income is active or passive. For side hustles, this matters because:

Active income is generally subject to self-employment tax
Passive losses may be limited or disallowed
Participation affects how losses can offset other income

Many side hustles easily meet material participation thresholds because the owner is doing the work themselves. The issue arises when income grows and the structure becomes more complex. Hiring help, outsourcing fulfillment or reducing direct involvement can shift how participation is evaluated.

Failing to assess material participation properly can result in incorrect loss treatment, underpaid self-employment tax or audit exposure.

When Form 1099 Income Signals a Change

Receiving Form 1099 income is often the first external signal that a side hustle has entered business territory.

Platforms, clients and payment processors issue Forms 1099-NEC or 1099-K based on payment thresholds, not on whether you consider yourself a business.

Once reported, that income is visible to the IRS. At that point, the question is no longer whether the income exists, but how it should be reported and taxed. Issues commonly surface when taxpayers:

Report 1099 income without deducting legitimate expenses due to poor records
Deduct expenses aggressively without understanding hobby-loss rules
Ignore self-employment tax obligations
Fail to make estimated tax payments as income grows

Sales Tax Exposure Often Comes First

Sales tax exposure frequently surfaces before federal income tax issues, especially for product-based side hustles. Selling online, at markets or across state lines can trigger sales tax obligations long before the business owner realizes it. Common risk areas include:

Not registering for sales tax once nexus is established
Collecting tax but not remitting it properly
Failing to track taxable vs non-taxable sales
Assuming platforms handle all compliance automatically

Unlike income tax, sales tax liability can become personal. States treat unremitted sales tax as trust fund money, and penalties escalate quickly. A side hustle that scales without proper sales tax controls can accumulate significant exposure in a short period of time.

What You’ll Need if Your Side Hustle Is Technically a Business

If your side hustle qualifies as business activity, Arizona, the federal government and other jurisdictions in which you operate will expect business-level compliance. This includes:

Separate recordkeeping
Estimated tax payments
Proper expense classification
Transaction privilege tax (TPT) registration and filings
Self-employment tax planning
Potential entity structure considerations

Waiting until income feels “big enough” often means waiting too long.

Get Thorough Accounting and Business Tax Preparation Assistance in Phoenix

Working with a CPA and business tax preparer can help you remain compliant, reduce unnecessary risk and build a structure that supports growth instead of reacting to it. Contact us here on our website or give us a call at (480) 561-5805 to speak with an accounting and tax professional today.

What to Know About the Tax Implications of Inherited Property in Arizona

Tue, 03 Feb 2026 22:57:46 GMT

Inheriting property in Arizona often comes with more tax complexity than expected. Basis adjustments, ownership structure, prior depreciation and how the property is reported after transfer can affect tax obligations. Misunderstanding any one of these areas can create unnecessary tax exposure when the property is sold, rented or divided among heirs.

Arizona does not impose a state inheritance tax, but federal rules still apply, and reporting errors are common, especially when multiple heirs or properties are involved.

Stepped-Up Basis and Why It Matters

One of the most important tax concepts tied to inherited property is the stepped-up basis. In most cases, the tax basis of inherited property is adjusted to its fair market value as of the decedent’s date of death. This adjustment can significantly reduce capital gains tax if the property is sold.

For example, if a parent purchased a home decades ago for $150,000 and it is worth $600,000 at death, the heir’s starting basis is generally $600,000 rather than the original purchase price. If the property is sold shortly after inheritance for close to that value, capital gains may be minimal or nonexistent.

Arizona follows federal basis rules, so this stepped-up basis applies for both federal and Arizona income tax purposes. Problems arise when heirs fail to document the property’s value at the date of death. Without a defensible valuation, taxpayers may default to an incorrect basis, often overstating taxable gain later.

Partial Step-Ups in Community Property Situations

Arizona is a community property state, so when one spouse dies, community property may receive a full step-up in basis rather than a partial one, depending on how the property was titled and characterized.

Property held jointly outside of community property rules may only receive a step-up on the deceased spouse’s portion. This distinction can materially change future tax outcomes.

Heirs and surviving spouses often assume all inherited property receives the same treatment. That assumption can lead to incorrect basis calculations, especially when properties were acquired before marriage, inherited previously or refinanced over time.

Multi-Heir Ownership and Allocation Challenges

When multiple heirs inherit a single property, tax reporting becomes more complicated. Each heir receives a proportionate share of the stepped-up basis based on their ownership percentage. That allocation must be tracked carefully, especially if one heir buys out another or the property is sold later.

Common issues include:

Disagreements over valuation at the date of death
Unequal distributions not properly documented
One heir using the property while others do not

If the property generates income, each heir is responsible for reporting their share. Improper allocation can result in mismatched reporting and IRS notices, even when total income is correct.

Prior Depreciation Can Change the Outcome

Inherited rental property introduces another often-overlooked issue: prior depreciation. Depreciation taken by the decedent does not carry over to the heir in the same way it would with a gifted property. The stepped-up basis generally resets depreciation going forward.

However, this does not eliminate all complications. If the property is sold, depreciation recapture rules may still apply depending on how the basis was calculated and how long the heir held the property. Errors often occur when heirs attempt to continue depreciating the property using the decedent’s old schedule rather than establishing a new one.

Failing to reset depreciation correctly can distort income, trigger recapture issues at sale or raise red flags during an audit.

Using the Property After Inheritance

What an heir does with the property after inheritance also affects tax treatment. Converting an inherited home into a rental, selling it or using it as a primary residence all have different implications. For example:

Renting the property requires setting up depreciation correctly from the stepped-up basis
Selling the property later requires accurate gain calculations
Moving into the property may allow for future exclusion planning, but timing matters

Each choice changes the reporting requirements, and mistakes made early can compound over time.

Planning Before a Sale or Transfer in the Greater Phoenix Area

Working with a CPA who understands Arizona property rules and federal tax interaction can help heirs make informed decisions early. H&H Accounting Services assists clients with inherited property planning, basis calculations, depreciation strategy and multi-heir reporting issues.

Contact us at (480) 561-5805 to discuss your situation and make sure your reporting reflects the full tax benefits available to you.

Getting More Value From Bookkeeping and Payroll Services

Thu, 29 Jan 2026 18:16:30 GMT

Bookkeeping and payroll services are often viewed as back-office necessities rather than strategic tools. When handled collaboratively, however, they can provide clarity, consistency and fewer surprises at tax time.

The value business owners get from these services depends not only on the provider but also on the information and communication that supports the process.

Accurate bookkeeping and payroll work best when business owners and their accounting professionals operate as a team. Simple habits, consistent documentation and timely communication can dramatically reduce errors, rework and stress throughout the year.

Why Accuracy Starts With Timely Information

Bookkeeping and payroll rely on real-time data. When documents are delayed or incomplete, even the most experienced professionals are forced to make assumptions that may later need correction.

Providing timely bank statements, credit card activity, invoices and receipts allows transactions to be recorded accurately when they occur. This reduces the need for retroactive adjustments and helps ensure that financial reports reflect what is actually happening in the business.

Late or missing information often leads to rework. That rework can affect financial statements, payroll filings and tax calculations later on.

Keeping Personal and Business Finances Separate

One of the most impactful steps business owners can take is maintaining a clear separation between personal and business finances. Commingled accounts create confusion, slow down bookkeeping and increase the risk of misclassification.

Separate bank accounts and credit cards make it easier to:

Track business performance accurately
Identify deductible expenses
Support payroll and owner compensation decisions
Simplify tax preparation

When personal and business transactions are mixed, accountants must spend additional time sorting through activity, which increases costs and the potential for errors.

Supporting Payroll With Clear and Consistent Processes

Payroll accuracy depends on consistency. Changes to pay rates, hours, benefits or employee status need to be communicated before payroll is processed, not after.

Providing updated employee information, time records and benefit changes on a regular schedule helps prevent corrections, amended filings and employee dissatisfaction.

Common payroll issues often stem from:

Late timesheets
Unreported bonuses or reimbursements
Changes in employment status not communicated promptly
Inconsistent payroll schedules

Clear processes and advance notice allow payroll to run smoothly and compliantly.

Communicating Changes as They Happen

Businesses are dynamic. Staffing changes, new vendors, equipment purchases and compensation adjustments are all part of growth. Communicating these changes early allows bookkeeping and payroll records to stay aligned with reality.

Waiting until year-end to mention major changes to your CPA often leads to rushed corrections during tax season. Early coordination gives your accounting team time to apply the correct treatment and avoid last-minute surprises.

This is especially important for:

Hiring or terminating employees
Changing business structure or ownership
Purchasing major assets
Adjusting owner pay or distributions

Proactive communication helps prevent cascading issues later.

How Consistency Reduces Errors and Rework

Consistency is one of the most overlooked contributors to accurate financial records. When documents are delivered on a predictable schedule and processes remain stable, errors become less likely.

Regular bookkeeping updates allow issues to be identified and corrected early. This keeps financial reports reliable and prevents small discrepancies from growing into larger problems.

Consistent payroll practices also reduce the need for amended filings and corrections, saving time and reducing compliance risk.

The Connection Between Bookkeeping and Tax Preparation

Bookkeeping and payroll are not separate from tax preparation. They are the foundation. Clean books and accurate payroll records make tax filings faster, more accurate and less stressful.

When bookkeeping is inconsistent or payroll corrections pile up, tax preparation becomes reactive rather than strategic. This can lead to missed deductions, misreported income and unnecessary back-and-forth during filing season.

Early coordination ensures that year-end tax work reflects what has already been properly tracked throughout the year.

Turning Services Into a Strategic Advantage

When business owners engage actively with their bookkeeping and payroll process, the benefits extend beyond compliance. Accurate records support better cash flow planning , clearer performance tracking and more informed decision-making.

Instead of viewing bookkeeping and payroll as tasks to complete, businesses can treat them as tools that support growth and stability.

Get More From Your Bookkeeping and Payroll With the Help of Our CPA in Phoenix

Bookkeeping and payroll work best when accuracy, communication and consistency are shared priorities.

H&H Accounting Services partners with business owners to create streamlined bookkeeping and payroll processes that reduce errors, improve clarity and support smoother tax preparation. Contact us at (480) 561-5805 to learn how better coordination throughout the year can help your business get more value from its accounting services .

Filed Your Taxes but Missed Deductions? What Amended Returns Can Fix

Thu, 29 Jan 2026 18:09:32 GMT

Filing your tax return can feel like closing the book on the year. Once it’s submitted, many taxpayers assume there’s no going back. In reality, filing does not always mean final, especially if you later realize deductions, credits or income adjustments were missed.

If you filed your return and then discovered overlooked deductions, incorrect classifications or missing forms, an amended return may offer a practical path to correction. For individuals and business owners alike, the first quarter of the year is often the ideal time to review what was filed and determine whether changes make sense.

What an Amended Return Is and What It Can Do

An amended return allows you to correct or update a previously filed tax return. It is commonly used to adjust reported income, claim deductions or credits that were missed or correct filing status and dependency information.

Amended returns are not unusual. Many taxpayers file quickly to meet deadlines, then later receive additional documents, clarification from vendors or better guidance on allowable deductions. Filing an amendment is simply a formal way to bring your return in line with accurate and complete information.

What an Amended Return Can Fix

Missed deductions or credits
Incorrect income reporting
Business expense classification errors
Depreciation or amortization issues
Retirement or health account contribution errors

An amended form is not an admission of wrongdoing. It is a correction process built into the tax system.

Common Deductions That Are Often Missed

Missed deductions are more common than most people realize, particularly for small business owners, freelancers and self-employed individuals. Some of the most frequently overlooked items include home office expenses, mileage or vehicle use, professional services, software subscriptions, retirement contributions and health insurance premiums for qualifying individuals.

Business owners may also miss depreciation opportunities, equipment write-offs or deductions tied to timing issues when expenses were paid late in the year but not properly captured.

For individuals, credits related to education, dependents or energy efficiency upgrades are sometimes missed due to incomplete documentation at the time of filing.

An amended return allows these items to be reviewed and claimed if eligibility requirements are met.

Why Q1 Is a Smart Time to Review Filed Returns

The first quarter of the year is often when taxpayers gain clarity. Financial statements are finalized, bookkeeping catches up, and additional tax documents may arrive after an initial filing.

Reviewing your return in Q1 allows you to:

Correct issues while the tax year is still recent
Recover refunds sooner rather than later
Align your tax strategy with upcoming quarterly payments
Reduce compounding errors that affect future filings

Waiting years to amend is possible, but earlier corrections are generally simpler and easier to manage.

When an Amended Return Makes Sense and When It Does Not

Not every small change warrants an amended return. Minor rounding differences or insignificant adjustments may not materially affect your tax outcome.

Amending makes the most sense when:

A missed deduction or credit changes your tax liability
Business income or expenses were misreported
Filing status or dependency errors occurred
You received corrected tax documents after filing

A professional review can help determine whether the benefit of amending outweighs the time and cost involved.

How Amended Returns Affect Refunds and Payments

If the amendment results in a lower tax liability, you may be eligible for an additional refund. If it results in additional tax owed, paying sooner can reduce penalties and interest.

Amended returns are processed separately from original filings and typically take longer to complete. That delay is normal and does not indicate a problem with the return itself.

Importantly, amending does not reset audit risk simply by existing. Accurate, well-documented corrections are a normal part of tax compliance.

Strategic Considerations for Business Owners

For business owners, amended returns can also be strategic. Correcting deductions or depreciation may improve cash flow, clarify financial reporting and create a more accurate baseline for future planning.

It can also prevent small issues from carrying forward into future years, where they become harder to unwind.

This is especially relevant for pass-through entities, self-employed individuals and owners making estimated payments.

Why Professional Review by a Qualified Tax Preparer Matters

Amending a return is not just about plugging in new numbers. It requires understanding how changes interact with other parts of the return, including credits, phase-outs and carryovers.

A professional review ensures that amendments are accurate, supported and aligned with your broader tax strategy rather than creating unintended consequences.

Talk to H&H Accounting Services About Amended Tax Returns in Phoenix

If you’ve already filed your taxes but suspect deductions were missed or details were incorrect, it may not be too late to fix them. H&H Accounting Services helps individuals and business owners review filed returns, identify missed opportunities and determine whether an amended return makes sense.

Contact us at (480) 561-5805 to discuss Q1 recovery strategies and ensure your tax filings reflect the full picture of your financial year.

How to Use Last Year’s Numbers to Avoid Cash Flow Surprises in 2026

Thu, 29 Jan 2026 18:03:04 GMT

Cash flow problems rarely come out of nowhere. In most cases, they are the result of predictable timing gaps, underestimated expenses, or seasonal swings that could have been anticipated with the right data. One of the most effective ways to prevent cash flow surprises in 2026 is by using your actual numbers from the prior year as a planning foundation.

Instead of relying on rough estimates or best-case assumptions, businesses and self-employed individuals can build more accurate projections by analyzing what already happened. Last year’s financial activity provides a realistic roadmap for what to expect and where adjustments are needed.

Step 1: Start With Clean, Complete Prior-Year Data

Before projecting anything forward, it is essential to make sure last year’s numbers are accurate. This means reviewing final income statements, expense reports and bank activity to confirm that transactions were categorized correctly.

Look for:

One-time expenses that will not repeat
Missing income or delayed deposits
Expenses that were misclassified or duplicated
Owner draws or distributions that affect cash but not profit

Clean data ensures that projections are based on reality rather than distorted figures.

Step 2: Break Cash Flow Into Inflows and Outflows

Cash flow planning is not about profit alone. It is about timing. Start by separating last year’s activity into two categories: money coming in and money going out.

Inflows typically include:

Client or customer payments
Recurring revenue
One-time projects or seasonal income

Outflows often include:

Payroll or contractor payments
Rent and utilities
Taxes and estimated payments
Debt service
Software and subscriptions

Reviewing these separately helps identify where cash timing mismatches occurred.

Step 3: Identify Seasonal Patterns and Timing Gaps

Many cash flow issues are seasonal, even when revenue looks stable on an annual basis. Using last year’s monthly data, look for patterns such as slower months, high-expense periods or times when receivables lagged behind expenses.

Questions to ask include:

Which months had the lowest cash balance
When large expenses are clustered together
When tax payments created are short-term strain
Whether income timing shifted during the year

These patterns often repeat unless intentionally addressed.

Step 4: Adjust for Known Changes in 2026

Once last year’s patterns are clear, adjust projections for changes you already know are coming. These might include rent increases, staffing changes, new equipment purchases or planned growth initiatives.

It is also important to account for tax obligations based on last year’s results. Underestimating estimated payments is a common cause of cash flow stress.

Using prior-year data makes these adjustments more grounded and easier to quantify.

Step 5: Build Monthly Cash Flow Projections

With adjusted inflows and outflows, create a month-by-month projection for 2026. This does not need to be complex. The goal is visibility, not perfection.

Monthly projections help you:

Anticipate low-cash periods
Schedule expenses more strategically
Time owner compensation responsibly
Plan for taxes without last-minute scrambling

Even simple projections can dramatically reduce surprises.

Step 6: Stress-Test the Numbers

Once projections are built, test them. Consider what happens if income comes in later than expected or if expenses increase slightly.

Questions to Answer

How much buffer exists in slower months?
Are cash reserves sufficient to weather slow periods?
Which expenses could be delayed if needed?

This step turns projections into a planning tool rather than a static document.

Step 7: Use Projections as a Living Tool

Cash flow planning works best when reviewed regularly. Comparing actual 2026 results to projections allows you to make adjustments early rather than reacting after problems arise.

Why This Approach Works

Using last year’s numbers removes guesswork. It grounds planning in real behavior, real timing and real financial habits. This approach is especially valuable for small businesses, freelancers and owners who manage variable income.

Rather than reacting to cash flow problems , you gain the ability to predict them and take steps to limit the challenges they might cause.

Phoenix Business Owners Can Get Help Planning Ahead With Our Financial Planning Services

If you want to avoid cash flow surprises in 2026, the most reliable place to start is with the numbers you already have.

H&H Accounting Services helps businesses and individuals turn prior-year financial data into practical cash flow projections and planning strategies. Contact us at H&H Accounting Services by calling (480) 561-5805.

We can help you forecast cash flow and build a forward-looking plan that supports stable, predictable cash flow in the year ahead.

Can You Make a 2025 Retirement Contribution in 2026? What Business Owners Need to Know About Retroactive Funding Rules

Wed, 17 Dec 2025 18:29:15 GMT

Retirement plans are built with enough flexibility to accommodate different types of earners and business structures. That flexibility extends to how contributions are made, the limits that apply and the deadlines you must follow. The rules for when you can fund a retirement plan vary significantly based on the type of account you use and the way your business is organized.

Some types allow contributions up to the business’s tax filing deadline. Others lock in deadlines tied to payroll cycles or year-end elections. Understanding your retirement plan, and how to make the best use of its contribution flexibility, can pay dividends for not just this tax year but future years.

SEP IRA Contributions Through the Filing Deadline

SEP IRAs remain one of the simplest options for business owners because the contribution window is flexible. For example, a 2025 contribution can be funded in 2026 as long as it’s made before your business filing deadline. The same rule applies each year: SEP IRA contributions follow the tax-filing calendar, including extensions.

A sole proprietor filing on a traditional April schedule may have until mid-October 2026 to fund the prior year’s SEP contribution. S corporations and partnerships follow their entity deadlines, and the extension period applies there too. This flexibility is useful for owners who want to close the books, finalize taxable income and then calculate the optimal SEP contribution.

Staff inclusion matters because SEP contributions must be made for eligible employees if you make one for yourself. That requirement also follows the retroactive window, so the business must fund employee contributions by the extended deadline as well.

Solo 401(k) Contributions Split Between Employee and Employer Timing

Solo 401(k) plans offer strong contribution limits, but their deadlines are more nuanced. Contributions fall into two categories, and each has its own rules.

Employee deferrals must be elected by December 31 of the plan year for most businesses. The contribution itself may be deposited later, but the election has to occur before the year's end. A limited exception exists for sole proprietors in their first year of establishing a Solo 401(k), who may be allowed to make a retroactive deferral election by their personal tax filing deadline.

This split can cause confusion for some business owners. Employer contributions often remain available until the fall of the following year, while employee deferrals are tied directly to December 31.

SIMPLE IRA Contributions Must Follow Payroll Timing

SIMPLE IRA plans follow payroll more strictly than SEP IRAs or Solo 401(k)s. Employee deferrals must be taken through payroll during the year in which the contribution applies. Employer matching and nonelective contributions may be deposited up to the business’s tax return deadline, including extensions, even though they must be based on the prior year’s compensation.

If payroll for the year is complete, you cannot retroactively designate additional SIMPLE IRA contributions for the prior year.

Catch-up contributions for eligible employees, including the owner, work the same way. They must flow through payroll, not a late lump sum in the following year. This structure is the biggest difference between SIMPLE plans and other small business retirement plans. SIMPLE IRAs are designed to sync with payroll withholding rather than retroactive funding based on a closing of the books.

Owners planning to maximize SIMPLE IRA contributions must confirm deferral percentages before the final payroll cycle in December. If end-of-year cash flow changes affect how much you want to save, you need to adjust the deferral rate in time for the last payroll run.

Traditional and Roth IRA Contributions Through the Filing Deadline

Traditional and Roth IRA contribution rules are more straightforward. Individuals can make contributions for the prior year up to the personal tax filing deadline. No extension is required to allow this. Contributions for 2025 can be made any time up to the April 2026 deadline, even if the taxpayer files early.

These contributions also apply to business owners who contribute outside of an employer plan. Many owners determine their IRA eligibility only after reviewing final income, which is why this post-year-end window can be especially helpful for owners on the cusp of Roth IRA income limits.

Traditional IRA deductibility depends on income, filing status and participation in an employer plan. Making these contributions after final income is known often leads to cleaner planning decisions and avoids backtracking if estimates change.

Choosing the Right Funding Timeline for Your Situation

Business owners working across multiple retirement plans may want to work out a combined contribution timeline. Talk with your accountant or financial planner to find out if something like this would work for you:

SIMPLE IRA or Solo 401(k) deferrals run through payroll until December 31
Plan is evaluated before year-end to determine whether a salary increase, bonus payroll or final deferral adjustment is needed
After the books close, SEP or employer Solo 401(k) contributions are calculated
Owner waits until filing season to finalize the exact amount based on taxable income
IRA contributions fill the final gap between available cash and overall savings goals

Learn How to Maximize Your Retirement Contributions While Maintaining Compliance With All Relevant Arizona and Federal Laws

Managing multiple contribution windows while tracking payroll deadlines, plan rules and year-end adjustments can be difficult for business owners. H&H Accounting Services helps owners coordinate their retirement plan deadlines, determine contribution amounts and align retroactive funding with cash flow and tax goals .

Contact us online or give us a call at (480) 561-5805 if you want support building a clear retirement contribution timeline that fits your business.

S Corp Salary vs. Distributions: How to Choose the Right Mix for Taxes and Compliance

Wed, 17 Dec 2025 18:25:45 GMT

Balancing salary and distributions is one of the most persistent challenges for S corporation owners. The structure is efficient but only when owners set compensation intentionally and revisit it as the business grows.

Most owner questions come down to how to keep compensation aligned with the work being performed, how distributions fit into overall tax planning and how year-end timing affects payroll and basis calculations.

How Low Is Too Low for Reasonable Compensation

Reasonable compensation is not a fixed dollar amount. It is a function of the role you perform, the hours you work and what it would cost your business to hire someone else to do the same job.

Owners often underestimate how many functions they cover. Many fill several operational roles at once, which means their work would cost more to replace than they expect.

Too low is any number that does not reflect the value of the services actually performed. If an owner manages staff, runs day-to-day operations, handles sales, performs technical work or fills a specialized role, the salary must reflect that. If the business has employees covering those responsibilities and the owner only provides oversight, the salary can shift accordingly.

The challenge is avoiding a number that is disconnected from reality. Salary should match the workload you provide to the company, not the minimum needed to keep payroll active.

How Distributions Affect Payroll, FICA and Estimated Taxes

Distributions are a key advantage of the S corporation structure. They bypass payroll tax, which is why many owners prioritize them. The tradeoff is that salary covers Social Security and Medicare obligations while distributions do not. If the salary is set too low, you may end up relying on estimated taxes to cover the income portion without building sufficient FICA contributions through payroll. Distributions do not change taxable income, but they do reduce basis, which affects how much can be withdrawn tax-free.

Owners who take large distributions relative to their salary can see mismatches in their quarterly estimated tax planning. Payroll withholds federal income tax, state tax and FICA. Distributions provide none of those withholdings, so owners must plan their quarterly payments carefully. Many underestimate their tax liability because they assume distributions behave like wages, and they do not.

Benchmarks CPAs Use to Establish Salary

Role: What work do you actually perform. A technical specialist, a manager and an administrative owner have very different compensation profiles. Many S corporation owners function as both operator and manager, which raises the salary benchmark.

Industry: Compensation varies significantly by industry. What is reasonable for a consulting practice is very different from construction, medical, real estate or trades. A CPA can look at common replacement salary data, industry surveys and regional averages.

Hours: Owners who work part-time or operate in a seasonal business can adjust salary accordingly. The number of hours performed each month, quarter or year affects the amount needed to align pay with real workload.

Replacement Cost: Ties all of these together. If your business had to hire someone to perform the work you do, the cost of hiring that person is the clearest benchmark for your salary.

How Often Should Salary Be Adjusted

Salary should be revisited at least annually. Many owners increase compensation when revenue grows or when they shift into a more defined leadership or oversight role. Others adjust downward if they step back from daily work.

Significant changes in staff also matter. When an owner hires a team to absorb operational work, the owner’s salary can move closer to a management benchmark. When the owner continues handling most of the essential functions, salary should reflect that.

Compensation should also be reviewed when distributions become a much larger share of total income. If distributions rise substantially without any change to salary, it may signal that the balance needs to be recalibrated.

What Happens if Distributions Exceed Basis

The basis determines how much you can withdraw tax-free. Distributions that exceed basis are taxable, which comes as a surprise to many first-time S corporation owners. Basis increases with income and contributions and decreases with distributions and certain losses.

If distributions reduce the basis to zero, any amount beyond that point becomes taxable. This issue often appears late in the year when an owner takes large distributions without reviewing current year profits, accumulated basis or prior retained earnings.

Tracking basis throughout the year prevents accidental taxable distributions and keeps year-end planning predictable.

Why Your CPA Wants Payroll Run Before December 31

Year-end payroll locks in the amount of salary recognized for that tax year. If an owner needs additional wages to align with industry benchmarks, support reasonable-compensation expectations or balance salary relative to distributions, that payroll must be completed before December 31.

This is also the cutoff for withholding federal and state taxes through payroll, for issuing accurate W-2s and for matching compensation with the correct year’s basis and income calculations.

Completing payroll after year-end cannot retroactively apply to the prior tax year, which is why CPAs push owners to review compensation in November or December rather than waiting until January.

Support for Structuring Your S Corporation Compensation in the Greater Phoenix Area

Balancing salary, distributions, basis and year-end payroll requires a clear and practical approach rather than a one-size-fits-all rule. H&H Accounting Services helps S corporation owners evaluate their responsibilities, build an appropriate salary strategy, plan distributions and prepare year-end payroll without surprises.

Contact our CPA at H&H Accounting Services by calling (480) 561-5805 and schedule a review of your compensation structure.

Tax Deadlines for Arizona Filers and Businesses

Wed, 17 Dec 2025 18:18:15 GMT

Arizona taxpayers often stay focused on federal dates like the April 15 tax filing deadline or the January 31 deadline for providing W-2s and 1099s, but the state has its own calendar of requirements that can be easy to miss.

Businesses face additional deadlines tied to Transaction Privilege Tax filings, city sales tax differences, withholding reconciliation and deadlines connected to actions rather than returns. Adhering to both state and federal requirements can help your business avoid penalties, interest and unnecessary stress during the year.

Arizona Transaction Privilege Tax and City-Level Filing Differences

Arizona’s Transaction Privilege Tax, or TPT, functions differently from a traditional sales tax. The tax is imposed on the business for the privilege of conducting taxable activity within the state, and TPT filings follow their own schedule.

Most businesses file TPT monthly, although some with lower annual liability may qualify for quarterly or annual filing. Monthly TPT returns and payments are generally due on the last business day of the month following the reporting period. Even if a business has no taxable activity for the period, a zero return is still required.

Many operators overlook city-level obligations, especially businesses with multiple locations. Cities set their own tax rates and may require additional reporting through the state portal. Filers often assume state-level compliance covers all jurisdictions, which is why reporting gaps at the city level are a common source of notices and penalties.

State and Federal Deadlines Are Not Always Aligned

Businesses frequently assume that a federal extension automatically gives them more time for all state-level filings. Arizona does allow extensions for some returns, but the timing and requirements do not always match the federal schedule. A federal extension for an S corporation or partnership does not extend Arizona TPT deadlines, withholding deadlines or city sales tax filings. These continue on their usual calendar regardless of federal timing.

Filing Deadlines Versus Payment Deadlines for Individuals and Businesses

Individuals typically follow the federal income tax timeline for filing returns. However, payment of any tax due must be made by the standard federal due date to avoid interest, even if the individual plans to file under an extension . If Arizona withholding applies through employment, reconciliation filings still need to be completed by the Arizona due date.

For S corporations and partnerships, federal filing deadlines differ from individual return deadlines. These businesses must also complete payroll withholdings, reconcile state withholding and ensure payments are submitted on time. Federal extensions do not automatically extend state-level payment obligations.

Employers must also file Arizona Form A1-R, along with copies of W-2s and any required 1099-NECs. These filings sit outside the income tax timeline and carry their own firm due dates.

Deadlines Based on Actions, Not Filings

Some of the most important deadlines on the Arizona calendar are tied to required actions rather than formal filings. These often create the biggest compliance problems because they fall earlier than the related tax returns.

Issuing 1099-NECs

Any business that pays a contractor $600 or more in a year must issue a Form 1099-NEC. These must be provided to recipients by January 31. This deadline does not move if you plan to file the related return under a federal extension. Penalties apply if the form is issued late, even when the business is otherwise current on federal or state returns.

Completing and Issuing W-2s

Employers must furnish W-2s to employees by January 31 as well. These also feed into Arizona’s state withholding reconciliation deadlines. Late W-2 issuance creates cascading problems for both workers and the employer’s compliance record.

Running Final Payroll for S Corporation Owners

S corporation owners who take W-2 compensation must ensure their final payroll runs before December 31 for the wages to count in that tax year. Waiting until early January to correct an oversight is not permissible and often creates issues with reasonable compensation calculations, payroll tax reconciliations and year-end state withholding reports.

Closing the Books Before Making Elections

Certain federal and state elections depend on accurate year-end books. Businesses that wait too long to finalize their ledgers risk carrying errors into tax filings , affecting depreciation schedules, pass-through income reporting and state adjustments. These issues are far easier to prevent than to correct after filing.

Common Pitfalls for Arizona Filers

Arizona filers commonly run into trouble in these areas:

Forgetting that city-level sales tax reporting may differ from the state requirements
Missing zero return filings for slow periods
Believing a federal extension also extends Arizona deadlines
Delaying W-2 or 1099-NEC issuance because they assume their extension covers those forms
Running the S corporation owner payroll after year-end and trying to treat it as prior year compensation
Completing year-end bookkeeping too late to support timely elections or adjustments

Professional Support to Help Phoenix Businesses Remain Compliant With Arizona Tax Requirements

Arizona’s layered tax system requires close attention to state, city, payroll and federal deadlines throughout the year. If you want support keeping your deadlines organized and your filings accurate, schedule a consultation with our CPA at H&H Accounting Services by calling (480) 561-5805.

How to Balance Business Debt and Cash Flow Heading Into the New Year

Tue, 04 Nov 2025 20:30:24 GMT

For many Arizona business owners, the final quarter of the year is both the busiest and most financially demanding time. Holiday sales, increased inventory orders, seasonal staffing and year-end expenses all collide at once. Cash flow becomes stretched, while credit lines, vendor accounts and short-term loans are pushed to their limits.

Managing this balance between business debt and cash flow is critical not just for surviving Q4 but for setting up a stable start to 2026. Strong sales numbers mean little if your company’s liquidity can’t support operations until customer payments arrive. The key is timing and understanding when money goes out, when it comes in and how debt fits into that equation.

Understand Your Short-Term Liabilities

Short-term liabilities, such as vendor payables, credit card balances and current portions of long-term loans, often expand in the fourth quarter. Retailers, distributors and manufacturers that need to stock inventory ahead of holiday demand face the biggest strain. The challenge is that expenses hit long before the corresponding revenue does.

Businesses that want to get a better handle on their debt to cash flow balance this holiday season can start by creating a list of all short-term obligations due within 90 days. This should include:

Supplier invoices and vendor payables
Payroll obligations and related taxes
Rent and utilities
Credit card balances
Principal and interest payments on loans due in the next quarter

Even though you can’t generate a 100% accurate estimate for future months, you can formulate an estimate based on previous Q4s and adjust for your business’s performance so far in the current year.

If your accounts payable are rising faster than receivables, it may be time to restructure payment terms with suppliers. Many vendors will extend net-30 terms to net-45 or net-60 for reliable customers, especially if it helps secure future business.

Manage Vendor Relationships Strategically

Strong vendor relationships are an overlooked asset during cash flow crunches. Open communication and consistency can often buy flexibility when you need it most.

If you anticipate delays in payment, reach out before invoices become overdue. Vendors appreciate transparency, and many will offer temporary extensions or split-payment arrangements for trusted clients.

Likewise, taking advantage of early-payment discounts when cash allows can strengthen relationships and save money over time.

Consider diversifying your supplier base as well. Relying on a single source for critical inventory increases risk and limits negotiating power. Having multiple relationships can improve terms, pricing and delivery reliability, especially when cash flow is tight and timing is critical.

Evaluate Your Debt Service Ratios

Debt service ratios are a simple but powerful measure of how comfortably your business can cover loan payments from operating income. The most common formula is Net Operating Income divided by Total Debt Service. This shows how many times over you can pay your debt obligations.

A debt service coverage ratio (DSCR) above 1.25 is generally considered healthy. That means for every $1.00 in loan payments, your business generates $1.25 in income. If your DSCR is below 1.0, you’re operating at a shortfall, meaning debt payments are exceeding cash inflow.

Heading into the new year, review your DSCR. If it does need adjusting for more sustainable cash flow, consider:

Reassessing loan structures: Converting short-term, high-interest debt into a longer-term facility can lower monthly payments and improve liquidity.
Refinancing where possible: If your business credit has improved, refinancing can reduce interest costs.
Avoiding stacking loans: Taking multiple short-term advances or merchant cash loans can quickly erode cash flow through overlapping payments and high fees.
Focusing on working capital optimization: Extend vendor terms where possible, speed up receivables collection and maintain adequate liquidity reserves.

Monitor Inventory and Receivables Together

Businesses that rely heavily on inventory during the holidays face a timing gap. Cash leaves early to fund stock purchases, but payments from customers or retail partners arrive weeks later. To manage that gap effectively, track inventory turnover and receivable collection together.

If inventory is moving more slowly than expected, consider discounts or promotions to accelerate sales before year-end. Holding excess stock ties up capital that could be used to service debt or fund payroll.

Conversely, strong sales paired with delayed receivables can also create cash shortages. In those cases, businesses may want to tighten collection practices, enforce payment terms more aggressively or offer small incentives for early payment.

Partner With Accounting Experts Who Understand Business Cycles in Phoenix, AZ

H&H Accounting Services helps Arizona businesses manage these seasonal challenges with tailored cash flow and debt management plans .

Contact us at (480) 561-5805 to schedule a review of your cash flow strategy before year-end, and start 2026 with the financial stability your business needs to grow.

Q4 Tax Planning Moves Arizona Business Owners Should Make Before December 31

Tue, 04 Nov 2025 20:25:57 GMT

As the year winds down, business owners in Arizona should take a close look at their financials before December 31. The final quarter of the year offers one last opportunity to make strategic moves that can reduce taxable income, improve cash flow and set the stage for a strong start to 2026.

Smart year-end tax planning is not just about cutting a check to the IRS for less; it’s about timing, structure and taking advantage of every deduction and credit available under current tax law.

Accelerated Depreciation and Section 179

One of the most powerful year-end tools available to businesses is accelerated depreciation. Under Section 179, qualifying equipment, machinery, vehicles and certain software purchases can be fully expensed in the year they’re placed in service.

For 2025, the Section 179 limit remains generous, allowing most small and midsize businesses to write off up to $1,250,000 in eligible assets, with a phase-out threshold beginning at $3,130,000.

Arizona follows federal depreciation rules, which means businesses can typically benefit from the same expensing opportunities at both the federal and state level. Timing is key, as the equipment must be both purchased and put into service before December 31 to qualify.

Bonus depreciation also remains available for many types of new and used assets, though at a reduced percentage compared to prior years. Even so, combining Section 179 with bonus depreciation can create a meaningful year-end deduction that significantly lowers taxable income.

For example, an Arizona construction company purchasing and putting into service new heavy equipment in December can expense the full cost in 2025, freeing up cash flow for early 2026. The same principle applies for technology upgrades, vehicles or furniture. If it supports operations, it likely qualifies.

Maximize Retirement Plan Contributions

Another highly effective tax planning strategy is contributing to retirement plans before year-end. Business owners who sponsor a SEP IRA, SIMPLE IRA or 401(k) can use these plans to reduce taxable income while building personal wealth for the future.

For 2025, the elective deferral limit for 401(k) plans is $23,000, with an additional $7,500 catch-up contribution for those aged 50 or older. Employers can also make matching or profit-sharing contributions, potentially bringing total plan contributions depending on the plan structure and participant age.

If a business does not yet have a retirement plan in place, there may still be time to establish one before year-end. Certain plans can even be created after December 31 and still allow deductible contributions for the tax year, depending on the entity type and filing deadline.

Business owners in Arizona can also take advantage of federal tax credits for setting up new retirement plans.

The SECURE 2.0 Act expanded the small employer startup credit, covering up to 100 percent of eligible administrative costs for businesses with 50 or fewer employees, with additional credits for employer contributions.

Timing Business Expenses and Income

Managing the timing of expenses and income is a foundational year-end tax strategy. Businesses can often shift taxable income between years by adjusting when they pay bills, issue invoices or recognize revenue.

Businesses that operate on a cash basis can accelerate certain expenses to lower taxable income for the current tax year, like prepaying vendor invoices, stocking up on supplies or making charitable contributions before year-end. Similarly, deferring customer billing until early January can push income into the next tax year, which may reduce business taxes depending on overall financial position and projected profitability.

For accrual-basis businesses, the strategy is more nuanced but can still be impactful. Ensuring all year-end expenses are properly accrued, including bonuses, payroll taxes and professional fees, can ensure deductions are not lost to timing errors.

Arizona business owners should also review accounts receivable and inventory before year-end. Writing off uncollectible accounts or adjusting slow-moving inventory can provide additional deductions while keeping financials accurate for tax reporting.

Review Entity Structure and Tax Elections

Q4 is also an ideal time to review your business entity structure and tax elections. The optimal structure, whether an S corporation, partnership or LLC, can change as income grows or business activity shifts.

An entity taxed as an S corporation, for example, allows business owners to take part of their earnings as a reasonable salary and the rest as a distribution, which may lower self-employment taxes. However, S corporations have additional payroll and compliance requirements that need to be considered.

Other planning opportunities include evaluating the benefits of the Qualified Business Income (QBI) deduction. The calculation can be complex, but year-end adjustments to payroll, retirement contributions or expense timing may help maximize this deduction.

Get Expert Business Tax Preparation Guidance in Phoenix, AZ

Even experienced business owners benefit from a year-end review with a professional accountant and business tax preparer . Schedule a year-end review with H&H Accounting Services today by calling (480) 561-5805.

Why Reviewing Your Chart of Accounts Before Tax Season Can Save You Thousands

Tue, 04 Nov 2025 20:21:15 GMT

For many business owners, tax season feels like a scramble. You spend hours sorting through expenses, reconciling accounts and trying to make sense of what happened over the past twelve months. Often, the real problem is not the taxes themselves but the bookkeeping structure (or lack thereof) that supports them.

Taking time before tax season to review and clean up your chart of accounts can transform your financial reporting from chaotic to clear. Accuracy and transparency can pay dividends, and may even reveal avenues for reducing both your tax liability and accounting costs.

The Role of the Chart of Accounts

Your chart of accounts (COA) serves as the foundation of your accounting system. Every transaction in your business, including every sale, vendor payment, payroll entry or equipment purchase, should be categorized here. It provides the structure for financial reports, tax filings and management decisions.

When the COA is well organized, it gives you an accurate picture of how money moves through your company. When it is cluttered, inconsistent or outdated, it hides critical information. A messy chart of accounts leads to duplicated expense categories, misclassified assets and unreliable reports. That confusion makes it harder to prepare accurate tax returns and increases the time your CPA must spend cleaning up your books.

Why a Year-End Review Matters

Cleaner Tax Reporting
When expense categories are accurate, your CPA can easily match them to IRS reporting requirements. This reduces the risk of errors that might trigger questions or adjustments during filing.
Improved Expense Tracking
A refined COA helps you distinguish between deductible expenses, capital assets and non-deductible items. For example, knowing which equipment qualifies for Section 179 expensing versus depreciation can change your taxable income dramatically.

Easier Audits and Reviews

Well-organized financial records help prove deductions quickly if your return is ever reviewed by the IRS or the Arizona Department of Revenue. A detailed, accurate chart of accounts shows that your recordkeeping meets compliance standards.

Better Business Decisions: Clean data is not just for tax season. When you understand your true expenses and revenue drivers, you can make better operational and investment decisions year-round.

Common Problems That Cost Businesses Money

Even small mistakes in the chart of accounts can have costly effects. The most common issues include:

Duplicate expense categories such as “Office Supplies” and “Office Expenses,” which cause confusion and make it easy to miss deductions.
Personal expenses recorded in business accounts , which complicate tax filings and can create audit red flags.
Improper asset tracking , where equipment purchases are listed as expenses instead of capital assets. This can lead to missed depreciation deductions worth thousands of dollars.
Outdated or irrelevant accounts that no longer reflect your business structure or operations.

Steps to Review and Clean Up Your Chart of Accounts

Start with a Current List
Export your COA from your accounting software. Look for duplicate or confusing categories. Consolidate where appropriate to make reporting clearer.
Align with Tax Categories
Compare your expense accounts to IRS Schedule C or corporate tax categories. Standardizing them ensures that your reporting aligns directly with how deductions will be filed.
Separate Assets from Expenses
Review large purchases from the year and classify them properly. Fixed assets such as vehicles, computers and equipment should appear under asset accounts, not expenses, to allow for depreciation or Section 179 expensing.
Review Liability Accounts
Check that credit cards, loans and payroll tax liabilities have correct balances and that payments have been applied accurately throughout the year.
Simplify for Reporting
A chart of accounts should be detailed enough to show insight but not so complex that it creates confusion. Aim for consistency across periods and departments so financial statements are easy to compare year over year.
Reconcile and Verify
Once categories are cleaned up, reconcile bank and credit card accounts to ensure transactions are properly recorded.

The Payoff: Efficiency and Savings

Your accountant spends less time sorting transactions, which means lower business tax preparation fees.
You gain visibility into true business performance, making it easier to identify areas for cost control or potential deductions.
Most importantly, your tax return becomes faster, cleaner and less likely to trigger questions from the IRS.

For Arizona business owners, where state and federal tax alignment can vary depending on business type, having a clean COA helps you apply deductions properly at both levels. It also makes year-end planning strategies, such as accelerated depreciation or expense timing, easier to execute.

Partner With Business Account and Tax Preparation Professionals in Phoenix, AZ

Schedule a year-end accounting review with H&H Accounting Services today by calling (480) 561-5805 and start tax season with organized books, clear data and confidence that your business is maximizing every deduction available.

The Tax Implications of Selling a Business in Arizona

Thu, 23 Oct 2025 21:36:02 GMT

Selling a business is often the culmination of years of dedication, risk-taking and growth. For Arizona entrepreneurs, the decision to exit is both exciting and daunting. Beyond finding the right buyer and negotiating a fair price, one of the most important aspects of the transaction is understanding the tax implications. The way a sale is structured, whether as an asset sale or a stock sale, can significantly affect the seller’s tax bill. Careful planning in advance can also help minimize taxes and make the transition smoother.

Capital Gains Taxes in Arizona

One of the most immediate tax considerations when selling a business is capital gains tax. When you sell a business for more than your adjusted basis (the original investment plus improvements, minus depreciation), the gain is taxable.

Federal capital gains tax : For most small business owners, the gain is treated as long-term capital gain if the business has been owned for more than a year. Federal rates currently range from 0% to 20%, depending on your income level.
Arizona state tax : Arizona does not have a separate capital gains tax rate. Instead, capital gains are taxed as ordinary income at the state level. This means your gain will be included in your Arizona taxable income, with rates ranging from about 2.5%.
Long-term capital gains subtraction: For 2025, AZ still allows a 25% subtraction of net long-term capital gains only for assets acquired after 12/31/2011 (effective state rate 1.875% on that portion). A law to expand this to all LT gains starts tax year 2026.

Because both state and federal taxes apply, the combined bill can be substantial. Entrepreneurs often underestimate this portion of the sale, only to find that their net proceeds are far lower than anticipated.

Early planning, including timing the sale in a lower-income year or spreading payments through an installment sale, can reduce the bite.

Asset Sale vs. Stock Sale: What’s the Difference?

Another key tax factor is whether the deal is structured as an asset sale or a stock (equity) sale. Each method carries different implications for both the seller and buyer.

Asset Sale

In an asset sale, the buyer purchases the business’s individual assets, such as equipment, inventory, intellectual property and goodwill, rather than the entire corporate entity.

Tax treatment for sellers :
Gains on tangible assets like equipment may be taxed as ordinary income due to depreciation recapture.
Gains from intangible assets, such as goodwill, are often taxed at capital gains rates.
This mix of ordinary income and capital gains can result in a higher tax bill for the seller compared to a stock sale.
Why buyers prefer it :
Buyers benefit because they can “step up” the basis of the assets, leading to higher depreciation deductions in the future.

Stock Sale

In a stock sale, the buyer acquires the ownership shares of the company itself. The entity remains intact, including its assets, liabilities and contracts.

Tax treatment for sellers :
Sellers usually prefer stock sales because the entire gain is taxed as a capital gain, generally at lower rates than ordinary income.
Stock sales also tend to be simpler, since the entity remains unchanged.
Why some buyers may resist a stock sale :
Buyers inherit all of the company’s liabilities, known and unknown. This can make stock sales less attractive unless indemnifications or warranties are negotiated.

Because buyers and sellers often have opposing preferences, the structure becomes a critical negotiation point. Skilled advisors can help bridge the gap and explore hybrid arrangements, such as partial asset allocations to balance tax outcomes.

Transition Planning to Reduce Taxes

Maximizing tax efficiency requires planning well before a sale. Here are a few strategies Arizona entrepreneurs can consider:

Entity Structure Review
The tax impact of a sale depends heavily on whether your business is organized as a sole proprietorship, partnership, S-corporation or C-corporation. For example, S-corps may allow for pass-through taxation on gains, while C-corps could expose you to double taxation if the sale is structured improperly.
Installment Sales
By spreading the sale proceeds over several years, you may stay in a lower tax bracket, easing the immediate tax burden. This approach also helps with cash-flow planning, though it does introduce the risk that the buyer may default.
Retirement Planning
Rolling some of the proceeds into retirement accounts or using tax-advantaged strategies can help offset capital gains. Coordinating with a financial advisor ensures you maximize these opportunities while adhering to state and federal tax laws.
Gifting or Estate Planning
Business owners nearing retirement often use the sale as part of a broader estate plan. Gifting shares to family members before the sale or establishing trusts can help reduce estate taxes and transfer wealth efficiently.
Timing the Sale
Consider aligning the transaction with years of lower taxable income. For instance, selling after a year of reduced business operations or during retirement may lower your overall tax rate.

Why Local Guidance Matters

Every business and every deal is unique. Local Arizona entrepreneurs face a combination of federal rules and state-specific considerations that can be confusing to navigate. Partnering with a knowledgeable accountant who understands the nuances of Arizona tax law can prevent costly mistakes and open the door to strategies that maximize your net proceeds.

Talk to Our Experts Today to Help With Your Business Tax Services

At H&H Accounting Services, we can help Arizona business owners plan every stage of their exit , from structuring the deal to minimizing taxes and ensuring a smooth transition. If you’re considering selling your business in Phoenix, our business consultants can walk you through your options and build a strategy that protects your hard-earned success.

Call H&H Accounting Services now at (480) 561-5805 to schedule a consultation.

The Real Cost of Hiring Without Payroll Help in Arizona

Thu, 23 Oct 2025 21:28:08 GMT

For small business owners in Arizona, growth often starts with hiring. Bringing on that first employee, or expanding your team, can be exhilarating. But many entrepreneurs underestimate what comes next: the complex world of payroll. From tax withholding and reporting to worker classification and compliance with state and federal rules, payroll is one of the most detail-driven areas of running a business.

While handling payroll yourself may seem like a way to save money, the truth is that mistakes can cost far more than outsourcing to an experienced accounting partner. Misclassifying workers, missing deadlines, or miscalculating taxes can lead to penalties, audits and even legal disputes.

The Risks of Worker Misclassification

One of the most common and costly errors small businesses face is misclassifying workers. Many employers assume it’s easier to label a worker as an “independent contractor” rather than an “employee.” Contractors don’t require payroll tax withholdings, unemployment insurance contributions or workers’ compensation coverage. However, if the IRS or Arizona Department of Economic Security determines that your worker should have been classified as an employee, the penalties can include:

Back payroll taxes for both employer and employee shares
Interest and late payment penalties
Liability for unpaid unemployment insurance and workers’ compensation premiums
Possible wage claims for benefits employees should have received

In Arizona, regulators are paying more attention to worker status, particularly in industries like construction, hospitality and home services. One misclassified worker could easily result in tens of thousands of dollars in back payments and penalties.

Payroll Tax Errors Add Up Quickly

Payroll isn’t just writing checks. Employers are responsible for properly calculating, withholding and remitting a range of taxes. These include:

Federal income tax withholding
Social Security and Medicare contributions (FICA)
Federal Unemployment Tax (FUTA)
Arizona state income tax withholding
Arizona unemployment insurance contributions

Each has its own rules, deadlines and forms. If you miss a filing or underpay even a small amount, penalties begin accruing immediately. The IRS, for example, imposes penalties ranging from 2% to 15% of the underpaid amount, depending on how late the deposit is. On top of that, interest compounds until the debt is fully paid.

Small employers juggling payroll on their own often underestimate the time it takes to stay on top of changing tax rules and due dates. Missing just one quarterly filing can snowball into months of stress, financial strain, and hours spent dealing with tax agencies.

Compliance Is More Than Just Taxes

Payroll compliance also includes a variety of other regulations designed to protect employees. Arizona small businesses must adhere to:

Minimum wage laws : Arizona’s minimum wage is higher than the federal rate, and it increases annually based on inflation.
Overtime rules : Employers must properly calculate overtime pay for non-exempt employees.
Wage reporting : Employers must file new hire reports with the state.
Recordkeeping : Payroll records must be maintained for specific periods in case of audits.

Failing to follow these rules can result in state or federal investigations, lawsuits and reputational harm. Even well-intentioned employers can make mistakes, especially as employment laws evolve year to year.

The Hidden Cost of DIY Payroll

Many small business owners take on payroll because they think they can’t afford outside help. But consider the hidden costs:

Time lost : Hours spent calculating withholdings, filing forms and reconciling reports could be spent growing your business.
Stress and risk : Worrying about whether you did things correctly is a drain on your focus and energy.
Penalties and interest : Even small errors can cost thousands of dollars.
Employee trust : Mistakes in paychecks or late payments erode employee morale and trust in your leadership.

When you add these factors together, the “savings” of DIY payroll often vanish. Professional payroll support not only saves time but also reduces risk.

Why Outsourcing Makes Sense for Phoenix Businesses

Working with a professional accounting team for bookkeeping and payroll brings confidence and peace of mind. An experienced partner can:

Accurately classify workers and guide you through classification requirements
Handle all payroll tax calculations, filings and payments
Monitor Arizona’s annual minimum wage increases and other local requirements
Maintain precise records to protect you in case of audits
Offer guidance on employee benefits , withholdings and retirement contributions

Instead of scrambling to keep up with regulations, you can rely on specialists who know the Arizona landscape and federal requirements inside and out.

Transition Planning: From DIY to Professional Payroll

Transitioning to professional payroll support can be seamless. The right accounting team will review your current process, correct any errors and put systems in place to ensure accuracy moving forward.

Our team at H&H Accounting can help your business avoid costly mistakes and keep your employees paid accurately and on time. Call us at (480) 561-5805 to schedule a consultation and discover how professional payroll support can save your business money and stress.

How Feasible Are Catch-Up Contributions in Your 50s, and Are There Tax Strategies That May Help?

Thu, 23 Oct 2025 21:21:33 GMT

It’s a familiar story: life gets in the way, and suddenly you’re in your late 40s, 50s or even 60s, realizing you haven’t saved nearly enough for retirement. Maybe you prioritized raising kids, buying a home or running your business, and retirement planning simply fell down the list of financial priorities.

The good news is that it’s not too late. The IRS provides special tools, known as catch-up contributions, and there are tax strategies that can help you accelerate your savings without having to live like a pauper. With careful planning, you can still make meaningful progress toward a more secure retirement.

What Are Catch-Up Contributions?

Catch-up contributions are extra amounts you’re allowed to put into retirement accounts once you reach age 50. These provisions acknowledge that many people may only begin saving seriously later in life, and they give you an opportunity to stash away more in a tax-advantaged way.

401(k), 403(b), and 457 plans : In 2025, workers under 50 can contribute up to $23,500 annually. If you’re 50 or older, you can contribute an additional $7,500, bringing your total limit to $31,000 per year. Savers aged 60 to 63 are also entitled to extra catch-up contributions of up to $11,250 (if the plan allows), making the total $34,750.
Traditional and Roth IRAs : The standard limit is $7,000 in 2025. If you’re 50 or older, you can contribute an extra $1,000, bringing the total to $8,000 annually.
SIMPLE IRA : The standard limit is $16,500 in 2025, with an extra $3,500 catch-up allowance for those 50 and over and a higher catch-up limit of $5,250 for savers aged 60 to 63 with eligible plans.

These increased contribution limits allow older workers to maximize retirement savings during their highest-earning years.

Tax Advantages of Catch-Up Contributions

One of the most powerful aspects of catch-up contributions is the tax benefit.

Traditional 401(k) and IRA contributions are generally tax-deductible. Every dollar you put in reduces your taxable income, potentially lowering your tax bracket. For example, a 55-year-old contributing the maximum $31,000 to a 401(k) could reduce their taxable income by that amount, which can result in thousands of dollars saved in federal and state taxes.
Roth accounts , on the other hand, don’t provide an upfront deduction, but withdrawals in retirement are tax-free. This can be a smart move if you expect your tax rate to be higher in the future.

The tax savings can make it much easier to contribute more without significantly impacting your day-to-day lifestyle.

Additional Tax Strategies to Boost Retirement Savings

While catch-up contributions are a great start, there are other strategies that can help accelerate your progress.

1. Health Savings Accounts (HSAs)

If you’re enrolled in a high-deductible health plan, you may qualify for an HSA. These accounts offer triple tax benefits: contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free. After age 65, you can withdraw HSA funds for any purpose (non-medical withdrawals are taxed like ordinary income). For 2024, individuals can contribute $4,300 (self-only) and $8,550 (family), and those age 55+ may contribute an extra $1,000 as catch-up.

2. Backdoor Roth IRA Conversions

If your income is too high to contribute directly to a Roth IRA, you can use a “backdoor” strategy by contributing to a traditional IRA and then converting it to a Roth. While you’ll pay taxes on the conversion, it locks in future tax-free growth. This is a huge benefit if you’re starting late but still have 10–15 years until retirement.

3. Maximize Employer Matches

Many Arizona employers offer a match on 401(k) contributions. Failing to take advantage of this is essentially leaving free money on the table. If you’re behind on savings, making sure you at least contribute enough to capture the full employer match should be a top priority.

4. Strategic Asset Location

Beyond how much you contribute, where you hold investments matters. Placing bonds and income-generating investments in tax-deferred accounts while keeping stocks in taxable accounts may improve after-tax returns. A skilled accountant can help fine-tune this balance.

5. Adjusting Lifestyle Without Extreme Sacrifice

Catching up on retirement savings in your 50s or 60s does usually require some belt tightening. But small adjustments like downsizing discretionary expenses, delaying a large purchase or even working a few extra years, can compound significantly when paired with tax strategies.

6. Delaying Your Social Security Benefit Pays Dividends

Delaying Social Security past your full retirement age increases your monthly benefit by up to 8% per year until age 70, providing a reliable way to boost guaranteed income in later years. The full retirement age for people born 1960 or later is 67. If you delay until 70, that’s a 24% increase in monthly Social Security benefits.

The Feasibility Question: Is It Too Late?

Many people in their 50s or 60s assume they’ve missed the boat. But in reality, these can be your highest-earning years, which means they’re also the years when you can save the most.

At age 52, if you contribute the full $30,500 to a 401(k) annually and earn a 6% return, you could build nearly $600,000 in 15 years. Pair that with spousal contributions, IRAs and an HSA, and the numbers add up quickly.

While you may not achieve the same cushion as someone who started saving at 25, making full use of catch-up provisions and tax-advantaged strategies can still lead to a retirement that’s both comfortable and sustainable.

Maximize Your Retirement Savings with Local Experts in Phoenix, AZ

The IRS rules surrounding contributions, deductions, and conversions are complex. Mistakes can be costly, and opportunities are often missed by those who go it alone. Working with an accountant and experienced personal tax preparer ensures you’re not only maximizing contributions but also coordinating them with your overall tax picture, estate plan and retirement goals.

At H&H Accounting, our team can help you structure contributions and identify tax-advantaged opportunities. Give us a call at (480) 561-5805 or contact us here on our website to schedule a consultation.

When Phoenix Startups Should Transition from DIY Bookkeeping to CPA Support

Thu, 18 Sep 2025 20:57:53 GMT

Launching a startup in Phoenix is exciting. You’ve got an idea, a business plan and the drive to make it work. In the early days, most founders take a hands-on approach to everything, including the books. DIY bookkeeping with spreadsheets or entry-level accounting software can feel like the smart, scrappy way to manage limited resources.

But as your company grows, so do the demands on your financial systems and time. At some point, continuing with a do-it-yourself approach creates risks that can slow your momentum, increase stress and even cost you money.

And, as your business becomes more successful, your time becomes more valuable. There’s an opportunity cost to trudging through bookkeeping software when you could be doing something that generates revenue.

The key question for many founders is: When is it time to transition from DIY bookkeeping to professional CPA support?

Early Stage: Why DIY Works (At First)

In the beginning, DIY bookkeeping makes sense:

You have limited transactions.
Cash flow is simple.
Every dollar saved counts.
You’re still learning the rhythms of your business.

At this stage, founders often manage with cloud-based software or even spreadsheets. But this setup should ideally be temporary. Once your business starts scaling, the complexity of bookkeeping and good tax preparation quickly outpaces the simplicity of DIY methods.

Warning Signs You’ve Outgrown DIY Bookkeeping

Transaction Volume Has Increased

If reconciling accounts now takes hours instead of minutes, it’s a sign you’re dealing with more than a DIY system can handle. Missed entries or duplicated transactions create errors that snowball over time.

Payroll Gets Complicated

Hiring your first employee, or contractor, brings new tax reporting responsibilities. Managing payroll taxes, withholdings, and compliance in Arizona is risky to handle without professional accounting assistance.

Tax Time Brings Stress

If you dread April because your records aren’t organized, it’s probably time to seek professional business tax preparation support. CPAs not only prepare returns but also help you minimize liability through planning.

You’re Seeking Outside Funding

When you start seeking outside funding, DIY spreadsheets aren’t enough. Investors and lenders expect formal financial statements, including profit and loss, balance sheet, and cash flow, along with supporting reports like AR/AP aging, break-even analysis, and budget-to-actual comparisons. These give them confidence not only in your numbers, but in how you run your business.

You’re Unsure About Compliance

From sales tax in Arizona to federal filing requirements, compliance becomes more complex as you grow. Waiting until you’re audited to get professional help is far riskier (and more expensive) than bringing in a CPA earlier.

Risks of Waiting Too Long

Sticking with DIY bookkeeping longer than you should can hold your startup back in ways you may not notice until it’s too late.

Missed Deductions: Without proper categorization, you could lose out on valuable tax savings.
Cash Flow Blind Spots: Inaccurate books can mask cash shortages or overspending until problems become critical.
Delayed Growth: Inaccurate financials make it harder to secure investors, loans, or grants.
Burnout: Founders already wear too many hats. Spending weekends reconciling books is energy better spent on sales, product or strategy.
Costly Fixes: Correcting messy books after months (or years) of DIY errors is more expensive than maintaining accuracy with professional help from the start.

The Benefits of Transitioning to CPA Support

Bringing in a CPA isn’t just about compliance. It’s about giving your startup the financial foundation to scale confidently.

Accurate Financial Reporting: Professional bookkeeping and CPA oversight provide reliable data you can actually use to make decisions.
Strategic Planning: CPAs look beyond the numbers to help you with budgeting, forecasts and tax strategies.
Time Savings: Free up your schedule so you can focus on growth, not spreadsheets.
Investor Readiness: Clean, accurate books make your startup look more professional and appealing to potential investors.
Peace of Mind: Knowing your books are accurate and compliant relieves the constant background stress many founders carry.

When Phoenix Startups Typically Make the Switch

Every startup grows at its own pace, but here are common milestones where founders in Phoenix often bring in professional bookkeeping, tax preparation or CPA support:

Crossing $250K–$500K in revenue. At this level, the cost of mistakes often exceeds the cost of professional help.
Hiring employees. Payroll and benefits administration add a layer of complexity DIY systems rarely handle well.
Preparing to scale. Expansion into new markets, product lines or funding rounds requires precise financial oversight.
Year two or three of operations. Once you have multiple tax periods to compare, strategic planning becomes critical and CPAs provide the insights DIY tools can’t.

Stop Struggling with DIY Bookkeeping—Let H&H Accounting Services Help

At H&H Accounting Services, we help Phoenix startups transition from DIY bookkeeping to professional CPA support with ease. Contact us at (480) 561-5805 to schedule a consultation.

How Arizona Businesses Can Use Section 179 Before the Year-End Rush

Thu, 18 Sep 2025 20:50:29 GMT

As the year winds down, many Arizona business owners are taking a closer look at their tax strategies. One of the most powerful tools available is Section 179 of the IRS tax code, which allows businesses to deduct the full purchase price of qualifying equipment or software in the year it’s placed in service.

Instead of depreciating assets over several years, Section 179 provides an immediate tax break, freeing up cash flow and making it easier to reinvest in growth. But there’s a catch: purchases must be completed and in service by December 31. That makes the final quarter of the year the most critical time to act.

What Section 179 Covers

Section 179 applies to a wide range of business property, including:

● New and used equipment (machinery, vehicles, tools).

● Off-the-shelf software.

● Office furniture and fixtures.

● Computers and technology.

● Certain improvements to nonresidential property (HVAC, roofing, security systems and fire protection).

For tax year 2025, businesses can deduct up to $2,500,000 under Section 179, with a phase-out beginning at $4,000,000 in purchases. Plus, 100% bonus depreciation applies to qualifying assets, making this an even more powerful tax strategy.

Why Year-End Planning Matters

December often brings a flurry of last-minute equipment purchases. Unfortunately, waiting until the very end of the year can create problems:

Supply Chain Delays: Backorders or shipping slowdowns could prevent your equipment from being placed in service before December 31.
Installation Requirements: For property to qualify, it must be ready and usable, not sitting in a warehouse. Complex installations can take weeks.
Cash Flow Strain: Rushing into purchases without planning can create unnecessary financial stress.

By starting now, Phoenix businesses can make smarter purchasing decisions, spread out cash flow and ensure everything is operational before the deadline.

Scenarios Where Section 179 Shines

Growing Companies Needing Equipment

A construction firm adding vehicles or heavy machinery can deduct the cost this year rather than stretching it over a decade. This creates immediate tax savings to offset growth-related expenses.

Technology Upgrades

If your business relies on outdated computers or servers, upgrading now not only improves productivity but also allows you to take a full deduction under Section 179.

Professional Services

Law firms, medical practices or accounting offices often overlook Section 179. New furniture, software and even HVAC systems in office spaces qualify.

Fleet Expansion

Company vehicles over 6,000 pounds gross vehicle weight (like trucks and SUVs used primarily for business) may qualify for larger deductions.

How to Plan Strategically

To maximize Section 179 benefits, attempt to follow these steps before the year-end rush:

Review Your Taxable Income
Section 179 deductions are limited to taxable income. Work with your CPA to project year-end numbers and determine how much you can realistically deduct.
Prioritize Business Needs
Don’t buy equipment just for the deduction. Focus on assets that will add value to your operations in 2025 and beyond.
Consider Financing
Section 179 allows you to deduct the full purchase price even if you finance the equipment. That means you can spread payments out while enjoying immediate tax benefits.
Confirm Eligibility
Make sure the property qualifies and is placed in service by December 31. Keep detailed records of purchase and installation.
Coordinate with Bonus Depreciation
If you exceed Section 179 limits, bonus depreciation may provide additional deductions. This is where professional business tax preparation guidance is essential.

FAQs About Section 179

Q: Can used equipment qualify?

Yes, as long as it’s new to your business.

Q: Do vehicles qualify?

Yes, though passenger vehicles have special limits. Larger vehicles may qualify for full deductions.

Q: What happens if I spend more than the Section 179 limit?

You can still benefit from bonus depreciation on qualifying assets.

Q: Do I have to pay cash?

No. Financing is allowed, and you can still deduct the full purchase price this year.

Risks of Waiting Too Long

Many Phoenix, Scottsdale and Tempe businesses wait until mid-December to think about Section 179, only to find:

Equipment isn’t available.
Installers are booked until next year.
Their CPA doesn’t have time for strategic planning.

Waiting until the last minute can mean missing out on thousands of dollars in deductions. By acting now, you can take advantage of Section 179 with less stress and better results.

Maximize Your Section 179 Deduction With Our Phoenix Business Accounting and CPA Services

At H&H Accounting Services, we help Arizona businesses strategically plan Section 179 purchases to maximize deductions while staying cash-flow smart. From calculating your taxable income to coordinating with financing and bonus depreciation, we ensure your equipment purchases pay off at tax time.

Contact us at H&H Accounting Services today by calling (480) 561-5805 and schedule a year-end tax planning consultation .

Are Your Estimated Taxes on Track for Q3?

Thu, 18 Sep 2025 20:45:41 GMT

September marks an important milestone for self-employed individuals and small business owners: the Q3 estimated tax payment deadline on September 15.

This is the time of year when adjustments may be necessary. Income often fluctuates, especially for entrepreneurs, contractors and seasonal businesses. If you’re earning more or less than you originally projected back in April, now is the time to revisit your numbers. Otherwise, you may end up overpaying, underpaying or scrambling to catch up when year-end arrives.

Why Q3 Is the “Adjustment Quarter”

The third quarter is unique because you’ve got eight months of actual income data under your belt. That means your financial picture is much clearer than it was when you made your Q1 and Q2 payments.

● If your business is booming: Higher-than-expected income means your original estimates might no longer cover your actual tax liability. Adjusting now helps you avoid a large, painful bill (and potential underpayment penalties) at tax time.

● If your business has slowed: You don’t want to continue overpaying based on inflated projections. Lowering your Q3 and Q4 payments frees up cash flow when you need it most.

Scenarios Where You Might Need to Recalculate

Seasonal Businesses

If your busiest months are summer-heavy, your Q1 and Q2 payments may have been low relative to your income. Updating your Q3 payment keeps you from facing a tax shortfall in April.

Unexpected Growth

Maybe you signed a new client, launched a product that took off or had a surge in demand. Great news for your business, but it also means higher taxable income. Q3 is your chance to get ahead of the IRS before penalties apply.

Income Drop

If Q3 showed a dip due to fewer projects or slower sales, there’s no need to continue paying as if you’re on pace for a record year. Recalculating your payments helps conserve cash.

Big Life Changes

Buying a home, having a child, or shifting your filing status could change your deductions or tax bracket.

Adjusting estimated payments keeps your tax strategy aligned with your actual life circumstances.

FAQs About Q3 Estimated Taxes

Q: If I overpaid in Q1 and Q2, can I skip my Q3 payment?

Technically, yes. If your total payments already cover your projected liability through September, you might not need to send more. However, skipping a quarter can complicate your year-end tracking. Most tax professionals recommend applying the overpayment toward future quarters to avoid confusion and to keep your cash flow balanced.

Q: What if I underpaid earlier in the year?

The IRS expects payments to be made as income is earned, not “caught up” in a lump sum at year-end. If you underpaid in Q1 or Q2, it’s wise to increase your Q3 and Q4 payments to reduce potential penalties.

Q: Do I have to make equal payments each quarter?

Not necessarily. The IRS understands income can be unpredictable. They only expect you to make your best estimate at each deadline, not to forecast the entire year’s earnings in advance.

You can also use the “annualized income method” to calculate payments that reflect when income was actually earned. This approach is especially helpful for seasonal businesses or those with inconsistent cash flow.

Q: How do I know if I’m safe from penalties?

Generally, you’ll avoid penalties if you pay at least 90% of your current-year tax liability or 100% of last year’s liability (110% for higher-income taxpayers). A professional tax preparer can help determine which benchmark is safest for your situation.

Q: Can I use my tax software to recalculate, or should I call an accountant?

Tax software is fine for simple situations. But if your income is complex, you’ve had a major life change, or you’re unsure about safe harbor rules, working with a personal income tax preparer ensures accuracy and peace of mind.

How to Recalculate Your Q3 Payment

If you think your income or expenses have shifted, here’s a quick recalibration process:

Tally your year-to-date income and expenses through the end of August.
Project your income for the rest of the year, factoring in seasonal trends or new contracts.
Recalculate your tax liability based on the updated projection.
Divide the difference between what you owe for the year and what you’ve already paid by two (for Q3 and Q4).
Submit your payment by September 15 through IRS Direct Pay, EFTPS or by check.

This process helps ensure your Q3 and Q4 payments keep you on track without overextending your cash flow.

Our Phoenix Tax Preparers Can Help You Worry Less About EFTPS Payments

Don’t wait until April to find out your quarterly payments were off. At H&H Accounting Services, we work with self-employed individuals and businesses across Phoenix to keep estimated taxes accurate and stress-free.

Whether your income is up, down or unpredictable, we’ll help you calculate the right payment so you can focus on running your business, not worrying about the IRS.

Schedule a consultation with the tax preparers at H&H Accounting Services by calling (480) 561-5805.

What Arizona Freelancers Should Know About Estimated Tax Payments

Wed, 13 Aug 2025 17:49:26 GMT

If you’re self-employed in Arizona, you don’t have an employer withholding taxes from your paycheck.

Unfortunately, the federal government doesn’t really trust you to set aside enough money each month to cover your income tax bill.

Freelancers, independent contractors and small business owners are all responsible for sending in quarterly payments. How can a freelancer or contractor determine how much he or she is going to earn by the end of the year to properly estimate their quarterly payments? It’s not always easy, but failing to pay enough can trigger IRS penalties and last-minute stress when April arrives.

Who Needs to Pay Estimated Taxes?

You expect to owe at least $1,000 in federal income tax for the year after subtracting withholding and refundable credits
You have income that isn’t subject to automatic withholding, such as freelance work, contract gigs, side business profits or rental income
You’re not having enough tax withheld through other sources to cover your liability

This includes gig workers, real estate agents, independent consultants, self-employed creatives and many small business owners in Arizona. If you file jointly and your spouse is also self-employed or under-withheld, you may need to coordinate your payments together.

When Are Estimated Taxes Due?

The IRS expects you to pay throughout the year, not just at the end. Payments are typically due on the following schedule:

April 15 – for income earned January–March
June 15 – for income earned April–May
September 15 – for income earned June–August
January 15 (of the following year) – for income earned September–December

If a due date falls on a weekend or holiday, the deadline is typically pushed to the next business day. Arizona doesn’t have its own estimated tax requirement for most individuals, but you should check with a tax professional if your business structure requires additional state filings.

How to Estimate Your Payments

If you’re not sure how much you’ll make this year, calculating your estimated taxes can feel overwhelming. The IRS provides a couple of ways to approach it:

Safe harbor method : If you pay 100% of your previous year’s tax liability (or 110% if your adjusted gross income was over $150,000), you can usually avoid penalties, even if you end up owing more.
Projected income method : Estimate your current year’s income and calculate tax as if you were filing today. This is more accurate but requires adjusting your payments if your income changes.

You’ll also need to account for self-employment tax, which covers Social Security and Medicare contributions. For 2025, this is 15.3% on net self-employment income.

You can use IRS Form 1040-ES to help calculate and submit your payments. Many freelancers also use accounting software or work with a CPA to stay on top of these quarterly requirements.

How to Make Your Quarterly Tax Payments Online

Once you’ve estimated your payment, sending it to the IRS is relatively straightforward with the Electronic Federal Tax Payment System (EFTPS):

Go to eftps.gov and log in. If you haven’t used it before, you’ll need to enroll. The IRS will physically mail you a PIN, so if it’s your first time using EFTPS you should enroll at least a week in advance.
Select “Make a Payment” and choose “Estimated 1040.” This applies your payment to your personal quarterly tax obligations.
Enter the amount, payment date and bank account info. You can schedule payments in advance if you’d rather not worry about each deadline manually. This may be ideal for people using the safe harbor method.
Submit your payment and save the confirmation. The site provides a receipt for your records.

You can also use IRS Direct Pay for one-off payments, but EFTPS gives you better tracking and scheduling tools if you’re required to pay quarterly.

What Happens if You Underpay or Miss a Deadline?

The IRS charges penalties and interest for both late payments and underpayments. Even if you file your annual tax return on time, you could still owe penalties for not keeping up with your quarterly estimated.

Underpayment penalties are based on how much you underpaid and how long the payment was late. While the exact numbers vary, they can add up quickly, especially for high-income months where taxes weren’t set aside properly.

If you miss a deadline entirely, it’s better to submit a payment late than not at all. You can still reduce your penalty by catching up as soon as possible.

Tips to Stay on Track With Your Estimated Quarterly Tax Payments

Set up a dedicated tax savings account : Transferring 25–30% of your income as it comes in can make quarterly payments more manageable.
Automate reminders : Add quarterly tax deadlines to your calendar or use your accounting software’s alert system.
Adjust mid-year if needed : If your income has increased or decreased substantially, update your estimated payment calculations so you’re not caught off guard.
Work with a tax professional : They can help you choose the safest method and adjust it as your income evolves.

Avoid Penalties and Stress by Working With an Experienced Phoenix Tax Preparer

Estimated tax payments are a routine part of self-employment, but they often catch new freelancers and gig workers off guard. Setting aside money as you go, projecting conservatively and meeting each deadline can help you avoid penalties and stay focused on growing your business, not scrambling every quarter.

You can worry less about your business and personal taxes by working with a trusted CPA, bookkeeper or accountant . Call (480) 561-5805 to speak with one of our tax and accounting professionals at H&H Accounting Services.

Why Cash Flow Gets Tight in Summer and What Arizona Businesses Can Do About It

Wed, 13 Aug 2025 17:38:27 GMT

Not every business is lucky enough to have durable, non-seasonal demand. Education and childcare providers often face enrollment gaps over the summer. Coffee shops and restaurants with shaded patios might struggle when even the most dedicated regulars head indoors or out of town. Retail stores in walkable districts often take a hit when foot traffic disappears in the heat. And in places like Sun City or other snowbird-heavy neighborhoods, a significant portion of the customer base simply isn’t around.

Even service-based businesses like landscaping, pool maintenance and residential cleaning can experience slowdowns. Some clients scale back services during vacations or put them on pause entirely while they’re gone. Others may be cost-cutting to offset travel expenses or rising electric bills.

Seasonal or weather-related declines in traffic are common in Phoenix from late spring through early fall.

While tourism and HVAC demand keep some industries humming, plenty of others face sluggish sales and tighter margins. For small and midsize businesses that don’t have a cash buffer or contingency plan, those slower months can make it harder to cover payroll, pay vendors or keep up with marketing and inventory.

Why Summer Cash Flow Gaps Matter

Reduced summer demand can create a ripple effect that lasts months. If revenue slows in June and July, business owners may delay payments to vendors or make smaller inventory orders. If customers return in late August or September, the business may not be fully stocked or staffed to handle renewed demand.

Unpredictable cash flow also makes it harder to pursue long-term planning. Hiring decisions get postponed, upgrades are shelved and strategic opportunities may be missed. And if you rely on seasonal contracts or year-round client relationships, summer interruptions could damage trust and retention.

Projecting Seasonal Dips With Historical Data

If your business has been operating for more than a year or two, you probably have more insight into seasonal trends than you think. Look through your revenue and expense records by month, not just by quarter, and look for patterns. You might find:

Annual slowdowns in the same two- or three-month stretch
Unusually high cooling costs in June through September
Reduced invoice payments or customer collections in late summer
Drop-off in in-store visits tied to temps near or above 110°F

Even if you don’t use accounting software or POS data tools, your bank statements can provide a decent starting point. Once you’ve identified your low-revenue months, you can plan for them the same way you would for tax season or annual renewals.

Building a Buffer for Summer

The most direct way to manage summer cash flow is to build a reserve fund during your busier months. This can be as simple as transferring a percentage of net income into a separate business savings account from January through May, then drawing on it during June and July. You can also explore short-term financing options, such as:

Business lines of credit : Flexible borrowing you can tap as needed to cover payroll or inventory.
Invoice factoring : A way to get paid early for outstanding invoices, though it may come with fees.
Seasonal business loans : Some lenders offer products specifically designed for businesses with predictable highs and lows.

If you go this route, make sure you understand the repayment terms and whether interest accrues immediately or only when funds are drawn.

Operational Adjustments That Help

Beyond financial tools, operational adjustments can also ease summer strain. Consider:

Adjusting operating hours : Opening earlier and closing midafternoon may better align with customer behavior and reduce utility costs.
Reducing hours or staff during slow periods: If demand drops significantly, tightening schedules can help manage payroll without permanent cuts.
Promoting summer specials : Offering discounts, loyalty perks or group deals can help drive traffic when footfall is otherwise low.
Targeting summer residents : If your neighborhood loses part of its population, focus on marketing to the ones who stay. Locals appreciate businesses that cater to them while everyone else is away.

Speak With Phoenix Business Consultants Who Can Provide Actionable Recommendations on Seasonal Cash Flow Challenges

If this summer has been tighter than expected, it’s not too late to put a system in place for next year.

Schedule time in the fall to revisit your cash flow reports and talk to your accountant or bookkeeper about what changes could help. You may want to shift your pricing strategy slightly, modify your billing cycles or build recurring revenue where possible to stabilize your baseline.

Phoenix businesses already deal with enough heat. With a few smart adjustments and a bit of planning, summer slowdowns don’t have to turn into cash flow crises. Speak with the business consultants at H&H Accounting by calling (480) 561-5805 for workable solutions.

10 IRS Audit Triggers for Arizona Small Businesses

Wed, 13 Aug 2025 17:26:26 GMT

Most small business owners in Arizona aren’t trying to cheat the IRS, but most audits aren’t triggered by intentional obfuscations or underpayment. Honest mistakes draw scrutiny to thousands of Arizona businesses every year. If your tax return includes certain patterns, categories or inconsistencies, you may be more likely to face an audit.

The IRS doesn’t disclose its exact audit formula, but these 10 common red flags have historically increased the chances of a closer look, especially for sole proprietors, LLCs and small S corporations.

1. Underreporting Income

This is one of the most common audit triggers. The IRS receives 1099 forms and other income statements from clients, payment platforms and even banks. If the income you report doesn’t match what the IRS already sees, your return could be flagged for review.

For Arizona small businesses with multiple income streams, from freelance work to product sales to contract gigs, it’s especially important to track and report everything, even if a client forgets to send a 1099.

2. Excessive Deductions

The IRS expects your deductions to be in proportion to your revenue. If you claim unusually high expenses for your business size or industry, it may raise questions. Categories like meals, travel and advertising get extra attention if they seem inflated relative to your reported income.

Keep itemized records and receipts for everything you deduct, and make sure you can clearly connect those costs to business activities.

3. Large Cash Transactions

Arizona businesses in industries like retail, auto sales, food service and hospitality may still handle some payments in cash. If you regularly deposit more than $10,000 in cash, banks are required to file Form 8300.

Too many large or suspicious deposits without a paper trail can draw IRS attention if your income reports don’t line up with bank activity.

4. Home Office Deductions

Claiming a home office is perfectly legal, but it’s also commonly misused. To qualify, the space must be used exclusively and regularly for business. Overstating the square footage or deducting unrelated household expenses can backfire. The IRS may flag your return if your home office deduction appears unusually large or inconsistent year to year.

5. Misclassified Workers

If your business hires independent contractors rather than employees, make sure you’re classifying them correctly. The IRS and the Arizona Department of Revenue are both cracking down on misclassification, especially if they suspect a business is attempting to avoid payroll taxes. Failing to issue 1099s or treating someone as a contractor when they function like an employee can trigger an audit, as well as additional penalties.

6. High Business Vehicle Deductions

For sole proprietors and contractors, claiming 100% business use of a vehicle is rare and often questioned by the IRS. If you deduct mileage or auto expenses, keep a mileage log and be realistic about personal use.

Businesses that require driving (like mobile repair services or real estate agents) should still be prepared to show documentation.

7. Repeated Business Losses

The IRS expects businesses to make money. If you report losses year after year and you're a sole proprietor or single-member LLC, the IRS may investigate whether your activity is a legitimate business or just a hobby.

Losses must be substantiated, and your business must show a genuine profit motive.

8. Mismatched State and Federal Returns

If your Arizona state return doesn’t match your federal return, or if you fail to file one of them entirely, it raises immediate red flags. The IRS and Arizona Department of Revenue often share data. Inconsistencies or omissions between returns can result in audits at both the state and federal levels.

9. Unusually High Charitable Donations

Generous giving is encouraged—but large charitable contributions must be well-documented and reasonable for your income level. If your business claims significant donations compared to earnings, the IRS may request receipts, appraisals or acknowledgment letters to verify the deductions.

10. Rounded Numbers and Poor Records

Returns full of neatly rounded numbers, like $1,000 for supplies and $5,000 for travel, may suggest that you’re estimating rather than using actual records. The IRS may see this as a sign of poor bookkeeping, which increases the chance of an audit. Inconsistent expense reporting from one year to the next can also draw attention.

Work With a Phoenix Bookkeeping and Tax Preparation Professional to Remain Audit-Ready Year-Round

The best defense against an audit is keeping clean, consistent and well-documented records. Use accounting software or work with a bookkeeper to track income and expenses in real time. Keep digital or physical copies of receipts, invoices, mileage logs and payroll records . And if you’re unsure about how to classify an expense or deduction, a CPA or tax advisor can help you avoid costly mistakes.

Audits may be rare, but they’re stressful and time-consuming when they happen. Our CPA and bookkeeping professionals can help you keep your financials organized. Our CPA also represents Phoenix businesses and individuals during IRS audits . Call us at (480) 561-5805 for IRS audit prevention or representation.

What Arizona Freelancers Should Track This Summer to Maximize Tax Deductions

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Jul 2025 21:14:29 GMT

Freelancing in Arizona offers flexibility, independence and the chance to build your dream career, but it also comes with the responsibility of managing your own taxes . Unlike traditional employees, freelancers don’t have taxes withheld from each paycheck. That means it’s up to you to track expenses year-round and make quarterly estimated payments if you want to stay compliant and take full advantage of available deductions.

Summer can be an especially busy season, whether you’re traveling for gigs, networking at local events or just catching up on admin work at home. That’s why it’s the perfect time to tighten up your recordkeeping and make sure every eligible deduction is documented.

1. Track Business Mileage

If you’re using your personal vehicle for freelance-related activities, client meetings, supply runs and reaching project locations, you could be eligible to deduct the mileage. For 2025, the IRS standard mileage rate is 70 cents per mile , but this rate can change annually. Keeping precise records now ensures you won’t lose track of any distance traveled.

What to do:

Use an app like MileIQ or Everlance, or keep a manual log.
Record the date, purpose, starting point and total miles driven for each trip.
Note whether the trip was entirely business-related or mixed with personal errands.

2. Save Receipts for Meals and Entertainment

While personal meals aren’t deductible, business meals with clients or colleagues are, typically at 50%. If you discuss business, pitch a project or collaborate over lunch, you can likely write it off.

What to do:

Keep receipts for meals and jot down who you met with and the business purpose.
Use your accounting software or a spreadsheet to track these throughout the summer.
Don’t forget coffee shop meetings, they count, too.

3. Log Home Office Use

Arizona freelancers who work from home may be eligible for a home office deduction. The space must be used regularly and exclusively for business, even if it’s just a corner of your living room.

What to do:

Measure the square footage of your dedicated workspace.
Keep records of rent, mortgage interest, utilities, internet costs and repairs.
Use either the simplified method (standard per-square-foot rate) or actual expense method.

4. Track Equipment and Office Supplies

From laptops to printer ink, anything you purchase specifically for your freelance business may be deductible. That includes equipment, software, office furniture and general supplies.

What to do:

Save receipts for all business-related purchases.
Categorize them by type: technology, furniture, and general office supplies.
For items over a certain value, you may need to depreciate them over several years.

5. Document Subscriptions and Software Costs

Do you use Adobe Creative Cloud, Zoom Pro, Microsoft 365, Canva or industry-specific tools? Subscriptions and cloud-based platforms that support your freelance work are valid deductions.

What to do:

List all monthly or annual digital tools and subscriptions.
Include any recurring payments tied to your business.
Keep confirmation emails, invoices or bank statements for proof.

6. Keep Track of Marketing and Web Expenses

Your website hosting, domain name, ads and even printed business cards can all count as deductions if they help promote your freelance work.

What to do:

Save invoices for anything promoting your business.
Track how much you spend on paid social media ads, boosted posts or Google Ads.
Include expenses for hiring designers or marketing consultants.

7. Record Educational and Training Costs

If you take a summer workshop, enroll in an online course, or attend a business conference, those costs may be deductible as professional development.

What to do:

Keep receipts for course fees, textbooks, or conference passes.
Note the topic and how it relates to your freelance business.
Include travel or lodging if directly connected to the event.

8. Monitor Utilities and Cell Phone Use

If you use your cell phone or internet service for business, you can deduct a portion of those bills. Just make sure you’re calculating the percentage that actually supports your freelance work.

What to do:

Estimate the monthly percentage of business use for your phone or internet.
Keep copies of bills as backup.
If your personal phone is also your work line, consider setting clear usage boundaries.

9. Track Payments to Contractors

If you hire a virtual assistant, editor, or any subcontractors this summer, you’ll need to issue a 1099-NEC to anyone you pay over $600 during the year.

What to do:

Collect W-9 forms upfront.
Track total payments made to each contractor.
Keep a record of the type of services provided.

Stay Ahead of Summer Business Spending With Our Freelancer Tax Services in Phoenix, AZ

It’s tempting to loosen up during the slower summer months, but smart recordkeeping now means fewer headaches when tax season rolls around. A little organization today can translate into hundreds or even thousands in tax savings later.

Need support with bookkeeping , freelance tax preparation or deductions? Contact H&H Accounting Services today for a personalized consultation by calling (480) 561-5805.

How to Prepare for a Mid-Year Financial Review (And Why It Matters)

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Jul 2025 21:03:40 GMT

The midpoint of the year is more than just a seasonal marker; it’s a powerful checkpoint for business owners. Whether you're running a small business, managing a startup or overseeing a growing enterprise, conducting a mid-year financial review can help you avoid surprises, correct course and maximize your year-end profitability.

Too often, entrepreneurs wait until the fourth quarter or worse, tax season, to assess where they stand. By then, it may be too late to make meaningful changes. A mid-year financial review gives you the insight and flexibility to make smart decisions while there’s still time to act.

Why a Mid-Year Financial Review Matters

The first half of the year provides a wealth of data. Sales trends, operating costs, payroll patterns and tax payments can all reveal how well your business is performing or where it may be falling short.

Waiting until the end of the year often means rushing through analysis while juggling holiday sales or closing the books. A mid-year review , on the other hand, gives you space to think strategically. It allows you to:

● Identify inefficiencies in your spending

● Evaluate profit margins

● Adjust tax withholdings or estimated payments

● Update financial goals based on real performance

● Prepare for any upcoming investments or expenses

Making small changes now can make a big difference by December. It can also help reduce the stress and pressure of year-end financial reviews.

Step 1: Review Your Profit and Loss Statement

Your P&L statement is one of the best tools for seeing how your business is performing. It gives you a snapshot of income, cost of goods sold and expenses. Look at both the top-line revenue and the net income. Are you ahead or behind where you thought you'd be by now?

Look for trends in each expense category. Are marketing costs creeping up? Are utility bills higher than expected? Use this data to determine where you can cut unnecessary costs or reinvest in high-performing areas.

Also, compare your current numbers to the same period last year. This helps identify growth, stagnation, or decline and can prompt important conversations about where to focus next.

Step 2: Reassess Tax Withholdings and Estimated Payments

Many business owners make the mistake of sticking with their January tax estimates all year. But if your income has grown or shrunk since your estimate, it’s time to revisit your tax strategy .

Review your year-to-date income and deductions with your accountant. They can help you determine if your estimated payments are still accurate or if adjustments are needed. Paying too little could leave you with penalties, while overpaying ties up cash you could be using to grow your business.

Now is also the time to check your payroll tax filings, 1099 documentation and other compliance-related items to ensure everything is on track.

Step 3: Update Your Year-End Projections

Once you’ve reviewed your performance and tax positioning, it’s time to look forward. Forecasting the next six months helps you plan for growth and avoid surprises. Base your projections on realistic sales goals, planned expenses, and any upcoming changes like hiring or major purchases.

Ask yourself: if I continue at the current pace, what will my financial picture look like at the end of the year? Then run alternate scenarios to see how adjustments in pricing, client retention, or expenses could impact your bottom line.

This step helps you determine if you’re likely to meet your financial goals, or if you need to course correct.

Step 4: Evaluate Cash Flow and Emergency Reserves

Profitability doesn't always mean positive cash flow throughout the year. A mid-year review should include a detailed look at how money is moving through your business. Are you experiencing long gaps between receivables and expenses? Are late payments from clients affecting your ability to pay vendors or employees?

Make sure you have enough cash reserves to get through slower months or emergency expenses. If you don’t, now is the time to build that cushion.

Step 5: Talk to Your Accountant or Financial Advisor

A mid-year review is not something you need to handle alone. An experienced accountant can help interpret your financials, offer proactive advice and ensure you're making tax-smart decisions. They can also flag issues you may not have considered, like changes in tax law or industry-specific deductions.

By involving your financial advisor now, you gain clarity and confidence for the rest of the year and set yourself up for a smoother tax season .

Get Expert Help With Our Business Accounting, Consulting and Tax Preparation Services in Phoenix, AZ

At H&H Accounting Services, we help business owners in Scottsdale and the greater Phoenix area make smarter financial decisions all year long, not just at tax time. Our team provides clear, practical insights to help you assess your mid-year performance, adjust your tax strategy and position your business for a strong finish to the year.

Whether you need help analyzing your profit and loss statement, making adjustments to estimated taxes, or planning your next big move, we’re here to guide you every step of the way. Contact us here to schedule your consultation or give us a call at (480) 561-5805.

Should You Be Prepaying Expenses or Delaying Income? Tax Timing Tips for Q3

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Jul 2025 20:55:27 GMT

As we move into the third quarter of the year, it’s the perfect time for small business owners, freelancers and independent contractors to reevaluate their financial positioning. One powerful but often overlooked way to manage your tax liability is through strategic tax timing, namely, the choice to prepay expenses or delay income.

These tactics can impact your overall tax burden by allowing you to “smooth” income across tax years, stay in a lower tax bracket and keep cash flow more predictable. But before jumping in, you’ll want to assess how each move affects your financial health and aligns with your business goals.

What Is Tax Timing?

Tax timing involves the deliberate acceleration or deferral of income and expenses to minimize tax obligations and improve financial outcomes. For cash-basis taxpayers (most small businesses and freelancers), income is recognized when received, and expenses are recognized when paid. That gives you flexibility to shift the timing of transactions in your favor.

When Prepaying Expenses Makes Sense

Prepaying expenses can help you reduce taxable income for the current year. This is especially helpful if:

You're having a high-income year and want to remain in a lower tax bracket
You anticipate a lower income next year
You have sufficient cash flow to cover early payments

Examples of expenses you may consider prepaying in Q3:

Rent for office or co-working spaces
Insurance premiums
Marketing and advertising campaigns
Subscriptions to industry tools and platforms
Professional services (consultants, legal, accounting)

Advantages:

Reduces this year’s taxable income
Helps you stay in a lower tax bracket
Allows for predictable budgeting on recurring costs

Things to watch for:

The IRS has rules about how far in advance you can prepay expenses. For example, an expense must benefit your business within 12 months to be deductible in the year you pay it. Always check with a tax professional to avoid disallowed deductions.

When Delaying Income Is the Smarter Move

Delaying income can be a useful tool if you’ve already earned more this year than expected and want to avoid being bumped into a higher tax bracket. It can also help reduce estimated tax payments due in Q3 and Q4.

Tactics to consider:

Push client billing into early Q1 of the next year
Delay launching new products or services until January
Structure contract terms with partial payments split across calendar years

Advantages:

Smooths out income across tax years
Keeps taxable income lower in your highest-earning year
Offers more control over year-end tax planning

Things to watch for:

While it’s legal to delay invoicing or contract timing, you can’t simply refuse to recognize income that has already been earned or received. Be mindful of the “constructive receipt” rule; if you had the ability to access the income this year, it generally counts as income this year.

What About Cash Flow?

It’s important to remember that these strategies aren’t just about taxes; they also affect your liquidity and cash flow. If you prepay too many expenses or push out too much income, you might reduce your tax bill but end up short on cash. Finding the right balance between smooth cash flow and adequate liquidity may include:

Creating a 6-month cash flow forecast to understand upcoming obligations
Prioritizing essential prepayments and skipping anything you’re not 100% sure you’ll need
Delaying only the income that won’t compromise your ability to pay operating expenses or make payroll
Staying on top of your quarterly estimated taxes to ensure you don’t incur underpayment penalties

Tax Bracket Management in Action

Scenario A

You’re on track to earn $118,000 this year, but most of that income came in Q2 and Q3. If delay a $10,000 invoice until January and prepay $5,000 in business expenses now, your taxable income could fall to $103,000, potentially keeping you in a more favorable tax bracket and lowering your year-end liability.

Scenario B

You expect to earn less next year due to a planned sabbatical or reduced workload. Prepaying expenses now ensures you take deductions while your income is still high, when they’re worth more from a tax perspective.

Should You Always Use These Strategies?

No, tax timing strategies aren’t one-size-fits-all. They’re most beneficial when your income fluctuates significantly year-to-year or quarter-to-quarter. If your income is steady or you work on a fixed contract model, the benefits may be minimal, or even counterproductive if it strains your cash flow.

Before you try any tax timing strategies, it will likely be in your best interest to work with a business tax professional who can evaluate your full financial picture and explain the pros and cons of your options.

Get Strategic Support With Our Accounting Services

Managing your tax burden effectively requires more than guesswork. At H&H Accounting Services, we specialize in helping Arizona-based entrepreneurs, contractors and freelancers take control of their finances with proactive planning, not just during tax season, but all year long.

Make smarter tax decisions this quarter and reach out to us at H&H Accounting Services today, here on our website or at (480) 561-5805 for expert support and personalized planning.

1099 vs W-2: What Arizona Employers Need to Know Before Hiring Seasonal Help

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Wed, 25 Jun 2025 21:57:02 GMT

Cash flow is the lifeblood of any business, and it's crucial to keep a close eye on where every dollar is going. Whether you're a startup in Tempe or an established company in Scottsdale, you might be surprised how many hidden expenses are quietly draining your profits.

A healthy revenue stream doesn't always translate into a healthy bank balance. In many cases, the culprit is not a lack of income but overlooked costs that chip away at your financial stability month after month. If your business feels like it's constantly playing catch-up with cash, it’s time to take a closer look at what might be slipping through the cracks.

Slow-Paying Clients

One of the most common cash flow killers is slow-paying clients. You might be closing deals and sending out invoices regularly, but if payments are delayed, your business suffers. This can be especially challenging for service-based businesses that rely heavily on consistent cash inflow to cover day-to-day operations.

To improve your cash position, consider tightening your payment terms. Shift to shorter cycles such as net 15, or request partial payments upfront. Automated reminders through your invoicing software can also encourage faster payments. Offer small discounts for early payments or charge late fees when necessary.

It’s not always easy taking a hard line with partners you rely on, but it may become necessary if slow payments are jeopardizing your business stability.

Unused or Excessive Subscriptions

Software-as-a-service (SaaS) tools and subscriptions have made running a business more efficient, but they can also lead to waste. Many Phoenix businesses are still paying for apps and platforms they no longer use or barely touch. These monthly charges might seem insignificant individually, but together they can total thousands each year.

To address this, conduct a subscription audit every quarter. Review bank statements and credit card transactions for recurring charges. Cancel services you no longer use and consolidate where possible. For example, many platforms now offer multiple tools in one suite, which can replace several standalone services.

Inefficient Payroll and Overstaffing

Payroll is one of the largest ongoing costs for any business. Hiring too fast or keeping underperforming staff on the team can put unnecessary pressure on your cash flow.

Evaluate team performance regularly and ensure that each role contributes to business objectives. Use time-tracking tools to assess workload and productivity. If full-time positions aren’t justified, consider outsourcing non-core tasks or hiring contractors. You may also benefit from implementing payroll forecasting tools to align staffing with your financial goals.

Poor Tracking of Small Expenses

Traveling across the Valley for meetings, grabbing coffee with clients or making last-minute supply runs might seem like minor expenditures. But untracked business mileage and small out-of-pocket purchases can create blind spots in your financial records.

To get a handle on this, use apps like MileIQ or QuickBooks to track business mileage and link expense reports with your accounting software. Encourage your team to upload receipts immediately so that everything is documented and categorized in real time. These small expenses are often tax-deductible, so tracking them can also improve your year-end position.

Inventory Mismanagement

Retailers, wholesalers, food service and even home service providers in Phoenix often suffer from inventory-related cash flow problems. Too much inventory ties up cash that could be used elsewhere, while too little means missed opportunities and unhappy customers.

Implement inventory tracking software to monitor sales patterns and adjust stock levels accordingly. Adopting just-in-time purchasing practices can also help you reduce storage costs and avoid overbuying.

Inventory management should be reviewed monthly, not just quarterly, to stay aligned with cash flow needs.

Bank and Credit Card Fees

Service fees, overdrafts and credit card interest are often ignored because they seem like part of the cost of doing business. However, these small fees can add up significantly over time, especially if you’re not paying attention to your account structure or using the right financial products.

Take the time to review your bank statements and compare your current accounts to newer, more business-friendly options. Many banks offer accounts specifically designed for small businesses with lower fees and better interest structures. Also consider renegotiating your terms with your bank. It’s more possible than you might think, especially if you’ve been a loyal customer.

Find and Eliminate Hidden Expenses With Our Phoenix Accounting Team

At H&H Accounting Services, we help Phoenix businesses gain clear visibility into their finances. Our team specializes in uncovering hidden costs, improving cash flow and building strategies that support sustainable growth. Whether you're a solo entrepreneur or managing a growing team, we tailor our accounting services to meet your needs.

Call us at (480) 561-5805 to schedule a consultation today .

What’s Draining Your Cash Flow? Hidden Expenses Phoenix and Scottsdale Businesses Overlook

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Thu, 19 Jun 2025 22:09:10 GMT

Slow-Paying Clients

It’s not always easy taking a hard line with partners you rely on, but it may become necessary if slow payments are jeopardizing your business stability.

Unused or Excessive Subscriptions

Inefficient Payroll and Overstaffing

Payroll is one of the largest ongoing costs for any business. Hiring too fast or keeping underperforming staff on the team can put unnecessary pressure on your cash flow.

Poor Tracking of Small Expenses

Inventory Mismanagement

Implement inventory tracking software to monitor sales patterns and adjust stock levels accordingly.

Adopting just-in-time purchasing practices can also help you reduce storage costs and avoid overbuying.

Inventory management should be reviewed monthly, not just quarterly, to stay aligned with cash flow needs.

Bank and Credit Card Fees

Find and Eliminate Hidden Expenses With Our Phoenix Accounting Team

Call us at (480) 561-5805 to schedule a consultation today .

Tax Strategies for Retirees Relocating to Arizona: What Still Applies After You Move?

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 16 Jun 2025 22:04:13 GMT

Moving to Arizona for retirement, or even wintering here part-time, offers plenty of lifestyle benefits. But before you settle into your home in Sun City, Peoria or another Phoenix-area community, it’s important to understand how your move could affect your taxes.

Your State of Residency Still Matters

Many retirees split their time between Arizona and another state. If you live in Arizona for part of the year and another state for the rest, your tax liability depends on your official state of residency.

Arizona does not tax Social Security benefits and has relatively low tax rates on other types of retirement income. However, you can’t automatically claim Arizona residency just because you bought a house here. Your primary residence, the state where you spend the most time, vote, register your car and claim a driver’s license, typically determines which state can tax your income.

If you still claim residency in your original state, that state may continue taxing your full retirement income, even if you spend months in Arizona. If you switch your residency to Arizona, you may still owe partial-year taxes to your previous state, depending on their laws.

You Might Owe Taxes in More Than One State

Changing your primary residence doesn’t always mean cutting ties completely. Some states aggressively tax retirement income, especially pensions and 401(k) distributions, and may try to collect taxes even after you move.

If your old state considers the income “earned” there or if distributions came from accounts you contributed to while working in that state, you could still be on the hook for source-based taxation.

Double taxation isn’t common, but it's possible in some cases. Fortunately, Arizona offers credits for taxes paid to other states, which may offset the burden. Still, multi-state retirees should work with a tax advisor familiar with both states’ laws to avoid costly mistakes.

Social Security and Pensions: What Arizona Taxes

Arizona does not tax Social Security benefits, which makes it attractive to many retirees. The state does tax most pension income and retirement account withdrawals (like traditional 401(k)s and IRAs), but the rates are relatively modest compared to high-tax states like California, New York or New Jersey.

If you have a government pension—military, federal, or certain Arizona state plans—you may qualify for additional exclusions, but private pensions are generally taxable under Arizona law.

Beware the State You Leave

Some high-tax states, like California and New York, have a reputation for aggressively pursuing former residents. If you move to Arizona but continue to maintain property, bank accounts or professional relationships in your former state, they may still consider you a resident, especially if you return regularly or haven't changed key legal documents.

To avoid this, make sure to update your:

Voter registration
Driver license
Vehicle registration
Mailing address for tax and financial documents
Legal residence listed on estate planning documents

Proving you’ve established a new primary residence can help prevent tax issues down the line.

Planning Withdrawals Strategically Still Matters

Even after relocating, the way you structure your retirement withdrawals can make a big difference. For example:

Drawing from taxable accounts before tapping IRAs can help manage your marginal rate
Roth conversions might be more tax-efficient in Arizona than in higher-tax states
Timing large withdrawals in years when your income is lower may reduce your overall tax bill

Just because Arizona has lower taxes doesn’t mean strategy no longer matters. You still want to avoid jumping tax brackets or missing out on deduction opportunities.

Talk to a Personal Tax Professional Before You Move

Whether you’re planning a full relocation or just becoming a part-time Arizona resident, your tax situation will likely change. Planning ahead can help you avoid surprises like unexpected tax bills from your former state or missed deductions tied to your income sources.

A qualified advisor can help you:

Determine the right time to change residency
Coordinate state returns if you live in two places
Structure your retirement income to minimize total tax exposure

Get Tax Guidance from a Phoenix-Area Accounting Team That Understands Multi-State Issues

At H&H Accounting Services, we can help retirees understand the tax implications of relocating to Arizona, whether you’re making a permanent move or splitting time between states. Our team can help you determine residency status, identify potential exposure to out-of-state taxes and file correctly across jurisdictions. We also review how different types of retirement income are taxed at the state level so you can avoid unnecessary surprises.

Call us at (480) 561-5805 to schedule a consultation .

How to Choose the Right Payroll Schedule for Your Small Business

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 29 Apr 2025 18:48:21 GMT

For small business owners in Arizona, payroll isn’t just a task—it’s a core part of running a smooth, compliant and efficient operation. One of the most important payroll decisions you’ll face is how often to pay your employees: weekly, biweekly, semimonthly or monthly.

Each option comes with unique benefits and challenges. Choosing the right one means balancing employee satisfaction, cash flow, administrative burden and long-term scalability.

Weekly Payroll

This approach pays employees once every week—52 times a year. It’s a popular choice in industries like construction, hospitality and retail where workers are paid hourly.

Pros:

Employees often appreciate getting paid every week. It’s easier for them to manage bills and unexpected expenses, which can improve morale and retention.
Since time is often tracked weekly, it’s easier to reconcile timecards and calculate overtime.
Weekly payroll is especially attractive in competitive labor markets and can help you stand out to new hires.

Cons:

More frequent pay runs mean more administrative work and higher processing costs.
Your business must be prepared to have enough cash available every week.
If you use a third-party payroll provider, each run typically has a fee—so this approach may cost more than longer pay periods.

Best for: Hourly teams, seasonal workers and businesses trying to attract and retain talent in labor-intensive roles.

Biweekly Payroll

Paying employees every two weeks means 26 pay periods a year. It’s a widely used option that offers a balance between weekly and monthly payroll.

Pros:

It’s familiar to most employees and still feels consistent and frequent.
Works well for both hourly and salaried staff.
Reduces the number of pay runs compared to weekly payroll, saving time and money.

Cons:

Because 52 weeks don’t divide evenly into 12 months, you’ll have two months with three payrolls instead of two. That can throw off monthly budgeting if you’re not prepared.
It doesn’t align neatly with calendar months, making monthly accounting and financial reporting a little more complicated.

Best for: Businesses with a mix of hourly and salaried staff that want to keep employees happy without processing payroll every week.

Semimonthly Payroll

This schedule pays employees twice a month—typically on the 1st and 15th or the 15th and last day of the month—for a total of 24 pay periods annually.

Pros:

It aligns neatly with monthly accounting cycles and is easy to manage from a budgeting standpoint.
It requires fewer payroll runs than weekly or biweekly, which can lower costs.
A good fit for salaried workers, since it splits annual salary evenly into two predictable monthly payments.

Cons:

Pay dates fall on different weekdays each month. If payday lands on a weekend or holiday, you’ll need to adjust.
Not ideal for hourly workers. Because the pay period may split weeks, calculating time and overtime can be more complex.

Best for: Companies with salaried employees that want a consistent payroll system and simplified bookkeeping.

Monthly Payroll

With this setup, employees are paid once per month—just 12 times a year. It’s the most efficient from a processing standpoint but often the least preferred by employees.

Pros:

Fewer payroll runs means less time and money spent on processing.
Simplifies your business’s budgeting and cash flow planning.
May work for salaried employees who have predictable income needs.

Cons:

Not well-suited to hourly workers or employees living paycheck to paycheck.
Some employees may feel financial strain between paydays, which can affect morale.
Monthly payroll isn’t allowed in Arizona for most hourly workers due to wage payment laws requiring at least two paydays per month.

Best for: Businesses with only salaried employees and consistent income streams looking to streamline payroll.

Arizona-Specific Considerations

In Arizona, employers are required to pay employees at least twice per month. That makes monthly payroll unsuitable for most hourly workers unless they meet federal exemption criteria.

If your Arizona-based business employs people in other states, be sure to comply with those states’ wage laws too. Multi-state compliance can get tricky, which is why working with a reliable accounting partner is key.

Making the Right Choice

To choose the best payroll schedule for your small business, consider the following:

Are your employees hourly, salaried or both?
How often do you want to handle payroll admin tasks?
Do you have a payroll company and how much do they charge for processing?
What’s your current and projected cash flow situation?
Do you need to comply with multiple states’ payroll laws?
What payroll frequency would your employees prefer?

Your decision will impact employee satisfaction, accounting workflows and even recruiting. Choose a schedule that aligns with your business’s structure today but can also scale with you as you grow.

Need Help With Payroll in Phoenix?

Whether you’re just starting your business or reevaluating your current process, H&H Accounting can help. From choosing the best payroll schedule to ensuring compliance and streamlining processing, we’re your trusted Arizona-based accounting team .

Contact us at H&H Accounting Services today through our website or give us a call at (480) 561-5805 and let’s build a payroll system that works for you and your employees.

Key Tax Differences Between Independent Contractors and W-2 Employees in Arizona

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 29 Apr 2025 18:34:03 GMT

For Arizona business owners, especially in fields like construction, marketing and healthcare, the decision to classify a worker as an independent contractor or a W-2 employee can have significant tax and compliance implications. While independent contractors can offer flexibility and cost savings, W-2 employees may bring stability and fewer legal risks if managed properly.

Misclassification isn’t just a paperwork mistake, it can result in penalties, back taxes and labor law violations.

Independent Contractors vs. W-2 Employees: The Tax Basics

Independent Contractors (1099 Workers)

Considered self-employed
Responsible for paying their own income tax, Social Security and Medicare taxes (self-employment tax)
Must receive a Form 1099-NEC if paid $600 or more in a year
Not eligible for employer-provided benefits like health insurance, paid leave or unemployment insurance

W-2 Employees

Taxes (Social Security, Medicare, federal and state income taxes) are withheld by the employer
Employer also pays half of the Social Security and Medicare taxes
Must be provided a W-2 form at year-end
Eligible for benefits and protected by labor laws (minimum wage, overtime, etc.)

Why the Distinction Matters for Arizona Businesses

The IRS and Arizona Department of Revenue closely watch how businesses classify workers. While Arizona follows federal classification rules, you could face state-specific penalties if you misclassify an employee to avoid paying taxes or benefits.

Industries like construction, marketing and healthcare often use a mix of contractors and employees, which makes it especially important to know the tax differences and how they affect your operations.

Construction: The Risk of Misclassification Is High

In Arizona’s construction industry, it’s common to hire subcontractors for short-term projects. But not all workers can legally be classified as contractors.

Advantages of Using Contractors

Reduced payroll taxes and no obligation to offer benefits
Greater flexibility in staffing for fluctuating project needs

Disadvantages of Using Contractors

Risk of misclassification if the contractor is under direct supervision or uses company tools
No control over schedule or methods (if you try to control those, the worker may legally be considered an employee)
Higher risk of audit in construction due to historical abuse of 1099 classification in the industry

The state of Arizona has increased audits and investigations into construction businesses misclassifying employees to avoid taxes and workers’ comp. If you're unsure, err on the side of caution or consult a payroll and accounting professional.

Marketing and Creative Industries: Flexibility Wins, But Watch the Details

In creative fields like marketing, graphic design and content production, using independent contractors is common practice. Freelancers can be paid to fulfill defined deliverables without long-term commitment.

Advantages of Using Freelancers

Easier to scale up or down depending on workload
No payroll taxes or benefit obligations
Ideal for project-based work

Disadvantages of Using Freelancers

Less control over how and when work is done
Harder to enforce brand standards and process consistency
Must ensure contractors truly work independently and aren’t treated like employees

For instance, if you require a graphic designer to be available 9 to 5, attend daily meetings and use your company’s systems, you may be blurring the line and risking misclassification, even if they invoice you as a freelancer.

Healthcare: High Stakes for Worker Classification

Some healthcare facilities utilize a blend of full-time staff, part-time employees and 1099 professionals such as nurses, therapists and specialists. While this model allows for adaptability, it carries substantial legal and tax risks.

Potential Advantages of Using Contract Healthcare Providers

Cost-effective for filling staffing gaps or temporary roles
Avoids paying the benefits and salary of a full-time worker when it’s not justified by patient volume or practice needs
No benefits or overtime costs

Risks of Depending on Contract Nurses and Therapists

Patient safety and compliance concerns if contractors aren’t held to the same standards as employees
Greater exposure to liability without strict employer control over conduct
IRS and Department of Labor may scrutinize contractor use in high-risk professions like healthcare

Many healthcare providers in Arizona choose to classify regular caregivers and long-term clinical staff as employees to avoid labor disputes and potential liability.

Choosing the Right Fit for Your Business

The right classification depends on your business model, how much control you need over the worker and how long or often they’ll be performing services. While independent contractors can help you stay agile and reduce costs, they come with greater legal risk if used incorrectly.

W-2 employees, on the other hand, may cost more, but they provide stability and reduce compliance headaches, especially when workers are essential to your operations or regularly perform core functions.

Let Our Phoenix Accounting, Consulting and Tax Professionals Help You Get Your Employee Classifications Right

Making the wrong classification can lead to audits, back taxes, penalties and lawsuits. H&H Accounting Services helps Arizona businesses like yours navigate the complexities of employee classification, payroll taxes and IRS compliance.

Whether you’re hiring contractors, building your team or are already under review, contact us at H&H Accounting Services today here on our website or give us a call at (480) 561-5805 for expert support and peace of mind with our tax services .

When Will I Get My Tax Refund and How Should I Use It?

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 29 Apr 2025 18:24:25 GMT

Tax season can feel like a whirlwind of paperwork and numbers, but for many Americans, it ends on a high note: a tax refund.

Whether you’re already imagining how to spend it or you’re anxiously refreshing the IRS website every day, you’re not alone in wondering, “When will I get my refund—and what’s the smartest way to use it?”

How Long Do Tax Refunds Take?

Once you’ve filed your taxes, your refund timeline depends on two main factors: how you filed and how you chose to receive your refund.

Typical IRS Timelines

E-file with direct deposit : Usually within 21 days of acceptance
E-file with a paper check : May take 4 to 6 weeks
Paper return with direct deposit : Around 6 to 8 weeks
Paper return with a paper check : Up to 8 to 12 weeks

The fastest option by far is to e-file your return and opt for direct deposit. Filing early in the season also helps, since IRS processing times may slow down as more returns come in.

What Can Delay Your Refund?

Errors in your return : Typos, incorrect Social Security numbers or math errors can trigger reviews.
Identity verification issues : The IRS may flag your return to prevent fraud, especially if you’ve been a victim of identity theft in the past.
Earned Income Tax Credit (EITC) or Additional Child Tax Credit : Refunds claiming these credits are legally held until mid-February due to anti-fraud laws.

Double-check everything before you file—or better yet, work with a trusted tax professional to avoid preventable tax refund delays.

How Are Tax Refunds Calculated?

Your refund is based on how much tax you owed versus how much was withheld or paid throughout the year.

Refund = Overpayment

If you had more taxes withheld from your paychecks than you owed, the IRS returns the excess to you. This is your tax refund.

What Increases Your Refund?

Certain credits and deductions can significantly boost the amount you get back:

Earned Income Tax Credit (EITC)
Child Tax Credit
Education credits (e.g., American Opportunity Credit)
Saver’s Credit
Above-the-line deductions like student loan interest or IRA contributions

What Doesn’t Typically Boost Your Refund?

Claiming dependents alone doesn’t guarantee a refund. It depends on your income and eligibility for credits.
Filing early won’t necessarily mean a bigger refund; it just gets you paid sooner.
Getting a big refund doesn’t always mean you made smart tax choices—it may just mean you overpaid throughout the year.
Some people might look at overpaying taxes as a method of forced savings, but it means giving the government an interest-free loan with your money. Instead of waiting for a refund, that money could be working for you—whether it's earning interest in a high-yield account or helping you avoid credit card debt.

Tracking Your Refund

You’ve filed, now what? You can track the status of your refund using the IRS’s “Where’s My Refund?” tool at irs.gov/refunds.

What You’ll Need:

Social Security number or ITIN
Filing status
Exact refund amount

The tool updates once a day, typically overnight.

When to Call the IRS:

It’s been 21+ days since e-filing with no status update
It’s been 6+ weeks since mailing your return
The tool says to contact them or shows an error

Otherwise, patience is key. Frequent checking won’t speed things up, but working with an experienced tax pro can help you feel confident that your return was filed correctly the first time.

Smart Ways to Use Your Refund

1. Pay Off High-Interest Debt

If you have credit card debt or personal loans, putting your refund toward paying them down can save you hundreds in interest over time.

2. Build Emergency Savings

Life happens. Setting aside even a portion of your refund in a high-yield savings account can give you peace of mind when unexpected expenses pop up.

3. Boost Your Retirement

Contributing to an IRA or increasing your retirement fund with a lump sum from your refund is a smart way to invest in your future, and it may lower your taxable income next year.

4. Save for Quarterly Estimated Taxes

If you’re self-employed or freelance, consider setting aside a chunk of your refund to cover your estimated quarterly tax payments. Paying the appropriate amount quarterly prevents underpayment penalties and makes your financial life smoother.

5. Build Equity in Your Home

Use your refund to make home improvements that increase your property’s value or apply it directly to your mortgage principal. Either option helps build equity faster and can save you money in the long run.

Need Help With Taxes or Planning Ahead? Our Personal Tax Preparation Services in the Greater Phoenix Area Can Help!

If you want to file your return correctly, avoid delays and make the most of your refund, H&H Accounting Services is here for you. Whether you’re self-employed or you just want to make sure you’re properly maximizing (and justifying) your credits and deductions, our team of experienced tax preparation professionals will guide you through every step.

Understanding Changes to Tax Laws for Small Businesses for the 2024 Tax Year

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Apr 2025 21:57:20 GMT

The landscape of tax regulations for small businesses is constantly evolving, and remaining apprised of changes is essential for small business compliance. Several important tax law changes have been implemented for the 2024 tax year that directly affects small businesses. These changes impact everything from deductions to credits, reporting requirements and worker classification.

Adjustments to Standard Deductions

Each year, the IRS makes inflation adjustments to various tax provisions. One of the most notable adjustments is the increase in standard deductions. The standard deduction for single filers is increasing to $14,600, and for married couples filing jointly it will increase to $29,200. This change can affect the taxable income of business owners who file as individuals.

Small businesses that operate as pass-through entities, such as sole proprietorships or partnerships, should be aware that these adjustments could result in a lower taxable income, which in turn can reduce the amount of tax owed. Additionally, businesses can continue to itemize deductions if they choose to do so, but the higher standard deduction might make this less beneficial for some.

Modifications to Bonus Depreciation

One of the key provisions for small businesses filing for the 2024 tax year is the modification to bonus depreciation. Under the Tax Cuts and Jobs Act (TCJA), businesses were able to immediately deduct 100% of the cost of qualified property in the year it was purchased, known as bonus depreciation. However, this deduction is gradually decreasing.

In 2024, businesses will be able to deduct 80% of the cost of qualified property in the year of purchase, a reduction from the previous 100%. This phaseout will continue annually, with the deduction dropping to 60% in 2025, 40% in 2026, and 20% in 2027.

Increased Standard Mileage Rates

For businesses that use vehicles for operations, the IRS has increased the standard mileage rate for the 2024 tax year. The rate for business use of a vehicle increased to 67 cents per mile, up from 65.5 cents in 2023. This change means that businesses can deduct more for using a vehicle in their operations, which can result in substantial savings for companies that rely on transportation.

It’s important to maintain detailed records of mileage driven for business purposes, so you're claiming the proper deduction. Consider using accounting software or mileage-tracking apps to simplify this process and ensure accuracy.

Employer Pension Startup Credit

The SECURE Act 2.0 introduced a major change for small businesses that want to provide retirement benefits to their employees. The new law increases the small employer pension startup credit. For businesses with fewer than 50 employees, this credit can cover up to 100% of the startup costs for retirement plans, such as 401(k)s or SIMPLE IRAs, for the first three years.

This is a significant benefit for small businesses that want to offer retirement savings options to employees but may have been deterred by the costs of setting up a plan. The credit can offset the setup and administrative costs, making it more feasible for smaller companies to provide these benefits.

Changes to 1099-K Reporting Requirements

One of the more controversial changes in recent years has been the adjustment to the 1099-K reporting thresholds. Previously, third-party payment platforms like PayPal and Venmo were required to report payments made through their platforms if the total amount exceeded $600 in a year.

The IRS has partially delayed the implementation of the stricter reporting requirement for 2024, giving small businesses more time to prepare. The threshold for the 2024 tax year is now $5,000.

This delay allows small business owners additional time to adjust their reporting systems and ensure that they comply with the new thresholds when they go into effect.

Increased Enforcement on Worker Classification

The IRS has become more stringent in its approach to worker classification. Misclassifying workers as independent contractors instead of employees can result in costly penalties for small businesses. The IRS is expected to ramp up enforcement efforts when processing 2024 tax filings.

The classification of workers affects how businesses report income, payroll taxes and various benefits. Small business owners should carefully review their workforce and make sure that they’re following the appropriate guidelines for classifying employees versus independent contractors.

Clean Energy Investment Incentives

Businesses that invest in clean energy solutions can still benefit from tax incentives for 2024. These include tax credits for the installation of renewable energy systems, such as solar panels, energy-efficient HVAC systems and electric vehicle charging stations.

Although the longevity of clean energy tax incentives are unclear for the upcoming years, investing in clean energy can still be an attractive selling point for customers who value environmental responsibility.

The Role of Professional Guidance

Navigating tax law changes can be complex, especially for small business owners who may not have an in-depth understanding of tax regulations. Partnering with a professional accountant, such as the team at H&H Accounting Services, can allow you to ensure your business is complying with new tax laws and taking full advantage of available credits and deductions.

Stay Informed About Changes to Tax Laws for Your Small Business in Phoenix

As small business owners, it’s essential to stay informed about changes in tax laws to minimize your tax liabilities. By staying proactive and seeking professional advice, you can navigate these changes with confidence and set your business up for success.

For expert assistance with your tax planning and compliance, contact us at H&H Accounting Services today by calling (480) 561-5805.

New Year, New Budget: Creating a Financial Plan for 2025

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Apr 2025 21:44:30 GMT

A well-structured annual budget is essential for setting financial goals, managing expenses and ensuring long-term profitability. By analyzing historical data, understanding cost structures and making informed projections, businesses can create a financial plan that supports sustainable growth.

Reviewing Historical Data for Informed Decision-Making

Before setting a budget for the new year, it is crucial to review financial data from the previous year. This historical data provides insights into revenue patterns, seasonal fluctuations and expense trends.

Key areas to analyze include:

Sales Trends – Identify peak sales periods and slow seasons to adjust inventory and staffing accordingly.
Operational Expenses – Review costs associated with rent, utilities and production to pinpoint areas where savings can be achieved.
Profit Margins – Assess which products or services yielded the highest returns and focus on maximizing profitability.
Payroll and Hiring Trends – Examine payroll costs and determine if adjustments in hiring or workforce allocation are necessary.

By using historical data, businesses can forecast revenue, adjust spending and make informed decisions about inventory, hiring and production.

Structuring Your Annual Budget

A well-structured budget includes all anticipated revenue and expenses, allowing businesses to allocate resources effectively. Key components to account for include:

Revenue Projections – Estimating total income based on previous sales trends and market conditions.
Fixed Costs – Expenses that remain constant, such as rent, insurance and loan payments.
Variable Costs – Expenses that fluctuate based on production and sales volume, such as raw materials, utilities and marketing.
Emergency and Contingency Funds – Allocating a portion of the budget for unexpected expenses to maintain financial stability.
Growth and Investment Plans – Setting aside funds for expansion, new equipment or technology upgrades.

Fixed vs. Variable Costs

Differentiating between fixed and variable costs is essential for accurate budgeting and financial planning.

Fixed Costs are those that remain constant regardless of business activity. Examples include:

Rent or mortgage payments
Salaries for permanent employees
Insurance premiums
Loan repayments

Variable costs fluctuate based on business performance. Common examples include:

Cost of raw materials and inventory
Shipping and distribution expenses
Utilities (e.g., electricity and water consumption for businesses with varying production volume)
Commission-based employee wages

By distinguishing between these cost types, businesses can better manage cash flow and adjust spending as needed throughout the year.

Planning for Growth and Unexpected Expenses

A successful budget should not only cover daily operations but also account for future growth and unexpected financial challenges. Business owners should:

Set Aside Emergency Funds – Preparing for unforeseen expenses, such as equipment repairs or economic downturns, prevents financial strain.
Plan for Expansion – Allocating funds for new hires, additional inventory or marketing initiatives to support business growth.
Evaluate Cost-Cutting Opportunities – Identifying areas where expenses can be reduced without sacrificing quality improves profitability.

How a Phoenix Accounting Firm Can Support Budget Planning

Partnering with a professional accounting firm can significantly improve your ability to create and maintain an annual budget. A CPA brings expertise in financial analysis, tax planning and regulatory compliance—ensuring that every line of your budget aligns with both short-term goals and long-term financial health.

Accounting professionals can help interpret complex financial data , turning historical performance into actionable insights. This allows for more accurate revenue forecasting , realistic expense planning and better cash flow management .

Business owners in Phoenix can also receive strategic advice on how to prioritize spending, invest in growth opportunities or reduce overhead costs without compromising operations.

Perhaps most importantly, a CPA can hold you accountable to your financial goals. Through regular check-ins and reporting, they help you monitor variances in actual versus projected performance and adjust the budget as needed throughout the year. This ongoing support is especially valuable when navigating economic changes, seasonal shifts or unexpected disruptions.

Whether you’re refining your budget for the first time or looking to strengthen your financial strategy for 2025, working with an experienced accounting firm can provide the structure, insight and discipline your business needs to stay on track.

Contact us today here on our website or give us a call at (480) 561-5805 to ensure your business has the data it needs to make informed decisions.

The Power of Financial Forecasting: Setting Your Business Up for Success in 2025

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Apr 2025 21:36:51 GMT

In today’s fast-paced business landscape, success requires more than just hard work and determination—it demands strategic planning and financial foresight. Financial forecasting is one of the most powerful tools available to Scottsdale, Phoenix and Tempe business owners looking to navigate the uncertainties of the future. By accurately projecting revenue and expenses, businesses can make informed decisions that drive growth, optimize cash flow and avoid financial pitfalls.

Professional guidance from experts like those at H&H Accounting Services can help owners position their businesses for success in the coming year.

What Is Financial Forecasting?

Financial forecasting is the process of estimating future financial performance based on historical data, industry trends and business insights. It involves projecting revenue, expenses and cash flow to create a clear financial roadmap for the future. Forecasting allows businesses to prepare for potential challenges, seize new opportunities and maintain financial stability.

There are two main types of financial forecasting:

Short-Term Forecasting: Typically covers the next 12 months and focuses on cash flow , budgeting and operational needs.

Long-Term Forecasting: Looks ahead several years to support strategic planning, expansion efforts and investment decisions.

Techniques for Accurate Financial Forecasting

To create a reliable financial forecast, businesses must use a combination of qualitative and quantitative techniques.

Historical Data Analysis

Reviewing past financial performance is essential for identifying trends and seasonal patterns. By examining revenue and expense data from previous years, businesses can establish realistic benchmarks and make informed projections for the year ahead.

Industry and Market Research

Staying aware of industry trends, market conditions and broader economic factors helps businesses anticipate challenges and spot new opportunities. Analyzing competitor strategies can also offer insights into pricing, demand and areas for potential growth.

Scenario Planning

Preparing for uncertainty involves developing multiple financial projections based on best-case, worst-case and expected-case outcomes. This type of scenario planning allows businesses to build flexibility into their budget and create contingency plans for disruptions like supply chain issues or shifts in consumer behavior.

Utilizing Financial Forecasting Software

Financial forecasting software such as QuickBooks , Xero or Microsoft Excel can simplify the budgeting process by automating calculations and generating projections. When integrated with real-time financial data, these tools provide continuous oversight and allow for timely adjustments.

Working with Professional Accountants

Collaborating with experienced accountants—such as the team at H&H Accounting Services—ensures your financial forecasts are grounded in accurate records and sound strategy. Their guidance can help interpret data, assess risk and refine your overall financial planning approach.

The Role of Accurate Bookkeeping in Forecasting

One of the biggest challenges businesses face in financial forecasting is making sure that data is accurate and up to date. Without reliable financial records, forecasts can be misleading, resulting in poor decision-making. This is where proper bookkeeping comes into play.

Accurate bookkeeping ensures that all financial transactions are recorded correctly, making it easier to track income, expenses and cash flow. Having up-to-date books also allows businesses to:

Identify financial trends and patterns in real time.
Avoid errors that could lead to incorrect projections.
Stay compliant with tax and financial reporting requirements.

Why Financial Forecasting is Essential for Business Success

Financial forecasting is more than just a numbers game—it’s a strategic tool that can drive business success. Here’s how accurate forecasting can benefit your business in 2025:

Improved Budgeting – Helps allocate resources efficiently and prevent overspending.
Better Cash Flow Management – Ensures businesses have enough cash on hand to cover operational expenses and unexpected costs.
Informed Decision-Making – Provides data-driven insights to support business growth, investment decisions and hiring plans.
Risk Mitigation – Identifies potential financial risks and enables proactive planning to avoid pitfalls.
Investor and Lender Confidence – Demonstrates financial stability to investors and banks, making it easier to secure funding.

Set Your Business Up for Success With Our Dependable Accounting Services in Phoenix

Don’t leave your business’s future to chance. Our team of experienced accountants specializes in financial forecasting, bookkeeping and tax planning.

Contact us at H&H Accounting Services today by filling out the form on our website or give us a call at (480) 561-5805 to take control of your financial future and set your business up for lasting success in 2025 and beyond.

Closing Out the Fiscal Year: Accounting Tasks Your Business Shouldn’t Skip

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 28 Feb 2025 21:55:53 GMT

A thorough year-end closing process helps prevent errors, streamlines tax preparation and provides insights for better financial planning. Ignoring critical accounting steps can lead to discrepancies, penalties or missed opportunities for financial optimization.

If you want to ensure nothing is missed this year, you may benefit from making and following a checklist of all your close out tasks before the end of your fiscal year and tax deadline.

Reconcile All Accounts

Before finalizing your books, conduct a comprehensive reconciliation of all financial accounts. If you stay on top of your own accounting using QuickBooks or another platform, you may be able to do this task yourself. However, working with an experienced accountant can be beneficial. You should ideally be reconciling:

Bank accounts
Credit cards
Accounts receivable (outstanding invoices)
Accounts payable (unpaid bills)

Ensure that your records match bank statements and other financial documents. Discrepancies should be investigated and corrected before closing the books. Catching errors early can prevent financial misstatements and potential tax issues.

Review Accounts Receivable and Collect Outstanding Invoices

Unpaid invoices can negatively impact cash flow, so now is the time to follow up on outstanding payments.

Send reminders to clients with overdue balances.
Offer payment plans if necessary to collect revenue before the end of your fiscal year.
Write off bad debts before preparing your taxes if they are unlikely to be collected.

Clearing up outstanding receivables before closing the books ensures accurate revenue reporting, improves your cash position and can create tax-savings opportunities.

Verify Accounts Payable and Settle Debts

Review all outstanding vendor invoices and pay any due balances to avoid late fees or strained supplier relationships. If possible, make payments before the year ends to claim eligible expenses for tax deductions.

Ensure that all expenses are recorded in the correct accounting period. Accrue expenses for services received but not yet billed to ensure financial statements reflect true obligations.

Conduct an Inventory Count

For businesses that manage inventory, an accurate year-end inventory count is essential for proper financial reporting and tax calculations.

Compare physical inventory to recorded stock levels.
Adjust discrepancies due to loss, damage or theft.
Write off obsolete or unsellable inventory.

Inventory valuation affects cost of goods sold (COGS), which directly impacts profitability and tax liability.

Ensuring accurate records prevents overstatement or understatement of inventory-related expenses.

Assess Fixed Assets and Depreciation

Review your company’s fixed assets—such as equipment, vehicles and property—to update depreciation schedules and determine if any assets need to be retired or sold. This process should include:

Ensuring depreciation expenses are recorded correctly.
Removing disposed or obsolete assets from financial records.
Evaluating whether new purchases qualify for accelerated depreciation or deductions.

Proper fixed asset accounting ensures accurate financial reporting and positions you to maximize your tax savings for the fiscal year.

Prepare for Tax Obligations and Deductions

Year-end is a critical time to review tax liabilities and identify potential deductions. An experienced business tax professional or accountant can help you:

Estimate taxes owed and make necessary payments to avoid penalties.
Maximize deductions by documenting eligible business expenses, such as office supplies, travel costs and home office expenses.
Determine whether deferring income or accelerating expenses could put you in a more advantageous tax position.

If your business operates on a fiscal year separate from the calendar year, ensure that tax planning aligns with your reporting deadlines.

Generate Year-End Financial Reports

Accurate financial reporting provides insights into your company’s performance and can help ensure your decision-making is informed by accurate and relevant KPIs. For most businesses, the key reports will be:

Profit and Loss Statement (Income Statement): Summarizes revenue, expenses and net profit for the year.
Balance Sheet: Provides a snapshot of assets, liabilities and equity.
Cash Flow Statement: Tracks cash inflows and outflows so you can get an accurate picture of your current liquidity.

Reviewing these reports helps identify financial strengths and weaknesses while guiding budget planning for the next year.

Review Payroll and Employee Benefits

Ensure all payroll records are accurate and up to date, especially for tax reporting purposes. Verify:

Employee wages, bonuses and benefits are properly documented.
Payroll taxes and withholdings are correctly calculated and reported.
Year-end tax forms (W-2s, 1099s) are prepared for distribution.

Additionally, evaluate your company’s benefits programs, such as retirement contributions or healthcare plans, to determine if adjustments are needed for the upcoming year.

Evaluate Budget Performance and Set Goals for Next Year

Compare actual financial performance against the budget set at the beginning of the year. Identify variances to determine areas for improvement, as well as where you exceeded expectations.

Were revenue targets met?
Did expenses align with expectations?
What financial trends emerged that should influence next year’s strategy?

This data isn’t just important for a year-end performance review. It is key for establishing a realistic budget for the upcoming year and will help you set measurable, realistic financial goals and allocate resources efficiently.

Back Up and Secure Financial Records

Protecting your financial data is just as important as reviewing it. Ensure that all records—including accounting software data, invoices, receipts, and tax documents—are securely backed up.

Store copies in cloud-based accounting systems or external hard drives.
Restrict access to sensitive financial information to prevent unauthorized modifications.
Ensure compliance with your own internal data security and retention policies as well as any regulatory requirements you may be subject to.

Having a secure record-keeping system helps with audits, tax filings and financial planning while minimizing the risk of data loss.

An Accurate Fiscal Year Analysis Can Be Key to Future Success

It’s difficult to improve your business if you don’t have a clear picture of its performance. A well-organized year-end closeout process ensures you have the data to make actionable plans for improvement or to continue positive trends.

The business accounting and tax preparation team at H&H Accounting Services can assist with reconciling accounts, managing receivables and payables, reviewing financial reports and preparing for tax obligations. Call us at (480) 561-5805 and let us help your business avoid costly mistakes and position itself for future success.

The Impact of Sales on Inventory Management and Cash Flow

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 18 Feb 2025 21:48:56 GMT

Limited-time sales and promotional incentives are powerful tools for driving customer traffic, boosting short-term revenue and managing inventory. However, the impact of sales extends beyond increased sales volume; they can also allow business owners to achieve targeted inventory management and cash flow goals.

How Sales Promotions Help Business Owners Manage Inventory More Precisely

Sales promotions, whether in the form of discounts, BOGO (buy one, get one) offers or flash sales—when effective—can directly impact inventory management strategies. These promotions can help businesses:

Clear Out Excess Inventory: When products are overstocked or approaching the end of their lifecycle, sales can accelerate turnover. For example, seasonal items or perishable goods often require markdowns to avoid losses.
Prevent Dead Stock: Products that aren’t selling as expected can become “dead stock,” taking up valuable storage space and tying up capital. Offering discounts can minimize these risks by incentivizing purchases.
Manage Stock Rotation: Sales can support first-in, first-out (FIFO) inventory management by pushing older stock out the door faster, which is especially important for businesses dealing with perishable or time-sensitive products.
Improve Forecast Accuracy: Running sales can provide insights into consumer behavior and preferences, helping refine future inventory orders and avoid overstocking.

Of course, these goals can only be achieved if promotions actually accelerate sales and increase volume. It’s important to craft promotions that appeal to your consumers and encourage fast action.

While sales can be effective for managing inventory, it’s important to avoid potential pitfalls, like excessive inventory depletion. Frequent or overly generous sales may also cause customers to delay purchases until a promotion, disrupting inventory management between sales and jeopardizing long-term profitability.

The Potential for Promotional Incentives to Temporarily Enhance Cash Flow

Sales promotions can have a significant impact on cash flow. While reducing prices may temporarily affect profit margins, the influx of cash from increased sales volume can improve liquidity by providing an immediate boost to cash flow. There are different reasons why a business might pursue this approach:

A business might accept the trade-off to generate cash for meeting operational expenses, covering payroll or reinvesting in new, more in-demand stock.
Moving old or slow-moving inventory through promotions converts stagnant assets into cash, which can then be used for more strategic investments.
Inventory comes with storage, insurance and potential depreciation costs. Sales help reduce these expenses by maintaining a leaner inventory.
Retailers often use sales to clear inventory before seasonal shifts to ensure they have enough cash flow.

However, businesses need to calculate the break-even point for sales promotions to ensure that the increased sales volume compensates for reduced margins and that cash flow benefits are not offset by increased costs.

Calculating the Break-Even Point

The break-even point in units (BEU) allows you to determine how many units you need to sell at the discounted price to cover fixed costs. You can determine the BEU by dividing fixed costs (total overhead expenses) by the contribution margin (CM), which is the measure of profit made per unit sold after covering variable costs. The CM can be calculated by subtracting the variable cost per unit (the direct cost of acquiring or producing the unit) from the discounted price per unit.

Knowing the BEU before starting a sale and adjusting your discounts to make the BEU achievable can help ensure your promotion has the positive outcome you’re hoping to achieve.

Strategic Reasons to Use Sales as an Inventory Management Tool

End-of-Season Clearance

To make room for new collections, businesses often offer steep discounts on seasonal products. This strategy prevents old inventory from lingering into the next season and tying up capital.

Managing Overstock and Reducing Dead Stock

When inventory forecasting misses the mark, sales provide a practical way to rebalance stock levels. Flash sales or bundling promotions can help clear excess inventory quickly.

Introducing New Products

Sales on old stock can generate the cash needed to invest in new product lines. Additionally, promotions can help introduce new items to the market by attracting budget-conscious customers who might not try the product at full price.

Generating Quick Cash Flow

If a business faces unexpected expenses or a temporary cash shortfall, a targeted sale can improve liquidity quickly. This approach can be particularly useful during slow seasons.

Supporting Marketing Campaigns

Limited-time sales tied to holidays, special events or marketing initiatives can drive brand visibility and enhance sales volume while simultaneously managing inventory.

Considerations When Running Sales for Inventory and Cash Flow Management

While sales promotions offer many benefits, businesses need to approach them strategically to avoid negative impacts:

Monitor Inventory Levels: Avoid over-promoting products with limited stock, which can lead to backorders, stockouts or customer dissatisfaction.
Analyze Profit Margins: Before launching a sale, calculate the impact on margins and ensure that the strategy aligns with financial goals.
Plan for Increased Demand: Ensure that supply chains can handle the uptick in sales volume to prevent logistical issues or delayed deliveries.
Avoid Discount Dependency: Frequent sales can train customers to wait for discounts, which may hurt regular sales and affect overall cash flow stability.
Balance Short-Term Gains with Long-Term Strategy: While sales can generate quick cash flow, businesses should ensure that promotions do not erode brand value or profitability over time.

Get Advice on Inventory Management and Cash Flow Optimizations

Sales promotions can be powerful tools for managing inventory and enhancing cash flow. However, they’re not always the ideal option to address persistent cash flow or inventory problems. If you are looking for a more sustainable solution, you may want to discuss cash flow and inventory management optimization options with an experienced Phoenix or Scottsdale business consultant .

Call H&H Accounting Services at (480) 561-5805 to schedule a consultation .

Bonus Planning: How to Reward Employees Without Overextending Your Budget

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 14 Feb 2025 21:41:55 GMT

Rewarding employees with bonuses is an excellent way to boost morale, increase retention and recognize outstanding performance. However, without a solid strategy, bonus programs can quickly strain company finances. A well-planned bonus structure ensures that employees feel valued while keeping costs manageable.

Align Bonuses With Business Performance

One of the most effective ways to control bonus costs is by linking them directly to business performance. If the company thrives, employees benefit; if the business struggles, bonuses adjust accordingly.

A key to this approach is transparency. Employees who know the business isn’t meeting or exceeding expectations won’t be surprised when their bonuses, or lack thereof, reflect that drop in performance.

Workers who are unaware of performance shortfalls can become frustrated when they learn that they will not receive income they may have been relying on.

Some businesses implement a profit-sharing model, where a portion of the company's earnings is set aside for employee bonuses. Employees receive their share only when the company meets or exceeds profit targets. This approach fosters a sense of ownership, encouraging employees to contribute to the company’s overall success.

Another option is departmental or individual performance-based bonuses, where incentives are tied to key performance indicators (KPIs). This ensures that bonuses are earned based on measurable contributions rather than being expected as automatic payouts.

Offer Non-Monetary Rewards

While cash bonuses are always appreciated, they’re not the only way to recognize employees. Many non-monetary incentives can be just as effective at boosting engagement and satisfaction.

Some budget-friendly alternatives include:

Extra Time Off: Additional paid vacation days or flexible scheduling options provide employees with enhanced work-life balance.
Professional Development: Covering the cost of courses, certifications or industry conferences can help employees grow their skills while benefiting your company.
Equity or Stock Options: If your business offers stock options, granting shares to employees can provide long-term financial rewards without immediate cash outflow.
Workplace Perks: Free lunches, gym memberships or wellness stipends can make employees feel valued without a significant financial burden.

Set Clear and Attainable Metrics

Ambiguity in bonus programs can lead to frustration and disengagement. Employees should understand exactly what they need to do to earn their bonuses. Clear, transparent metrics ensure that rewards are fair and aligned with company goals.

Consider using the SMART (Specific, Measurable, Achievable, Relevant and Time-bound) framework to define bonus criteria. For example, instead of a vague goal like "increase sales," a clearer metric would be "achieve a 10% increase in quarterly revenue compared to the previous quarter."

Establishing transparent metrics also helps prevent unnecessary disputes and ensures that employees see the bonus structure as fair and achievable.

Use Tiered or Deferred Bonuses

Rather than paying large lump-sum bonuses at year-end, consider tiered or deferred payouts to spread costs over time.

Tiered Bonuses: Offer different payout levels based on performance. For example, an employee who meets 80 percent of their goal might receive a smaller percentage of their potential bonus, while someone who exceeds expectations receives the full amount.

Deferred Bonuses: Staggering payments over several months or years can help with cash flow management while still providing valuable incentives. For instance, you could structure a retention bonus where a percentage is paid upfront, and the remainder is awarded after a set period of continued employment.

Both methods ensure that bonuses remain an incentive while preventing financial strain on the company.

Incorporate Spot Bonuses

While structured annual or quarterly bonuses are useful, smaller spot bonuses can be just as impactful. These are one-time rewards given to employees who go above and beyond in their roles.

Spot bonuses allow for immediate recognition and can be customized based on your budget. Some examples include:

Rewarding an employee for stepping up during a high-pressure project.
Recognizing team members for innovative problem-solving.
Providing a bonus for exceptional customer service feedback.

Since these bonuses aren’t tied to a fixed schedule, they offer flexibility while still motivating employees.

Regularly Review and Adjust Bonus Structures

The effectiveness of a bonus program depends on how well it aligns with both company goals and employee expectations. Economic conditions, company growth and industry standards all influence what employees consider a competitive bonus. When you’re analyzing the effectiveness of your current bonus structure, consider:

Whether bonus payouts align with the company’s financial health.
If employees feel the system is fair and motivating.
How your program compares to competitors in your industry.

Seeking employee feedback through surveys or one-on-one discussions can help refine your approach and ensure that incentives remain effective without causing unnecessary financial burden.

Discuss Your Company’s Compensation Structure With Experienced Phoenix Business Consultants

In some industries, bonuses play a vital role in attracting, retaining and motivating employees, but they should be implemented strategically to avoid financial strain.

A well-balanced approach to bonus planning ensures that employees feel appreciated while your company remains financially stable. If you would like to establish a thoughtful incentive program or you’re looking for advice on a bonus approach that will strengthen morale and motivate your team, call the business consultants at H&H Accounting Services at (480) 561-5805.

Year-End Tax Planning for Phoenix Businesses: What You Need to Know About 2024 Taxes

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 24 Jan 2025 21:40:06 GMT

With the new year, Phoenix businesses have a unique opportunity to implement tax-saving strategies. Proactive planning can reduce your tax liability, ensure compliance and position your business for financial success in the upcoming year. The right strategies depend on your specific business structure, goals and financial standing, but some universal tactics can benefit businesses across industries.

Take Advantage of Section 179 and Bonus Depreciation

Businesses planning significant investments in equipment, machinery or technology upgrades can benefit from Section 179 deductions and bonus depreciation rules.

Section 179 Deduction: This allows businesses to deduct the full cost of qualifying equipment or software purchased or financed during the tax year, rather than depreciating it over several years.
Bonus Depreciation: For qualifying assets not covered by Section 179, bonus depreciation lets businesses deduct a large percentage of the cost upfront.

Before making large purchases, consult with a business tax professional to ensure the timing and classification of expenses align with your tax planning strategy.

Review Your Entity Structure

Your business’s legal structure significantly impacts your tax obligations. For instance:

S Corporations and LLCs often benefit from pass-through taxation.
C Corporations are subject to corporate tax rates but may take advantage of unique deductions.

If your business has grown or its needs have shifted, now is the time to evaluate whether your current entity structure is still the most tax-efficient option for 2024 filing.

Defer or Accelerate Income and Expenses

Depending on your anticipated income for the year, you may benefit from deferring or accelerating income and expenses.

If you expect a lower tax rate next year, defer income until January 2025 and accelerate deductible expenses into the next year. If you expect higher profits next year, accelerate income to take advantage of your current lower tax rate and defer expenses until 2025.

Maximize Retirement Contributions

Contributing to employee retirement plans, such as a 401(k) or SEP IRA, not only benefits your team but also reduces your taxable income. Employers can claim tax deductions for contributions made to these plans, while employees enjoy tax-deferred growth on their contributions.

Claim Tax Credits

Tax credits directly reduce your tax liability dollar-for-dollar, making them more valuable than deductions. Review available federal and Arizona-specific tax credits, such as:

Research and Development (R&D) Credit: For businesses investing in innovation, product development or process improvements.
Work Opportunity Tax Credit (WOTC): For hiring employees from specific target groups, such as veterans or individuals receiving government assistance.
Arizona Enterprise Zone Program Credits: For businesses operating in certain areas and hiring employees from designated zones.

Clean Up Your Financial Records

Accurate financial records are essential for effective tax planning and preparation. Use the year-end as an opportunity to:

Reconcile your accounts
Review outstanding invoices and payables
Identify and write off bad debts

A clean set of books not only simplifies tax filing but also helps identify potential deductions and opportunities for savings.

Evaluate Inventory and Cost of Goods Sold (COGS)

If your business holds inventory, review your inventory levels and cost of goods sold to determine the best tax strategy. Businesses can write down unsellable or obsolete inventory as a deduction. Additionally, consider whether the LIFO (Last In, First Out) or FIFO (First In, First Out) accounting method is more advantageous for your tax position.

Utilize Arizona State-Specific Incentives

Arizona offers unique tax-saving opportunities that can benefit Phoenix-based businesses, including:

Arizona Charitable Tax Credit: Contributions to qualifying charitable organizations can offset your Arizona state tax liability.
Solar Energy Tax Incentives: Businesses that install solar energy systems may qualify for federal and state tax credits.

These incentives align with Arizona’s goal of promoting community development and environmental sustainability while offering financial benefits to businesses.

Plan for Estimated Taxes

Small businesses, freelancers and self-employed professionals typically need to make quarterly estimated tax payments. Although it can be difficult, it is necessary to ballpark your expected income for the year by the end of the first quarter. Review your previous year’s income and your own projections to ensure you’re paying enough to avoid penalties. Although overpaying isn’t ideal, it’s better than being penalized for underpaying, and anything you overpay earlier in the year will be refunded.

Consult a Professional Accountant

Tax laws are complex and change frequently. The best way to ensure compliance, maximize deductions and minimize liabilities is by partnering with experienced business accountants and tax preparers who understand local and federal tax codes.

Plan Ahead with Top-Notch Accounting Services in Phoenix

Year-end tax planning doesn’t have to be overwhelming. With expert advice and proactive strategies, you can take control of your taxes, save money and prepare for a successful new year.

Contact H&H Accounting Services today at (480) 561-5805 to schedule your tax planning consultation.

Overlooked Business Tax Deductions for 2024

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 14 Jan 2025 21:34:49 GMT

As a business owner, you know how important it is to take advantage of every opportunity to reduce your tax burden. While many are familiar with deductions like office supplies, employee salaries or travel expenses, there are several lesser-known deductions that can significantly impact your bottom line. Identifying and claiming these overlooked deductions could mean keeping more of your hard-earned revenue.

Home Office Deduction

If you operate your business from home, you may qualify for the home office deduction—even if your business also has a physical office location.

Eligibility: The space must be used exclusively and regularly for business purposes.
Simplified Option: Instead of itemizing actual expenses, you can claim a flat $5 per square foot, up to 300 square feet.
What’s Included: Utilities, rent or mortgage interest, home insurance and depreciation are all partially deductible based on the percentage of your home used for business.

Startup Costs and Organizational Expenses

New businesses can deduct up to $5,000 in startup costs and $5,000 in organizational expenses in their first year of operation.

Examples of Eligible Costs: Market research, advertising, legal fees for incorporation and expenses for employee training.
Phase-Out: If your total startup costs exceed $50,000, the deduction amount begins to phase out.

Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction is available for certain pass-through entities like sole proprietorships, partnerships and S corporations.

What It Offers: A deduction of up to 20 percent of your qualified business income.
Limitations: The deduction phases out for high-income earners and may depend on the type of business you operate.
Strategy Tip: Consult a tax professional to confirm that you meet the requirements to maximize this deduction.

Meals and Entertainment

While entertainment expenses are largely no longer deductible, business meals remain partially deductible. Meals with clients, prospects, or employees for business purposes can generally be deducted at 50 percent.

Food provided at office events or during employee meetings is fully deductible. Keep detailed records, including receipts and notes on the business purpose of the meal.

Educational and Training Expenses

Investing in your team’s education is not only good for business, but it can also save you money on taxes.

With training programs, certifications and continuing education courses, you can deduct up to $5,250 per employee annually.

Business Vehicle Expenses

If you use a vehicle for business purposes, you may be able to deduct related costs.

Two Methods to Choose From:

Standard Mileage Rate: The standard rate in 2024 was 67 cents per mile and will be 70 cents per mile for the 2025 tax year.
Actual Expenses: Deduct costs like fuel, maintenance, insurance and depreciation.
Recordkeeping Tip: Use apps like MileIQ to track mileage accurately.

Energy Efficiency Incentives

If your business has invested in energy-efficient upgrades, you could qualify for deductions or credits.

Section 179D Deduction: For installing energy-efficient systems in commercial buildings, such as HVAC or lighting upgrades.

Energy Investment Tax Credit (ITC): For businesses that install renewable energy systems, such as solar panels.

Bad Debt Write-Offs

If your business extends credit to customers and cannot collect payment, you may be able to deduct the bad debt.

Eligibility: Applies to accounts receivable for services or products, unpaid loans or employee advances that are not repaid.
Limitations: Deduct only the amount already included in your gross income.

Technology and Software Subscriptions

The tools and software that keep your business running smoothly may be deductible.

Eligible Subscriptions: CRM tools, accounting software, project management platforms and cloud storage services.
Pro Tip: Ensure that subscription costs are fully itemized and separated from personal use to maximize deductions.

Health Insurance Premiums for the Self-Employed

If you’re self-employed, you may be able to deduct your health insurance premiums.

What’s Covered: Premiums for yourself, your spouse, dependents and children under 27.
Income Limits: This deduction cannot exceed your net business income for the year.

Retirement Plan Contributions

Contributing to retirement plans for yourself and your employees can yield substantial tax benefits.

Options Include: SEP IRAs, SIMPLE IRAs and 401(k) plans.
Benefit: Contributions reduce taxable income while helping you save for the future.

How to Determine Your Eligibility

Navigating tax deductions and credits can be overwhelming, especially with constant changes to tax laws. To confirm that you’re claiming all eligible deductions:

Maintain Organized Records: Keep receipts, invoices and detailed records of all expenses.
Consult a Tax Professional: A qualified business tax preparer can identify deductions specific to your business and ensure compliance with IRS regulations.
Use Tax Software: Tools like QuickBooks or Xero can help track deductible expenses throughout the year.

Maximize Your Tax Savings with the Help of Our Business Tax Preparers in Phoenix, Scottsdale and Tempe

Don’t leave money on the table this tax season. At H&H Accounting Services our team of business tax preparers specializes in helping businesses uncover overlooked deductions and navigate complex tax codes .

From determining your eligibility for credits to optimizing your deductions, we’re here to help you maximize your business deductions.

Contact us today through our website to schedule your consultation or give us a call at (480) 561-5805 and make 2024 your most tax-efficient year yet.

Tools and Strategies for Maximizing the Tax Benefits of Charitable Contributions

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 10 Jan 2025 21:26:39 GMT

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Strategies for Enhancing Cash Flow

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 30 Dec 2024 20:58:14 GMT

There are very few businesses that wouldn’t like to increase revenue while cutting costs. Unfortunately, these performance enhancements are often difficult to achieve. Competing products or services, limited clientele, market saturation and logistical challenges in diversifying revenue streams are just a few barriers to higher revenue.

However, increasing revenue is not the only path to healthier cash flow . Businesses can encourage clients to pay on time, alter their inventory management strategies or cut costs around the edges to achieve more sustainable cash flow.

Streamlining Inflows to Get Paid Faster

One of the quickest ways to improve cash flow is to ensure your customers pay you on time. Late payments place unnecessary strain on your business's finances. While these strategies won’t work for every business, like B2C retailers that are paid in full by customers whenever they make a purchase, they can be beneficial for B2B businesses that offer more flexible payment terms or trade credit:

Automate your invoicing system so invoices go out promptly and reminders are sent automatically.
Offer small discounts for early payments to encourage timeliness. For example, instead of offering Net 30 you could offer 2/10 Net 30, meaning clients who pay their bill within 10 days receive a two percent discount.
Establish and enforce clear payment terms with outlined deadlines and penalties for late payments.

Focus on Expense Management

Laying off workers, selling equipment or making other drastic cuts that diminish your business’s ability to operate isn’t the only option for expense management. Rather than implementing sweeping cuts, focus on smaller, impactful changes like these:

Negotiating better terms with suppliers, like extended payment deadlines.
Conducting a monthly review of recurring expenses to identify services or subscriptions you no longer use.
Prioritizing expenses that drive growth while deferring non-essential upgrades or projects.

Unused or Underutilized Software Subscriptions and Other Expenses

The software industry is highly competitive, with countless free or low-cost business tools being released on a regular basis. Businesses often underutilize software or maintain overlapping subscriptions that could be consolidated into a single tool.

If some employees work from home or only come in two to three days a week, downsizing empty office space could reduce your operating costs. Consider adopting a schedule where workers rotate in-person days so no more than half of your staff is in the office at any one time.

Non-Essential Projects to Put on the Backburner

Consider delaying short-term projects until your cash flow can cover the costs. Examples include non-essential property renovations, replacing employee laptops or upgrading software.

It may also make sense to exam your current marketing campaigns. Many businesses owners fail to regularly analyze the performance of their marketing efforts and continue spending dollars on campaigns with low ROIs. Switching marketers or cutting low-performing campaigns can help reduce expenses.

Improving Cash Flow With Better Inventory Management

For product-based businesses, inventory can quickly become a cash flow trap. Overstocking ties up valuable cash, while understocking risks losing sales. Striking the right balance is crucial:

Use inventory management software to monitor trends and avoid over-ordering.
Focus on high-margin products that contribute the most to your bottom line.
Adopt just-in-time (JIT) inventory practices, which minimize holding costs by aligning stock with demand.

Efficient inventory management not only reduces costs but also frees up cash for reinvestment.

The Power of Forecasting

Cash flow forecasting helps anticipate financial challenges before they occur. A robust forecast helps you plan for seasonal fluctuations, identify gaps in cash availability and prepare for growth opportunities.

Many modern bookkeeping platforms allow you to project future inflows and outflows based on historical data. Regularly update these forecasts to ensure they remain accurate and actionable.

Is Your Phoenix, Scottsdale or Tempe Business Interested in Better Managing Cash Flow?

Improving cash flow isn’t just about surviving—it’s about thriving. Ensuring steady inflows, precise outflow management, and accurate forecasting can provide the stability your business needs to seize new opportunities.

If you’re ready to take control of your cash flow and explore strategies tailored to your unique business needs, reach out to H&H Accounting Services at (480) 561-5805.

The Role of Cash Flow in Business Valuation

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 16 Dec 2024 20:53:06 GMT

Many business owners in Phoenix, Scottsdale, and Tempe eventually decide to sell a company they’ve built, acquired or invested in. Determining the value of a business is complex, and a variety of tangible and intangible attributes must be considered to arrive at a fair valuation.

Among the many factors considered, cash flow is one of the most critical. Cash flow not only reflects a company’s current financial health but also its potential for long-term profitability. Investors, buyers and stakeholders all rely on cash flow analysis to gauge a business’s worth, making it an indispensable component of business valuation.

How Cash Flow Factors Into Business Valuation

The net movement of money in and out of a business can be measured or viewed in a number of different ways. Not all cash flow is equal; what looks good on paper can sometimes have negative practical consequences. The three main categories of cash flow, particularly in the business valuation context, include:

Operating Cash Flow : Generated from day-to-day business activities, such as sales and expenses.
Investing Cash Flow : Involves money spent or earned from investments, acquisitions or asset sales.
Financing Cash Flow : Covers transactions related to debt, equity and dividends.

In the context of business valuation, up-to-date operating cash flow is typically the most important. It’s the most accurate snapshot of the business’s core operations.

Why Is Cash Flow Crucial for Business Valuation?

Indicator of Financial Health

Cash flow offers a clear picture of how well a business can cover its expenses, invest in growth and weather economic downturns. A company with consistent positive cash flow is generally seen as more stable and valuable.

Basis for Earnings Valuation Models

Many valuation methods, such as the discounted cash flow (DCF) model, rely on cash flow projections to estimate a business’s value. The DCF model calculates the present value of expected future cash flows, emphasizing the importance of cash flow consistency and growth potential.

Reflects Profitability vs. Revenue

Revenue alone doesn’t indicate profitability. A business with high revenue but poor cash flow may struggle with expenses or debt. Buyers and investors prioritize cash flow because it demonstrates the actual money available to reinvest or distribute.

Risk Assessment

Cash flow trends help assess risk. Erratic cash flow signals financial instability, while steady growth indicates lower risk and higher valuation.

How Cash Flow Impacts Different Valuation Methods

Income-Based Valuation

This approach focuses heavily on cash flow, using methods like DCF to predict future income and assess its present value. Adjustments may be made for non-recurring expenses or changes in working capital to provide an accurate cash flow picture.

Market-Based Valuation

In market-based valuation, cash flow is a key metric for comparing a business to similar companies and assessing its attractiveness as an acquisition.

Asset-Based Valuation

While asset-based valuation focuses on tangible and intangible assets, cash flow still plays a role in overall valuation. A business’s cash flow can influence the effectiveness of asset utilization, particularly in the context of income generation.

Improving Cash Flow to Enhance Business Valuation

If you’re preparing your business for sale or investment, improving cash flow can significantly boost its value. Business owners in Scottsdale and Phoenix might want to consider adopting these strategies:

Optimize Accounts Receivable : Reduce payment delays by implementing clear terms and incentives for early payments.
Control Operating Expenses : Identify inefficiencies and reduce unnecessary costs to improve net cash flow.
Invest in High-ROI Activities : If you are looking down the road at a sale, you may still have time to adjust your business and enhance its attractiveness as an acquisition. Prioritize projects that deliver high returns and preserve liquidity.
Maintain a Cash Reserve : A strong reserve signals financial stability and lowers perceived risk for investors.

Common Cash Flow Challenges That Might Scare Off Buyers or Investors

Uneven cash flow may not be a deal breaker for every buyer if they recognize and appreciate that your business is seasonal in nature. However, significant seasonal cash flow variations can complicate sales or influence valuation.
High debt levels can drain cash flow, negatively impacting perceived value.
Rapid growth without adequate cash flow management can lead to overextension, reducing operational efficiency.

Are You a Phoenix or Scottsdale Business Owner Looking to Cash Out?

Cash flow is a cornerstone of business valuation, influencing how stakeholders perceive a company’s profitability, risk and growth potential. By maintaining strong, consistent cash flow and addressing potential weaknesses, business owners can maximize their valuation and attract the right investors or buyers.

If you’re a business owner who wants to maximize their business’s valuation, call (480) 561-5805 and schedule an appointment with the consulting and accounting professionals at H&H Accounting Services. Our experts can provide tailored insights and strategies to enhance your company’s value.

How AI and Automation Are Transforming Cash Flow Management

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Thu, 05 Dec 2024 20:48:05 GMT

Advancements in artificial intelligence (AI) and automation are reshaping cash flow management for businesses of all sizes. Many tools leveraged by SMBs, including QuickBooks and Xero, are incorporating AI features and have long been providing automation tools to enhance cash flow tracking. Some examples include automated invoicing, expense tracking and cash flow projections. Most importantly, these features integrate seamlessly with tools and platforms like PayPal and Shopify, which many small businesses already use.

Whether you want a tool that will allow you to forecast financial trends, automate routine tasks or make data-driven decisions with greater speed and accuracy, there are ready-made solutions available.

The Role of AI in Cash Flow Management

Software developers wasted no time integrating AI into their existing platforms. Many businesses already have access to AI tools that leverage machine learning algorithms to analyze historical financial data, detect patterns and generate accurate forecasts.

Predictive Analytics

AI tools can predict cash flow trends by analyzing sales cycles, customer payment behaviors and past seasonal fluctuations. This enables businesses to anticipate shortfalls and surpluses, fostering proactive decision-making. However, historical data is vital for generating useful forecasts.

Anomaly Detection

AI systems can flag irregularities in cash flow, such as unexpected expenses or discrepancies in invoices, enabling businesses to address potential issues before they escalate.

Dynamic Cash Flow Forecasting

Unlike static models, AI-powered forecasting adapts to real-time data, providing businesses with up-to-date insights for better planning and investment decisions.

Automation in Cash Flow Management

Not every business requires a complex (or expensive) customized AI cash flow forecast generator. Many established automated features in bookkeeping platforms offer streamlined solutions for time-consuming cash flow tracking. These tools can reduce manual errors and free up resources for more important tasks:

Automated Invoicing and Payments

Automation tools can schedule, send and follow up on invoices while processing incoming payments seamlessly. This reduces delays and improves accounts receivable efficiency.

Expense Tracking

Automated systems categorize and track expenses, providing businesses with a clear picture of their spending patterns.

Cash Flow Alerts and Notifications

Automation platforms can send alerts when cash flow thresholds are breached, helping businesses maintain liquidity and avoid overdraft fees.

Emerging Tools and Technologies

Even if your business isn’t leveraging AI for cash flow tracking or forecasting, you might end up using these tools in the not-too-distant future:

Integrated Financial Platforms
Platforms like QuickBooks and Xero are incorporating AI to offer real-time dashboards, predictive analytics and automated reporting for their business users.
AI-Driven Credit Management
Tools like AI-powered risk assessment systems evaluate customer creditworthiness, enabling better decision-making for payment terms and reducing bad debt risks. While not solely cash flow tools, these risk assessments can significantly impact operations, including accounts receivable, which directly affect cash flow.
Smart Spend Management Solutions
Systems like expense automation apps provide insights into company spending, helping businesses identify inefficiencies and manage budgets effectively.

Benefits of AI and Automation in Cash Flow Management

AI and automation bring several transformative benefits to cash flow management. Improved accuracy is one of the most significant advantages, as AI can analyze vast amounts of data with precision, minimizing human error and ensuring reliable forecasts and reports.

These technologies also save time by automating repetitive tasks, allowing finance teams to shift their focus to strategic planning and growth initiatives.

Real-time insights generated by AI empower businesses to make well-informed decisions about investments, cost-cutting measures and resource allocation, enhancing overall decision-making processes.

Challenges and Considerations

While the advantages of AI and automation are clear, businesses should carefully consider potential challenges before adopting these technologies. The initial implementation costs of AI tools and platforms can be prohibitive, particularly for smaller businesses with limited budgets.

Data security is another critical concern, as integrating AI systems requires protecting sensitive financial information from breaches or unauthorized access.

Businesses should also consider the learning curve of new technologies. Employees may need training to use these tools effectively and maximize their benefits.

These tools are rapidly becoming indispensable to modern businesses. You can safely assume your competitors will be leveraging them to enhance their own operations. Taking steps to integrate AI and automation into cash flow management can help ensure your business doesn’t get left behind.

The Future of Cash Flow Management

Advancements in real-time forecasting, deeper integration with financial software and improved accessibility of tools will provide businesses with more sophisticated options to enhance their financial stability and growth potential.

Companies that adopt these technologies will be better positioned to stay competitive in an increasingly data-driven world. To learn about the AI and automation tools already integrated into your platforms, or to discover which solutions can benefit your business, call H&H Accounting Services at (480) 561-5805.

Why Scottsdale Business Owners Can’t Afford to Confuse Cash Flow and Profit

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 22 Nov 2024 20:54:16 GMT

Cash flow refers to the actual inflows and outflows of a business’s liquid cash. For example, customer payments in a till are operating cash flow, while credit card payments to a supplier are outflows of cash. Cash flow is specifically a measure of a business’s cash inflows and cash outflows, and the sources can take many forms, from cash sales and credit card payments to payroll and operating expenses.

Profit, or net income, is the difference between revenues and expenses. It doesn’t account for the actual timing of cash inflows or outflows.

A profitable business can have cash flow problems that may make it difficult to manage day-to-day operations. There are also scenarios where a business could have positive cash flow due to receiving a loan or the proceeds of a sold asset while not actually being profitable.

It is possible to make poor decisions based on the temporary picture painted by cash flow. An excited business owner who receives one or two sudden large payments for big orders might increase the salaries or perks of their most valued employees. They might also want to reward the team responsible for the large increase in cash flow by taking everyone out to a high-priced dinner at one of Scottsdale’s many world-renowned restaurants.

It’s not unheard of for business owners to act impulsively after a big win supercharges their confidence. Problems can arise when business owners fail to take a step back and determine whether those large payments are sustainable or would even put their business in the black.

A more common issue for profitable businesses with cash flow struggles is their reliance on high-interest debt. They may risk their own profitability because they need fast cash to manage daily or vital expenses, like inventory purchases or payroll .

The Difference Between Liquidity and Profitability

Liquidity is a measure of a business’s ability to meet short-term financial obligations, like paying vendors, utilities or payroll. A business’s liquidity can be calculated using the current ratio, which is assets divided by current liabilities, or the quick ratio, which is assets minus inventory divided by current liabilities.

In those calculations, assets are your actual cash, accounts receivable and marketable securities. Current liabilities are things like accounts payable, short-term debt (like credit card debt) and liabilities due within the year.

A quick ratio over one indicates a business has enough liquidity to cover current liabilities. If the ratio is under one, a company may not be able to meet its short-term obligations without selling inventory.

How Can Scottsdale Businesses Tell Whether They Are Profitable?

There isn’t always a simple, effortless way to ascertain profitability at any given moment. The problem with quarterly or end-of-year financial statements, like a profit and loss (P&L) statement, balance sheet or cash flow statement, is the time between the reports. Determining profitability on a daily or weekly basis can be more difficult than determining whether your business is cash flow positive.

Business owners can formulate monthly profit and loss statements, which summarize revenue, the cost of goods sold (COGS) and operating expenses, to determine net profits. Unfortunately, a month is still a long interval in which many important decisions may arise.

A business could also keep a running tally of revenue and COGS and compare the results with industry benchmarks to make an educated guess about profitability.

One of the most dependable ways to monitor profitability is maintaining up-to-date bookkeeping software. If your business makes accurate daily entries with your bookkeeping software, you can track profitability for the year in real time. Bookkeeping platforms typically have financial reports, like profit and loss statements, available with the click of a button – if it has accurate data.

There are two ways to stay up to date with bookkeeping and ensure your business always has maximum transparency into both cash flow and profitability. The first, and by far the most difficult, is DIY bookkeeping. Doing your own bookkeeping with modern accounting software is extremely labor intensive for most businesses and can monopolize a lot of an owner or manager’s time.

The more sustainable and affordable option, from an opportunity cost perspective, is hiring an experienced accounting company that offers bookkeeping.

Ensure You Always Know Your Business’s Profitability and Cash Flow

The team at H&H Accounting Services provides bookkeeping to several Scottsdale businesses. We take pride in being responsive and accurate, ensuring our clients always maintain maximum transparency and the ability to make decisions with up-to-date financial information.

You can learn more about our bookkeeping services for Scottsdale businesses by calling us at (480) 561-5805.

How Scottsdale Businesses Can Optimize Vendor and Supplier Transactions to Enhance Cash Flow Sustainability

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 12 Nov 2024 20:02:19 GMT

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How Phoenix Companies Can Strengthen Cash Flow During Tough Times

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Wed, 06 Nov 2024 19:57:10 GMT

There are several paths to stability during recessions or periods of business contraction. An economic downturn is far from the only scenario that can lead to cash flow problems. The introduction of a competitor in your space, changing consumer preferences, supply chain challenges, inflation, and a host of other potential factors can cause businesses to experience reduced cash flow.

How feasible solutions are for a business will vary based on its industry, margins and existing operational approach. However, setting a plan in place now and beginning to build cash reserves for a future rainy day can potentially pay dividends.

Diversifying Revenue Streams

One of the most dependable ways to future-proof a business is through revenue diversification. If one product or service becomes obsolete or consumer demand drops sharply due to competing products or changing preferences, your business will have an alternative revenue stream to fall back on.

Netflix started as a DVD rental service but far outlived DVDs by diversifying into a streaming platform.

Amazon started out as an online bookstore but thrived as a marketplace for all kinds of goods. Apple made personal computers that consumers found to be inferior to alternatives but is now one of the most profitable and highly respected device designers and manufacturers.

Although it is possible for businesses to diversify after their original revenue sources have fallen out of fashion, businesses are more likely to survive if they add revenue streams in advance of a downturn.

Build Cash Reserves

For businesses with more durable service or product offerings, building cash reserves can be a reliable way to survive during downturns. The COVID-19 pandemic is an example of a scenario in which many sustainable businesses were forced to shutter, permanently in some cases, because of a steep but temporary drop in cash flow. Having a cash reserve to weather unexpected storms may allow some businesses to reach the other side and resume normal operations.

Improve Expense Management

Auditing and eliminating unnecessary costs is always beneficial, but it is especially important during downturns. Hard choices can often prevent worse long-term outcomes. If a service or product offering begins losing money, the employees who provide that service or product may need to be reassigned or terminated. In some cases, vendors can be convinced to reduce per-unit price or change payment schedules to enhance cash flow for struggling service lines.

Offering Flexible Payment Options or Tightening Credit Policy

There are scenarios where a business can retain clients who are tempted to leave by meeting them halfway on things like billing. Providing multiple payment methods or financing options may encourage customers to continue purchasing from you, even during economic downturns or recessions.

On the flip side, businesses with lax credit policies may need to tighten collections when they face financial headwinds. Cracking down on unpaid receivables and late payments can potentially give businesses breathing room by safeguarding their remaining cash flow.

Take Steps to Enhance Customer Loyalty

Businesses with loyal customer bases are more likely to maintain revenue during downturns. Although most consumers act solely in their own economic interest, they do sometimes make sacrifices to support businesses in which they are emotionally vested. Building that kind of relationship with customers can potentially allow businesses to weather difficult periods.

Manage Aspects of the Business That Influence Cash Flow

Cash flow isn’t solely a measure of revenue generation – cash outflows are equally important. Managing cash flow means not only prioritizing fast and full collection of receivables but also optimizing inventory levels to avoid spending too much on materials or products your business doesn’t need right away and delaying non-essential expenditures wherever possible.

Seek Out Long-Term Contracts

Securing long-term agreements can allow businesses to secure durable revenue that can be relied upon even during difficult economic times. Key clients can sometimes be enticed into entering long-term contracts with incentives, like discounts.

Invest in Efficiency

Pursuing efficiency enhancements early can make businesses more adaptable if supply costs increase or sales decrease. Businesses that have already lowered their operating costs through automation or streamlining are less likely to fail during a recession or industry challenges.

Leveraging Government or Financial Assistance

During recessions, disasters, pandemics and other unforeseen events, many businesses will be eligible to receive various grants or government relief programs, often in the form of low-interest loans with generous terms. These may be far more advantageous than high-interest lines of credit or business financing.

Make Your Phoenix or Scottsdale Business More Resilient to the Challenges of Tomorrow

Operating a business is an inherently uncertain proposition. Even those in resilient markets can be vulnerable to changes in their industry or recessions. If you want to identify ways to enhance the resiliency of your business or improve efficiency to make your operations more sustainable, the team at H&H Accounting Services is here to help. Call us at (480) 561-5805 for a free consultation.

Hidden or Unexpected Expenses That Drain Your Phoenix Business’s Liquidity

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 28 Oct 2024 19:52:33 GMT

Maintaining the ability to meet short-term obligations and weather operational disruptions or unexpected expenses is a universal need of all businesses – even those with steady cash flow. Sufficient liquidity allows businesses to cover their operating costs, take advantage of opportunities and avoid financial stress.

The importance of liquidity can vary from business to business. Small businesses in Phoenix with low financial reserves might depend more on immediate cash flow to cover operational costs.

Businesses in some industries, like retail and service industries, depend on regular cash transactions and strict inventory management practices to maintain adequate liquidity. Seasonal businesses, including hospitality and event-oriented businesses in the Valley, may rely entirely on liquidity to cover off-season expenses.

Basic cash reserves aren’t necessarily the only source of liquidity for Phoenix businesses. Various high-yield savings tools, short-term loans, and lines of credit are all potential options that allow businesses to access liquid funds to handle the unexpected. However, these sources of liquidity are not equally helpful in every circumstance.

Building liquidity requires deliberate financial planning and a savings strategy with a goal of durable liquidity at its center. This is particularly important for businesses that may experience variable cash flow.

Phoenix businesses can also attack the problem from the opposite side and make themselves less vulnerable to events that might necessitate draining limited liquidity or depending on high-interest financing. For example, modifying accounts receivable practices, holding clients accountable for timely payments, and implementing more stringent cost controls are all ways to enhance long-term liquidity and reduce the risks posed by unexpected emergencies that might otherwise drain limited liquidity.

The ultimate goal should be to avoid scenarios where alternatives to liquid capital may be necessary to maintain operations.

Relying on lines of credit as a temporary substitute for cash may be feasible, but it’s only sustainable if a business has the ability to repay that debt without rapidly generating significant interest costs. Selling off inventory or assets to deal with a temporary liquidity problem can lead to long-term losses, especially if doing so will negatively affect operations. In those circumstances, the solution to the liquidity crisis may be nearly as damaging as the unexpected event that caused it.

Unexpected Expenses That Can Lead to Liquidity Challenges

Unanticipated Equipment Breakdowns: These can be particularly painful for businesses with limited margins and tight cash flow.

A fryer or walk-in breakdown at a food service business can be potentially disastrous. Both are vital pieces of equipment without which the enterprise cannot operate, making the necessity of fast repair or replacement vital. Although the expense can potentially be covered with financing or lines of credit, the added debt can be a challenge for businesses with constrained cash flow.

Unexpectedly High Utility Costs: Damaged HVAC ducts leading to air leaks, broken thermostats, water heater malfunctions, slab leaks, undiagnosed electrical issues, or workers forgetting to turn off equipment are all potential issues that can lead to unexpectedly high utility bills. Problems that aren’t obvious are the most dangerous, as a drain might go on for weeks before its source is discovered.

Vendor Price Increases: Inflation and supply chain issues often hit businesses with narrow margins the hardest. A steep increase in material or inventory costs can threaten sustainability. While available liquidity can be tapped to compensate temporarily, doing so might not be a sustainable solution. The challenge can be particularly acute if raising prices isn’t feasible due to stiff competition from other businesses in your industry that might be better able to absorb material price increases.

Employee Turnover: Hiring and training new employees is costly in almost every business. The loss of an effective employee can lead to reduced productivity, compounding turnover costs.

Insurance Premiums: Unexpected insurance premium increases, or having inadequate coverage to deal with an unexpected claim, can pose real challenges to businesses. A lack of liquidity to deal with the unexpected cost may jeopardize business sustainability.

Tax Penalties or Compliance Fines: Running afoul of regulators, or the Arizona or Federal Revenue Service, can lead to significant financial penalties for businesses. Meeting deadlines and complying with all regulatory oversight requirements is always preferable, as the cost of doing so is typically less than the penalties that follow.

Get Help Addressing Liquidity and Cash Flow Challenges in Phoenix

The consulting and business accounting team at H&H Accounting Services is always ready to assist Phoenix area businesses with the liquidity or cash flow challenges they may be facing. We can identify potential solutions to address limited liquidity, assist with securing financing and identify opportunities to improve cash flow management . Call us at (480) 561-5805 for a free one-hour consultation .

The Dangers of Over-Extending Credit to Clients

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 28 Oct 2024 19:29:23 GMT

Offering credit is a central feature of many B2B and B2C businesses in Phoenix and Scottsdale. Construction companies, manufacturing firms, law firms and other professional service providers, as well as retailers and healthcare providers, offer installment plans or deferred payment options in various forms.

Consumers and business partners may expect their service providers, vendors or retailers to extend credit in many circumstances. Unfortunately, there are some unique risks that come with offering credit to clients and customers. While some of these risks can be mitigated, many of them are unavoidable.

Cash Flow Disruptions

The most obvious way extending credit can put a business at risk is through cash flow disruptions. Failure to receive payments can make it difficult for businesses to cover operating expenses. The severity of cash flow disruptions and the operational consequences are highly dependent on the business’s liquidity, the behavior of their clients and their margins.

If only a small number of clients or customers make use of credit, unpaid accounts may not be a serious risk. Problems are more likely to arise if multiple clients default at the same time, which can potentially happen during times of severe economic challenges.

Debt Risk

Unpaid accounts can lead to shortfalls that make it difficult to cover overhead and operational expenses. Businesses may be forced to rely on loans or lines of credit to continue operations, putting them in an even more difficult long-term situation.

Strained Relationships With Suppliers

Relationships, including business relationships, are two-way streets. If your business is a preferred vendor and relies upon just a handful of clients for the majority of your revenue, the sustainability of your business may depend heavily on the actions of those business partners. Multiple late payments or delinquent clients can have far-reaching ramifications, and repeated issues may force you to deal with your clients differently.

Although it can be difficult, holding businesses accountable is vitally important, as no business wants to be in a situation where they struggle to pay their own suppliers or face reputational repercussions because they can’t collect the debts owed to them.

Unfortunately, enforcing contracts can lead to additional costs, including legal fees, that may further compound the cash flow challenges caused by unpaid or late payments.

Increased Administrative Costs

Aggressive pursuit of unpaid invoices can be a full-time task that sometimes requires a team of people.

Managing overdue accounts, chasing payments, and dealing with collections can represent a significant operational expense for some businesses in Scottsdale and Phoenix. Putting in place safeguards to reduce the likelihood of late payments or defaulting is often preferable.

Interest and Borrowing Costs

One of the primary ways in which businesses can make up their cash flow shortfalls and restore liquidity is by taking on debt of their own.

Some forms of debt can be more problematic than others. Lines of credit, like a business credit card, may be useful if credit is repaid within the billing cycle, but high-interest debt can lead to compounding issues for businesses that can’t afford to pay back their own debt quickly.

Reducing the Risk Posed by Outstanding Receivables

The optimal way to mitigate the risks inherent with extending credit can vary depending on the borrower.

Assessing the creditworthiness of the client prior to extending credit is one of the best ways to minimize the risk of default. Although credit checks are most frequently thought of as a consumer-facing tool, they can be used with business clients as well.

A business’s history should also factor into credit decisions. A client that has been operating for decades and maintains a good reputation among their vendors is likely less of a credit risk than a new small business with an uncertain future.

Setting clear credit terms is also one of the most reliable ways for vendors to prevent outstanding receivables. Define payment due dates, interest for late payments, penalties, and credit limits upfront in any business relationship to avoid misunderstandings.

If invoices go unpaid, there should be no doubt over the penalties or your business’s legal rights and collection options. Enforcing these late payment penalties is key, even if there could be repercussions for the business relationship. It’s better to have an annoyed client than to miss payroll or fail to cover your own overhead.

Some businesses also extend incentives for early payment, like discounts, that encourage clients to settle balances sooner.

Businesses that depend on a handful of clients for all their revenue should strongly consider diversifying their client base. A business that could be put at risk by a single client failing to pay on time is in a fundamentally precarious situation, even if late payments aren’t currently a problem.

Helping Phoenix and Scottsdale Businesses Mitigate Risks Posed by Credit

Some Phoenix or Scottsdale SMB owners operate in industries where their clients expect their vendors to extend credit. There are ways you can mitigate the risk of outstanding receivables. Call H&H Accounting Services at (480) 561-5805 to learn about some of the solutions we can help you implement.

Do Rising Housing Costs and Home Prices Impact Small Business Cash Flow in Scottsdale?

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 14 Oct 2024 19:21:20 GMT

Rising housing prices do not have a direct one-to-one impact on small business cash flow. However, the increased cost of living can have cascading effects that may have negative downstream cash flow consequences for some small businesses.

Increased Employment Costs

One of the two primary cash flow consequences of a rapid increase in housing prices is payroll costs.

For example, if Scottsdale were to experience a rapid increase in home sale prices or rent costs, workers who live in Scottsdale would potentially need large and frequent increases in their salary to continue living and working in Scottsdale.

As of September 2024, there’s roughly a 3.1 percent YoY increase in home sale price and a 16.4 percent decrease in the number of homes sold. Median rents in Scottsdale have also increased roughly five percent year-over-year from $3,000 to $3,149.

The impact can be particularly severe if the small business can’t easily raise its prices to counteract the increase in labor costs due to competition, company policy or other market factors. For example, a franchise operating in Scottsdale might have limited control over the prices they can charge to Scottsdale consumers, but they may still need to pay their staff more due to increasing rents in the area.

Increasing Commercial Rents

The other clear way in which a housing market boom may affect businesses is the cost of commercial space. The impact is not universal across all small businesses. Some may be able to pursue alternative lease solutions to counteract this cost:

They can move to Phoenix, Tempe or elsewhere in The Valley – depending on their business
They can relocate within Scottsdale
They can downsize to a smaller location, and may even be able to let some employees work remotely

The importance of business location and the difficulty of a move influence the feasibility of these options. Retail or food service businesses might not be able to easily relocate without even more serious cash flow repercussions, but a marketing firm or accountant may not have the same concerns.

Commercial leases don’t always increase uniformly. The 2023 office vacancy rate in Scottsdale was just under 15 percent, and there was only a 3.4 percent increase in average rent for the year. The average 2023 sale price for commercial space was down approximately 15 percent from 2022.

More recent City of Scottsdale data from Q2 2024 have office vacancies at 16.5 percent, retail vacancy at 4.1 percent and industrial vacancy at just 2.6 percent. YoY changes in price per square foot varied depending largely on vacancy rates.

For example, the price of industrial space in Airpark Industrial, which had only 3.7 percent vacancy as of Q2 2024, increased 7.8 percent from $20.88 per sq. ft. in Q2 2023 to $22.53 sq. ft. in Q2 2024.

The price of Airpark Office commercial space, with 16.8 percent vacancy, increased only 0.87 percent from $32.08 per sq. ft. in Q2 2023 to $32.36 per sq. ft. in Q2 2024.

While there are variations, higher demand for specific types of commercial space typically result in steeper price growth.

How much those increases impact a business’s cash flow can vary. Businesses with inconsistent cash flow or particularly tight margins might feel the pinch more than those with consistent cash flow and larger margins.

Living Expenses for Employees

According to Zumper.com, Scottsdale rental costs in September were up 21 percent compared to August but were down 11 percent year-over-year. The median rent in Scottsdale, $3,000, is 55 percent higher than the national average. The median rental cost in Phoenix is just $1,700, which is 12 percent lower than the national average.

Scottsdale’s relatively small geographic size, plus its proximity to other parts of The Valley, does make commuting from other, more affordable parts of the Phoenix area feasible. The ease of travel, or the ability to work remotely, may mitigate the cash flow challenges posed by the increased cost of living in Scottsdale.

That being said, attracting the best talent may necessitate paying Scottsdale-level salaries, which can impact cashflow.

The Benefit of Higher-Income Clientele

As of 2024, the median family income in Scottsdale is $129,072 compared to $75,683 in Phoenix and $85,028 nationally. Serving higher-income consumers can help alleviate cash flow concerns for small businesses in Scottsdale. Typically, higher-income individuals are less sensitive to increasing housing costs and are more likely to maintain their spending levels despite higher rent or mortgage payments.

Lower-income households are more likely to change their spending habits to compensate for increased housing costs. Small businesses serving those consumers are more likely to experience cash flow challenges as a result of increased housing costs.

Helping Scottsdale Businesses Smooth Cash Flow

H&H Accounting Services has helped Scottsdale business with a host of accounting and consulting tasks, including cash flow management . If you’re a small business owner concerned about cash flow, or you are looking for financing or loan assistance , don’t hesitate to contact our accounting and business consulting team by calling (480) 561-5805.

Tips and Tools for Managing and Simplifying Bookkeeping Tasks

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 23 Sep 2024 19:25:09 GMT

Bookkeeping is a vital aspect of running a business of any size, whether you’re a sole proprietor or the owner and manager of a company with hundreds of employees. From determining expenses and revenue to accurately filing business taxes and payroll, no business can be operated effectively without accurate bookkeeping.

Bookkeeping can be challenging for every business, with unique hurdles depending on size, business complexity, finances and industry. A large business with diverse product lines and multiple locations can have complex accounting needs, while a small business owner might have to deal with the unique challenge of managing all the bookkeeping tasks themselves.

No Phoenix business has it easy when it comes to bookkeeping – unless you outsource it. Although we would be happy if every Phoenix business outsourced their bookkeeping to our dependable and dedicated team at H&H Accounting Services, we understand that many business owners, especially small business owners, would prefer to handle the task themselves.

We would argue that your time is valuable, and it may turn out that the opportunity cost of DIY bookkeeping makes outsourcing the less expensive approach. This is doubly true if you consider the cost of software and tools.

Regardless, we know there are many business owners who believe in the DIY approach, and we do have some tips that might make your life easier.

Organization Is Key

Set aside time monthly, or preferably weekly, to review and organize receipts, invoices and all financial statements. Updating and organizing your records 52 or 12 times a year makes errors much less likely than doing it just once annually at tax time.

Adopt a filing system that works for you, whether physical or digital, to categorize documents according to type and date. If you primarily rely on physical recordkeeping, you may want some form or digital cloud backup in case of damage.

Try to Automate Where You Can

Anything you can automate, like invoicing, payroll and expense tracking, will reduce the likelihood of errors, save you time and make the bookkeeping process far easier. You should be able to set up automatic bank feeds in your accounting software, so inflows and outflows are constantly updated, which will simplify reconciliation.

Reconcile Regularly

You should be reconciling your accounts at least once a month when you receive either physical statements or email statements. This is another task you can likely do weekly given modern mobile and online banking tools. This allows discrepancies to be caught early and rectified quickly. This is always preferable, as it can be difficult to resolve those types of discrepancies if the issue occurred eight or 10 months prior.

Real-Time Tracking

There are a variety of expense tracking apps and accounting software platforms with companion mobile apps that enable streamlined automation. These tools can virtually eliminate the risk of missed expenses or lost receipts.

Keep Business and Personal Finances Separate

Even if you’re a sole proprietor, it’s often best to separate your personal finances from your business finances. This means separate bank accounts and credit cards. Doing so can greatly simplify bookkeeping, reduce confusion and the chance of mistakes, and can make tax filings far easier.

Bookkeeping Tools

Accounting Software

The most important tool for bookkeeping is accounting software. QuickBooks Online is a popular option. The cloud-based software allows for easy invoicing, expense tracking and financial reporting. The basic features are relatively user-friendly for small to medium-sized businesses, but the more advanced features can be difficult to master or make full use of.

Xero is a similar cloud-based option that can help with everything from bank reconciliation to inventory management and project tracking.

Wave , an alternative software that offers invoicing, receipt scanning and financial reporting, has a free bookkeeping starter tier as well as a paid pro plan. The free version lacks the polish and some of the features of the paid alternatives but may be ideal for small businesses, sole proprietors and freelancers.

Expense Tracking Apps

Expensify and Shoeboxed are examples of apps that allow you to scan and organize receipts and other documents. They even have tools for tracking mileage and granularly categorizing expenses to make reporting and tax preparation easier.

Payment Processing

Your choice of payment processing can be an important one. Square and PayPal can integrate with bookkeeping tools and allow for fast or even automatic payment and sales tracking. Be cognizant of fees and how they’re calculated, as well as both your user experience and the customer user experience with each platform’s features.

Time Tracking and Invoicing

Being able to accurately track time can be particularly important for businesses, especially when it comes to billing. Both FreshBooks and Toggl can simplify billing and can integrate with other accounting software.

The Best Bookkeeping Option for Phoenix Businesses Is Outsourcing

The truth is it’s hard to do bookkeeping efficiently and accurately without using several different apps and accounting platforms. Each of these tools can take time to master, and many don’t have reliable free or low-cost alternatives. In addition to enhanced accuracy, easier business tax filings and saved time, hiring a bookkeeper can save you the cost of wrangling a half dozen subscriptions for different bookkeeping tools.

If you’d like to find out of outsourcing bookkeeping makes sense for your business, we encourage you to call H&H Accounting Services at (480) 561-5805 for a free consultation.

How Does Inflation Affect My Business’s Financial Forecasts and How Should I Adjust My Budget?

Mon, 23 Sep 2024 19:13:44 GMT

Inflation, the rate at which the prices for goods and services increase, affects businesses and consumers alike. The impact of this unavoidable economic phenomenon necessitates the adoption of budgetary adjustments for nearly everyone.

The price of products and services doesn’t always increase uniformly across all commodities, sectors and consumer categories.

There are some classes of goods and services where inflation can influence nearly every step of production. For example, as the price of fuel increases, the price of any goods that must be shipped long distances will increase.

However, other inflationary pressures will cause some shipped products to increase more than others.

An outbreak of avian flu, increasing feed costs and rising fuel prices will drive up the cost of chicken and eggs for consumers.

At the same time, the price of cow feed may remain static. Ranchers might not be affected by an outbreak of a dangerous contagion like mad cow disease or a similar disaster that necessitates mass culling.

In that scenario, the price of hamburger, steak and milk may only increase slightly due to increased fuel costs, while the price of chicken and eggs might double.

The variables that influence the cost of goods and services are manifold, and there’s almost never a monocausal explanation. Unfortunately, from the perspective of businesses, the why of inflation doesn’t really matter. There’s likely nothing you can do about the causes, but you can control your reaction to it.

The Effects

How you respond to inflation should be tailored to the way in which it impacts your business. From a day-to-day perspective, these effects often take the form of:

· Changes in consumer behavior

· Increased material and overhead costs

· Increased labor costs

These changes might not hit you right away. There’s often a lag in inflationary effects, but they will eventually be felt and must be addressed eventually.

Inflation doesn’t just impact your net earnings – it can also hit your revenue. Consumers adjust their spending behavior based in large part on their purchasing power. If someone who earns $5,000 a month can only purchase $4,500 worth of goods due to inflation, they will typically refrain from some of their normal discretionary purchases, or they may buy lower-cost alternatives when shopping for necessities.

Can You Pass Increased Costs on to Customers Without Losing Business?

This is a tough question for many businesses to answer. It’s not sustainable to operate at a loss, which might happen if you keep your prices static while your expenses rise due to inflation.

Businesses typically have no choice but to pass their increased expenses on to consumers in the form of higher prices. Unfortunately, those consumers may have less money to spend on your goods and services, meaning they may be even less likely to buy your goods or services after you increase your prices.

Your Employees Will Want More Money

Employees are consumers too, meaning they feel the same effects of inflation as your clientele. The best way to inoculate workers from the negative effects of inflation is with pay increases, meaning higher labor costs for businesses.

What About My Borrowing Cost?

The Federal Reserve responded to this most recent patch of post-COVID inflation in one of the most predictable ways – increasing interest rates . If you need to apply for new financing or see the rates on existing credit lines increase, you will need to factor higher interest into your future budgets.

Alternatively, you may want to adjust your approach to financing. Rates will decrease when inflation is rising at a more manageable rate, which means many businesses will hold off on securing new financing until it’s more affordable. Businesses that need financing to weather periods of high inflation can also potentially refinance in the future when rates decrease.

Adjusting Your Budget and Finding a Balance

Businesses in Phoenix often must make hard choices when deciding on how best to adjust to inflation. Many steer toward a middle ground where they increase the price they charge for their goods and services as much as possible without causing a catastrophic drop in demand. They may also increase salaries just enough to prevent workers from looking for new jobs.

Businesses seeking relief from inflation may consider shopping around for vendor alternatives that can offer better rates on inventory. Even if they don’t end up changing vendors, they may be able to use competing offers for leverage in negotiations with their current vendors.

Think carefully about the ways in which price increases will influence demand for your products or services. Does your business provide necessities or discretionary goods and services? What are your competitors charging?

Discuss scenarios and options with trusted employees, family members, your accountant or a consultant before making any significant changes that may be difficult to reverse.

Get Expert Analysis on How Inflation Is Affecting Your Phoenix Business and Find Out What You Can Do About It

Are you worried about inflation’s impact on your expenses, revenue and consumer demand for your products and services? Businesses in Phoenix that want budgetary advice and ideas for managing the effects of inflation should call H&H Accounting Services at (480) 561-5805. Our consultants would be happy to discuss your situation during a free one-hour consultation.

Effective Accounting Techniques for Managing and Tracking Corporate Travel and Entertainment Expenses

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Mon, 23 Sep 2024 18:54:17 GMT

Travel and entertainment (T&E) can be significant operating expenses for businesses that require frequent travel or client entertainment. Not every business needs T&E, and it’s typically best to minimize these expenses if possible, especially if video conferencing software can be effectively used as an alternative.

Audio and video communication isn’t an adequate replacement for in-person interaction in some circumstances. Some examples of businesses that have unavoidably high T&E costs include:

Nationwide consulting firms that require frequent on-site client visits
Large in-person sales teams that rely on face-to-face meetings to close deals
Multi-jurisdictional law firms managing cases across different regions
Financial services businesses conducting due diligence and client meetings
Tech companies participating in trade shows, product launches or on-site technology integration efforts

The Importance of Travel and Entertainment Expense Tracking

There are several reasons why T&E tracking and management is vitally important. Tracking allows for forecasting future costs and allocating resources effectively. The data can help inform future decisions regarding vendor relationships and travel policies.

Travel poses a unique issue for management. Employees often have limited oversight, exposing businesses to the potential for significant losses from irresponsible behavior, fraud or the abuse of discretionary funds and per diems.

Tracking is also key for assessing expenses and spending patterns. Could you save more by booking at specific hotels or with certain airlines? Are there business-oriented travel packages? How many amenities do your employees really need for a 24-hour round trip? The only way to separate the necessary costs from the superfluous costs is with tracking.

Tracking Strategies

Expense management software may be key for your business. Some platforms incorporate automation and give managers real-time visibility into T&E and individual employee spending with the business’s funds. The best expense management software has integration with commonly used accounting systems to further automate expense reconciliation and management.

It’s best to use a platform with a good mobile app so employees can easily submit expenses on the go, enhancing accuracy and reducing the demand on management’s time. The less babysitting managers must do, the better.

It’s far easier to curtail T&E abuse when employees know they’re being meticulously tracked. Transparency also helps establish behavior expectations up front. Abuse is far less likely to happen if there’s a system that thoroughly tracks T&E without the need for management supervision.

Corporate Credit Cards

Corporate credit cards are a necessity for companies that rely on travel and entertainment. Each credit card can be issued in an employee’s name. Corporate cards can centralize spending and simplify tracking, making it easier to hold irresponsible employees accountable. These cards typically allow employers to set spending limits and monitor transactions in real-time.

Audits and Analysis

Any business with high travel and entertainment costs should regularly audit their T&E accounts and track platform-generated reports. Doing so helps ensure issues are caught early and compliance can be enforced without a lag between abuse or fraud and the consequences.

Good tracking platforms typically allow for customized reporting on a variety of criteria, like reports to track spending patterns of individual employees or departments. These can be used to identify areas or individuals that need improvement.

Optimizing Travel and Entertainment Expenses

Establishing relationships with preferred vendors, like airlines, car rental companies or hotels, can yield significant cost savings for businesses that depend on travel and entertainment. Many of these relationships can lead to enhanced group discounts for services, which is especially important if several employees regularly travel as a group.

Businesses should also set strict per diems and expense caps for meals, lodging and entertainment. Setting clear expectations up front and quickly holding employees accountable for violations is vital. Letting employees get away with abuse for weeks or months can cause the problem to spread to other workers.

Also be cognizant of the difference in spending between frugal employees, irresponsible employees and the average employee. Some workers may be overly thrifty, while others might splurge when they know the expenses are being picked up by their employer. You don’t necessarily want employees to be miserable, as it could affect their performance and future recruitment, but controlling costs can save significant money over the course of a year.

Rewards Programs

One way to encourage good behavior is through rewarding it with attractive incentives. For example, allow employees to keep a portion of their per diem they don’t spend – or give employees a percentage of the savings if they find cheaper travel arrangements or use reward points effectively.

There can be surprisingly easy ways to implement rewards programs like these, but businesses may first need to effectively track T&E and establish a baseline cost target.

Helping Phoenix Businesses Effectively Track and Manage Travel and Entertainment Expenses

H&H Accounting Services would be happy to discuss your business’s travel and entertainment tracking, management and accounting needs. We have extensive experience consulting with businesses in industries where T&E is an important activity, and we can recommend everything from tracking software and management strategies to reward programs to encourage responsible behavior.

Learn more about your options by calling us at (480) 561-5805.

Mid-Year and End-of-Year Tax Strategies to Optimize Tax Savings

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 02 Aug 2024 20:00:21 GMT

Timing does matter in the context of business tax strategies. The optimal time to act will vary depending on your industry, business and overarching strategy goals. Some of these strategies can be placed in different timing buckets, like year-round strategies, mid-year strategies and end-of-year strategies.

Year-Round Strategies

There are some accounting best practices that can be adopted to position businesses to take advantage of tax-saving opportunities when they arise. The most basic strategy is also one that every business should adopt: accurate accounting.

Accurate and thorough bookkeeping and financial records, including all revenue, expenses, receipts and invoices, are the foundation on which any future tax strategies will need to be built. This is especially important in the context of expense documentation. Write-offs and tax credits are the most easily leveraged tools for tax savings, but claiming those benefits requires verifiable documentation.

Accurate accounting also allows businesses to monitor cash flow, which is key for forecasting. Anticipating shortfalls can be a critical component of mid-year tax strategies and can help businesses maintain adequate cash flow throughout the year.

Another year-round tax tactic that many businesses should consider adopting (if they haven’t already) is contributing to a retirement plan. Businesses that fund IRAs or 401(k)s for their workers can benefit from significant tax deductions.

Mid-Year Tax Strategies

One of the main reasons it’s so important to accurately predict changes in cash flow is quarterly estimated tax payments. Every business should be, at least informally, estimating their tax liability throughout the year. Tracking tax liability can help business owners identify potential deductions when they do arise and set aside adequate money for quarterly or end-of-year tax payments.

Many small business owners are responsible for estimated quarterly payments to the IRS. Paying too little can result in penalties and may leave business owners in a position where they end up owing a much larger lump sum at the end of the year. Overpaying estimated quarterly taxes may cause business owners to sacrifice a lot of liquidity for no good reason.

You shouldn’t let the IRS hang onto cash your business might need during a tough time simply because you failed to anticipate a shortfall in sales. Although you will get overpaid taxes back, it might be too late for the funds to be put to good use.

Businesses should also keep an eye out for deduction opportunities throughout the year. This includes deductions for qualifying business expenses like travel, meals, office supplies and equipment. Phoenix business owners may want to ask their accountant about Section 179 deductions, or immediate expense deductions that allow owners to take an immediate deduction rather than capitalizing and depreciating an asset over time.

Mid-year is also a good time to start identifying and planning tax-deductible charitable contributions. It’s vital to document all contributions and ensure they are going to qualified organizations.

End-of-Year Tax Strategies

As you enter the last quarter, you may want to begin accelerating any upcoming deductible expenses to make sure you can claim them prior to the end of the fiscal year. Some businesses may even want to look at their accounts receivable and talk to their tax preparer about potentially deferring income until the next tax year.

This is also a good time to review inventory and consider writing off obsolete or unsellable inventory to maximize the current year’s deductions.

Businesses that participate in research activities that qualify for R&D tax credits should also ensure they’ve made the necessary investments prior to yearend.

Is Your Phoenix Business Maximizing Tax Saving Opportunities Throughout the Year?

State and federal tax codes are notoriously complex, even for experienced CPAs and business tax preparers . Many small and medium-sized business owners aren’t aware of all the tax credits and write-offs that might be available to them, or they fail to take advantage of short-lived tax-saving opportunities that arise throughout the year.

Timing can be extremely important when it comes to taxes. If you want to ensure you’re not missing any opportunities, call (480) 561-5805 to speak with the business accounting and consulting professionals at H&H Accounting Services .

Does Sales Tax Change During the Summer and How Can Phoenix Businesses Stay Compliant?

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 02 Aug 2024 19:36:24 GMT

The current sales tax in Arizona is 5.6 percent on most sales. Businesses must also collect taxes for Phoenix (or the city in which they operate) and Maricopa County. For most retail sales in Phoenix, the total sales tax is 8.6 percent , but different products or services, like rent, the cost of hotels, telecommunications and utilities, can vary. The rates have been relatively unchanged since 2016, when the combined state, county and city rate increased from 8.3 percent to 8.6 percent.

The city, county and state sales tax are not seasonal and don’t change in the summer. However, your sales might change in the summer, or the tools and POS systems you use might be a little different, depending on your business.

Can Your POS Handle Variable Transaction Volume?

In many cases, seasonal changes in revenue or sales activity won’t have any impact on your POS system and the collection of sales tax, but there may be scenarios where transaction volume or varying methods of sales could lead to inconsistencies in tracking, reporting or collecting sales tax. If that’s the case for your business, having a POS system that is capable of handling fluctuations without mistakes may be important during the summer, if that’s a busy season for your business.

Does Arizona Have Any Sales Tax Holidays?

Arizona does not have any sales tax holidays. Although that might not seem ideal for consumers, it does at least simplify the collection of sales tax for businesses. You don’t need to worry about sales tax holidays unless you sell products or services in states where sales tax holidays are present.

The collection and reporting rules for sales tax holidays are specific to the state in which they are collected. Businesses are usually required to comply with the state’s sales tax laws, including sales tax holidays, if they have a physical presence or an “economic nexus” in the state. Whether there’s an economic nexus often depends on transaction volume. If your business sells through a marketplace facilitator, like Amazon or eBay, the marketplace is typically responsible for handling sales tax, including honoring sales tax holidays.

While businesses in Arizona benefit from relatively straightforward sales tax collection rules, the story can be more complicated if your business operates in other states. If you have concerns about out-of-state sales tax collection, you may want to discuss sales tax implications, including sales tax holidays, with an experienced accounting professional .

How Do Seasonal Discounts and Promotions Affect Sales Tax?

If you do run summer discounts, you might wonder whether sales tax should be calculated on the normal retail price or the discounted sale price. Sales tax should be applied after discounts are considered. In other words, the sales tax for a $10 item should be $0.86. If the product is 50 percent off, the sales tax would be $0.43. Accurate calculation of sales tax based on the actual sale price rather than the normal retail price is vital for properly documenting revenue and tax preparation.

Have a Reliable POS System for Mobile Sales if Relevant

If your business does any kind of summer sales at events, like having a vendor booth at a Phoenix convention or festival, it’s important to have your point of sale (POS) system set up properly in advance. You may want to run tests in the days or weeks ahead of your first outing with a new POS system to ensure prices are correct and state, county and city sales tax are being correctly calculated for the inventory you plan to sell.

Properly Track Transaction Privilege Taxes

If your business does participate in off-site events at which sales are made, you may want to confirm your Transaction Privilege Tax (TPT) license set up properly. The sales tax you charge at the event should be for the city in which the sale is made.

On your TPT return, you will need to report the sales made in different cities separately. For example, if a business located in Glendale has a booth at an event held in the Phoenix Convention Center, they’ll need to collect Phoenix sales tax at the event and report it using the appropriate city code (PH) on their TPT return. The Arizona Department of Revenue will then ensure the tax revenue collected at the event is appropriately allocated to the right city.

Simplified Bookkeeping and Tax Preparation for Businesses in The Valley

H&H Accounting Services provides comprehensive business bookkeeping and tax preparation for businesses throughout the Phoenix metro area. If your business makes sales in different cities in The Valley, or you just have concerns about accurately reporting sales tax, give us a call at (480) 561-5805.

How to Ensure Accurate Financial Forecasting for Making Appropriate Budget Adjustments

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Fri, 02 Aug 2024 19:10:39 GMT

Every business wants to make informed budgeting decisions based on reliable data. While some businesses may be fortunate enough to have steady and predictable revenue and expenses, most are subject to varying sales, labor, material costs and overhead. Forecasting can help inform budgeting decisions and prevent avoidable mistakes that might negatively impact a business’s bottom line.

These decisions are typically only as good as the forecasting data available. As such, developing an accurate prediction of future performance is vital for businesses seeking to make budgeting decisions based on financial forecasting.

Maintaining Accurate Historical Data

Some of the most important data points for developing budgets for upcoming quarters and fiscal years include:

Sales
Expenses
Cash flow
Profit margins

These metrics are often used to develop a baseline for forecasting.

Market Trends and Customer Insights

Business performance metrics are far from the only variables that influence future demand and sales for products and services. A variety of market trends and customer behavior also play a significant role in developing accurate forecasts.

The performance of a business will be unavoidably impacted by trends within their industry as well as market and economic conditions. Developing a reliable and educated estimate of current conditions and likely future trends will be vital in forecasting upcoming demand for a business’s products and services.

Consumer sentiment may also play a significant role, although its impact will depend on the business. Gathering customer insights may help increase your confidence in consumer sentiment predictions, although how difficult this is to measure will depend on the circumstances and your business model.

An HVAC company in Phoenix can be secure in the knowledge that local homeowners and businesses will need air conditioning repair, replacement and maintenance during the spring and summer months. They can also easily predict a large drop in demand during the fall and winter months. However, the full customer insight picture consists of far more than just weather-based demand.

Customer insights should also account for new competitors, current incentives offered by competitors, new HVAC technologies customers are seeking, the company’s reputation, the effectiveness of marketing efforts in a crowded industry and much more.

The equation is different for every industry. Food service, like a fast food franchise, may experience waxing and waning demand due to variables that are out of their control, while manufacturers might have consistent demand but rely almost entirely on just a few clients. If just one or two of those clients switch to competing vendors, it could jeopardize your entire operation.

Performance metrics like sales and cash flow can be accurately tracked with good bookkeeping. With the right software, those reports can be generated at any time with the click of a button. Ascertaining how the business landscape might change in the next quarter or fiscal year due to consumer behavior can be murkier.

Key Performance Indicators (KPIs)

KPIs can be invaluable shorthand for spotting trends that could potentially inform future performance. Graphing out KPIs can allow businesses to make predictions and budgeting decisions. Interpretation is important when considering KPIs. Businesses can use them to make informed adjustments, but attributing changes to the wrong root causes can be problematic, especially in the context of budgetary decisions.

Risk Management

Understanding upcoming risks or staying informed of industry changes that might contribute to risks is valuable when making budget decisions. Market volatility, regulatory changes or supply chain disruptions are all examples of events that should be factored into forecasts and quarterly or annual budget decisions.

While some of these risks are predictable, accurately identifying them may require investing significant time into studying your industry and market.

For example, no one could have predicted the COVID-19 pandemic would happen, but business decision-makers should have been able to ascertain quickly that supply chains would be disrupted for months. Recognizing that inevitable hurdle quickly and fully understanding how those disruptions would affect their operations would have allowed an informed owner or manager to plan accordingly far enough in advance to lessen the impact.

Natural disasters, material shortages or price fluctuations are all potential events that might have cascading effects that could impact your business – but the only way to make use of that information in advance is possessing the tracking capabilities, data and wherewithal to recognize the signs.

Phoenix Businesses Looking for Reliable Forecasting and Expert Consultant Guidance Can Rely on H&H Accounting Services

If you’re looking for help with bookkeeping, forecasting or consulting on everything from cash flow management to risk management , the team at H&H Accounting Services is here to help. Our CPA and accounting professionals provide comprehensive accounting and consulting services to local businesses at competitive rates. Call us at (480) 561-5805 for a free one-hour consultation.

What Should You Look for in a Phoenix CPA?

Tue, 25 Jun 2024 22:30:29 GMT

Becoming a certified public accountant (CPA) is a testament to an accountant’s commitment and proven expertise in the field of accounting. Although becoming a CPA is an impressive accomplishment, it doesn’t necessarily make an accountant uniquely qualified to handle your needs. There are thousands of CPAs in Phoenix, some of whom may be better for you than others.

Doctors and lawyers who are at the top of their graduating class frequently advertise that fact as a point of pride. What we tend to conveniently forget is that there’s also a bottom of the class. The person ranked last earned the same M.D. or J.D. as the person ranked first. Future patients or clients of those doctors and lawyers might never know they’re visiting a bottom-of-the-class professional.

A version of this logic can be applied to CPAs. In Arizona , CPAs have to score at least 75 on each American Institute of Certified Public Accountants (AICPA) exam section and a 90 on the professional ethics exam to earn their credential.

When you’re looking at Phoenix CPAs to hire, you likely won’t know whether the person scored 99 or 75 on their CPA exams, or where they ranked in their university class. As such, it’s often best to base your hiring decision on criteria you can see and assess.

Credentials and Certifications

The purpose for which you need a CPA should help guide your choice. In some cases, there may be additional certifications that you’ll want to seek out in a CPA.

Businesses that need to investigate potential internal fraud or abuse may want to interview CPAs who are also Certified Fraud Examiners (CFEs).
A multinational corporation might specifically look for accountants who have earned the Chartered Global Management Accountant (CGMA) credential.
Tech businesses or large corporations with complex software needs may want to hire CPAs who are also Certified Information Systems Auditors (CISAs)
People or businesses who are looking for financial planning or advising services may want to consult with a CPA who is also a Certified Financial Planner (CFP).

CPAs with advanced skills and training may come at a higher price point. SMBs with more general accounting or consulting needs may be better served by working with CPAs who possess a well-rounded and consistent book of business.

Working with a small to mid-size local accounting firm that has maintained customer relationships for many years is often a safe bet. Client retention is typically a reflection of client satisfaction.

Relevant Experience

While the CPA certification does tell you something about an accountant’s general level of knowledge in the areas covered by the exam, it doesn’t necessarily mean the CPA is familiar with your business or the unique challenges you face.

When you consult with a CPA, be sure to ask them general questions about their past and current clientele. Ascertain whether they’ve worked with businesses in your industry or other companies that have operational needs similar to your own.

Be sure to ask a CPA about any unique concerns you have. Maybe you’re a retiree who just used a Section 1031 exchange to invest the proceeds of a second home sale into a Delaware Statutory Trust (DST). The tax implications can be complex, and the tax prep tedious. You not only need to find a detail-oriented tax preparer but one who is up to date on IRS requirements and the forms required to avoid an audit.

Ask specific questions about the CPA’s experience handling situations like yours or posit scenarios and listen to what they’d recommend or how they’d approach your situation.

Communication Skills and Accessibility

Effective communication is vital in the CPA-client relationship. A competent CPA should be able to explain complex financial concepts in understandable terms. Accessibility is equally important; your CPA should be responsive and available to address your queries and concerns. Regular updates and proactive communication are signs of a CPA who values client relationships and is committed to your financial well-being.

Ethical Standards and Professionalism

CPAs are bound by a code of professional conduct that demands integrity, objectivity and ethical behavior. Ensure that your CPA has a clean professional record with no history of ethical violations . Professionalism also extends to how they manage confidentiality and handle sensitive financial information, reflecting their respect for client privacy and trust.

Technology and Tools

In today’s digital age, proficiency in technology is a must for any CPA. Not only does it enhance efficiency, but it also ensures accuracy and security in managing financial data. H&H Accounting Services provides QuickBooks support and is a Certified QuickBooks ProAdvisor . We can help you navigate and leverage QuickBooks for financial reporting, analysis and planning to streamline the financial management of your business.

Personal Fit and Comfort Level

Trust your instincts about a CPA's demeanor, approachability and understanding of your personal or business goals. A CPA who listens, empathizes and aligns with your financial vision can be a valuable ally in your financial journey.

Consult With Our Phoenix Accountants Today

The Phoenix metro area is home to thousands of accountants working at dozens of public accounting businesses. At H&H Accounting Services, we appreciate that there’s a lot riding on the work we do for our clients, from compilations to tax preparation . We want to ensure you’re comfortable with your choice of accountant, which is why we provide free one-hour initial consultations to all prospective clients. Call us at (480) 561-5805 to find out if we’re a good fit for your accounting needs.

Identifying and Leveraging Tax-Deductible Expenses During the Summer in Phoenix

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Thu, 20 Jun 2024 22:39:15 GMT

Summer in Phoenix can be hard for everyone. Parents have the added responsibility of caring for children or paying increased childcare costs while schools are out. Businesses, renters and homeowners are having to pay higher utility bills for increased HVAC usage. Gas is typically more expensive during the summer months. The snowbirds go back home for the summer, taking their money with them. More people flee the city on vacation for cooler locales, with far fewer visiting Phoenix during the hot summer months.

That’s not to say there are no benefits for businesses in Phoenix during the summer. While most tax credits and deductions do not have a technical seasonal component, there are seasonal variables that may make your business eligible to receive certain tax advantages.

The key for small businesses in Phoenix is identifying these opportunities, properly documenting them and working with an experienced business tax preparer to make maximum use of the tax credit or deduction.

Work Opportunity Tax Credit (WOTC)

Did you know that hiring kids for summer jobs actually qualifies your business for a tax credit? The WOTC can grant your small business a tax credit for 40 percent of up to $6,000 in seasonal wages for workers the IRS considers to be designated community residents or qualified summer youth employees. The size of the tax credit is dependent on the number of hours the summer worker ends up working (a 25 percent rate is available for summer workers who end up working less than 400 hours but more than 120).

Although you cannot deduct the full wages of those employees, at least not the portion for which you are receiving the WOTC, you can adjust your wage deduction calculation to still claim the deduction for the uncredited portion of the wages you end up paying for summer help.

Calculating the WOTC credit can get complicated and does require documentation, including a Pre-Screening Notice and Certification Request Form 8850, which is why you should discuss reporting requirements, payroll practices and bookkeeping needs with an experienced Phoenix business tax preparer .

Energy Efficiency Tax Credits

Most commercial buildings, whether it’s retail, food service or office space, are kept cooler than the average residential space. Thermostats in business settings are rarely set above 75. It’s not uncommon for them to be programmed in the mid-60s. In addition to having large cubic footage, many businesses also have significant window space, meaning lots of natural UV exposure and heat transference.

Business owners who deal with these challenges are acutely aware of the cost of HVAC, both in terms of daily utility costs and the price of equipment replacement, maintenance and repair.

The value of residential energy efficiency upgrades is debatable, even with available personal tax credits. This is in large part due to the sometimes small monthly utility savings despite a large upfront investment in energy-efficient technology.

The case for energy efficiency upgrades is much easier to make on a commercial level where the monthly cooling expenditure can be exponentially greater, as can the value of energy efficiency tax credits.

The Section 179D Energy Efficiency Commercial Building Tax Deduction , which was expanded in 2022 through the Inflation Reduction Act, offers significant potential savings. This deduction has multiple tiers and caps, with the base and bonus deductions depending on whether a project met certain labor requirements.

Higher tier requirements can be met if specific construction, alteration and repair work is performed at prevailing wage rates or if labor hours are performed by qualified apprentices. If you want to take advantage of Section 179D, you should discuss the requirements with an experienced CPA or business tax preparer .

There’s also an Arizona Commercial/Industrial Solar Energy Tax Credit as well as the Arizona Energy Equipment Property Tax Exemptions . This can potentially entitle commercial and industrial property owners to a state tax credit for 10 percent of installed costs up to $25,000 per building at a cap of $50,000 per business annually and an exemption from increased property taxes due to the added value of renewable energy equipment. Businesses may also qualify for SRP or APS rebates for kWh saved and/or the cost of upgrades. The actual rebates will depend on your utility provider.

Making Use of Summer Tax Credits and Deductions in Phoenix

Taking full advantage of state and federal tax credits can be complicated and does require forethought and planning. It’s important to time energy efficiency upgrades or hiring to ensure they align with the eligibility requirements for the tax credits or deductions you’re pursuing. Proper documentation of expenditures, as well as project details and worker qualifications, are also vital if the tax credits or deductions are contingent on those factors.

The team at H&H Accounting Services is dedicated to ensuring Phoenix businesses maintain compliance with Arizona Department of Revenue and IRS requirements. We can help explain your summer tax credit and deduction options so you can make informed hiring and energy efficiency upgrade decisions. Call us at (480) 561-5805 to learn more.

Effective Cash Flow Management Techniques for Businesses That Experience Seasonal Fluctuations in Revenue

Tue, 18 Jun 2024 22:16:47 GMT

Seasonal fluctuations in cash flow can be difficult to manage without adequate forethought and planning.

Predictability can help smooth inconsistencies and make seasonal variations easier to weather, but planning for every contingency can help you better prepare for those times of year when cash flow may drop.

Establish Accurate Forecasting Mechanisms

Having reliable bookkeeping methods in place to ensure detailed and thorough cash flow tracking is vital for accurate forecasting. Historical data can be used to predict future cash inflows and outflows more accurately. Having accurate forecasting data makes it possible to prepare for multiple circumstances, including the best-case, worst-case and most likely cash flow scenarios. Anticipating challenges and opportunities is the best way to be prepared for whatever the future holds.

Budgeting and Expense Management

Allocating budgets according to anticipated fluctuations is typically the best way to responsibly reduce discretionary spending during off-peak periods. This type of budgeting should not be a one-off exercise. Ideally, these expenses should be regularly reviewed and modified according to the latest performance figures. The goal should typically be to identify areas where costs can be trimmed without negatively affecting your business’s ability to meet core operational requirements.

Establish and Build Cash Reserves

Businesses that can set aside a portion of the profits they earn during peak season can enjoy a buffer for leaner periods. Maintaining an emergency fund to cover unexpected expenses or shortfalls due to unpredictable disruptions is ideal.

Manage Receivables

Businesses may be able to implement strategies to accelerate cash inflows, such as offering early payment discounts to customers or taking steps to improve invoicing processes. On the other side of the ledger, you may be able to negotiate longer payment terms with suppliers in order to retain cash longer, although it is important to balance this benefit against the need to preserve supplier relationships.

In some cases, a supplier will be willing to work with you to preserve your business, so don’t hesitate to leverage existing relationships if the need arises.

Diversifying Revenue Streams

Some businesses may be able to adopt additional products or new service offerings to generate revenue during off-peak seasons. A classic example would be a ski resort that attracts visitors during the summer months with mountain biking excursions, hiking and adventure activities like zip lines, rope courses and climbing walls. While bookings may still be lower than in the winter, diversifying destination offerings can make a ski resort a more attractive summer destination, especially for those who may be looking for a respite from the heat.

Seasonal retailers could similarly diversify, like a ski shop also offering skateboarding or biking products. Diversifying can potentially introduce new inventory challenges and make budgeting and managing operational expenses more complicated, so it is important to approach diversification with caution and planning.

Identifying Flexible Financing Options

Lines of credit and business loans are vital for many seasonal businesses. Having an accessible line of credit during off-peak season to cover short-term cash needs may keep a business going. An alternative to traditional financing is invoice financing, which can provide immediate cash for outstanding invoices.

Inventory Management

Carefully tracking historic sales data and actively adjusting inventory levels based on seasonal demand is the best way to avoid overstocking and stockouts. While some businesses do enjoy consistent demand from year to year, this is a luxury that most are not afforded. Competition, changing consumer trends and interests, prices, economic performance and a whole host of other variables can affect seasonal demand. It’s important for business owners to track seasonal demand to ensure they’re not left in a difficult inventory position after a particularly busy or sparse season.

Implement Cost Control Measures

Converting fixed costs to variable costs where possible can provide significant relief during off-season periods. For example, try hiring temporary and part-time staff during peak season instead of having all full-time, year-round employees. There are other steps you can take in addition to this obvious measure, like outsourcing other functions and overhead costs like accounting , bookkeeping and payroll .

Customer Payment Plans

There are a few different strategies businesses can implement to smooth annual cash flow. Payment plans can appear to be an attractive, consumer-friendly perk of doing business with you – which it may actually be – but they can also provide some degree of cash flow during traditional off-seasons. A subscription model, if it’s applicable to your business, may be another source of steady off-peak cash flow. For example, home service providers often offer annual service plans, which means some regular Phoenix HVAC customers are paying a service provider even in the fall or winter when they aren’t running their system.

Get Help Smoothing the Cash Flow of Your Phoenix Business

Are you a business owner in Phoenix with some degree of seasonality? Are you looking for ways to even out annual cash flow to eliminate some of your off-peak budgeting challenges? The business consulting experts at H&H Accounting would be happy to analyze your statements and make recommendations for things like financing, cost control, inventory management or cash flow optimization. Call us at (480) 561-5805 to discuss your situation during a free one-hour consultation.

Step-by-Step Guide to Performing a Mid-Year Financial Review for Phoenix Businesses

bhavnerhhp.rev77@gmail.com (Bryson Hevner) — Tue, 11 Jun 2024 22:02:02 GMT

Setting ambitious goals for your business is always a good idea. Unfortunately, setting benchmarks and targets is only the first step. The more challenging part is executing a plan to reach them and then tracking the performance of those efforts during the fiscal year to determine whether your strategy is getting you closer to hitting the targets you set.

The accuracy of your mid-year financial review is vital in this regard, as there’s no other reliable way to ascertain the performance of your business and any operational changes you made to enhance performance at the start of the year.

Preparing Mid-Year Financial Statements

Income statements (profit & loss statements), balance sheets and cash flow statements are all important tools for ascertaining revenue, expenses, net income, assets, liabilities, equities and cash inflows and outflows. Whether businesses prepare and analyze these documents monthly, quarterly or annually depends on the business size, industry and needs.

If your small business in Phoenix doesn’t usually pull these reports frequently, it may be wise to get into the habit if you want to perform a mid-year financial review. The good news is accounting software, like QuickBooks , can be integrated with other business systems like a CRM or ERP to ensure maximum synchronization and accuracy.

Thorough bookkeeping and integration can allow for real-time monitoring or on-demand reporting, making generating statements and tracking performance far easier.

Year-to-Date Analysis

The sooner you have thorough digitized tracking of performance metrics, the better, as year-over-year comparisons can provide important context for any mid-year financial review. Ideally, you will want to compare the current year’s performance to the same period of the previous year and identify trends in revenue, expenses and profitability.

Profit margin, current ratio and debt-to-equity ratio are all important measures for this type of year-to-date analysis. This is particularly valuable for businesses with some degree of seasonality.

For example, an HVAC company in Phoenix will inevitably see a drop in revenue during the fall compared to the previous summer – but that comparison is not nearly as informative as a comparison of this fall’s revenue to last fall’s revenue.

Compare Against Budget

Businesses will want to compare their actual financial performance to the budget figures they began the fiscal year with. Mid-year is a good time to identify where there are differences between your targets at the start of the year and the current state at the time of analysis. Investigating why these variances occurred can provide an opportunity for identifying problems and improving future performance. It will also likely be necessary to adjust budgets at this time to reflect updated projections and current operational realities.

Analyze Revenue Streams

Revenue should be broken down by product or service line, with the high-performing and underperforming areas identified for further analysis and action. Before you make any major decisions, it’s necessary to determine whether revenue changes were influenced by seasonal trends or external factors that have distorted results, in which case they may not reflect normal performance.

Evaluate Expenses

Six months of data can give you a fairly clear picture of your major cost drivers and allow you to identify opportunities to reduce those costs and improve efficiency. The end goal should be to align expenses with your business priorities and goals. This can necessitate making tough decisions. Although this can be unpleasant, it often is necessary to ensure your continued solvency or return your business to a place where growth can resume.

Assess Cash Flow

Identifying and understanding the totality of your business’s cash flow picture, including operational, investing and financial sources, will be vital for ensuring your business maintains sufficient liquidity to meet your short-term obligations for the remainder of the year. Mid-year may be a good time to reassess strategies and implement changes to improve cash flow shortfalls, like implementing a faster invoicing solution or negotiating more beneficial payment terms with suppliers.

Check Accounts Receivables and Payables

In a related vein, mid-year reviews present a convenient justification to chase down overdue invoices and implement strategies to collect outstanding payments. This opportunity goes both ways. Keeping up to date on payments to suppliers and avoiding preventable late fees is always preferable when you have the liquidity to cover the expenditure.

Evaluate Inventory Management

Mid-year analysis, especially with year-over-year comparisons, can be great for reviewing inventory levels and turnover rates compared to the start of the year and the previous year. This can potentially bring into clearer focus slow-moving or obsolete inventory that may have been overlooked prior to this in-depth review. Discoveries like these can help you make better purchasing and production plans and optimize inventory levels moving forward.

Review Goals, Consult with Stakeholders and Develop an Action Plan

What you do with this mid-year analysis will determine the ultimate value of the exercise.

Does performance align with your strategic goals? Are you closer or further from the key objectives or milestones you set at the start of the year? What strategic adjustments can you make to reach those goals?

These are all questions business owners should answer with the help of key stakeholders, including management and employees. Doing so can help you create a detailed action plan to address any issues you identified during the mid-year review. Take the opportunity to assign responsibilities, set deadlines and make a concrete plan to implement needed changes.

The business accounting , bookkeeping and consulting team at H&H Accounting Services is here to help Phoenix businesses with financial reporting, tracking and consulting. From integrating your CRM with QuickBooks to helping you generate the necessary reports for a mid-year analysis, we can provide the tools and knowledge you need to ascertain performance, identify areas that need work and formulate a plan for future improvements. Call us at (480) 561-5805 to learn how we can help.

Tax Credits and Incentives for Innovation Available to Phoenix Businesses

Tue, 28 May 2024 19:09:04 GMT

There is a generous federal research and development (R&D) tax credit available to all businesses, but not every activity, even those that may seem research and development adjacent, makes a business eligible for the tax credit.

Arizona also has an exclusive R&D tax credit that operates under the same eligibility rules as the federal tax credit .

There are both refundable and non-refundable versions of the AZ R&D tax credit, with eligibility depending on the number of employees your business has (the refundable is only available to those with fewer than 150 employees and requires a Certificate of Qualification).

The Arizona R&D tax credit changes periodically. The current credit , available from 2011 through 2030, is 24 percent of the initial $2.5 million spent on qualifying R&D expenses, plus 15 percent of qualifying expenses over that amount.

Additionally, some businesses, depending on their industry and the type of R&D they’re pursuing, may be eligible for grants or special programs. Some of these may offer direct funding for specific types of R&D activities; usually those in high-priority industries or technology (like healthcare or environmental sciences). Some businesses may also qualify for economic development initiatives.

Businesses in biotech, pharmaceuticals, renewable energy or other sectors in which the government wants to incentivize R&D may be eligible for special tax incentives.

Making full use of state and federal R&D tax credits, grants and special programs can be complicated. Many businesses require the assistance of business tax preparers or a CPA to maximize the value of all the benefits they can potentially receive.

What Does and Doesn’t Constitute an Eligible R&D Activity?

There can be understandable confusion pertaining to what is considered an R&D activity for tax purposes. The IRS offers in-depth guidance through I.R.C. Section 41 and on their website , but in simple terms, the research and development needs to be geared toward making something new and involve some uncertainty about the outcome. Activities like quality assurance or data collection for study purposes won’t count, even if they may seem like research.

Some examples of activities that qualify as R&D include:

Developing a new product: Designing, fabricating prototypes and testing new products that involve some degree of technological innovation or a significant improvement over past iterations of the product. These improvements can pertain to the product’s performance, functionality or even just reliability.
Improving existing products: The products being developed don’t necessarily have to be new to be eligible for R&D tax credits. Enhancing an existing product via substantial improvements in performance, efficiency or environmental sustainability may qualify.

Improving production processes: Developing or improving production processes to make them more cost-effective, efficient or environmentally friendly, including developing automation or advanced manufacturing techniques, may qualify.

Developing software: In order for software development to be eligible for an R&D tax credit, the business must be able to show that the software is providing a significant functional improvement over existing software alternatives, particularly if it would overcome current technological hurdles.

Prototyping and testing: Fabricating prototypes and the testing of prototypes of new technologies to validate new concepts or technologies often qualify, including trial and error experimentation used to find solutions for technological uncertainties.

Developing environmental solutions: Pollution control, waste management or renewable energy research for environmental technologies are potentially eligible for R&D tax credits as well as other grants or special programs.

Some examples of what might not qualify as R&D include:

Routine data collection: Market research and consumer surveys, even if their ultimate goal is to gain ideas for future R&D, do not typically meet the definition of technological advancement.

Developing new business practices: Business models, management techniques or strategies don’t count as technological innovations, even if they are new.

Aesthetic changes: Simply changing the design, style or even taste (for food products) aren’t considered technological improvements.

Developing software for internal use: The exception for R&D software development are those made entirely for internal use unless it can be shown that it contributes to a significant innovation or solving a technological problem.

Maintenance and repairs: Maintenance or repairs typically won’t qualify for R&D credits.

Does Your Phoenix Business Need Help Claiming the R&D Tax Credit or Qualifying for Relevant Grants and Programs?

Identifying all the tax credits, grants or programs for which your business’s R&D efforts qualify and taking full advantage of them isn’t always easy. Specific types of documentation and substantiation are necessary, including things like lab results, project logs or documentation demonstrating the nature of the R&D as well as the challenges and risks associated with the process.

The business consultants and tax professionals at H&H Accounting Services can help your business substantiate your R&D qualifications and assist in maximizing these benefits. Call us at (480) 561-5805 for a free consultation.

Accounting for Mergers and Acquisitions

Tue, 28 May 2024 19:01:12 GMT

The difficulty of mergers and acquisitions (M&A) can vary depending on the complexity of the businesses involved, but even the simplest integrations require the completion of an array of accounting and business modification tasks. The outcome of these processes can affect the business’s financial performance, operational strategy and the future outlook of the combined entity after merger completion. Thoughtfully approaching each part of the process is vital for a successful end result.

Accounting Tasks Involved in M&A

Due Diligence

Maybe the most important of all the steps is the preliminary step: due diligence. This involves conducting a thorough financial, legal and operational analysis of the business being merged with or acquired. Nearly every M&A entails some possible risks and liabilities, as well as the potential for valuable synergies. These can affect the value of the combined business as well as the success of the integration process itself.

Purchase Price Allocation (PPA)

A key step in M&A is assigning a value to the company being merged with or acquired. Determining and assigning a fair value of assets and liabilities at the acquisition date will be necessary for a fair and equitable process. Purchase price is typically determined based on the fair value of assets and liabilities, with the excess value being recorded as goodwill. PPA will influence depreciation and amortization in the future and can have an impact on financial statements for many future years.

Valuation of Intangible Assets

Many businesses possess assets that can’t always be easily quantified. Brand identity, product reputation, patents, customer relationships and proprietary technologies can be difficult to value despite making a business an attractive acquisition target. These assets also don’t appear on a balance sheet, making valuation a little trickier. Despite the intangibility of some of these assets or attributes, there are many acquisition or merger scenarios where the intangible justifies the bulk of the purchase price.

Consolidation of Financial Statements

Consolidating financial statements after an acquisition or merger has been formalized is a vital step in the process. This should cover the entirety of the balance sheet, from assets and liabilities to revenue and expenses. It’s important that combined statements meet all necessary accounting standards.

Goodwill Impairment Testing

This is an ongoing step after the merger or acquisition has been finalized. It’s the continual evaluation of the premium paid over the fair market value of the identifiable assets and liabilities of a company that were used for the initial PPA. As is often the case, companies acquire other companies for over the recorded value based on the intangible assets of the company being acquired. The excess price is goodwill. The value of that goodwill, or the intangible assets that justified the goodwill, can decrease in value over time due to a variety of factors, from economic downturns to worse-than-expected performance of the acquisition.

Goodwill impairment testing is primarily for financial reporting and strategic business management. Determining if a company got a bad deal on an acquisition through goodwill impairment testing does not entitle the buyer to a refund, but it can be recorded as an expense on the company’s income statement, reducing asset value and potentially lowering profits. These losses are generally not tax deductible.

Business Modification Tasks Involved in M&A

Integration Planning and Execution

The process of integrating two businesses can be extremely complex. In addition to operating procedures and systems, companies must integrate cultures. Aligning corporate strategies, integrating IT systems and even consolidating locations and duties are all potential steps that must be carefully planned and thoroughly implemented.

Legal and Regulatory Compliance

Depending on the industry and the competitive landscape of the sector, companies may need to look closely at various regulatory requirements, antitrust laws, securities regulations and potentially even international trade laws. What will and won’t impact an M&A will depend on the businesses and the industry in which they operate. In some cases, one of the parties may need to divest from some business facets or make concessions to regulators for M&A approval.

Human Resources Management

In addition to different cultures, some M&A parties may have differing HR policies, practices, pay scales, job titles and roles. These operational differences need to be consolidated, with individual employees receiving the necessary contract or position changes. This is a key step for retaining key talent acquired while also safeguarding morale.

Rebranding

Depending on the scenario, some businesses may embark on large or small rebranding efforts for the merged or acquired businesses. This may include a unified brand message, revised marketing materials or a newly integrated customer engagement strategy.

Maximizing Synergies

The pursuit of cost savings or revenue synergies is often a key driving factor behind M&As. Maximizing the value of these requires streamlining and consolidation once the deal has been finalized and integration has begun. This may entail significant operational changes, cross-selling products or consolidating vendor relationships.

Is Your Phoenix Business Acquiring or Merging With Another Business?

The team at H&H Accounting Services has extensive experience with all types of business accounting and business consulting services, including consulting, advising and assisting on the accounting tasks required for a successful merger or acquisition. Call us at (480) 561-5805 for a free consultation to discuss your M&A needs.

Tax Compliance in the Gig Economy

Tue, 28 May 2024 18:54:48 GMT

Maintaining compliance with all necessary tax laws is one of the complications inherent in the modern gig economy. It’s an increasingly important requirement for workers as a whole now that so many are freelancing full-time or have “side hustles” where they perform services, make products, write or drive for DoorDash, Uber or another rideshare/rideshare-adjacent delivery business.

If you are a Phoenix worker thinking about going freelance in your profession or taking up a second job in the gig economy, there are a few important things you should know upfront about income tax preparation .

You’ll be required to make quarterly estimated tax payments to the IRS.
If you plan to deduct business expenses, you need to keep close track of your operating expenses, including saving receipts and keeping a mileage log.
You will be responsible for paying the entirety of the Federal Insurance Contributions Act (FICA) tax – Medicare and Social Security – on your freelance income.

You Likely Won’t Benefit From Withholding

Although most formal full-time employers allow workers to adjust their withholding, most employees choose not to tamper with the rate. Withholding is easy, convenient and often allows workers to get a refund check after they’ve filed their taxes, which many people find gratifying.

As a gig worker or freelancer, the entities or people who pay you typically won’t provide withholding, meaning you’ll need to set money aside to pay taxes on your own.

Know Your Tax Bracket

The key to setting aside adequate money to cover your tax liability is knowing your tax bracket. If you’re a single filer making between $47,151 and $100,525 in 2024, your marginal tax rate will be 22 percent. However, if you’re making $80,000, only $32,849 will be taxed at 22 percent. You’ll need to calculate each portion of your income at the appropriate tax rates for each bracket to arrive at your total taxes.

Quarterly Payments

You’ll need to estimate what you think you’ll make for the full year by April in order to make your first quarterly payment on time and avoid IRS penalties. This isn’t always easy for gig workers, especially if you don’t have a great way to estimate how much you’ll end up making by the end of the year. It’s often preferable to overpay because you’ll get the money back at the end of the year. Underpaying your quarterly payment by too much can result in penalties.

Keep Detailed Records

Keeping accurate records will be vital. Whoever pays you will send a copy of your 1099 to the IRS, meaning the federal government will know how much you make. Not having a formal full-time employer doesn’t mean the federal government isn’t watching.

It may be a little different if you don’t receive a traditional paycheck, like if your employers use direct deposit or some other payment platform. It’s still good to have some formalized recordkeeping system to ensure that, at the end of the year, you can easily compile all your income. It’s also helpful to have records if the IRS challenges your income.

Expense Tracking

Depending on the type of work you do, itemizing business expenses might be a vitally important step. Any ordinary or necessary expenses you incur running your business can likely be deducted. A home office, supplies, equipment and mileage are all examples.

However, it’s easy to run afoul of the IRS by being overly generous with your deductions. If you’re a freelance driver, whether as a commercial truck driver or as a rideshare driver, you will very likely benefit from deducting miles on your vehicle and fuel consumption. It’s vital to keep a mileage log to distinguish between your personal vehicle use and work use. This includes logging the date, purpose and distance of each work trip.

Because this is such a common need in the modern economy, there are many apps available that use GPS to automate this tracking, making it much easier to report.

If you are itemizing travel costs, be sure to familiarize yourself with the IRS’ standard mileage rate for the current year. This does change annually, so you will want to check every year prior to filing.

Writing off a home office is a similarly delicate process. While you can deduct the cost of utilities, internet, your phone bill and mortgage if they qualify as a business expense, you must calculate the appropriate percentage. In other words, if your work internet usage only accounts for 25 percent of your home internet usage, you should only deduct 25 percent of the cost. You’ll also need some way of justifying that calculation to the IRS.

For example, to write off the cost of a home office, the office must be used “regularly and exclusively” to conduct business and be the principal place of your business. In other words, your bedroom doesn’t count if you sleep in it and work in it. The IRS provides a simplified per square foot of home office deduction at a maximum of 300 square feet.

There are also different types of expenses, including direct expenses, indirect expenses and internet and phone. Direct expenses, like the cost of painting or repairing your home office, are fully deductible. A percentage of indirect expenses can be deducted, like incidental costs you incur through home ownership, and by extension, home office ownership. This includes things like utilities, mortgage interest and home insurance.

You will need some kind of proof of business use that establishes your home office as your primary workspace, like logs of meetings with clients and client visits.

Are You a Phoenix Freelancer or Gig Worker Looking for Help Maximizing Your Income Tax Deductions?

H&H Accounting Services is dedicated to maximizing the value of deductions our clients are eligible to receive. Doing this is complicated and requires not only detail-oriented tracking of expenses but also an in-depth understanding of IRS rules and evidentiary requirements.

Let our income tax preparers help ensure you do everything by the book and avoid unpleasant audits or deduction denials. Call us at (480) 561-5805 to get started.

What Is the Role of Forensic Accountants in Uncovering Financial Fraud and Tax Evasion?

Tue, 30 Apr 2024 23:38:13 GMT

The IRS does not treat every tax filing discrepancy the same way. The most basic level of audit typically occurs because of inconsistencies in tax returns. The IRS will send a letter to the filer for additional information or clarification on a specific item, and taxpayers can often resolve the issue by sending proof or verification through the mail.

An office audit occurs when the IRS requires the taxpayer to meet an IRS examiner in person. These do result in more in-depth investigations where an auditor will dig into all of a taxpayer’s documents pertaining to claimed deductions, income and other items on their tax return.

A field audit is a more in-depth forensic investigation that involves an examination of a taxpayer’s records at their home or office. A field audit often includes a literal search of the subject’s property or even their accountant’s offices.

Criminal investigations can be rolled into more serious audits if IRS examiners suspect the tax filer was committing tax fraud. Intent is usually the key factor in whether or not a taxpayer is charged with a crime. If you made inadvertent mistakes that led to an audit, you probably won’t face a criminal investigation.

In fiscal year 2023, IRS Criminal Investigators initiated 2,676 criminal investigations , which represents a minuscule fraction of the millions of fax filings they process annually. These serious investigations are often in relation to money laundering, cybercrimes or other dramatic examples of high-profile tax fraud.

How Do Investigators Determine Whether There Was Fraudulent Intent?

There are some common behaviors associated with intentional tax fraud. Perpetrators often:

Have multiple sets of books
Alter records
Make false entries into forms or accounting software
Take steps to conceal income
Act in secrecy, like doing their own bookkeeping

The IRS Criminal Division’s forensic accountants, referred to as special agents, dissect financial data and may leverage special software and databases to gather and analyze financial records and other information sources.

The Role and Skillset of a Forensic Accountant in Tax Investigations

Fraud Detection

At a most basic level, forensic accountants are tasked with identifying inconsistencies and abnormalities in records and data. They do so by scrutinizing accounting entries, cross-referencing financial statements of the person/business being investigated with third-party documents and looking for patterns of behavior that deviate from normal business or accounting practices.

Some of the hidden schemes forensic accountants can help uncover include embezzlement, kickbacks or false billing practices that enable the business or person to dodge their rightful tax obligations.

Legal Expertise

In addition to having the skills and knowledge of a CPA, forensic tax investigators also need to possess a deep understanding of the legal framework surrounding relevant accounting practices and tax law. Their financial analysis is geared toward uncovering the evidence prosecutors need to make a case that fraud was intentional. Translating complex financial data into actionable legal arguments is key for forensic accountants performing tax investigations.

Interviewing and Investigation

There’s more to being a forensic accountant than just having the knowledge to review invoices, balance sheets and bank statements. During tax investigations, forensic accountants often need to interview the various parties involved in the financial operations or activities of investigated businesses or individuals. They may also need to look for other types of evidence in addition to just financial data. Evidence of off-the-book purchases or efforts to destroy documentation may be vital in establishing a pattern of fraud.

Writing and Reporting Skills

The ability to distill reams of financial records and evidence into a digestible form that provides a clear and concise overview of the situation is a vital skill for forensic accountants. The reports submitted by forensic accountants must withstand significant scrutiny – not just from the IRS but also from the lawyers hired by the person or business being investigated.

Mistakes can potentially lead to guilty parties escaping punishment or innocent parties being unfairly maligned, fined and even prosecuted. Forensic accounting reports may also need to clearly communicate findings and methodologies to people who aren’t intimately familiar with the process, like a judge or members of a jury.

Do You or Your Business Need Assistance from a CPA?

The vast majority of IRS audits are civil matters having to do with tax filing discrepancies or underpayment. Unfortunately, knowing your audit is civil may not make it feel any less oppressive or stressful. If you’re facing an IRS audit or your business just needs an independent CPA for forensic accounting or auditing services in Phoenix, the CPA at H&H Accounting Services can help.

You can discuss your auditing needs or situation during a free one hour consultation by calling us at (480) 561-5805.

Are There Any Unique Tax Implications for Environmental, Social and Governance Investments?

Tue, 30 Apr 2024 23:30:47 GMT

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No – investing in an ESG fund doesn’t necessarily qualify taxpayers for any unique tax write-offs or credits. Companies or funds that are classified as ESG investments may benefit from various government incentives, tax credits for sustainable practices or favorable tax treatment based on current laws. In that respect, you may indirectly benefit from tax incentives for which ESG investment qualify due to their governance or operational practices.

Companies that enact what are often considered ESG policies can potentially benefit from a variety of government incentives, from deductions and credits for adopting energy-efficient practices and equipment to earning carbon credits or grants for things like recycling and waste reduction initiatives.

These policies may or may not benefit investors. There are no guarantees in the market or in business operations. It’s important to consult with investment professionals or to take the time to do your own research before making any investments – including into funds or companies that advertise as ESG.

Are ESG Funds and Stocks Good for Investors?

ESG investments are not without their controversies. The primary argument against ESG investing is that funds have a fiduciary duty to maximize returns and portfolio growth for beneficiaries – not sacrifice potential gains to ensure investments align with the fund manager’s policy preferences or worldview.

The other side of the argument is that sustainable and responsible practices should be encouraged for the future of people, the environment and industries, even if those practices must be subsidized or benefit from special tax treatment in some fashion. Advocates often believe these improvements will ultimately lead to more sustainable, long-term positive performance.

One of the fundamental tenets of the free market is that people should be able to invest in and support businesses that align with their worldview and goals for the future. Critics of ESG holdings in pension funds often argue that beneficiaries don’t get that choice and may suffer reduced performance because of ESG-oriented decision-making by fund managers.

Not everyone believes in the same things. In one controversy, an Episcopal Church-based fund for clergy and lay employees refused to buy what it categorized as ‘sin stocks’ (typically stocks for companies that have an interest in gambling, adult entertainment, weapons, alcohol, tobacco or anything else that could harm people’s health). Public school teachers may have very different definitions of what qualifies as good and bad ESG, and their pension fund might include some stocks the Church’s pension fund would never hold.

Two different groups of investors might have different sets of social or environmental priorities. One group might want to invest in companies that support local communities (investing in building hospitals and schools), while the other might prefer to support human rights or improve the living conditions of people all over the world (like providing disaster relief, drilling wells or providing malaria nets in Africa). Funds don’t necessarily have to focus on one specific agenda or advocacy goal, but there are ESG funds with specific priorities .

Many investors don’t have any of these priorities or don’t believe their investment decisions should be made in the context of environmental or social advocacy. Their overriding goal is to increase the value of their portfolio. Those investors might not have any problem with helping people but would rather do so in their own way (like making their own charitable contributors or donating their time).

An argument can be made that these investors can more effectively improve the world by maximizing their portfolio growth based on actual performance metrics rather than ESG policies. This ultimately enables them to pursue a more targeted approach to improving the world in a way that aligns with their own beliefs.

Some businesses may make government subsidies a key aspect of their operations or rely on them to maintain profitability. Relying on artificial policy-generated demand, which could evaporate if people with opposing views are elected, may be unsustainable from a business perspective. Should those subsidies disappear, fund value might drop, which would be bad for investors.

Alternatively, outside factors might negatively impact a company’s performance and their value. For example, a dramatic drop in the price of foreign solar imports might devalue domestic solar manufacturers that are held in ESG funds.

Some companies also game the system, adopting token ESG policies in an effort to get included in funds that otherwise wouldn’t hold their stock.

Should Phoenix Retirement Savers and Investors Buy ESG Funds?

Sure – if the fund’s ESG policies align with your goals and beliefs. If you don’t like the idea of ESG funds, you don’t have to buy them for your self-directed retirement or investment portfolio. The controversies typically arise when investors and savers, particularly pension fund beneficiaries, aren’t given a choice.

While the performance of ESG companies may benefit from government incentives or friendlier tax policies, simply owning those companies or funds in your portfolio will not entitle you to the same tax advantages. In other words, tax implications for buying and selling ESG stocks are the same as any other equity, regardless of the company’s business model, advocacy or governance.

If you have questions about the tax implications of dividends, tax-advantaged funds or capital gains or losses, don’t hesitate to call the tax preparation team at H&H Accounting Services at (480) 561-5805.

The Complexities and Tax Implications of Cryptocurrency Transactions for Individuals and Businesses in Phoenix

Tue, 30 Apr 2024 23:25:54 GMT

Cryptocurrencies are a particularly complicated asset for tax purposes. Digital assets are still assets as far as Arizona state and federal tax laws are concerned. Gains are taxable and losses can potentially be written off.

Don’t assume that the sale or purchase of cryptocurrencies is invisible to the government. Just because the blockchain doesn’t have your name in it does not mean you can’t be identified via an exchange account or other recordkeeping related to the sale and purchase of cryptocurrencies or other digital assets. The safest approach is transparency, as exchanges may end up reporting transactions to the IRS even if you don’t.

Cryptocurrency Classification

Despite being called a “currency” and looking for all intents and purposes like fungible assets, cryptocurrencies are considered property rather than a traditional currency. Any gains, losses or income you have related to cryptocurrency transactions should be treated the same way the purchase and sale of other property would be treated.

As capital assets, cryptocurrencies are subject to capital gains taxes.

Do Cryptocurrency Exchanges Report Transactions to the IRS?

Cryptocurrency exchanges that serve customers in the United States are legally required to comply with the Know Your Customer (KYC) and Anti-Money Laundering (AML) laws. These laws require exchanges to verify the identity of users by collecting information like name, address and date of birth.

The primary goal is to prevent money laundering and illegal activity like terrorism financing, but mandatory reporting also makes it more difficult for people to hide transactions made through the exchange from the IRS.

Not every major exchange sends their users a Form 1099 . If you don’t receive a 1099 from your crypto exchange, you should report all your cryptocurrency disposals on Form 8949. You should list ALL your crypto transactions on this form, regardless of whether it resulted in a gain or a loss.

You also technically need to fill out the Form 8949 if you used cryptocurrency to make a purchase. Since the government views it as a property class, not a currency, using it to buy a good qualifies as a trade.

The IRS has added a specific cryptocurrency question to Form 1040 . Filers must inform the IRS if, at any time in the tax year, they received, sold, sent, exchanged or otherwise acquired a digital asset. This technically covers assets like NFTs as well.

The IRS does look for reporting discrepancies in individual tax filings, exchange reporting and other information sources. It’s best not to assume that your transactions are invisible, even if you don’t use one of the major exchanges.

What About Mining Cryptocurrency?

Mining cryptocurrency is treated slightly differently than trading digital assets. The IRS views successful mining as regular income, meaning the value of the cryptocurrency at the time it was mined is taxable and should be reported. The income you should report will depend on the dollar value of the cryptocurrency on the day of receipt.

If you’re mining as a self-employed business activity, the income will also be subject to self-employment tax, meaning you’ll need to pay Social Security and Medicare taxes based on the value of the cryptocurrency. Income and expenses related to crypto mining should be reported on a Schedule C profit and loss form for businesses .

The Challenges of Accurately Tracking and Reporting Digital Asset Gains and Losses

Maybe the biggest challenge cryptocurrency traders face is the difficulty in reporting high-frequency trading. Every transaction should be recorded and reported, which may require you to fill out many copies of Form 8949. A 1099 from an exchange is not a substitute for Form 8949 – you should provide both in your tax filing.

Details matter to the IRS, and it’s important to keep records and report every transaction.

Many people who actively trade cryptocurrencies end up needing tax filing help, especially if they’re a high-frequency trader or initiated many transactions over the course of the tax year.

The team at H&H Accounting Services is here to help. Our expert tax filers and business consultants would be happy to advise and assist on your cryptocurrency tax planning and preparation. Call us at (480) 561-5805 to schedule a free one-hour consultation.

What Are the Fees and Services for Personal Income Tax Preparation?

Tue, 26 Mar 2024 19:07:00 GMT

How much professional tax preparation costs can vary significantly depending on the complexity of your income sources, deductions and credits. There’s a difference between a straightforward, single-income standard deduction tax filing and a Schedule A tax filing that requires itemizing a host of deductions and accurately calculating all the deductible expenses according to proper IRS tax preparation procedures.

The Most Important Factor: Which of the Two Types of Tax Preparation Do You Need?

The type of deduction you take will have the greatest impact on the total cost of your income tax preparation. These two types of deductions are:

Standard Deduction

If your income is straightforward and you don’t have a lot of deductible expenses, you’ll typically take the standard deduction. Filing taxes using the standard deduction is exceedingly fast and typically can be done online with a low-cost DIY tax preparation platform. In most cases, people who use the standard deduction just need to file a single Form 1040 and sometimes a Form 1099 for dividend income.

Some filers who take the standard deduction may potentially be eligible for some itemized deductions, but the total value of those deductions may not exceed the standard deduction value – in which case, just taking the standard deduction is the way to go.

Itemized Deduction

Things get more complicated once you begin itemizing deductions. You would typically choose this tax preparation route if the value of all your deductions combined exceeds the standard deduction. Some examples of common deductions include those related to charitable contributions, property taxes, mortgage interest payments and medical expenses.

Tax filers can’t take the standardized deduction plus a handful of itemized deductions – you must choose one or the other. Some tax filers might choose the standard deduction most years but decide to itemize after a year with particularly high out-of-pocket medical costs or charitable contributions.

How Can I Tell If I Should Itemize or Just Take the Standard Deduction?

The first thing you’ll want to look up is what the standard deduction amount is for the current year (it changes regularly). This can be easily found on the IRS website or through a quick search online. For 2023, the standard deduction is:

Single or Married Filing Separately: $13,850
Married Filing Jointly: $27,700
Head of Household: $20,800

Next, you’ll want to loosely calculate your potential deductible expenses to see if their total value is potentially higher than whichever of those standard deductions apply to you. The cap for state and local tax deductions is $10,000 for married filing jointly and $5,000 for married filing separately or single. The mortgage interest deduction only applies to the first $750,000 of indebtedness, and qualifying medical expenses are those that are over 7.5 percent of your adjusted gross income.

Other expenses, like losses from a disaster, should also be included in your calculation.

There are potential long-term factors to consider as well, such as whether your current deductions are a single-year event or whether those expenses are recurring. Whether you should take the deductions this year may depend on whether you suspect your income will increase significantly in coming years or if you suspect you may incur similar or higher deductible expenses in following years.

How you can best maximize the impact of itemized deductions can vary depending on your unique circumstances. If you’re not sure, it might be best to consult with an experienced personal income tax preparer .

How Expensive Will It Be to Work With a Professional Income Tax Preparer?

The number of itemized deductions you qualify for may make a difference in the cost of professional tax preparation, but the variety of forms or schedules is truly the biggest influence on eventual price. If you have self-employment income (Schedule C), investment income (Schedule D), rental property income (Schedule E), own a business or part of a business via a partnership (potentially Forms 1065, 1120 or 1120S) and qualify for the Earned Income Tax Credit (Schedule EIC) or the education expenses tax credit (Form 8863), the filing process can be extremely convoluted.

Some of your deductions may also be reflected in your Arizona state tax preparation, which can further increase the tax preparation cost. You might also incur additional fees if you require added assistance from other experts, such as an attorney for audit representation or a financial advisor for future tax planning.

There are also one-off or repeating life events or income streams that might complicate your filings either a single year, a number of sequential years or moving forward. Income from the sale of investments or real estate, income from international sources or one-off life changes, such as getting divorced, retiring or having a child, can potentially muddle your tax situation.

Get Competitively Priced Expert Income Tax Preparation in Phoenix

The tax preparers at H&H Accounting Services are committed to providing thorough and accurate tax preparation services to all types of tax filers in Phoenix, including those with complicated tax situations. We strive to offer a competitively priced solution tailored to your unique situation. Schedule a free consultation with a local tax preparer today by calling (480) 561-5805.

8 Tips for Finding the Best Tax Preparer Near You

Tue, 26 Mar 2024 18:34:48 GMT

1. Ask About Availability

If you’re nearing the income tax filing deadline but still need help with preparation, you need to verify that any tax preparer you consult with has the bandwidth to put in the time and effort necessary to get your taxes accurately completed and filed on time.

2. Check Credentials

The credentials you should look for in a Phoenix tax preparer will depend on the complexity of your taxes. There are a few different levels of preparers. Some, like annual filing season program participants, have received some formalized, IRS-approved continuing education to ensure they can provide knowledgeable guidance to people with basic income tax preparation needs.

If your taxes are more complicated, you might want to look for an Enrolled Agent (EA). These professionals are licensed by the IRS and must pass a three-part Special Enrollment Examination to establish their proficiency in income and business tax preparation. There are also continuing education requirements for EAs.

People with the most complicated income tax or business tax needs may want to consult with a CPA, such as the CPA at H&H Accounting Services in Phoenix, to increase the likelihood that their taxes will be properly completed and filed to maximize deductions while minimizing the risk of an audit.

3. Check the Tax Preparer’s Work History

You can look up and verify the credentials of most tax preparers. You can check on CPA certification through the American Institute of CPAs’ (AICPA) website or the Arizona State Board of Accountancy , or verify the status of an enrolled agent through the IRS’s website .

4. Check Their PTIN

Anyone who is paid for tax preparation services is required to have a valid Preparer Tax Identification Number (PTIN) from the IRS. In addition to confirming the tax filer has a PTIN, you may want to look them up in the IRS’s Directory of Federal Tax Return Preparers to ensure they have the credentials they claim to possess.

5. Ask About Their Experience Handling Situations Like Yours

Some tax preparers might have focused experience with people who have certain types of income, forms or deductions. They might have worked with many past clients who have international income, real estate investment income or self-employment income and can help with your unique concerns.

If you had unusual financial circumstances this year, such as a 1031 exchange with the proceeds of a second home sale being invested into a DST, you should probably ask a tax preparer if they understand the implications and how to properly report that to the IRS in your tax filing.

6. Ask About Fees

Some tax preparers may work on a per-form or per-schedule basis because it ensures the amount of work they put in is aligned with the fee they charge. Others may offer an hourly rate or even a flat fee based on specific services.

Problems can arise if you’re told one price upfront, but the tax preparer discovers additional forms or schedule requirements as they begin preparation. Be sure they are transparent about costs during your consultation.

Also, keep in mind that credentials can have a dramatic impact on the fees involved. The income tax preparation services of a CPA will cost more than an EA, and an EA will cost more than an annual filing season program participant.

7. Do They Offer E-Filing?

All reputable tax preparers should offer electronic filing services. The service is required by the IRS for any paid preparer who prepares more than 10 tax returns for clients annually. If an alleged tax preparer doesn’t offer electronic filing, you should probably look elsewhere.

8. Avoid Preparers Who Make Promises Without Reviewing Your Situation

If a preparer makes bold marketing claims about results, like promising that they get clients higher refunds than other tax preparers, you may want to think twice before hiring them. Every tax filer’s situation is different, and a tax preparer who is dishonest or manipulates your income or expenses in order to get you a higher return may be breaking the law and could end up getting you audited – which can be far more expensive than simply filing income taxes correctly and paying what you owe.

Committed to Integrity, Accuracy and Efficiency in Income Tax Preparation for Phoenix Taxpayers

If you’re looking for assistance with your income tax preparation, don’t hesitate to call H&H Accounting Services. We have a number of credentialed income tax preparers with years of experience, including a CPA, and are ready to provide detail-oriented income tax preparation services. Call us today at (480) 561-5805 to get started.

How Do I Know I'm Getting the Best Tax Return Possible?

Tue, 26 Mar 2024 18:18:35 GMT

There’s no tool or platform that allows you to input a handful of financial details to calculate the best possible return for your situation. If there were a guaranteed method of doing so, everyone would use it and all the tax preparers would be out of a job.

There are a number of steps you can take or certain professionals you can work with to increase the likelihood that you maximize the value of your tax return, but it’s not always easy or straightforward.

Filing Status

Married filers have a variety of potential statuses to choose from, and which you pick can influence the size of your return. The other people who have options are those who are not married but have dependents, in which case they can potentially file as single or head of household. People who have lost a significant other might also be able to file in a specific status ( Qualifying Widow(er) with Dependent Children Filing Status ).

Why does filing status matter? It can influence your tax liability and the standard deductions available. For example, filing as the head of a household with a qualifying dependent entitles you to a higher standard deduction than you would receive as a single filer. Other circumstances, like a son or daughter who covers more than half of a parent’s financial support, might qualify a filer to use that status as well (the parent doesn’t even need to be living with you).

Married filing separately might also result in the loss of some potential deductions and credits. There are only a handful of scenarios where married filing separately may result in a better tax return, including:

You or your spouse is subject to the Alternative Minimum Tax (AMT), which may qualify that spouse for additional tax deductions
One spouse is entitled to certain itemized deductions due to a lower adjusted gross income (AGI)
There are state tax savings opportunities that exceed the cost of losing out on married filing jointly credits

Determining when married filing separately is the best status for your situation isn’t always straightforward, especially if you’re trying to figure out if the savings on Arizona state taxes justify the loss of credit eligibility on federal income taxes. It’s likely in your best interest to consult with an experienced tax preparer for advice before choosing.

Did You Account for All Your Tax Credits?

There are an astonishing number of tax credits available to American taxpayers, from the lifetime learning credit and home energy credits to credits for retirement contributions and childcare. Most DIY tax filers simply don’t know about all the tax credits they are eligible to receive, and it’s not uncommon to miss some. This may result in the taxpayer taking the standard deduction because, based on what they know, it’s higher than their potential itemized deduction, or they simply settle for a less-than-perfect itemized deduction.

Identifying all available tax credits is one of the primary reasons it’s beneficial to consult with an experienced tax preparer .

If you want to get the best return possible, knowing all your tax credits can help. Keep in mind that claiming credits may require evidence, so it’s good to develop the habit of saving receipts and bills to ensure you can verify the expenses.

Did You Use All Your Deductions?

Credits are subtracted from the taxes you owe. Deductions decrease your income tax liability by reducing your taxable income. In other words, a $3,000 tax credit would reduce $20,000 of taxes owed to $17,000, while a $3,000 deduction would reduce your taxable income from $80,000 to $77,000.

There are two types of deductions: above-the-line and below-the-line deductions. Above-the-line deductions are used while calculating your AGI, while below-the-line deductions are subtracted from your AGI after it has been calculated.

Knowing the deductions you qualify for and how they should be calculated based on their status is another thing a tax preparer can help you with. It’s important to apply these deductions properly to maximize their value and reduce the likelihood that you do something wrong and are forced to pay additional fees, interest or get audited.

Watch the Date

The end of the calendar year can be more important than the tax filing deadline. It can be beneficial to have deductible activities finished within the year you’re claiming them. In other words, you might want to ensure you use all the dollars in your flexible spending account for qualifying healthcare expenses and make all your planned charitable donations or IRA contributions prior to the end of the year. There are exceptions in some circumstances, but it’s often easier to get these done within the tax year.

Get Help Maximizing Your Tax Return in Phoenix

The tax preparers at H&H Accounting Services are committed to helping Phoenix taxpayers choose the right status for their situation and maximize their tax credits and deductions. Don’t hesitate to call us at (480) 561-5805 to have your tax preparation questions answered .

What Questions Can a Financial Analysts Help You Answer?

Thu, 14 Mar 2024 18:01:15 GMT

Financial analysis is intended to help individuals, businesses and investors make informed decisions.

When they do their job right, they help people uncover valuable insights that drive strategic planning, investment decisions and risk management. Conversely, coming to the wrong conclusions can have serious negative consequences, which is why choosing the right analyst for the task is so vital.

Finances are complex, and there are vast differences between things like individual tax planning, estate planning, portfolio management and business analysis. Be sure the financial analyst you choose has experience with the tasks and services you require.

What Is Financial Health as It Pertains to Businesses?

Financial analysts assess a company's financial health by analyzing key financial metrics such as profitability, liquidity, solvency and efficiency.

By evaluating metrics like profit margins, liquidity ratios and debt levels, analysts can gauge the company's ability to generate profits, meet short-term obligations, manage long-term debt and operate efficiently.

When they’re equipped with accurate data, CPAs and other financial professionals may be able to provide guidance that can enhance business performance and improve long-term stability.

How Does My Company Perform Compared to Peers?

Comparative analysis allows financial analysts to benchmark a company's performance against industry peers and competitors.

By analyzing financial ratios, growth rates, market share and other performance indicators, analysts can identify strengths, weaknesses, opportunities and competitive threats facing the company.

Who you compare your company to matters and it’s often best to base comparisons on real peers rather than aspirational peers. This type of analysis can help you accurately gauge where you are, where you want to go and what competitors are doing differently that may be helping or hurting their comparative performance.

What are the Growth Prospects of My Company?

Financial analysts assess a company's growth prospects by analyzing historical performance, market trends, industry dynamics and the performance of strategic initiatives.

By projecting future revenues, earnings and cash flows, analysts can evaluate the company's growth potential and identify factors that may drive or impede growth in the future. That being said, no financial analyst has a crystal ball that tells them the future, and the quality and accuracy of their output is dependent on the input. Being transparent and open with any CPA or consultants you hire can help ensure the information they provide has value for future decision-making.

What are the Risks Facing My Company?

Risk analysis is a critical aspect of financial analysis. Common types of risks analyzed include market risk, credit risk, operational risk, regulatory risk and geopolitical risk.

By assessing the likelihood and potential impact of these risks, analysts can develop risk management strategies to protect the company's financial interests.

Are My Company's Investments Generating Adequate Returns?

Financial analysts evaluate the return on investment (ROI) of a company's capital expenditures, investments and projects to assess their effectiveness and profitability. By analyzing metrics such as return on assets (ROA), return on equity (ROE) and net present value (NPV), analysts can determine whether investments are generating sufficient returns to justify their costs and risks.

How Efficiently Is My Company Utilizing Its Resources?

Efficiency analysis focuses on evaluating how effectively the company utilizes its resources, including assets, capital and human capital, to generate profits and create value for shareholders.

By analyzing metrics such as asset turnover, inventory turnover and employee productivity ratios, analysts can identify opportunities to improve operational efficiency and maximize profitability.

Does My Company Have Any Competitive Advantages and Are They Being Properly Utilized?

Being the biggest or most well-known service provider in a market or sector isn’t the only type of competitive advantage. Small, agile companies or those with unique specializations and attributes often have their own sets of competitive advantages. An analyst can help you identify and utilize your business’s competitive advantages, whether that’s brand strength, intellectual property, market positioning or barriers to entry for competitors.

By analyzing the durability of your company's competitive advantages, analysts can evaluate its ability to maintain market share, defend against competitors and generate long-term value for stakeholders.

What Are My Key Drivers of Profitability and Growth?

Financial analysts identify the key drivers of profitability and growth for companies by analyzing revenue sources, cost structures, market dynamics and competitive positioning.

By understanding the primary factors influencing your business's financial performance, analysts can provide strategic recommendations to enhance profitability, optimize resource allocation and capitalize on growth opportunities.

Get Experienced Financial Analysis in Phoenix

H&H Accounting Services can use financial analysis to identify your business’s competitive advantages and enhance overall performance. If you're seeking strategic insights , risk management solutions or help with loan applications , our team is here to help.

What Are Financial Indicators and Which Matter for My Business?

Thu, 14 Mar 2024 17:37:25 GMT

Understanding and properly interpreting financial indicators is essential for informed decision-making, strategic planning and performance evaluation. Financial indicators, also known as key performance indicators (KPIs), provide valuable insights into various aspects of an organization's financial health, performance and viability.

KPIs are not necessarily universal, and indicators that matter for one business might be unimportant or irrelevant to others. Before making decisions based on financial indicators, it’s important to determine which truly illuminate the health and sustainability of your enterprise.

Defining Financial Indicators

Financial indicators are quantitative measures that are used to assess and evaluate the financial performance and health of an organization. These metrics provide stakeholders with valuable insights into various aspects of a company's financial operations, allowing them to monitor performance, identify trends and make informed decisions.

Financial indicators can be categorized into different areas, including profitability, liquidity, solvency, efficiency and market valuation.

Understanding Different Types of Financial Indicators

Profitability Indicators: Profitability indicators measure a company's ability to generate profits. Common profitability metrics include gross profit margin, net profit margin, return on assets (ROA) and return on equity (ROE). These indicators help assess the efficiency of operations and the overall profitability of the business.
Liquidity Indicators: Liquidity indicators evaluate a company's ability to meet short-term financial obligations and manage cash flow effectively. Metrics such as current ratio, quick ratio and operating cash flow ratio measure the company's liquidity position and its ability to cover short-term liabilities with liquid assets.
Solvency Indicators: Solvency indicators assess a company's long-term financial stability and its ability to meet long-term debt obligations. Metrics such as debt-to-equity ratio, interest coverage ratio and debt service coverage ratio gauge the company's leverage and its capacity to service debt obligations over time.
Efficiency Indicators: Efficiency indicators measure the effectiveness of a company's operations and resource utilization. Metrics such as asset turnover ratio, inventory turnover ratio and accounts receivable turnover ratio evaluate how efficiently the company manages its assets, inventory and accounts receivable to generate revenue.
Market Valuation Indicators: For publicly traded companies, market valuation indicators assess the market value of a company's stock relative to its earnings, assets and other financial metrics. Metrics such as price-to-earnings (P/E) ratio, price-to-book (P/B) ratio and dividend yield provide insights into the company's valuation and investor sentiment.

Significance of Financial Indicators

By monitoring key financial metrics, companies can identify areas of strength and weakness, track progress toward financial goals and make adjustments to their strategies and operations as needed. Financial indicators also serve as valuable tools for investors, lenders and other stakeholders to assess the financial health and performance of a company and make informed investment decisions.

Leveraging Financial Indicators for Success

Financial indicators can serve as diagnostic tools, similar to the imaging tests a doctor might use for diagnosing ailments. Identifying current KPIs and establishing benchmarks allow businesses to see where they are and determine where they want to be in the future.

You don’t necessarily have to be a nationwide business or publicly traded to make use of financial indicators. Some of the ways small businesses in Phoenix can use them include:

Setting Clear Financial Goals: Define clear financial goals and objectives aligned with the company's overall strategic vision and mission.
Monitoring Performance Regularly: Continuously monitor and track key financial indicators to assess performance, identify trends and detect potential issues or opportunities.
Benchmarking Against Industry Peers: Compare financial indicators against industry benchmarks and competitors to evaluate relative performance and identify areas for improvement.
Making Data-Driven Decisions: Use financial indicators as a basis for making data-driven decisions and strategic planning across all levels of the organization.
Adjusting Strategies as Needed: Use insights from financial indicators to adjust strategies, allocate resources effectively and optimize business operations for long-term success.

Get Help Identifying Relevant Financial Indicators and Calculating Them for Your Phoenix Business

Ready to elevate your financial strategy and drive success for your business? Partner with H&H Accounting Services for expert financial services tailored to your unique needs. From comprehensive accounting and bookkeeping to strategic financial planning and analysis , our team is dedicated to helping you achieve your financial goals.

How Can Implementing Cost Controls Improve Cash Flow?

Thu, 14 Mar 2024 16:51:55 GMT

Cash flow management involves monitoring the flow of cash into and out of a business to make sure there is enough liquidity to meet financial obligations and ongoing operational expenses. While increasing revenue is one way to improve cash flow, implementing cost controls can also play a significant role in enhancing cash flow and improving overall financial health.

Understanding Cash Flow

Cash flow refers to the movement of money in and out of a business. Positive cash flow occurs when the incoming cash from sales, investments or financing activities exceeds the outgoing cash used for expenses, investments and debt repayments.

Negative cash flow occurs when outgoing cash exceeds incoming cash, potentially leading to financial strain and liquidity issues.

Factors Affecting Cash Flow

Sales and Revenue Generation: Increasing sales and generating more revenue can boost cash flow by bringing in more cash from customers and clients. Selling more of the products or services you already offer isn’t necessarily the only source of revenue growth. Expanding service offerings can potentially reach untapped markets or fulfill a different demand of customers who are already familiar with or loyal to your business.

Expenses and Overhead Costs: Managing expenses and reducing overhead costs can help conserve cash and improve cash flow by lowering the amount of money going out of the business. There are countless ways to do this beyond the obvious options like cutting staff or closing offices. Renegotiating supplier contracts, lease agreements or refinancing debts are just a handful of potential options. An experienced CPA may be able to help you analyze existing expenses and identify areas where you can cut expenses.

Accounts Receivable and Accounts Payable: The timing of payments from clients and to vendors can have a significant impact on cash flow. Delayed payments from customers or suppliers can affect cash flow negatively, while prompt payment collections can improve cash flow. Simply renegotiating or changing from net 60 to net 30 might enhance cash flow and buy your business breathing room.

Inventory Management: Efficient inventory management practices can minimize carrying costs and prevent excess inventory buildup, freeing up cash that would otherwise be tied up in inventory and reducing storage-related expenses.

Capital Expenditures and Investments: Large capital expenditures or investments can impact cash flow by requiring significant cash outlays upfront, while the returns on these investments may be realized over time.

Strategies for Improving Cash Flow Through Cost Controls

Budgeting and Forecasting: Develop comprehensive budgets and cash flow forecasts to track income and expenses, identify potential cash flow gaps and plan for future financial needs.

Expense Reduction: Review and analyze all business expenses to identify areas where costs can be reduced or eliminated. This may involve renegotiating contracts with suppliers, consolidating services or finding more cost-effective alternatives.

Streamlining Processes: Streamline business processes and workflows to improve efficiency and reduce waste. This may involve automating repetitive tasks, optimizing resource allocation and eliminating unnecessary steps in the production or service delivery process.

Negotiating Payment Terms: Negotiate favorable payment terms with suppliers to extend payment deadlines and preserve cash flow. This may include negotiating discounts for early payment or arranging installment payments to spread out cash outflows over time.

Debt Management: Evaluate existing debt obligations and explore options for refinancing or restructuring debt to reduce interest costs or lower monthly payments. It’s also important to prioritize debt repayment to avoid accruing excessive interest and penalties.

Inventory Optimization: Optimize inventory levels to minimize carrying costs and prevent overstocking. A CPA may be able to help you analyze your inventory management systems to track inventory turnover rates, identify slow-moving items and make informed purchasing decisions.

Cash Flow Monitoring: Regularly monitor cash flow statements and financial reports to track cash inflows and outflows, identify trends and proactively manage cash flow fluctuations. This enables businesses to anticipate cash flow issues and take corrective action before they escalate.

Get Experienced Advice from a CPA and Business Consultant in Phoenix

If you are looking for an experienced Phoenix consultant to help you implement cost controls, look no further than our CPA at H&H Accounting. Give us a call today at (480) 561-5805 or contact us here on our website to schedule your free consultation today.

What’s the Difference Between Filing Personal Taxes and Business Taxes?

Tue, 13 Feb 2024 23:07:30 GMT

Although there are some similarities between business and personal taxes – both require forms to be filled out, deadlines to be met and possible deductions and credits to be calculated – there are profound differences between the two systems.

The forms you’re required to complete are different from personal tax forms and can vary depending on your business structure.
Although there are progressive tax rates for businesses, similar to the varying rates for individuals, there are a diverse variety of complicating variables that may affect corporate tax rates.
The types of business deductions or tax credits available are typically different.
Many businesses don’t have just one tax deadline and instead have to make quarterly withholding payments.
Although there are some similar best practices for personal and business tax planning, the strategies can vary due to the different types of credits and incentives available.
Record-keeping and bookkeeping are far more important for businesses and are necessary for substantiating any claimed deductions or to deal with audits if they occur.

Those are just some of the generalized differences from a birds-eye view. From a process standpoint, filing business taxes can be much more complex than personal tax filing.

Characteristics of Personal Income Taxes

Individual income taxes aren’t a mystery to most people – you’re taxed at a progressive rate, from 10 to 37 percent, based on your taxable income. You can claim deductions, such as those for mortgage interest payments and charitable contributions, as well as credits, like for education spending or the Earned Income Tax Credit. Deductions or credits reduce your taxable income, potentially allowing some filers to drop into a lower tax bracket.

Your personal status – single, married filing jointly, married filing separately or head of household – affects your tax bracket calculation and deductions.

The primary tax filing form for individual filers is the IRS Form 1040.

Characteristics of Business Income Taxes

The concept of business taxes is essentially the same as income taxes – if your business makes money and is structured in a certain way, the government will want a cut of the profits. All types of for-profit business entities, from corporations and partnerships to sole proprietorships, must pay taxes in some form.

The tax structure under which the business must file is dictated by the legal structure. Corporations are subject to corporate income tax rates, whereas pass-through entities like sole proprietorships or S-corps essentially don’t have separate business taxes since the owner just claims that as income on their personal tax return.

In other words, if you’re a sole proprietor, you don’t have to file a separate business tax return because you’re reporting your business income and expenses as your own personal income and expenses. This also means you could have access to more business-related deductions and credits on your personal income tax return.

Other types of businesses, including corporations and partnerships, can also claim a variety of deductions and expenses – even for purely operational costs like rent payments, utilities, payroll and even the costs of goods sold.

There could also be credits available for certain activities that have the potential to benefit your business in the future, like research and development.

Many businesses, including people who are self-employed sole proprietors, must make estimated quarterly tax payments since there is no built-in withholding (unlike for individuals employed by businesses that withhold taxes from each paycheck).

The primary forms of businesses vary but are often Form 1120 for corporations or Form 1065 for partnerships.

Should You Hire a Professional Tax Preparer for Your Individual or Business Income Taxes in Phoenix?

Whether you need professional tax preparation for your personal income taxes depends on the complexity of your situation. If you’re claiming credits and deductions or have a drastic change in reported income that could raise flags at the IRS, it may be in your best interest to work with a professional tax preparer to ensure you strictly follow all the laws and codes. If you’re in a low to medium tax bracket and take the standard deduction, you will likely be fine just using a low-cost software solution.

Business taxes are another matter. Even small businesses often benefit from the help of a professional tax preparer who can help you identify all available deductions and credits and make proper use of them to ensure you don’t run afoul of any reporting rules or laws governing their use.

The team at H&H Accounting Services excels at helping individuals and businesses file their taxes to maximize savings. Don’t leave money on the table by paying the government more than you should. Our team will help ensure you can reinvest as much tax savings as possible back into your business. Call us at (480) 561-5805 for a free one-hour consultation.

What Is Tax-Loss Harvesting?

Tue, 13 Feb 2024 22:55:02 GMT

Tax-loss harvesting is when people sell investments at a loss in order to offset regular or capital gains income. Selling an investment at a loss means you sell it for less than what you paid for it. Why would you go out of your way to sell assets at a loss? Wouldn’t it be better to just make a profit and pay taxes on that profit? The answer is complicated.

How Tax-Loss Harvesting Works

You bought $10,000 of Company A. It dropped in price and is now worth $7,000. You have an unrealized loss of $3,000.
You bought $8,000 of Company B. Its value increased to $12,000. You have an unrealized gain of $4,000.
You sell both stocks, realizing the gain of $4,000 and the loss of $3,000.

In that scenario, your taxable gain would only be $1,000. If you had held on to Company A and sold Company B, you would have a taxable gain of $4,000.

Wouldn’t It Be Better to Simply Avoid Losses?

There are a few reasons why investors may pursue a tax-loss harvesting strategy. Since short-term capital gains are taxed at a higher rate than long-term capital gains, you could potentially use tax-loss harvesting to offset the gains that would be taxed at a higher rate. This gives an investor more flexibility to make advantageous sales when they’re available without fear of the tax implications for doing so.

There’s also an opportunity cost inherent with leaving money in a poorly performing investment. In the above example, you don’t necessarily want to take a loss of $3,000, especially if you suspect that if you wait a few years, Company A may eventually recover and allow you to break even or even make a modest profit; let’s assume $500.

However, you might prefer to own a new stock, Company C, if it has a better outlook. You may suspect that if you buy Company C, you’d likely make a profit of $4,000 in the same time period as you’d make $500 on Company A.

There’s an opportunity cost of $3,500 by keeping Company A instead of buying Company C.

In that scenario, you can both realize and harvest the loss from Company A and put the money into Company C.

Since you can carry over realized losses, you can potentially offset the tax you’d eventually owe on the realized gain you make from selling C with the realized loss from Company A.

There’s also the potential that a loss can alter the tax bracket of the investor. Realized capital gains are included in your total income, meaning it could potentially push you into a higher bracket. Tax-loss harvesting could keep you in a lower bracket, meaning more of your regular salary would be taxed at the lower rate rather than having some of your income taxed at the higher marginal rate.

The other fundamental benefit of deferring tax liability is the investor has to pull out less of their money from current investments in order to cover their tax burden. If their income situation changes, they might be charged at a lower tax rate in the future. In other words, they can defer having to pay taxes on realized gains until they are in a lower tax bracket.

There could also be scenarios where the loss is unavoidable. For example, if you invested money into a business that went on to fail, you could potentially carry forward the loss to offset future income or capital gains. There are many limitations on what types of investments qualify, like whether or not it’s an ordinary loss versus a capital loss. For example, a single filer can deduct $50,000 ($100,000 for married joint filers) if a small business stock investment becomes worthless or is sold at a loss if the Section 1244 rule applies.

In other words, if a person makes an investment that will inevitably lose money, they can at least use the loss to lessen their future taxable income and tax burden.

Does Tax-Loss Harvesting Make Sense for Me? How Do I Use It?

Tax-loss harvesting is complex, and it’s a strategy that’s typically only useful for certain people in specific circumstances. If you’re a Phoenix taxpayer looking for ways to reduce your tax liability, the team at H&H Accounting Services is here to help. Call us at (480) 561-5805 to speak with an expert tax preparer about strategies that might work best for your situation.

Five Major Life Events That Can Impact Your Personal Income Taxes

Tue, 13 Feb 2024 22:26:03 GMT

While there are many different life events that can affect your income in a variety of ways, there are five in particular that can have a profound impact on how you pay your taxes. These life events can affect how you file your taxes, what credits you can potentially receive and your overall tax burden:

Changes in employment: Starting a new job or losing your job can potentially result in a drastic change in your taxable income. Certain types of jobs may also come with new types of compensation that could influence how you file your taxes.
Marriage or divorce: Changes in your marital status can result in changes to your filing status (i.e., whether you’re filing jointly or married but filing separately). Divorce may also allow you to claim additional deductions in some circumstances.
Real estate sales or purchases: There are unique tax implications for both buying a home or selling one, as well as ongoing deductions available to some homeowners.
Having a child: A growing family can potentially qualify you for a few new tax credits. You may also have an incentive to put money into certain tax-advantaged savings vehicles specific to children.
Retiring: One of the main tax implications of retirement is a potentially drastic change in your taxable income. There may also be tax implications if you start taking Social Security or drawing down your retirement savings accounts.

Starting a Job or Being Unemployed

The most obvious tax implication of starting a new job is a difference in income, which could put you into a higher (or potentially lower) tax bracket. A new job might also change your tax situation if part of your compensation comes in the form of some income alternative, like stock options.

Incentive stock options (ISOs) are not taxed like regular income and are instead taxed as income at the time of sale. A slight variation on the time-oriented capital gains rule applies. If you hold the shares for at least one year after exercising the option and then sell at least two years after the grant date, you’ll be taxed at the long-term capital gains rate rather than your normal income tax rate.

There’s no tax due on these when the option is exercised. The difference between the exercise price and the fair market value (FMV) of the stocks when they’re exercised is considered an adjustment when calculating the alternative minimum tax (AMT).

Non-qualified stock options (NSOs) have fewer tax benefits compared to ISOs. The difference between the exercise price and the FMV is considered taxable income, so it’s taxed at your income tax rate (and is subject to SS and Medicare taxes) rather than the capital gains tax rate. After the options are exercised, any gain or loss is treated like a capital gain or loss and the normal capital gains rules are applied.

Marriage and Taxes

Prior to marriage, workers file their taxes using the “single” filing status (or potentially head of household depending on circumstances). After marriage, they can choose one of several alternatives, including married filing jointly (MFJ), married filing separately (MFS) or, if circumstances make it appropriate, qualifying widow(er) with a dependent child.

This is entirely dependent on you and your spouse’s unique circumstances, but there are many potential situations in which the options can be highly beneficial. For example, changing from single to married filing jointly may take you down to a lower bracket if there’s a large disparity between your income and your spouse’s income. The standard deduction is also double for married filing jointly filers.

It’s also worth noting that the married filing separately has some notable disadvantages, like becoming ineligible for many credits or deductions available to joint filers as well as a lower standard deduction. MFS is often recommended only in specific circumstances, like if one spouse has significant debts.

Real Estate Purchases

There are some potentially impactful deductions available to people with homes or mortgages, like the home mortgage interest deduction on interest paid on up to $750,000 of debt for loans taken out after 12/15/2017. The deduction on mortgages obtained prior has a higher $1 million limit.

There are also potential deductions available on the capital gains from the sale of your primary residence (or a home that meets specific requirements). Single filers can exclude up to $250,000 and MFJ filers can save up to $500,000 of capital gains if the sale meets the IRS’ criteria.

The deduction is straightforward if you lived in the house you sold full-time for many years prior to the sale. However, claiming it can be more complicated if you haven’t owned or lived in the home for very long or if you’ve only lived in it intermittently and are trying to claim the credit for a second home or vacation property. There is wiggle room on eligibility, but you should discuss your situation with a tax preparer to find out if your real estate transaction qualifies.

There are also potential deductions and credits for:

State or local property taxes
Qualifying home improvement projects
energy efficiency improvements
Interest payments on home equity loans/lines of credit (if the money is spent on home improvements)
Some closing costs (although not all of them)

Homes could also play a role in business-related deductions, like a home office deduction or rental income-related deductions.

Tax Incentives for Children

There are a number of tax credits available to parents, like the Child Tax Credit and the Child and Dependent Care Credit. Having a child may also allow you to alter your filing status, which could have positive tax implications (like changing your bracket). You might also open a 529 savings plan if you have a child. Although 529 plans are funded with after-tax dollars, the growth of the money in the plan is tax-free, and withdrawals aren’t taxed if they’re spent on qualifying education expenses.

Retirement Tax Implications

Retiring typically results in a steep drop in income, which means you might go down to a lower tax bracket. Whether withdrawals from retirement savings accounts are taxed depends on the account. IRAs funded with after-tax dollars are tax-free in retirement, while 401(k) withdrawals are taxed as income. Social Security is considered taxable, but even with these benefits, you may still be in a lower bracket than when you were working.

Phoenix Tax Filers Can Get Help Optimizing Their Tax Savings for All of Life’s Changes

Do recent changes to your life circumstances have potential tax implications? The team at H&H Accounting Services can help ensure you maximize your tax savings from positive life changes while minimizing the potential harmful effects of life circumstances that may have a negative impact on your taxable income.

Learn more during a free consultation by calling us at (480) 561-5805.

Why Is It Important to Keep Business and Personal Finances Separate?

Thu, 21 Dec 2023 22:48:05 GMT

For many professionals, the notion of combining business and personal finances isn’t a concern because it’s not a serious option. The issue primarily arises for sole proprietors and contractors who are, themselves, their own business. If you take one-off jobs to provide services like writing, painting, web development, handyman work or landscaping – or you’re just a 1099 worker who contracts with a single client full-time – it may not seem like there’s a real need to separate your personal finances from your business finances.

In these types of scenarios, there are typically two major reasons to separate your business and personal finances: liability and tax implications. If you are ever sued for failure to deliver on a contract or causing injuries or property damage, it’s important that your personal assets aren’t at risk of being seized and liquidated.

Going after a person’s personal assets, or stripping a business owner of their limited liability, is what’s known as 'piercing the corporate veil'. It’s the process of dissolving the protective barriers typically provided by formal business entities. By keeping your finances separate, you fortify the legal shield around your personal assets, ensuring they remain protected in liability scenarios and making it harder for the veil to be pierced.

From a tax perspective, there may be potential write-off opportunities that can make separating your business finances from your personal finances beneficial.

What If You're a Sole Proprietor, and There's No Difference Between You as a Private Individual and You as a Contractor?

If your revenue and expenses are on the low side for your industry and you don’t itemize deductions when preparing your taxes, you might be wondering whether it’s worth all the extra effort to establish even basic separations between you and your business.

Even after formally establishing a sole proprietorship, you and your business are still technically viewed as the same legal entity according to state and federal law. So, what is the point of separating financial accounts?

Even though Arizona law doesn’t demand a separation of finances for sole proprietors, it’s still a wise practice. By having distinct accounts, you can easily track your business expenses and income, making it straightforward to report your finances accurately to the IRS. It also streamlines the process of proving business expenses in the event of an audit, as your business overhead can be clearly delineated as distinct from your personal finances.

Establishing and tracking business expenses separately does require effort on your part, which is why many small business owners, including contractors and sole proprietors, work with accounting firms like H&H Accounting Services for business bookkeeping and accounting .

The Benefits of Separating Bank Accounts

Distinct accounts for personal and business use provide a more straightforward, clearer picture of your business's financial health. This separation makes it easier to track cash flow, manage budgets and plan for future investments or expenses.

Additionally, having separate accounts helps in identifying business trends and financial patterns, enabling more strategic decision-making. It also simplifies bookkeeping processes, making it more efficient and less prone to errors.

How Your Approach Influences Creditworthiness

Your method of handling finances directly impacts your business’s creditworthiness. Lenders and investors often scrutinize a business's financial records before making decisions. You will appear more organized and responsible with separate accounts, which can positively influence the impression banks or investors have of you and your operations.

This separation ensures that your personal financial challenges do not negatively impact your business credit rating. Building a strong business credit history opens doors to better loan terms, higher credit limits and potentially lower interest rates, which are essential for business growth and stability.

The Impact on Professionalism and Business Perceptions

Keeping personal and business finances separate not only helps in the smooth operation of your business but also enhances your professional image. While many of the people who hire you and work with you might accept or tolerate a lack of separation between business you and personal you, the fact is partners, clients and suppliers are more likely to respect and trust you as a businessperson if you clearly demonstrate integrity and financial diligence.

In other words, professionalism often enhances business relationships. Increased customer confidence can help with things like client retention and increase the likelihood of future referrals from those partners.

Get Help Separating Your Personal Finances From Your Business Finances in Phoenix

The team at H&H Accounting Services provides all types of personal and business accounting services for clients throughout the Phoenix metro area. We’re committed to offering flexible solutions for business and individual clients of all different sizes.

If you want to know how to shield your personal assets from the risks posed by business liability, or you’re just looking for ways to leverage accounting and bookkeeping to operate a more successful business, give us a call at (480) 561-5805. We would be happy to explain your options and how we can help during a free one-hour consultation.

10 Important Things Bookkeeping Does for Small Business Owners

Thu, 21 Dec 2023 22:38:27 GMT

1. Accurate Record-Keeping

Bookkeeping is fundamental for keeping accurate records of all business transactions. This meticulous recording of income, expenses and other financial transactions forms the backbone of a sound financial management system. Accurate record-keeping not only helps in tracking the business's performance but also aids in making informed financial decisions. It's essential for understanding where the business stands financially at any given time and for future planning.

2. Bank Statement Reconciliation

Reconciling bookkeeping records with bank statements is a critical task in ensuring financial accuracy. This process involves matching the transactions in the bookkeeping records with those listed in the bank statements to identify any inconsistencies or errors. Regular reconciliation helps detect fraudulent activities, prevent overdraft fees and ensure that all transactions are accounted for. It’s a key step in maintaining the integrity of a business’s financial records.

3. Management of Accounts Receivable

Efficient bookkeeping includes managing accounts receivable, which is vital for maintaining healthy cash flow. This involves keeping track of amounts due from customers, invoicing accurately and following up on overdue payments. Good accounts receivable management ensures that the business has enough cash on hand to meet its obligations. It also involves analyzing customer payment patterns, which can inform credit policies and customer relations strategies.

4. Handling Accounts Payable

Handling accounts payable is another crucial aspect of bookkeeping. This includes keeping track of what the business owes to its suppliers and vendors and ensuring that payments are made on time. Effective management of accounts payable helps in avoiding late fees, maintaining good supplier relationships and taking advantage of any available early payment discounts. It also involves verifying the accuracy of invoices and resolving discrepancies.

5. Payroll Processing

Accurate payroll processing is an essential function of bookkeeping. This task involves calculating employee wages, withholding taxes and ensuring compliance with labor and tax laws. Reliable payroll processing is crucial for maintaining employee satisfaction and avoiding legal penalties. Bookkeeping in this area also includes maintaining detailed records for audit purposes and managing payroll-related financial obligations such as retirement contributions and health insurance premiums.

6. Budgeting

Budgeting is a vital bookkeeping activity that involves planning future income and expenses. It helps businesses set financial goals, allocate resources efficiently and anticipate future financial needs. A well-prepared budget provides a roadmap for the business to follow and is instrumental in controlling costs and maximizing profits. Regular budget reviews allow businesses to adjust their strategies in response to financial performance or changing market conditions.

7. Tax Preparation

Having accurate and up-to-date bookkeeping throughout the year makes business tax preparation exceptionally easy. Since all the data and records are already compiled and backed up by documentation collected throughout the tax year, business tax preparation simply becomes a matter of filling out forms with the data that’s already been calculated. Thorough bookkeeping and financial document organization throughout the year also makes errors much less likely, reducing the risk of audits or other financial penalties resulting from noncompliance with state and federal tax laws.

8. Financial Reporting

Generating accurate financial reports is a key bookkeeping task. Some commonly used reports that can be generated via information gathered and collated during bookkeeping include profit and loss statements, cash flow statements and balance sheets. All these documents can provide important insight into the health and operational sustainability of your business. They can also help business owners make informed decisions in the future and provide optimal transparency for key stakeholders, like investors, creditors or financial institutions.

9. Inventory Management

Effective bookkeeping includes managing inventory. It involves tracking inventory levels, costs and sales to ensure that the business can meet demand without overstocking. Proper inventory management is crucial for optimizing stock levels, reducing storage costs and improving cash flow. It also provides valuable data for pricing, purchasing decisions and financial planning.

10. Organization of Financial Documents

Bookkeeping facilitates the safe storage and organization of all types of documents, including many that could be vital for necessary tasks in the future, such as tax preparation, audits, forecasts, getting business financing and resolving contract disputes if and when they arise. Since the process of bookkeeping requires the use of invoices, bank statements, receipts and other business documents, collecting and organizing these records is simply one of the side benefits of bookkeeping.

Providing Worry-Free Bookkeeping Services to Businesses in Phoenix

H&H Accounting Services is the company to call when your small or medium-sized business in the Phoenix metro area requires stress-free, accurate and detail-oriented bookkeeping services . Our team is committed to providing worry-free accounting services of all types to our business clients, and we would be happy to explain our process during a free one-hour consultation. Call us at (480) 561-5805 to schedule.

What Are the Consequences of Not Keeping Your Bookkeeping Up to Date?

Thu, 21 Dec 2023 20:30:14 GMT

Poor accounting practices and a lack of bookkeeping can have catastrophic consequences for small and medium-sized businesses. Failing to track expenditures, missing payments to vendors, not keeping track of accounts receivable or being the victim of employee theft or fraud are all issues that could potentially lead to business failure if not addressed promptly. This is especially true if your margins are thin, your business is young or you’re facing operational or industry headwinds.

The good news is bookkeeping is not overly expensive to outsource, allowing you to get business security and peace of mind without the added stress of trying to do it all yourself.

Cash Flow Complications

Consistent bookkeeping is crucial for accurate cash flow management. When bookkeeping is neglected, it becomes challenging to track the cash entering and leaving your business. This lack of visibility can lead to critical cash shortages or missed opportunities for investment or growth. For instance, without up-to-date records, you might not realize when customers are consistently late on payments or when your spending is outstripping your revenue, leading to financial strain. Regular bookkeeping helps you anticipate cash flow needs, ensuring you have the funds to cover expenses and capitalize on opportunities as they arise.

Tax Preparation Challenges

Outdated bookkeeping significantly complicates tax preparation. With incomplete or disorganized financial records, preparing accurate tax returns becomes a herculean task. This disarray often results in missed deductions and credits, ultimately leading to higher tax liabilities. Moreover, incorrect or late filings due to poor records can attract penalties from tax authorities. Regular bookkeeping ensures that all financial transactions are accounted for, making tax filing smoother and minimizing the risk of costly errors.

Inaccurate Financial Reporting

When bookkeeping isn't maintained, financial statements like the balance sheet and income statement become inaccurate. This inaccuracy can lead to poor business decisions based on faulty data. For example, you might invest in expanding your business, not realizing that your current financial position doesn't support such growth. Accurate, up-to-date bookkeeping ensures that financial reports truly reflect the health of your business, guiding informed decision-making.

Compliance and Legal Risks

Neglecting bookkeeping can lead to compliance and legal issues. For industries with specific financial reporting standards or those that handle client funds, the risks are even higher. Regular bookkeeping ensures compliance with these legal requirements, protecting your business from legal repercussions.

Difficulty in Securing Funding

Out-of-date bookkeeping can be a red flag for potential lenders and investors. When seeking funding, creditors and investors want to see comprehensive financial reports to assess the health and viability of your business. Without current and accurate financial data, it’s difficult to prove your business's creditworthiness or demonstrate its potential for growth. Consistent bookkeeping not only boosts your credibility but also increases your chances of securing necessary funding.

Increased Expenses and Inefficiencies

One of the most valuable benefits of bookkeeping, from a literal money-saving standpoint, is transparency in your business’s financial health. Irregular bookkeeping can distort or completely ignore overpayment, missed payments, inaccurate receipts, problems with inventory and a host of other potential issues that could lead to increased costs and operational inefficiencies.

Needless Stress and Damage to Your Business Reputation

Managing a business is challenging enough without the added anxiety of disorganized financial records. This stress can be compounded during critical times like tax season or when making significant business decisions.

Clients, suppliers and financial institutions often view regular financial reporting as a sign of stability and reliability. Inconsistent bookkeeping can lead to mistrust and skepticism, harming relationships that are critical to your business’s success.

Keeping your books up to date not only minimizes stress but also helps in maintaining a positive image and building trust with stakeholders.

Should Your Phoenix Business Invest in Professional Bookkeeping Services?

Yes. With accurate and up-to-date accounting, you may even discover problems or opportunities that will more than make up for the expense of hiring professional accountants for bookkeeping.

Even if no serious errors or issues are discovered right away, it’s still preferable from a tax and compliance standpoint to ensure all your ‘I’s are dotted and ‘T’s are crossed.

QuickBooks training, not to mention a subscription to the software, is expensive, and DIY bookkeeping can be time consuming. It’s undoubtedly a better and more cost-effective use of your time to spend a relatively modest sum of money to hire a professional to do it right rather than struggle with DIY bookkeeping and risk getting things wrong.

If you’d like to learn more about H&H Accounting Service’ bookkeeping or pricing, don’t hesitate to call us at (480) 561-5805.

Are There Different Types of CPAs?

Mon, 20 Nov 2023 22:15:04 GMT

There are no formal specialized CPA certificates or specializations. CPA licensure is a generalized proof of knowledge as it pertains to Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), Regulation (REG) and Business Environment and Concepts (BEC).

Although there aren’t specialized versions of the CPA exam, some CPAs may focus their continuous professional education in a particular area for enhanced career focus. They may also earn additional certifications, such as Certified Fraud Examiner (CFE) or Chartered Global Management Accountant (CGMA), to further enhance their expertise and credentials in specific areas.

There are many CPAs who have essentially earned informal specializations via a career commitment to a specific area of finance or accounting. For example, a CPA may focus their career working within a specific industry, corporate setting or with certain types of clients. They might exclusively pursue forensic accounting, tax planning for high-net-worth individuals or even focus on representing clients before the IRS during audits.

Many businesses don’t require a specialist CPA to handle their consulting or accounting issues. Luckily, there are also thousands of general CPAs at public accounting firms that have a well-rounded knowledge set gained by serving the needs of local SMBs and individuals who require their services.

Public Accountant vs. Private Accountants

Accountants and accounting services can be broken down into two broad categories: public and private.

Public accountants and CPAs work for public accounting firms that are hired by individuals and businesses to perform certain tasks. For example, businesses can contract with H&H Accounting Services for everything from bookkeeping and payroll services to business tax preparation or cash flow management .

Private accountants work internally, typically within large corporations, to meet the accounting needs of that business. Due to their budgets and the volume and complexity of their accounting needs, it makes sense for large nationwide or multi-national businesses with millions or billions of dollars of revenue to hire internal accountants. These types of businesses may still hire public accountants for audits or consulting services , but they typically rely on internal private accountants for general business accounting, bookkeeping and payroll.

Some of these large businesses have a need for CPAs within their accounting staff, although in many cases they will also employ accountants who haven’t earned a CPA.

Industries and Specialized Fields

Corporate Accounting: CPAs in corporate settings deal with complex financial reporting, compliance and strategic financial management for businesses.
Government and Non-Profit: CPAs who pursue careers in government agencies or at non-profits typically focus on fund accounting, grant management and ensuring compliance with specific regulatory requirements.
Forensic Accounting: These CPAs specialize in investigating financial discrepancies and fraud. Their expertise is often sought in legal cases and financial audits. Some public accounting companies have teams dedicated to forensic accounting, but you may also find forensic accountants working for government or law enforcement agencies.
Tax Specialists: Some CPAs focus exclusively on tax planning and compliance, offering their expertise to individuals, businesses and other entities. While people who are audited by the IRS can hire enrolled agents (EAs) or even attorneys to represent them during audits, many choose to secure the services of a CPA. Some CPAs who want to specialize in this area also become EAs.

Gaining Unique Expertise

CPAs often develop specialized skills through their work experiences. For instance, a CPA working in a real estate firm may become an expert in real estate taxation and investment strategies.

There are a variety of sectors and industries with unique and complex supply chains, vendor relationships or procedural challenges and hazards. From auto manufacturing and investment banking to consumer goods and commodities, many CPAs find a niche within sectors and commit their careers to learning about and working within these informal specialties.

Consulting and Advisory Roles

Many CPAs leverage their extensive knowledge to provide consulting services, offering advice on business strategy, financial management, mergers and acquisitions and more.

Entrepreneurial Ventures

Some CPAs choose to start their own accounting firms or consulting businesses, offering specialized services based on their expertise and experience.

Our Accountants and CPAs Specialize in Helping Phoenix Businesses and Taxpayers

The world of Certified Public Accountants is diverse, with professionals serving in various capacities across multiple industries. Whether working in public accounting firms, the private sector, specialized fields or as consultants, CPAs bring a wealth of knowledge and expertise to their roles, making them invaluable assets in any financial context.

At H&H Accounting Services, we have experience working with businesses in all types of industries . We have the knowledge and track record of success to tackle any accounting issues or challenges you may be facing. Call us at (480) 561-5805 to schedule a free consultation .

What You Should Know About the CPA Exam

Mon, 20 Nov 2023 21:59:35 GMT

There’s more to becoming a Certified Public Accountant (CPA) than simply passing a test. Accounting professionals must embark upon years of education and gain thousands of hours of accounting experience in the workplace before they’re even eligible to become a CPA.

The CPA exam itself is something like a capstone for the certification. It shows that the accountant has the knowledge to put what they’ve learned through years of education and professional experience into practice, verifying their expertise in the field.

Exam Format and Administration

The CPA Exam comprises four sections, each focused on a different domain of accounting expertise. The exam is computer-based and administered at Prometric test centers across the United States and in select international locations.

What Are Prometric Test Centers and What Is Their Role in Administering the CPA Exam?

Prometric test centers are a crucial component in the administration of the CPA Exam, as well as various other professional and academic tests (CFA exams, Microsoft certifications, CISCO certifications, GRE exams, real estate licensure, etc.). The CPA Exam and other tests are administered exclusively at these centers, as their global presence and advanced testing capabilities make them an ideal choice for high-stakes exams where integrity and fairness are paramount.

What Are Prometric Test Centers?

Prometric test centers are specifically designed for administering computer-based standardized tests. These centers provide a consistent, controlled environment that is ideal for high-stakes testing. Their uniformity ensures consistency and fairness for all test-takers, regardless of where they’re taking the CPA exam.

Why Are CPA Exams Administered at Prometric Centers?

The controlled environment helps maintain the security and integrity of the exam. They have the know-how and technology to monitor test takers and prevent cheating and content piracy.

Since Prometric centers are dedicated solely to administering these types of tests on a full-time basis, they’re able to offer flexibility in scheduling, allowing candidates to choose their preferred date and time for the exam.

What Does Passing the CPA Exam Really Mean for Clients?

People tend to assume having any kind of advanced certification is indicative of a professional level of expertise, but we often don’t have a full understanding of what exactly that expertise entails. This is especially true of highly specialized certifications like CPAs.

Why Does Having a CPA Matter? And What Does It Really Mean for Clients?

Comprehensive Understanding of Auditing and Attestation

CPAs are trained to perform audits with the utmost integrity and adherence to ethical standards. The Auditing and Attestation (AUD) section of the CPA Exam ensures that CPAs possess the necessary skills to conduct audits that are both thorough and fair.

A large part of the CPA exam is committed to ascertaining the test taker’s understanding of the complexities of financial reporting and internal controls. Someone who has passed the exam has a proven ability to identify discrepancies and ensure accurate financial disclosures.

Mastery of Business Environment and Concepts

The Business Environment and Concepts (BEC) section ascertains a test taker’s ability to think strategically about business operations and financial planning.

Someone who has passed the CPA exam has demonstrated a solid grasp of economic principles and financial frameworks, which shows they’re able to aid in making informed business decisions.

Expertise in Financial Accounting and Reporting

Passing the Financial Accounting and Reporting (FAR) section indicates that the test taker is well-versed in U.S. GAAP and other accounting standards. Knowing FAR and GAAP inside and out requires more than just rote memorization of rules and procedures. Test takers must be able to generate work products that adhere to these strict standards and absorb and process information delivered in these universal formats.

A CPA who has passed the exam has demonstrated their ability to handle financial reporting for corporations, not-for-profits and government entities, ensuring compliance and accuracy.

Understanding of Regulation and Ethics

The Regulation (REG) section determines the level of federal taxation, business law and ethics knowledge the test taker possesses. This foundational knowledge set is at the core of the CPA’s role. It’s what enables them to provide advice and guidance to clients on various financial matters.

A deep understanding of professional and legal responsibilities ensures that CPAs advise clients in compliance with laws and regulations.

Adherence to Professional and Ethical Standards

The commitment to ethics in accounting is one of the attributes that sets the profession apart from many others. While education for professionals in other fields, such as law or healthcare, includes ethics courses, the core practice focus of these service providers rests elsewhere.

Doctors are primarily concerned with healing people. While there are ethical considerations in healthcare, they’re secondary to the primary goal. There are a variety of ethical concerns in law, but attorneys are primarily focused on holding people or businesses accountable for actions or defending the rights of their clients.

Ethics and accuracy are inseparable in accounting to a degree that goes beyond what you might typically see in other professions. Taxation, auditing, reporting, budgeting and fraud prevention practices have embedded ethical implications.

Investors, financial institutions and clients can only make rational decisions about their own interests with data that’s generated impartially and accurately. There are significant incentives for malfeasance in many scenarios, and identifying malicious behavior isn’t always easy. Accountants are also entrusted with large sums of other people’s money, meaning there is significant room for abuse.

Simply put, being able to fully trust a person you don’t necessarily know is vital when it comes to accounting. Clients who hire a CPA have a unique level of assurance that this person has spent hundreds of hours studying ethics, understands the importance of ethical behavior and has a proven commitment to responsible and honest service.

Get Knowledge and Ethical Accounting Services in Phoenix

The CPA at H&H Accounting Services is committed to meeting the diverse accounting and consulting needs of businesses and individuals in the greater Phoenix area. Whether you need bookkeeping and personal tax preparation or consulting and auditing services, you can count on our knowledgeable and dedicated team of accounting professionals.

Call us at (480) 561-5805 for a free one-hour consultation.

How to Become a CPA

Mon, 30 Oct 2023 19:51:32 GMT

The CPA designation is more than just a certificate; it’s a testament to an accountant’s commitment to the pprofession that showcases their ability to handle complex financial tasks with precision and integrity.

CPAs are entrusted with ensuring financial accuracy and compliance, making their role indispensable in various sectors, including public accounting, corporate finance, government and non-profit organizations.

Educational Requirements

Bachelor’s Degree: While you can major in any field, a degree in accounting or a related field is highly advantageous.
Master’s Degree: To meet the CPA Exam requirements, an accountant needs to complete 150 semester credit hours. This necessitates coursework beyond a typical bachelor’s degree. Since accountants seeking a CPA must take at least 30 hours of upper-level accounting and 30 hours of coursework in business, mathematics and ethics, it’s often easiest to simply pursue a master’s degree rather than take additional courses piecemeal.

Investing in your education is crucial, as the knowledge gained during this time forms the backbone of your future success in the CPA Exam and your career.

CPA Exam Preparation

The CPA Exam is known for its rigor, testing candidates on a wide array of topics within accounting.

The exam is divided into four parts: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR) and Regulation (REG). While participating in a CPA review course isn’t required, most accountants who want to sit for the CPA exam do sign up for reputable review courses from reliable providers with proven track records of preparing test takers. These courses include structured study materials, practice exams and additional support services.

Most people sitting for the CPA exam are working accountants, meaning they need to prepare for the exam while still holding down a nine-to-five job. If you’re pursuing your CPA, creating a study schedule that allows you to balance your work and personal life while allotting sufficient time to preparation is crucial.

Navigating the Exam Application Process

The next step is to apply for the CPA Exam. Because CPAs are issued by individual states, you’ll need to make sure you’re taking the steps to qualify and apply for the Arizona-specific CPA exam. Arizona accountants who want to take the Uniform CPA Examination need to go to the National Association of State Boards of Accountancy website and apply .

Candidates must submit the necessary forms with the required fees, ensuring all their educational transcripts are sent to the board for verification.

If you’re interested in pursuing a CPA, you should visit the Arizona State Board of Accountancy website to learn about the many educational and work requirements. You can also read some of our past blogs on CPA requirements for more information.

Taking the CPA Exam

Exam takers need to schedule through the National Association of State Boards of Accountancy (NASBA) website, choosing a date and location that suits their preparation level and personal schedule. If you are going to take the exam, be sure to familiarize yourself with the testing center's rules to ensure a smooth exam day experience.

Gaining Relevant Work Experience

Even after passing the CPA exam, accountants still need to gain extensive practical experience before they can receive their license. Like most states, Arizona requires accountants to gain 2,000 hours of work experience under the supervision of a licensed CPA before they can officially become licensed themselves.

The work experience phase is crucial, as it proves CPA test takers can apply their theoretical knowledge in a practical setting. This work experience must be verified as well, so it’s important to keep a detailed record of work hours.

Applying for CPA Licensure

Once accountants have finished all the steps, they need to submit an application for licensure, accompanied by documentation of exam scores, education and work experience.

Maintaining Your CPA Status

You can learn more about Arizona’s continuing professional education requirements on the Arizona State Board of Accountancy website.

The renewal period in Arizona is two years
CPAs must complete at least 80 hours of continuing professional education each renewal period
Of the 80 hours, four hours must be ethics, 16 must be live or interactive webinars and 40 must be related to accounting, auditing, consulting services, taxation or business law

Is Becoming a CPA Worth It?

The path to becoming a CPA is rigorous but can be immensely rewarding. The commitment and investment of time and money isn’t for everyone, and there are fulfilling accounting career paths that don’t require earning a CPA.

However, CPAs are vital for handling a variety of business consulting , tax preparation and accounting services . If your business requires the services of a Phoenix accountant who has put in the time and effort to earn and maintain a CPA license, call H&H Accounting Services at (480) 561-5805.

What’s the Difference Between a CPA and ACCA?

Mon, 30 Oct 2023 19:41:38 GMT

The Association of Chartered Certified Accountants is a U.K.-based organization that offers an international credential referred to as the ACCA. In contrast, the Uniform Certified Public Accountant (CPA) Examination was developed by the American Institute of Certified Public Accountants (AICPA) in partnership with the National Association of State Boards of Accountancy (NASBA).

To put it simply, the “ACCA” credential and the “CPA” credential denote a similar skill set, but the CPA is localized (by state in the U.S.) while the ACCA is a global credential.

Both credentials are highly respected and can open doors to a rewarding career in accounting. However, they serve different purposes, come with their own sets of exams and are recognized differently around the globe.

Origins and Global Recognition

CPA: The CPA certification is unique to the United States. The exam is tailored specifically to U.S. GAAP and U.S. tax law, although it does also cover the International Financial Reporting Standards (IFRS). Reputationally, the CPA credential is far more common and widely recognized in the United States than ACCA.

ACCA: ACCA is a global qualification awarded by the UK-based Association of Chartered Certified Accountants. It boasts wide international recognition, especially in the Commonwealth countries, Europe and Asia. Like the CPA exam, the ACCA exam also covers IFRS. The tax law emphasis is international rather than U.S. focused.

Exam Structure and Qualifications

CPA: The CPA is more formally rigorous in terms of prerequisites since it requires a significant amount of real-world experience prior to even being eligible to sit for the exam. In addition to 150 credit hours of relevant education, exam takers must have at least 2,000 hours of verified work experience under a licensed CPA.

ACCA: ACCA's examination structure is more extensive, comprising 13 papers, which are divided into three levels: Applied Knowledge, Applied Skills and Strategic Professional.

According to some sources, the ACCA education requirements are comparable to a bachelor’s or master’s degree in the U.S. Although the ACCA doesn’t have specific work experience requirements, there are some education requirements that are unique to the U.K. Specifically, exam takers must have three General Certificate of Secondary Education’s (GCSE) and two Advanced Level qualifications (A-levels) or equivalents.

An A-level is an area of study 16 to 18-year-olds pursue in what we would consider an upper-class high school that enables entrance into higher education in those subjects. Although there’s no equivalent for a GCSE in the States, it’s similar to a high school diploma or a GED. In the U.K., students have to take subject-specific exams to prove their proficiency in each subject.

Scope of Work

Both CPA and ACCA prepare professionals for varied roles within the accounting and finance sector, but there are some differences in their primary focus areas.

CPA: Professionals with a CPA designation often find roles in public accounting firms, corporate accounting, tax consultation and auditing in the US. Their expertise in U.S. tax laws and GAAP makes them ideal candidates for organizations operating within or closely with the American market.

ACCA: ACCA professionals usually have a more international or global perspective, given the qualification's broad curriculum. They are versatile and can work in diverse roles, including financial accounting, management accounting, auditing and consultancy in regions where ACCA is highly recognized.

Duration and Difficulty

While both qualifications are challenging, the duration and nature of their difficulty vary.

CPA: The four CPA exams can technically be completed within a year or less. However, the content's depth, especially its focus on US-specific regulations and standards, can be daunting for those unfamiliar with the American system.

The education requirements and the real-world work experience can take a significant amount of time to accomplish.

ACCA: With 13 papers, the ACCA can take several years to complete. However, students might find that it offers a more gradual progression from basic to advanced concepts. There’s also more hand holding through the process, as the ACCA organization provides more resources and preparation assistance than the AICPA offers working professionals who are seeking their CPA accreditation.

Should You Hire a CPA or an ACCA for Your Accounting Needs in Phoenix?

Both CPA and ACCA are prestigious qualifications that can significantly boost an accountant's career. Most U.S.-based accountants will choose a CPA simply because it offers much broader career prospects in the country and the education and work-experience requirements are geared toward U.S. students and professionals.

If you’re looking for a skilled Phoenix-based CPA with the extensive work experience and knowledge to handle your business or personal accounting needs, don’t hesitate to call H&H Accounting Services at (480) 561-5805.

What’s the Difference Between Public and Private Accounting?

Mon, 30 Oct 2023 19:33:57 GMT

Public accountants work in or operate accounting firms that are hired by external clients to perform various accounting or consulting functions. Private accountants work for businesses or within organizations that have enough need for accounting services that it’s worth allocating their resources to hire someone internally.

The vast majority of small businesses in Phoenix do not have private accountants on their payrolls. It doesn’t make sense for a small business to pay someone $60,000 a year to do basic bookkeeping, payroll and business taxes when a public accountant can do all that and more for far less.

The Importance of External Audits

There are a variety of scenarios in which even large companies that have teams of private accountants still have to contract with public accountants at CPA firms. A standout example is external audits, which are impossible for companies to perform on themselves.

It’s vitally important that third parties, like lenders, investors or stakeholders, have honest and transparent data on a company’s health, growth and performance. While there’s no guarantee that companies will be dishonest on internal audits, the entire system works better with a mandatory level of trustworthiness and accuracy. Having external public accounting firms perform these audits ensures there are no real or perceived conflicts of interest.

Why External Consultants Are Preferable to Private Accountants

Companies bring in consultants for analysis and advice on processes, accounting practices, cash flow management or a host of other potential business needs.

External consultants bring a fresh, unbiased perspective to the table, helping to identify issues or areas of improvement that internal team members might overlook due to their close proximity to the company’s operations. This objectivity ensures that the analysis and recommendations provided are impartial, potentially leading to more effective and innovative solutions.

External consultants also possess specialized expertise and experience from working with a diverse set of clients across various industries. This exposure allows them to bring unique insights and best practices that the internal accounting team might not be aware of or have access to. They can quickly address complex issues, implement new systems or navigate regulatory challenges, providing valuable knowledge to the internal team in the process.

Businesses can run into situations where they need extra help to accomplish a specific project or systemic company-wide changes. These types of projects are inherently temporary, so hiring a whole new team of permanent employees to complete them doesn’t make sense. External consultants from public accounting firms are typically the preferred resource.

Educational and Professional Certifications

There are many great accountants working at businesses, but not all of them have the desire to pursue advanced degrees or tackle the exhausting, detail-oriented work of a CPA. There’s also liability and stress concerns to take into consideration. CPAs are held to extraordinarily high standards, and a lot can be riding on their compilations , audits or tax preparation work. Mistakes can result in serious and costly consequences, meaning there’s no room for error.

Simply put, not every accounting professional wants that responsibility or has the attention to detail and commitment to perform at that level. The CPA certification is vitally important for U.S. businesses because it offers a fast and convenient way for companies to identify a professional and hire them with a built-in assurance of their qualifications.

When a business hires a CPA, they know they’re getting the services of an accountant who has:

A master’s degree in accounting (or, at a minimum, a business degree plus master-level graduate courses in accounting)
Passed all four parts of the CPA exam (Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG) and Business Environment and Concepts (BEC))

To even sit for the CPA exams, an accountant needs years of experience in the accounting field, including thousands of verifiable hours working under the supervision of a CPA. Arizona CPAs must also complete 80 hours of continuing professional education every two years to maintain their certification.

Should Your Phoenix Business Hire a Public Accountant?

It depends on the accounting services your company requires. Payroll , bookkeeping and QuickBooks support may not require the services of a CPA, but compilations, audits and compliance consulting will likely need to be performed by a certified public accountant.

H&H Accounting Services offers the best of both worlds. We have a team of skilled and dedicated accountants to help with everything from tax preparation to bookkeeping and a CPA to assist local Phoenix businesses with more advanced accounting tasks.

Call us at (480) 561-5805 to learn how H&H Accounting Services can meet your accounting needs.

What’s the Difference Between a CFA and a CPA?

Tue, 26 Sep 2023 17:28:54 GMT

Financial professions are full of acronyms, many of which are used to designate various professional certifications. Two of the most esteemed are CFA (Chartered Financial Analyst) and CPA (Certified Public Accountant). Though both are prestigious titles in the finance realm, they differ substantially in their areas of expertise, examination processes and career paths.

Areas of Focus and Expertise

CFA: A CFA charter holder typically specializes in investment management. This includes portfolio management, investment analysis, stocks, bonds and other investment vehicles. CFAs often find themselves making investment decisions, recommending individual investments or portfolios and analyzing financial market trends.

CPA: A CPA is an accountant, not necessarily an investment advisor. Their expertise lies in areas like auditing, tax consultation, financial reporting and managerial accounting. CPAs are often responsible for ensuring that organizations adhere to accounting standards, producing and analyzing financial statements and providing guidance on tax strategies.

Examination and Certification Process

CFA: The CFA program consists of three rigorous levels of exams, each demanding extensive preparation. Candidates must clear all three levels, which cover topics like quantitative methods, corporate finance, economics, financial reporting, equity investment and more. It's not uncommon for candidates to spend over 300 hours preparing for each level.

CPA: Becoming a licensed CPA in Arizona is not entirely dissimilar from the requirements in other states – and there’s a lot more to it than just passing the Uniform CPA Examination. To even sit for the CPA exam, accountants must first have spent a lot of time in classrooms (at least 150 credit hours in accounting with 36 hours of non-duplicative accounting).

Work Experience Requirement

CFA: Earning a CFA charter requires at least 4,000 hours of investment-related qualified work experience completed within a minimum of three years. Applicants can earn this experience during or after they’ve already completed a CFA program.

CPA: To qualify for a CPA license in Arizona, accountants must gain a minimum of 2,000 hours of verified professional accounting experience and work for at least a year under the supervision of a licensed CPA at a public accountancy firm.

Career Paths and Opportunities

CFA: CFAs often find roles in asset management firms, hedge funds, investment banks and private equity firms. Common job titles include portfolio manager, research analyst and risk manager.

CPA: CPAs have a broader range of career opportunities since every business needs accounting services. They often work in public accounting firms, corporations, government agencies or as independent consultants. Common jobs for CPAs include controllers, financial analysts, tax consultants or auditors.

Global Recognition

CFA: The CFA designation is globally recognized and offers a standardized skill set for investment professionals worldwide.

CPA: The CPA designation, while highly esteemed, is more region-specific. Arizona does not offer license reciprocity, meaning earning a CPA license in another state doesn’t make you a CPA in Arizona. Out-of-state CPAs would need to seek licensure in Arizona before operating as a CPA here – although the experience and education are generally all transferrable.

Continuing Education

CFA: Once the CFA charter is obtained, charter holders are encouraged to maintain their knowledge and skills through the CFA Institute’s continuing education program, although it isn't mandatory.

CPA: CPAs typically have a mandatory continuing education requirement to ensure they stay updated with changes in accounting standards and practices. In Arizona, CPAs must complete at least 80 hours of approved continuing education in every two-year license period (including 40 hours of technical accounting, 16 hours on auditing and taxes, 16 hours in classrooms or webinars and at least four hours on ethics). There is no retesting requirements for CPAs in Arizona.

Do You Require the Assistance of an Arizona CPA?

While both the CFA and CPA designations denote a high level of expertise and professionalism, they cater to different niches within the finance world. If you need an investment advisor to dive deep into the nuances of your portfolio management, scheduling a consultation with a CFA may be a good idea. The team at H&H Accounting Services , including our CPA, is committed to offering reliable, worry-free accounting services for individuals and businesses in the Phoenix area. If you need help with retirement planning, it may be better to call a CFA. If your business needs compilations , cash flow consulting or just day-to-day bookkeeping assistance – call H&H Accounting Services. Schedule a free one-hour consultation by calling (480) 561-5805.

What Are the Duties of a CPA?

Thu, 14 Sep 2023 17:39:02 GMT

Many people assume certified public accountants (CPAs) are just glorified accountants – and in the most simplistic terms that might be a somewhat accurate description. What may not be common knowledge among people who’ve never worked with a CPA is the breadth of the various advisory, consultative and investigatory tasks they perform, and the unique relationships they have with their clients.

In most cases when you hire a service provider, you expect them to do what’s in your best interests. CPAs are often necessary for their trusted prioritization of ethics. They’re after the truth and don’t necessarily want to paint the rosiest picture of your business if it doesn’t reflect reality.

This is often necessary for businesses seeking financing or investors, as those third parties will want assurance that your finances and business stability are what you claim they are. A CPA can help you develop that evidence, and they will stake their reputation on its accuracy.

Auditing and Assurance Services

Auditing is perhaps the most recognized duty of a CPA. In this role, a CPA reviews an organization's financial statements and provides assurance they are accurate and comply with accounting standards. This assurance helps stakeholders trust the financial health and operations of a company.

Tax Preparation and Planning

Taxation is another significant area for CPAs. They not only prepare tax returns for individuals, businesses and non-profits, but they also offer advice on tax strategies. This could involve finding ways to minimize tax liabilities, staying up to date on the latest tax laws or assisting with estate planning.

Management Consulting

Many CPAs offer management consulting services. They might be involved in evaluating a company's internal controls, improving operations or assisting with financial strategy. This can also extend to advice on risk management, mergers and acquisitions or implementing new technology.

Forensic Accounting

In cases of financial disputes or suspicions of fraud, a CPA with a specialty in forensic accounting can step in. They analyze financial records to uncover fraudulent activities, assist in legal matters and may even testify as an expert witness in court.

Business Valuation

Whether it's for a merger, acquisition or legal reason, understanding the value of a business is crucial. CPAs specialized in this area can determine the economic value of a company using a myriad of techniques and models.

Information Technology Services

With the digitization of the financial world, many CPAs are now also adept at IT services related to finance. They might assist in implementing financial software (like QuickBooks ), making cybersecurity recommendations for financial data or help in developing technology strategies for financial operations.

Compliance and Regulatory Reporting

Businesses operate in a maze of regulations. CPAs help navigate these regulations by ensuring companies comply with financial reporting standards , whether that’s GAAP (Generally Accepted Accounting Principles) in the U.S. or other international standards.

Education and Training

Many CPAs serve as educators, whether as professors in universities or as trainers in corporate settings. They help cultivate the next generation of accountants and keep current professionals updated on the ever-evolving world of finance and accounting.

Environmental Accounting

As businesses become more environmentally conscious, they need expertise in measuring and reporting their environmental impact, from carbon footprints to waste management. CPAs trained in environmental accounting provide this valuable insight, helping businesses align their operations with sustainability goals.

Ethical Responsibility

CPAs occupy a unique niche in the financial industry because of their overriding independence. High ethical standards are important in many financial positions – but the focus is usually on doing what’s in the best interest of the client. In many cases, a CPA will need to pursue accuracy over a business’s best interest.

Very few professionals are entrusted with the same responsibilities as a CPA performing audits and forensic accounting. Their standing must remain above reproach for the sake of a host of parties (shareholders, company owners, employees, banks, etc.). It’s vital that the person paying the CPA doesn’t enjoy undue influence over the results of those activities.

At H&H Accounting Services, our team is acutely aware of the importance our clients place in objectivity, transparency and honesty. We’re proud to uphold those values and constantly strive to justify the trust placed in us by our accounting customers.

Get CPA Assistance in Phoenix

Are you in need of accounting services from a licensed and qualified CPA? H&H Accounting Services is here to help. Our Phoenix CPA is always ready to meet the accounting needs of local businesses and individuals. Call us at (480) 561-5805 for a free one-hour consultation .

Is a CPA Better Than an Accountant?

Fri, 08 Sep 2023 17:11:03 GMT

There are some things a CPA can do, like certify financial statements if your business is seeking financing, that can’t be done by an unlicensed accountant. On the other hand, there are scenarios in which hiring a CPA to perform a job a non-CPA could do would be a waste of resources. As with many professions, there’s a diversity of specialists and qualifications in accounting. You wouldn’t want a CPA to handle bookkeeping or payroll, but you would need a CPA to represent you before the IRS in the event of an audit.

What Is a CPA?

A Certified Public Accountant is an accountant who has passed the Uniform CPA Examination and met all the other necessary state certification and experience requirements. In Arizona the requirements are:

At least 36 hours of non-duplicative accounting courses (30 of which must be upper-level courses)
150 hours of college-level education in accounting (for reference the average BA is 120 credit hours)
2,000 hours of verified accounting work experience
A minimum of one year experience in a public accountancy firm supervised by a CPA
Passage of the Uniform CPA exam (requires a score of 90 percent or better)

Arizona does not offer license reciprocity, meaning that CPAs from out of state aren’t licensed here. If you want to work with a CPA in Arizona, it will need to be one who is licensed in Arizona.

Going through all that makes CPAs unique – it’s a huge investment of education and professional time simply to qualify for CPA licensure. This isn’t to say many accountants who haven’t earned their CPAs (or haven’t yet) aren’t qualified accountants – but being a CPA is an indicator of one’s dedication to the craft.

When to Choose a CPA

Complex Tax Situations: If you’re dealing with complex tax scenarios , such as owning multiple businesses or properties, inheriting wealth or dealing with international tax issues, a CPA may be better equipped to guide you.

Audits and Legal Matters: If your business is being audited or if there are potential legal implications tied to your financials, a CPA could be more suitable given their training in these areas.

Business Consulting: CPAs often branch out into business consulting , offering advice on business strategy, financial forecasting and more.

Forensic Accounting: If you suspect fraud or any financial irregularities , CPAs who specialize in forensic accounting can be invaluable.

When an Accountant Might Suffice

Basic Bookkeeping: For day-to-day record-keeping tasks , paying bills, invoicing and maintaining general ledgers, a regular accountant might be all you need.

Preparing Simple Tax Returns: If you’re an individual with straightforward finances or a small business without complex dealings, a seasoned accountant can prepare and file your taxes without the CPA title.

Budgeting and Financial Analysis: If you simply want to assess your financial health or create a budget, a good accountant should be able to help.

Payroll and Reporting: Handling employee payroll and producing standard financial reports can be accomplished effectively by an accountant.

Cost Considerations

Hiring a CPA generally costs more than hiring an accountant without the CPA designation. This is due to the specialized training, expertise and certification that comes with being a CPA. Hiring the best in any field comes at an added cost, but there are scenarios in which businesses or individuals require this added level of expertise and accuracy. For things like IRS audits, forensic accounting, tax planning or advising on things like cash flow management, a CPA may either be a necessity or the preferred professional to call.

There are many scenarios in which a CPA’s guidance will pay for itself, especially in an advisory capacity where their guidance could save a business far more in the long run than the initial cost of hiring a CPA.

Get Experienced and Reliable Assistance from a Phoenix CPA

H&H Accounting Services in Phoenix offers comprehensive accounting services ranging from consulting and audits performed by our CPA to reliable individual and business tax preparation, business bookkeeping and assistance with benefits planning. Whatever accounting or consulting services you or your Phoenix business needs, you can rely on H&H Accounting Services to approach your job with dedication, accuracy and a commitment to the highest ethical standards. Call our team at (480) 561-5805 for a free one-hour initial consultation.

What’s the Difference Between a CFA and a CPA?

Tue, 29 Aug 2023 19:14:57 GMT

Areas of Focus and Expertise

Examination and Certification Process

Work Experience Requirement

Career Paths and Opportunities

CFA: CFAs often find roles in asset management firms, hedge funds, investment banks and private equity firms. Common job titles include portfolio manager, research analyst and risk manager.

Global Recognition

CFA: The CFA designation is globally recognized and offers a standardized skill set for investment professionals worldwide.

Continuing Education

CFA: Once the CFA charter is obtained, charter holders are encouraged to maintain their knowledge and skills through the CFA Institute’s continuing education program, although it isn't mandatory.

Do You Require the Assistance of an Arizona CPA?

What Are the Duties of a CPA?

Tue, 29 Aug 2023 19:04:15 GMT

Auditing and Assurance Services

Tax Preparation and Planning

Management Consulting

Forensic Accounting

Business Valuation

Information Technology Services

Compliance and Regulatory Reporting

Education and Training

Environmental Accounting

Ethical Responsibility

Get CPA Assistance in Phoenix for Your Small or Medium Sized Business

Why Should Your Phoenix Business Work with a CPA?

Tue, 29 Aug 2023 18:52:58 GMT

There are compelling reasons for both businesses and individuals to work with an experienced accounting firm with at least one Certified Public Accountant (CPA) on staff. CPAs can help with everything from bookkeeping and audits to benefits planning and compilations.

A CPA’s services can also be valuable for people seeking assistance with personal income taxes, especially high net-worth individuals who are looking for ways to minimize their tax burden or establish a sustainable, long-term estate and tax plan.

You’ll also need to work with a CPA if you or your business is ever audited by the IRS. Having an experienced CPA in your corner can not only help you successfully navigate the situation but also greatly reduce the stress you experience.

Businesses that want to avoid the expense of maintaining an internal accounting and finance team or those who just need expert help to supplement their existing team in specific circumstances (like for compilations or internal audits) should also consider finding a CPA. If you’re seeking the assistance of a CPA in Phoenix, H&H Accounting Services can help.

Expert-Level Tax Knowledge

Many individuals can get by perfectly well with an entry-level tax preparer with fairly basic training. However, if your income is on the high side, you’re deriving income from complex or unusual revenue streams, you’re a retiree or you’re being audited, a tax preparer with a certificate from a 72-hour training course might not be adequate to your needs.

Only accounting professionals who have demonstrated an extremely high level of proficiency in tax laws and regulations can earn and maintain a CPA license. CPAs in Arizona require a minimum of 36 credit hours in accounting classes, 30 of which must be at least master level courses.

They must renew their license every two years, meaning they have to stay apprised of changes to tax laws and regulations to avoid losing their license. This helps establish a reliable level of confidence in any CPA you hire, as they wouldn’t be a licensed CPA if they didn’t keep up with modern rules and regulations.

Financial Planning and Developing Strategies

There’s more to accounting than accurately tracking income and expenses (although that is important). Tracking a business’s financial health, identifying opportunities for cost savings, finding creative ways to improve cash flow and thinking outside the box to develop strategies for maximizing profit growth are all ways in which a skilled CPA can help all types of businesses.

Any business owner in Phoenix who is looking for a seasoned accounting expert to help with budgeting, forecasting or developing long-term financial roadmaps should strongly consider reaching out to our CPA at H&H Accounting Services.

Supporting Decision Makers

Business owners know it can be lonely at the top. You might have trusted managers and employees who you rely on without reservation for running the day-to-day operations of your business – but that doesn’t mean they’re qualified to help with long-term planning or big decisions that could affect the solvency or success of your business. In fact, having some space between your business and a consultant can be a huge benefit when it comes to getting honest advice.

Our CPA doesn’t feel the need to sugar coat or obfuscate the truth to spare your feelings. We’ll provide honest and transparent analysis, even if what we’ve found isn’t necessarily what you want to hear. That level of honesty is one of the reasons why it can be helpful to consult with someone outside of your office. We work with data and believe data-driven decision making leads to optimal choices and outcomes.

Our CPA can advise you on all types of big decision, including things like:

Expansion planning
Selling your business
Major purchases
Finding and qualifying for financing
And much more

Adhering to Necessary Reporting Guidelines

Many businesses are subject to complicated regulations, not to mention state and federal taxes. We can help you develop and implement the necessary reporting and compliance practices to safeguard your business and prevent avoidable disruptions. We can also help compile independent financial reporting for outside parties, like stakeholders, investors, lenders and regulators.

Audits, Reviews and Compilations

There are a variety of audits, both internal and external, that may be necessary for obtaining financing or finding investors. A CPA is required for many of these processes. For example, compilations must be put together by a trusted and reputable CPA, and audits and reviews typically need to be performed by properly licensed CPAs. H&H Accounting Services can help you determine what types of audits or reviews are necessary for your situation and help with any level of analysis or data compiling.

Dealing with Changing Times

Running a business is rarely a straightforward, worry-free endeavor. Everyone needs help sometimes, whether it’s help with financial problems, weathering tumultuous or destabilizing industry events or helping you navigate challenges that are unique to your business or sector. A CPA can provide strategic guidance and financial advice to help you overcome those challenges and safeguard your business.

Get in Touch with an Experienced Phoenix CPA

Businesses and individuals in Phoenix who require the assistance of a CPA should contact H&H Accounting Services. Our team is always ready to assist with a variety of accounting and consulting services. Discuss your situation with our CPA during a free one-hour consultation by calling (480) 561-5805.

Compilations in Phoenix

Mon, 20 Feb 2023 19:07:46 GMT

We Regularly Help Businesses with Monthly, Quarterly and Annual Compilations

Compilations are a traditional type of report CPAs compile on behalf of businesses for bookkeeping and accounting purposes. Compilations don’t have the level of independent assurance for accuracy that a review or audit does. However, when based on accurate inputs, it provides reliable financial statements business owners, potential lenders and interested outside parties can use to judge a business’s performance.

Lacking the level of assurance provided by reviews or audits doesn’t negate the value of compilation, especially if a business is already adhering to GAAP, keeps thorough and accurate bookkeeping records and is transparent with the accounting firm or CPA developing the compilation.

These collections of financial statements can be particularly powerful tools for business owners and decision makers in a business or organization. They allow leaders to make informed decisions on the best ways to move forward or simply understand their financial health and stability.

Is a Compilation Adequate for Getting a Small Business Loan?

It really depends on the scenario and the type of loan you’re seeking. Banks may base the level of assurance they need on things like your history with the bank, your credit and the size of the loan you’re seeking. In some cases, a compilation or review may be adequate, while in others you may require a full audit to obtain approval.

Sometimes it helps to speak with an accountant or CPA beforehand to discuss what type of funding avenues are available for your business and what type of financial reporting makes the most sense for your situation. Doing so might save you a lot of money in the short and long term.

Essentially, it makes more sense to go with a much more affordable compilation rather than a more invasive, time consuming and expensive review or audit when all you really need is the assurance provided by a compilation generated by an independent and reputable local Phoenix CPA.

If a lender wants greater assurance that the financial statements contained within the compilation accurately reflect the operations and health of your business, a compilation may not be adequate to your needs.

How Often Should Your Business Get Compilations?

Monthly, quarterly or annual compilations can provide several benefits for small businesses, including:

Improved Record Keeping: Compilations help small businesses keep their financial records organized and up to date.
Enhanced Credibility: Presenting compiled financial statements to stakeholders can increase the credibility of a small business.
Better Planning: Compilations provide a clear and concise picture of the financial health of a small business, which can help with future planning and decision making.

The frequency at which your business may benefit from compilations depends on the size and complexity of the business, the industry in which it operates and the financial reporting requirements. Small businesses may choose to get annual compilations if they want to ensure their financial records are accurate and up to date, or if they want to demonstrate financial stability to potential lenders, investors or other stakeholders.

Do Lenders Require Regular Compilations?

There may be scenarios where a lender, as part of a loan agreement, requires a small business to provide a compilation on an annual basis. It’s important to understand the requirements of loans or expectations of lenders prior to agreeing to a loan.

If you have questions about compilations, how they are different from audits or reviews or simply want to know if your business should invest in a compilation, call H&H Accounting Services at (480) 561-5805.

Preparing Financial Statements in Phoenix

Mon, 13 Feb 2023 18:41:24 GMT

We’ll Help Prepare All Relevant Financial Statements for Your Business

Many business owners only find an accountant to prepare financial statements when they need them for a specific purpose. You might need them if you’re seeking funding from investors or venture capitalists (VCs), or when you’re trying to sell your company or get a loan from your bank.

However, there are compelling reasons to have up-to-date financial statements prepared periodically (or at least at the end of the fiscal year), even if you don’t have a specific, pressing need for them. Financial statements provide a window into your business’s health, wellness and sustainability.

Things like balance sheets, profit and loss reports and cash flow statements can help you make more informed decisions about nearly every aspect of your business, from hiring more staff (or laying some off) or expanding to a new location to equipment investments or fleet expansions.

As a business owner, you likely have an intimate understanding of your business and everything that happens within it. There’s likely no one who knows it better. Many business owners are still surprised at the observations they make when they see their business’s performance in the cold, hard black and white of a balance sheet or profit and loss report. You might discover things that seem obvious in retrospect, but that you never really consider in the day-to-day operations of your business.

Working with a CPA or accounting firm can help you gain a broad understanding of your business’s financial health and what that means for your sustainability and future growth.

Financial statements are prepared at various frequencies depending on your business’s needs (monthly, quarterly, annually or as needed).

Compilations

These collections of financial statements come with a cover letter on your CPA’s letterhead making it clear to outside parties (such as lenders) to establish independence from the business for whom the compilation is performed and assurance that the financial statements were prepared according to Generally Accepted Accounting Principles (GAAP).

If a CPA isn’t independent from the business, they must disclose and detail the circumstances of the relationship. This adds a veneer of trust and authority to financial statements used by lenders to verify the condition of your business’s health and financial situation.

A compilation is not the highest level of assurance of financial statement accuracy for outside viewers and is therefore not as expensive. Other measures, like reviews or audits, come with greater levels of independent assurance.

If your business is in need of complications, reviews or audits for loan applications or other purposes, get in touch with the team at H&H Accounting Services.

How Is a Compilation Created?

Essentially a compilation is generated by the CPA based on records and documents provided by the client. The accountant doesn’t need to go into your bookkeeping software to dig up that information on an in-depth review or audit; it’s simply based on what you provide. It’s accuracy is based largely on your business’s level of transparency.

You may be expected to provide things like:

Bank statements
Schedules of accounts
Aging schedules
Operating agreements
Loan agreements
Leases
Any other relevant documentation

The accountant you speak to about generating your financial statements can give you a detailed list of the resources they’ll require.

Is the Added Cost of a Review or Audit Worth It?

That depends largely on the purposes of your financial statements, who needs to trust they’re accurate and the quality of the information you’re providing to your accountant. A review offers more assurance than a compilation, meaning the CPA will perform a more analytical review of your accounts when preparing your financial statements. They aren’t necessarily verifying the resources you provide though, which is why it’s considered a medium level of assurance.

During an audit, the accountant will do a deeper dive into internal controls and look for evidence to support the resources you provide. This may include inspection, independently obtaining and reviewing source documents, detail-oriented observation of internal accounting practices and other fraud risk assessments.

Get Help with Financial Statement Preparation in Phoenix

Does your business need to generate reliable and accurate financial statements? The CPA and accounting professionals at H&H Accounting Services are here to assist. Call us at (480) 561-5805 today for a free one-hour consultation.

Reviews and Audits

Mon, 06 Feb 2023 18:28:08 GMT

Let H&H Accounting Services Provide the Reviews or Audits Your Phoenix Business Needs

A review and an audit are two different types of assurance services provided by a Certified Public Accountant (CPA) to assess the accuracy and reliability of a company's financial statements.

Review

A review is a limited level of assurance service that involves the CPA conducting inquiries and analytical procedures to obtain a reasonable level of assurance that the financial statements contained in the review are free of material misstatements.

The CPA provides a written report indicating that the financial statements are fairly presented in accordance with a specific accounting framework but does not provide an opinion on the accuracy of the financial statements.

This level of assurance is greater than what a CPA provides in a compilation cover letter but less than the assurance provided with an audit. Each higher tier of assurance requires more legwork and research on the part of the CPA, which is why reviews can cost significantly more than a compilation but less than an audit.

Audit

An audit is a higher level of assurance service than a review. It involves the CPA conducting an in-depth examination of the financial statements and the underlying accounting records and operations of a business to form an opinion on the accuracy and reliability of the financial statements. They are required to do due diligence to ensure the information they’re using to generate financial statements are indeed factually accurate.

The CPA provides an auditor's report, indicating whether the financial statements are presented fairly, in all material respects, in accordance with a specific accounting framework. This statement means the CPA is putting their own reputation on the line, so they have significant incentive to ensure the financial statements in the audit truly do reflect reality.

When Should a Business Get a Review or Audit Instead of a Compilation?

A compilation is appropriate when a business wants to have its financial statements organized and presented in a uniform format but does not need a review or an audit. A compilation is the least expensive of the three options and is typically used by small businesses that do not need to provide their financial statements to external stakeholders.

A review is appropriate when a business needs to provide at least a limited level of assurance on the accuracy of its financial statements but does not require an auditor's opinion. A review is less comprehensive and less expensive than an audit and can be useful for small businesses that want to demonstrate to stakeholders or lenders that their financial statements have been examined by a professional.

An audit is appropriate when a business needs to have a higher level of assurance on the accuracy of its financial statements and wants to provide an auditor's opinion. An audit is a more comprehensive and expensive assurance service and is typically required by for larger loans, government agencies, investors or other stakeholders.

The specific needs of a business and the requirements of its stakeholders will ultimately determine whether a compilation, review or audit is appropriate. It's always a good idea to consult with a CPA to determine the best course of action.

The team at H&H Accounting Services would be happy to help with your review or audit. Don’t hesitate to give us a call at (480) 561-5805 to learn more about your options.

Tax Deductions for Ecommerce Businesses

Tue, 01 Feb 2022 16:00:26 GMT

Are there special tax deductions or credits unique to online sellers and people who own and run e-commerce businesses? Not exactly – but these types of businesses frequently have certain types of business expenses that do make them eligible to receive many potentially significant deductions.

Necessary and Ordinary Costs

As a rule of thumb, the IRS relies on the “necessary and ordinary” rule for judging whether a business expense is deductible. Any expense your ecommerce business has that is required for operations and would be considered ordinary for similar businesses can likely be deducted in some way, shape or form.

Documentation is an absolute must if you want to claim legitimate deductions. If you or your ecommerce business is ever audited, you will need to justify all your deductions to the IRS.

Do You Run Your Online Storefront From a Home Office?

The home office tax deduction is one of the most common tax deductions for people who are self-employed or SMB owners. Unfortunately, many business owners make mistakes when calculating how big their home office deduction should be. If you claim too much, the IRS may audit you. If you are too conservative with your calculation you may end up paying more taxes than you should.

Technically, your home office deduction is proportional to the space and the cost of your home and utilities – but only as it pertains to your business hours.

If your home is 2,000 sq. ft. and your home office is 200 sq. ft., then 10 percent of your home is a work expense. If your mortgage is $2,000 a month, then that space would cost $200 a month. You could do the same type of calculation for your power use, internet costs, phone bill, etc. Just make sure you’re using a justifiable percentage.

There are other requirements as well, like:

You must primarily run your ecommerce site out of that home office
Technically, that room should only be used to run your business and not have non-business uses

Shipping Supplies and Costs

Nearly all the shipping costs for small ecommerce businesses are deductible – from packing peanuts to postage. Some businesses can even deduct the cost of P.O. Box rental. For any online store that ships sold products to customers, shipping costs are a necessary expense.

Do You Store Ecommerce Inventory in Your Home or Offsite?

In either case, you likely qualify for storage deductions. The home storage deduction is similar to the home office deduction, but to use it your home must be your exclusive business location (can’t have other fixed business locations). The space you claim for an inventory storage deduction also needs to be designed specifically for storage (like a garage).

Ecommerce businesses that use offsite storage, like rented warehouse space or a storage unit, can alternatively deduct the rent they pay for that space.

Home Utility Expenses that Can Be Deducted

If you run an online store out of your home, you will undoubtedly be using your home’s internet connection for doing business. You’ll also likely be using other paid services, like your cell phone or various video conferencing apps. Any expenses you incur at home that are business related likely qualify for a tax deduction. As with the home office, the deduction is not for your entire cell phone bill – only the percentage of it dedicated to your business. If you’re exclusively on business calls for eight hours each day, then your personal cell phone is a business expense about a third of the time.

Rent and Office Costs

Not every Ecommerce business is run out of the owner’s home. Many require office space or even rent desk space in various coworking environments. Your rental expenses and even your utilities or office supply costs may be deductible.

Not every office expense will be deductible for every business, which is why you should speak with the business tax preparers at H&H Accounting Services before you file your taxes to ensure compliance with all IRS rules.

Website Costs

If you’re running an ecommerce business, you likely have a lot of ancillary website costs. Everything from specific software you use and WordPress themes to hosting costs and SEO tools are potentially deductible.

These expenses are a necessary part of running your business, and they are clearly separate from your own personal expenses (in most cases). If your ecommerce website and hosting expenses are solely for your business, they are likely deductible. Even marketing tool subscriptions may potentially be written off.

Did You Use Independent Contractors to Build or Maintain Your Website?

Make sure to have every contractor you use fill out a W-9. Adhering to IRS reporting rules for freelancers is hugely important if you want to avoid running afoul of federal tax laws. If you follow the right procedures, you can deduct any wages you pay to independent contractors who build out and work on your ecommerce website.

Get Help with Your Ecommerce Tax Preparation

Tax laws can be hugely advantageous to ecommerce business owners who make full use of their deductions. However, the IRS is always on the lookout for people who claim more deductions than they should, especially if those businesses don’t have the receipts or bookkeeping to back up their deductions.

The business tax preparers at H&H Accounting Services understand business tax law inside and out. We’re always happy to help Phoenix ecommerce business owners maximize their tax savings while maintaining compliance with federal law.

Call us at (480) 561-5805 for a free one-hour consultation .

Understanding Exactly How Income Taxes Work for You and Your Business

Wed, 26 Jan 2022 19:06:05 GMT

No business is entirely immune from taxes. Even those operating at a loss still need to justify their revenue and expenses to the IRS to prove they actually don’t owe any taxes. How your business needs to report earnings to the IRS varies depending on how it’s structured.

For example, corporations need to use IRS Form 1120 . A sole proprietor needs to file a Schedule C Form 1040 as a profit or loss statement. This is also the same for an LLC since technically the limited liability company doesn’t pay income tax, but the owners would need to report all their business income.

Sole Proprietors and LLCs

Two Form 1040s – If you’re a sole proprietor or the owner of an LLC, you may need to file two 1040s, one for your individual income tax and a Schedule C profit and loss form.

Form 1040 Schedule C-EZ – Small businesses, like gig workers, freelancers and some contractors, may be able to file the Schedule C-EZ. It’s given the “EZ” specification because it’s… easier to file. Not every business qualifies for the easier option, so make sure you visit the IRS’s Schedule C-EZ page to learn more . Basically, you can use the easy version if:

You don’t have any employees
Your business doesn’t keep any kind of inventory (products, supplies, etc.)
Your business expenses are less than $5,000
You earned a profit

Many gig workers and freelancers fall into this category. If you do something like writing, programing or designing and all you use is your computer, you might meet all those qualifications.

Form 1040-ES – Regardless of how big your business is, if you’re self-employed, you need to pay estimated quarterly taxes. This is essentially government-mandated DIY withholding. You can do this online through the government’s EFTPS dashboard . There are several other options, including a direct pay for individuals and credit card payment options for businesses or individuals .

Failing to make your quarterly payments can result in penalties, even if you pay all your taxes before the tax deadline.

Form 1040-SE – This is essentially just a tool to help you figure out what you owe for Social Security and Medicare, or the “Self-Employment Tax.” Since you don’t have an employer who is paying half of your SS and Medicare, you’ll need to pay all of it yourself. It’s generally going to be 15.3 percent of your income (12.4 percent for SS and 2.9 percent for Medicare).

Partnership

Schedule K-1 – Each partner needs to complete the Schedule K-1. The information from the Schedule K-1 is then used to complete the joint Form 1065. Its main purpose is to determine each partner’s stake in the business and its profits or losses.

Form 1065 – This is just an “informational form.” The IRS wants to know what your business made or lost so it can confirm what you end up paying in your personal 1040 is accurate and fair.

Form 1040 Schedule E – In addition to your Form 1040, you might also be required to file a Form 1040 Schedule E, which is only required if you have supplemental income or losses from your partnership business.

Corporations

Form 1120-S – This is the S Corp version of the 1040 Schedule C. It’s the IRS’s tool for tracking not only your businesses revenue, expenses, losses and profits but also any credits or deductions to which your corporation may be entitled.

Form 1120-S Schedule K-1 – Just like the partnership K-1, every shareholder will be required to fill out this form. It serves the same purposes and usually doesn’t need to be filed with the IRS. It’s mainly a tool to help shareholders figure out their personal profit or loss from the business when they fill out their personal income tax forms.

Save Yourself a Lot of Time and Effort With a Business Tax Preparer in Phoenix

Preparing your business’s income taxes is a time-consuming job, especially if you haven’t stayed on top of your company’s finances for the past year. It’s easy to make a mistake or miss out on deductions or credits that could significantly reduce your business’s tax burden.

Working with a business accountant not only saves you a lot of time and frustration when April rolls around – it also helps ensure you won’t make a mistake or end up paying the IRS more than you should.

Schedule a free consultation with the business tax preparation and accounting professionals at H&H Accounting Services by calling (480) 561-5805.

How Can You Build Business Credit?

Tue, 04 Jan 2022 19:27:34 GMT

Having good business credit means you’re more likely to qualify for financing, commercial lines of credit and better terms and rates on your loans. All those things are important, especially if your business relies on credit for day-to-day operations, inventory, new equipment or much-needed expansions. There are many ways in which businesses, even healthy, robust businesses, benefit from borrowing money.

As with personal credit, there are things you can do to improve your business’s credit or damage it. The best thing you can do to build credit – personal or business – is to borrow money and pay it back on time.

The way your business qualifies for credit can make building credit a bit of a Catch-22. It’s tough to borrow money if you don’t have good credit or have no credit history, which makes it harder to build good credit.

Thankfully, there are many things you can do to improve your business credit that don’t require you to qualify for business financing.

You Can’t Build Business Credit Without a Business

This may seem like an obvious statement, but you’ll need a registered business separate from your personal finances to effectively build business credit. This may be an issue for sole proprietors or contractors who don’t have an employer identification number (EIN).

If you’ve just been using your own Social Security Number and reporting your income on a Schedule C form, it may be time to incorporate your business as either a C-Corp or S-Corp or register as an LLC. For most new small businesses, the LLC (limited liability company) route makes the most sense, but each situation is different.

Being able to keep business and personal expenses separate is vital for building business credit.

You’ll need to apply for an EIN through the IRS. Since businesses don’t have Social Security Numbers, they use EINs to identify themselves on tax forms. You can apply for business credit with your Social Security Number if you’re a sole proprietor or LLC owner without employees, but as far as the lender is concerned there will be no delineation between you and your business credit, which may be problematic or limit your borrowing options.

Having a separate business address and phone number can also help draw a clear distinction between you and your business.

Start Basic Business Financial Accounts

Opening a business checking account or any type of business banking account is a good second step after you’ve registered your business and gotten an EIN. You generally don’t need good credit to start a business bank account, you just need a business.

Making rent/mortgage payments and paying utilities does incrementally help your personal credit, and it essentially works the same way for business credit. Don’t pay business expenses out of your personal accounts – use your business bank account to pay business expenses. It will start building a credit history that will be associated with your business and not you personally.

How Business Credit Scores Work

There’s not a whole lot of difference between business credit agencies and personal credit agencies. The main differences are the agencies themselves. The most important credit score for most businesses will be their Dun & Bradstreet Paydex score . Many commercial lenders, vendors, suppliers and commercial landlords will reference a business’s Paydex score when determining risk.

You can take a proactive step by registering with Dun & Bradstreet’s Data Universal Number System (DUNS). Many loans don’t require a business to have a DUNS number, but some do – and registering is free, so why not do it?

Some of Your Vendors Might Report to Credit Bureaus

Your regular supplier and vendor relationships may be one of the best credit-building tools available, especially if they report to credit bureaus. Businesses extend each other credit all the time in the form of payment schedules. If you operate on NET 30, NET 60 or NET 90 with a vendor, and you always pay on time or early, it can help build you credit over time.

Reputation and business relationships matter, so try to leverage them where you can.

Business Credit Cards and Lines of Credit

If your business qualifies for a business credit card you should strongly consider getting one – as long as you can pay off your balances in full on time or early. Some businesses may also be able to qualify for a business line of credit, which is essentially money your lender puts in your business bank account that you’ll need to pay back.

Not every business owner will be able to qualify for a business credit card right out of the gate, especially if they have less-than-perfect personal credit, but if you can, it will be helpful.

Get Help With Business Financing in Phoenix

One of the many services our team at H&H Accounting Services offers is help applying for financing. We have extensive experience preparing the various reports, statements, compilations and budgets that lenders often want to see before approving your business for financing.

If you need help qualifying for building, expansion or equipment loans, our team can assist. We’re also the Phoenix accountants to call for any tax preparation or bookkeeping needs you may have. Call us at (480) 561-5805 for a free one-hour consultation .

What’s the Difference Between Business Auditing and Business Consulting?

Mon, 03 Jan 2022 16:00:22 GMT

Auditing specifically refers to the act of reviewing finances and records to verify the accuracy of financial statements, inventory, tax documents or some other aspect of a business’s operations. It may also be used to determine the value or locations of assets. It can be done in a legal investigatory context, as a quality assurance measure or as a safeguard against mistakes and fraud.

Consulting entails analyzing a business, identifying an issue and providing solutions. Consulting on financial matters is just one operational aspect of a business a consultant may evaluate.

Why Is Auditing Important?

Not every business will always need or benefit from auditing. It’s often specifically performed to investigate alleged or suspected fraud or for the purposes of fraud detection or deterrence. Auditing may also be necessary if a business has had historically poor accounting practices. Auditors are often tasked with checking existing financial documents against actual funds and assets to confirm everything is accurate and legal.

Differences Between Auditing and Consulting

Auditors and consultants have different skillsets. Auditors generally have backgrounds in finance and forensic accounting. They need to be intimately familiar with all types of balance sheets, financial documents and financing methods. An auditor must be able to track revenue, expenses, real property or any other assets and records across many different types of financial institutions and piece together a full and accurate picture of a company’s financials.

Consultants may have more specialized knowledge in certain aspects of running a business, but in many cases business consultants have broad experience in things like management, finances, accounting and human resources.

Both consultants and auditors are frequently Certified Public Accountants (CPAs) or have backgrounds in accounting, because being able to analyze all types of financial statements is often necessary for both professions.

Where auditors tend to focus on getting an accurate picture of a business’s financial situation, consultants are generally tasked with developing solutions to existing problems or improving specific aspects of a business’s operations.

For example, at H&H Accounting Services our business consulting services include things like financial analysis and developing and implementing accounting practices, both of which are related to auditing.

In addition to those services, we can also help with things like choosing an employee benefits plan, forecasting growth, developing risk management strategies and assisting with tax planning.

Cashflow is a significant struggle for many SMBs, especially right now. A business consultant can help you better manage cashflow and identify ways in which you can make your capital go further without needing to increase revenue.

Businesses might also hire a CPA like H&H Accounting Services before a merger or acquisition. A business consultant can help plan, double check the legality of every aspect of the merger, identify business redundancies and analyze each entity’s separate financials.

In short, both auditors and business consultants have their uses, but auditors tend to have a narrower focus on statements, bank accounts and financing, while business consultants can potentially advise on virtually every aspect of a business.

Should You Hire a Phoenix Business Consultant?

Not every business needs a business consultant or auditor all the time, but most SMBs can benefit from working with a consultant at some point, especially when attempting to overcome specific challenges.

Economic downturns, unexpected supply or demand disruptions in your industry or challenges caused by internal or external factors can throw hurdles in your business’s way. The COVID-19 pandemic was a perfect example.

Investing in a business consultant may help your Phoenix small business weather difficult times or unique situations.

Can a Phoenix Accountant Help Me Avoid Audits?

The simple answer is yes. More than any other business investment you make, having a bookkeeper, accountant and business tax preparer is likely the best way to prevent audits.

Audits generally aren’t desirable. They’re usually only necessary when something needs to be investigated, like discrepancies in your assets or IRS suspicions that your business isn’t paying its fair share of federal taxes.

Working with a Phoenix accountant and tax preparer like H&H Accounting Services is one of the most reliable ways to prevent time consuming and costly audits. When combined, our bookkeeping, accounting and tax preparation services make it easy for business owners to maintain maximum visibility into their company’s finances. It also makes business taxes far easier to manage.

You can schedule a free one-hour consultation with our team by calling (480) 561-5805. We’d be happy to come to you.

SBA Loans: Are They Right for Your Business?

Fri, 03 Dec 2021 19:00:03 GMT

There are pros and cons to all types of financing, including loans from the Small Business Administration (SBA).

What Is an SBA Loan?

SBA loans aren’t directly from the government; they’re Small Business Administration-guaranteed loans from a lending institution. There are many different types of SBA loans designed to meet a variety of capital needs.

The benefit for a lending institution is the loans are guaranteed up to a certain percentage, meaning banks feel safer in lending to riskier businesses they might not normally lend to if repayment isn’t (mostly) guaranteed.

Different loan amounts have different guarantees. For example, 7(a) loans for $150,000 or less can be guaranteed up to 85 percent, while an SBA Express loan won’t be guaranteed more than 50 percent. Some loans, like Export Express loans, have large 90 percent guarantees.

Some of these loans have very specific requirements. For example, to qualify for 100 percent construction financing, your business will be required to occupy at least 60 percent of the property being constructed.

If you’re considering your business loan options, you need to do your research on the specific types of SBA loans you qualify for or consult with a lender about your SBA loan eligibility.

The Pros of an SBA Loan

It’s not always easy for a small business owner to obtain financing for an expansion, or franchisers to get a loan to expand their burgeoning franchise empires. Lenders might not want to gamble their money on your internal profitability estimates – but the government is often willing to take on the risk to promote growth.

In addition to easier qualification requirements, SBA loans also boast some other borrower-friendly features, like extended term lengths on non-real estate commercial loans. They also lock in max rates at 2.75 over prime for most loans, as long as they’re more than $50,000 with a seven-year (or longer) term.

Small businesses also save a lot of money on down payments with SBA loans. Plus, you can secure financing for between 80 or 90 percent of your project’s estimated costs. There are also far fewer restrictions on what the money can be used for – as long as it’s going toward the stated business project for the loan. The money can be spent on soft costs, franchise fees or even operating costs.

For many people looking to start a small business or expand their existing one, SBA loans may seem like a blank check for the vast majority of their startup costs.

What’s the Catch of SBA Loans?

SBA loans aren’t the best option in every scenario, especially if you qualify for alternative financing with a lower rate. Although the maximum rate is tied to the prime rate, it still often ends up being higher than the rate you might receive from a non-SBA loan from the lender.

You might also need to put down personal assets as collateral to borrow these government-guaranteed funds. If you own a home, your SBA lender will likely want to put a lien on it to ensure you either pay the money back or they can recoup their losses if you don’t.

This may not seem like a big deal to some borrowers, especially if they’re confident in their ability to pay off their loan. However, having a lien on your personal property does have consequences, like making it difficult for you to move or purchase a new home. If you put up capital as collateral, it can affect your liquidity and potentially stand in the way of your business expansion plans.

There are also different types of SBA lenders. If you try to borrow through a non-SBA-preferred lender the process may take longer than normal. A preferred SBA lender essentially acts with the government’s authority to approve SBA loans. A lender that isn’t preferred will need to submit the application to the SBA, which adds an extra layer of bureaucracy and time.

Should You Get an SBA Loan for Your Phoenix Small Business?

Every business owner and entrepreneurial startup venture is different. The types of loans you’ll qualify for will vary based on how established you are, your resources, your business history, the size of the loan and the perceived riskiness of your business venture.

If you’re looking for advice, H&H Accounting Services would be happy to assist. Our team of business consultants and accountants can help you determine which financing options are best for your business and assist with the entire business loan process. Call us at (480) 561-5805 for a free consultation .

Self-Employed Tax Deductions

Thu, 02 Dec 2021 18:50:35 GMT

There are a lot of benefits to being self-employed. Many would argue the ability to write off business expenses is one of those benefits. However, tax deductions can be a mixed bag. Incorrect deduction can draw the flaming eye of the IRS down on you. Even if you have nothing to hide, an IRS audit is a hugely inconvenient process that will require significant time and resources to resolve.

Self-Employment Tax Deduction

If you’re self-employed, you’re undoubtedly familiar with the dreaded self-employment tax. Employers generally pay half of a worker’s Social Security and Medicare, but self-employed workers are responsible for the whole amount (a combined 15.3 percent of your income).

Luckily, the IRS considers your “employer” portion a business cost if you’re self-employed, which means you can deduct half of your self-employment tax from your net income. This specifically applies to your income, not net earnings from self-employment.

Home Office Deduction

Although it may seem simple in theory, determining an appropriate home office deduction that won’t inflame the IRS is a delicate matter.

You essentially need to determine the cost of the physical workspace you use only for business and the cost of keeping it operational.

If, for example, your home office is 10 percent of your home’s square footage then you can technically also deduct the 10 percent of your home mortgage interest, utilities, home insurance, depreciation and even home repairs you performed during the year.

You can also deduct a percentage of your home phone or internet costs as long as you’re using them exclusively for business purposes for part of the time. The percentage matters – if you try to deduct 100 percent of your internet costs, you might run into problems.

Surprisingly, the IRS trusts taxpayers to be honest and often won’t press for proof until your deductions seem excessive. They generally determine what’s abnormal by comparing your deductions to similar businesses in your industry.

If the IRS suspects you’re deducting way more than you should for your home office, they’ll want you to provide evidence to justify your deduction. If you get audited for claiming all the above expenses as deductions, you’ll need to provide the records and math on how you came to those conclusions.

If you want to be on the safe side, H&H Accounting Services can help you determine an appropriate home office deduction for your self-employed business taxes.

Health Insurance Tax Deduction

As a self-employed worker you likely have to pay out of pocket for your own health insurance. Since you don’t have a group plan, your premiums might be higher (unless you’re eligible for your spouse’s insurance).

If you aren’t eligible for anyone else’s plan and you have to pay for your own private policy, you can deduct the entirety of your health insurance costs – including dental and some long-term care premiums. You may also be able to deduct your family’s premiums if they aren’t eligible for coverage through any other sources.

Meals, Travel and Vehicle Use Deductions

Like with home office deductions, these deductions are frequently responsible for getting self-employed people into trouble. These types of deductions are there to be used, but some self-employed filers either accidentally or intentionally abuse them, which may attract the attention of the IRS.

Meals are tax deductible business expenses when you’re traveling for business, entertaining a client or you’re attending an industry/business event or conference. Last year’s changes in the Consolidated Appropriations Act, 2021 provide the temporary ability to deduct the full cost of business meals instead of just half.

These deductions are not intended to be used for your own personal non-business meals, and deducted meals can’t be far more expensive than would be appropriate for the circumstance claimed. You do need to keep not only receipts but a record of the times and places where these meals are occurring.

You’re also now able to deduct food and beverage costs from a work event separately from the entertainment expenses – as long as they’re separated on receipts.

Travel expenses can be deducted for trips that require more than a workday, meaning the length of the trip necessitates a rest period and the associated costs (like getting a hotel room). You’ll need to be able to cite a specific business purpose for the trip (sales, training, etc.).

Receipts are vital if you want to claim travel expenses. You can potentially deduct the cost of transportation both to your destination and at your destination (taxis, rideshare) as well as meal and lodging expenses.

Many of the meal deduction rules apply to travel deductions. Particularly extravagant lodging or meals can cause issues. You also can’t deduct the cost of your family’s travel if you bring them with you – you can only deduct the business portion of your travel expenses.

Vehicle and mileage deductions also require milage and travel records. The 2021 standard mileage rate is 56 cents , a bit lower than the 2020 rate of 57.5 cents per mile. The calculation is generally business miles driven multiplied by the standard mileage rate. If you’re using your personal car or a leased car, the calculation is a bit more complicated.

Our business and personal income tax preparers would be happy to help with your records and calculating your appropriate deductions.

Let Us Help You Maximize Your Tax Deductions in Phoenix

The team at H&H Accounting Services is dedicated to helping our clients keep more of their hard-earned money without running afoul of the IRS or state tax enforcers. The above are just some of the deductions we can help you with. There are also potential self-employment deductions for:

Business loan interest
Subscriptions
Training and education
Business insurance
Commercial property rental costs
Costs associated with starting a new business
Advertising expenditures
Retirement savings contributions
And more

Call us at (480) 561-5805 to find out how we can save you money on both your business taxes and your personal income taxes .

How a SWOT Analysis Can Start Your Business Off Right

Mon, 25 Oct 2021 20:33:13 GMT

The purpose of a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is fairly straightforward. The goal is to identify your business’s strengths, its shortcoming, potential opportunities for expansion or diversification and both short-term and long-term threats.

A strength could be something like quality. Maybe your business offers a better product than some of your competitors. A weakness could be high operating expenses or uneven cashflow. An opportunity might be the potential to open a second location. Threats often entail things your business can’t change, like new competitors or changing consumer preferences.

There’s no wrong time to do a SWOT analysis. Your business might benefit from doing a SWOT analysis at the very beginning, but there are many compelling reasons to perform them periodically throughout the life of your SMB.

Many businesses perform a SWOT analysis at least once a year. It can be a valuable tool to get your team on the same page about the health of your business and brainstorm ideas on ways it can be improved.

Gather a Team with Diverse Perspectives

Although you can do a SWOT analysis with just your upper management, it’s often a good idea to include middle managers, frontline employees or in some cases even customers. Getting perspectives from just one tier in a company’s hierarchy may offer a lopsided view and lead to groupthink about what constitutes a strength or weakness or what might be a real problem in the future.

The front-line workers in brick-and-mortar retail establishments who interact directly with customers often have good input to provide about how customers feel about their experience in the store, the selection and quality of products or how pricing or the shopping experience compares to competing stores.

Front-of-store workers, customer service specialist or retail salespeople also talk to their coworkers and might be privy to grumblings about benefits or compensation that don’t always make it up the chain from shift managers to store owners. For example, they might tell you that you’ve lost several employees to a competitor who offers an extra dollar per hour and health insurance to hourly workers.

People in management also have very different perspectives on what’s happening within a store based on where they’re positioned. Someone in HR might be more attuned to trends in employee behavior than other managers. Someone in accounting or distribution might spot potential supply hurdles sooner than other managers.

Customer feedback can also be important. Taking into account surveys or trends in online reviews can add value to a SWOT analysis. Honest and unvarnished assessments from regular customers might draw your attention to things your competitors do that you could emulate, or help you identify strengths you didn’t realize your store possessed.

For example, maybe you have a manager internally who thinks an overreliance on self-checkout is a weakness since it takes the personal touch out of the shopping experience. Then you find out through customer feedback that a lot of your shoppers specifically visit your store because it offers self-checkout. You might also discover that customers know they could pay less by going to one of your competitors but prefer to pay a bit more for the level of service or quality offered by your store.

Strengths

Strengths are things your business does well. This can include both the skills or knowledge of your team as well as the physical assets or infrastructure of your business. This is also where you’d want to include competitive advantages, like offering better pricing or products than your competitors.

Weaknesses

Being honest about all your business’s weaknesses is important, but it’s often best to focus on the most pressing weaknesses and the ones that are within your control to fix. If you know employee turnover is a problem, you can take this opportunity to diagnose causes and brainstorm solutions. Also list things your business lacks in terms of equipment, processes or institutional knowledge. A weakness could be anything from a poor location to unreliable suppliers, so think broadly.

Opportunities

Consider not only opportunities within your existing business offerings but also the potential for diversification. A weakness could also be an opportunity. If you know poor brand recognition is a weakness you can consider various marketing solutions or branding campaigns as opportunities. Opportunities might also be acquiring new technologies, systems, patents or even specialists.

Threats

Threats often focus on competitors and things that are beyond your control. For example, you can’t control the demand for your services. If your business had contracts to maintain payphones or print phonebooks, then cell phones and the internet were extinction-level threats. Hopefully your business doesn’t face those kinds of threats, but waning demand for your services or new competitors might constitute threats.

Would Your Phoenix Business Benefit from a SWOT Analysis?

Performing your own SWOT analysis is fairly simple. You could do it with a group on a big white board or even a piece of paper. Just draw four boxes – one for strengths, weaknesses, opportunities and threats – and list the pertinent points for each. If you’re looking for more in-depth analysis on specific aspects of your business – like employee benefit plans, cash flow, cost controls or risk management – the Phoenix business consultants at H&H Accounting Services can help.

Give us a call at (480) 561-5805 for a free, no-obligation consultation .

What Documents Should I Keep for Accurate Bookkeeping?

Mon, 25 Oct 2021 19:38:23 GMT

There’s a lot that goes into successful bookkeeping for your business . The overarching idea of bookkeeping covers more than just recording revenue and expenses each month. The primary role of bookkeepers is to record sales, receipts, payments and purchases in various ledgers – including petty cash books, customer ledgers, supplier ledgers and general ledgers. There are some ways in which bookkeeping may, by necessity, overlap with record keeping more generally.

What Types of Records Should You Keep for Bookkeeping Purposes?

Financial documents of all types are the most obvious answer, but there a handful of other important records or documents it’s important to keep for bookkeeping purposes. These include:

Business and employee certifications
Copies of business licenses
Important business documents (meeting minutes, resolutions, etc.)
Copies of your articles of incorporation
Permits and applications for permits
Business contracts
Insurance policies
Your business’s bylaws, operating agreements and relevant amendments
Any official financial fillings your business has made in the past
Tax returns and other tax documents
Cancelled checks
Electronic payment records
Records of fund transfers
Invoices, credit card statements and financing documents
And much more

What might be considered excessive pack rat collecting in your personal life is more like thorough due diligence when it comes to your business. If you’re not sure whether you need a document, it’s probably best to keep it. Even things like old insurance policies might one day be relevant if a past client or customer files a claim.

The Act of Bookkeeping

There are a handful of other responsibilities bookkeepers have in addition to maintaining ledgers and safeguarding records. For example, many businesses roll things like payroll and invoicing into bookkeeping. Whether your business has a dedicated bookkeeper or you work with a third-party provider like H&H Accounting Services depends on your personal preferences and your business’s needs.

You’ll also need to decide on things like your accounting method. With cash-basis accounting you only record income and expenses when money is exchanged. Accrual-basis accounting allows you to record transactions as they’re incurred, even if funds aren’t exchanged until a later date.

Many business owners feel like cash-basis is the easier of the two options. Cash-basis allows you to have a clearer picture of the cash you have on hand at any given time, while accrual-basis tends to provide a more accurate picture of your business’s health.

Which you choose likely depends on your particular business. Many professional business accountants and bookkeepers can provide both so business owners can watch the health of their business in terms of actual cash on hand and total assets.

What’s the Difference Between Bookkeeping and Accounting?

The ledgers and information compiled by bookkeepers every month is what accountants eventually use to put together balance sheets, income statements, cashflow statements and other potentially important documents like statements of shareholders’ equity. Those documents can be particularly important if your business is attempting to attract investors or secure financing.

The Benefit of Working With Third-Party Accountants and Bookkeepers

Hiring a company like H&H Accounting Services to handle your bookkeeping and business accounting can be hugely beneficial for many SMBs in the Phoenix, Scottsdale and Tempe areas.

Even the smallest businesses might have a high volume of complicated invoicing. Many retailers need to deal with sales tax – potentially in multiple jurisdictions – or manage complex payrolls, benefits and a long list of operating expenses.

You can purchase your own QuickBooks account and hire your own Certified ProAdvisor internally to handle some of those tasks, but that often ends up being a significant investment. Your business will likely save money by working with a single accounting company that can handle:

All your bookkeeping and business accounting
Tax preparation
Payroll

Working with the same company for all those services is also a lot easier since your tax preparer should have nearly all the relevant records on hand when the fiscal year comes to an end.

Those big three accounting services are likely the most vital, but they certainly aren’t the only things a skilled SMB accounting firm can do for you. At H&H Accounting Services, we also:

Develop budgets
Help with cash flow management
Assist with finding the most affordable, high-quality benefit plans for your employees
Perform risk assessments and internal audits
Assemble compilations
Help your business secure financing or loans

Working with experienced accountants who already have extensive experience in all these aspects of business accounting can save you time and money. It’s also a less risky proposition than hiring a specialist internally who may end up being inexperienced or incapable of offering all those services.

Get Help With Your Bookkeeping, Payroll and Business Tax Preparation in Phoenix

Does your business need reliable bookkeeping? H&H Accounting Services offers all the business accounting services your SMB might need today and in the future. Contact us at (480) 561-5805 for a free one-hour consultation and find out how we can simplify your bookkeeping and minimize your accounting headaches.

How a Business Management Consultant Can Help You Improve Your Business

Wed, 29 Sep 2021 23:16:37 GMT

Why and when would your business benefit from consulting service? There are many potential answers for why. Business consultants can help you plan for future growth, ensure you won’t experience painful consequences for inadequate accounting practices or inaccurate tax preparation, offer options for lowering your operating costs or develop solutions for a dozen other potential business challenges.

The “when” varies depending on the business. Some businesses seek out consulting services when specific things start happening. Maybe you started to struggle with client churn, you’re having difficulty retaining top talent or regulatory or supply changes in your industry have put your continued solvency into question. Some new business owners, especially those who don’t have a lot of experience starting or managing a small business, may work with a business management consultant right out of the gate.

Business consultants are a way for you to get expert advice and an actionable plan based on data and proven results without needing to invest on in-house experts.

Cash Flow Management Advice

Even a successful business can run into unsustainable problems with cash flow. There isn’t necessarily just one thing you can do to improve cash flow. There are more than a few potential solutions that you might not have thought of on your own.

Some businesses can incentivize their customers to pay early through the use of discounts. SMBs that usually buy supplies and equipment can switch to a lease model. There may be inventory management strategies you can implement to avoid sinking cash into products that aren’t moving quickly. Even changing something as simple as when you mail invoices might, when combined with other business modifications, be part of a cash flow improvement plan.

Cost Control Methods

Working with a consultant who can develop a detailed and thorough budget of your business expenses might open your eyes to things like:

Where and when excessive costs are occurring
Which parts of the year or business cycle revenue and expenses aren’t aligning

You could discover scenarios in which your variable expenses aren’t decreasing enough given drops in revenue, or that certain fixed costs are proving to be particularly problematic.

A business management consultant might also be able to help you identify:

Things your business can live without
Products or services you’re paying too much for
In-house tasks that could be outsourced for less without sacrificing quality

Strategic Business Planning

Strategic business planning is a great way to safeguard your business from an uncertain future or shore up potential weaknesses today that might lead to issues tomorrow.

A business consultant can:

Perform an assessment of your existing business
Help you define your strategic vision and value proposition
Help you come up with a three-to-five-year roadmap
Identify key performance metrics (KPIs) to measure your progress
Put together a strategy to implement your business plan

Securing Financing

Getting financing or a line of credit for your business might not be as easy as getting an auto loan or mortgage. Small business owners who might not have any experience working with commercial financing institutions might also make avoidable mistakes like failing to shop around their options or omitting pertinent information that might improve their chances for approval.

A business consultant can help you with financing applications and make sure you’re applying to multiple lenders to ensure you’re getting the best rate and terms possible for your needs.

Establishing Accounting Practices

Accounting businesses can help with your bookkeeping and tax preparation, but some of them are good for a lot more than just outsourced accounting services. Business management consultants can help with everything from forecasting and financial statement analysis to helping you adopt accounting principles that will be beneficial for your bottom line.

Tax Planning Strategies

State and tax laws aren’t static, especially right now. Having a proactive tax plan, especially one that takes into account your strategic business plan or your other cost cutting measures, can help you make the most out of deductions and credits. The team at H&H Accounting Services excels at business tax preparation and would be happy to discuss ways in which we can help minimize your business’s tax burden.

Contact Phoenix’s Experienced Business Management Consultants

Whether your business is just getting started or you’ve been operating for years, the team at H&H Accounting Services has relevant advice to provide. We combine accurate data with experienced analysis to help your business prepare for the future and optimize operations today.

Call us at (480) 561-5805 for your free, one-hour consultation . We’re happy to come to you.

How Business Tax Services Can Save You Money

Mon, 27 Sep 2021 23:31:07 GMT

Do you know the U.S. tax code’s page count? The hyperbolic claim that it was 70,000 pages long likely isn’t accurate, even if you used really big font when printing it out, but many reliable sources cite numbers in the 6,500 to 9,000 page range.

From a business owner’s standpoint there may as well not be a difference between 70,000 and 6,500 pages – either way you’re not going to take the time to read it front to back – much less absorb it and remember all the rules. Very few people will attempt that herculean task.

The point is the U.S. tax code is complicated – and business owners don’t just need to worry about complying with the U.S. tax code. There’s also the Arizona Department of Revenue to worry about, not to mention the tax codes of any other states in which you operate.

The complexity of the tax code means a few important things for business owners:

Amateurs can and do make mistakes
Those mistakes sometimes turn into IRS audits
IRS audits are financially and psychologically painful and tedious
There are lots of potential loopholes, credits and deductibles for which you likely qualify
Chances are you aren’t familiar with all the ways you could minimize your business’s tax burden

Most SMB owners and managers are smart people. That’s how they got to where they are. Whether you’re a lawyer, doctor, chef or real estate agent – your expertise likely isn’t the tax code.

Avoiding Mistakes

There are a lot of common pitfalls that can lead businesses and business owners to get audited.

You might try to deduct a suspicious number of expenses. Business owners frequently run into problems when they start taking an inordinate number of deductions compared to similar businesses in their industry. If most business owners in your tax bracket are taking 10 deductions but you’re claiming 150, it might raise red flags.

A lot of business owners end up going the other way – they don’t deduct legitimate expenses because they fear an audit. A CPA experienced in tax preparation can help ensure you make the most of our deductions and have the documentation to back them up.

Some of the most common deductions that get small business owners in trouble are:

Business travel deductions
Home office deductions
Mileage deductions

Professional Business Tax Preparers Can Make the Most of Your Business Tax Opportunities

There are legitimate reasons to remain an LLC or sole-proprietorship for as long as possible, but there are also some compelling reasons to incorporate. Some of the tax benefits of forming a C Corp include:

If you don’t take regular dividend distributions, you can shield yourself from more income tax burden
Your fiscal year doesn’t have to coincide with the calendar year, allowing for flexibility on which tax years you’re taking losses or profits
Easier to retain earnings within the company (unlike S Corp profits, C Corp profits won’t appear on your personal tax return)
You can be a salaried employee of your C Corp and you can deduct payroll taxes
You could pay shareholders/employees enough that there’s minimal taxable profit at the fiscal year’s end
You could write off a lot of benefits as long as they’re available to every employee
Charitable contributions are deductible, and they can be carried over (for now)
The IRS is less likely to scrutinize a new corporation that has operating losses for the first few years (even if you carry the losses over)

Your professional business tax preparer and CPA at H&H Accounting Services will catch the things in your taxes that might raise eyebrows at the IRS. If you had a great year, got big new contracts or invested in a lot of new equipment, there may appear to be “irregularities,” even though all you were doing was dominating at business.

Experienced business accountants can identify things that might cause problems and proactively get together documentation to head off potential audits of your business.

Keeping Your Money and Your Business’s Resources Where They Belong

Our business tax preparers in Phoenix truly believe our clients deserve to keep as much of their income as possible, and that their businesses should be able to reinvest and grow without being hamstrung by avoidable over taxation.

We also recognize how much you want to avoid time consuming and expensive audits.

Our detail-oriented team of tax preparation professionals will perform the due diligence and thorough accounting necessary to help your business thrive. Call us at (480) 561-5805 for a free one-hour consultation – we’ll come to you!

Should My Business Be an LLC, Sole Proprietorship or Partnership?

Mon, 23 Aug 2021 18:23:22 GMT

The type of business structure you choose should be dependent on a lot of factors, some of which may include:

How many owners/members you’ll have in your business
The expected size of your business
Whether there is any particular business structure/tax entity that offers tax benefits for your industry
How well you get along with partners and owners
The inherent risk and potential for liability of your business

Sole Proprietorships

Are you going to be the sole owner of your business? You won’t be able to start a partnership if you’re going it alone, but you can operate as a sole proprietorship or maybe even an LLC.

Sole proprietorships are the simplest way for a new small business owner to establish a business on their own. It’s also the most affordable way to begin a business. Technically you don’t really have to do anything. You can just start doing jobs for people and you’ll be considered a sole proprietor.

From a tax standpoint, there’s no distinction between an individual and their sole proprietorship business. The vast majority of businesses in the United States – nearly three quarters – are technically sole proprietors. As of the 2018 tax year – the most recent available year of tax data from the IRS – 27.1 million tax payers claimed sole proprietorship income.

There’s one big disadvantage with going the sole proprietorship route – a lack of personal protection. You and your business are technically the same thing, so your business’s financial losses are also your personal financial losses. If you need to file bankruptcy it would be a personal bankruptcy, not a commercial bankruptcy. If your actions as business open you up to liability and damages, you’ll be personally on the hook for those.

You’ll also need to pay all your self-employment taxes – Social Security and Medicare – as well as personal income tax for all your business income.

Even though you don’t necessarily need to register a sole proprietorship with the state or federal government, there may still be some bureaucratic hoops to jump through to make your business legal. Even sole proprietors might be subject to licensing and registration requirements of local municipal or city governments. You might also need to establish some method of collecting and paying state and municipal sales tax, depending on your business.

When you file your taxes, you would use a Schedule C form (Form 1040) to report income or losses for you and your business. You would also need to report and pay any employment taxes if your sole proprietorship employed anyone else during the fiscal year.

Partnerships

Sole proprietorships and partnerships aren’t all that dissimilar, except two owners are sharing the risk and profits. How formal or informal a partnership needs to be is often dependent on the partners, but you should ideally have a signed contract in case disputes arise.

Being able to share resources and assets is often a good thing, as is the ability to share losses should they occur. It’s not uncommon for disagreements to arise between partners on how to run a business, which is why having a solid partnership agreement is generally in the best interest of both owners.

Limited Liability Company (LLC)

There are several LLC pros and cons. Maybe the biggest motivating factor for businesses that form an LLC is the liability protection. LLCs essentially create a wall between your personal finances and your business finances, so if your business is liable for something you have some personal protection. There are even some estate planning benefits, like you can put your LLC membership in a living trust.

There’s also more flexibility for LLCs when it comes to taxes. The LLC can distribute profits to the owners and the owners’ income can be taxed like normal through personal income tax. Alternatively, LLCs can be taxed like corporations. You should speak with an accountant or business consultant to learn more about which method is best for your business.

There are some potential problems with LLCs. Depending on the states in which you do business LLCs with single owners might face some limits on the asset protection it provides. LLCs might also be subject to state-specific rules on transferring ownership, like requiring consent of each owner to modify membership in the LLC.

Have Questions About Whether to Do Business as a Sole Proprietorship, Partnership or LLC?

H&H Accounting Services is committed to providing exceptional bookkeeping , business tax preparation and consulting services for all types of businesses in Phoenix, including sole proprietors, partnerships and limited liability companies. If you have questions about which type of business structure is best for your industry, give us a call at (480) 561-5805.

We offer free one-hour consultations and would be happy to come to you to discuss your business’s needs.

What Retail Clothing Stores Can Do to Make Doing Their Taxes Easier?

Fri, 20 Aug 2021 18:03:57 GMT

Arizona has a 5.6 percent state-wide sales tax that applies to clothing, but most cities and counties in the state have higher sales tax rates based on local laws. The highest rates are in Mammoth and Superior where additional local sales tax increases the rate to 11.2 percent as of 2021.

There are a total of 101 tax jurisdictions in the state, so it’s important for brick-and-mortar retail clothing businesses to stay up to date on the sales tax rates for the area in which they’re located.

For example, Phoenix has a tax rate of 2.3 percent while Maricopa County has a tax rate of 0.7 percent. That means retail businesses of any kind in Phoenix need to charge 5.6 + 2.3 + 0.7 percent – or 8.6 percent sales tax.

Things Can Get a Lot More Complicated If You’re Selling Online

A 2018 case over ecommerce sales tax brought by South Dakota against online retailer Wayfair went all the way to the U.S. Supreme Court. The court decided that remote sellers – which today mostly means ecommerce businesses – create an “economic nexus” when they sell products to consumers. This economic nexus, depending on how the state wants to define it, justifies the e-retailer’s collection of state and local sales tax.

Whether or not a business has a nexus in a state is up to the state to determine. Up until the Wayfair ruling, most businesses were only considered to have an economic nexus in a state if they had a physical presence there, whether that was a storefront, warehouse, distribution center or even contract workers delivering packages. Since the ruling, the vast majority of states, minus a few holdouts, consider online retailers to have a nexus in their state as soon as they sell products to someone living there, regardless of physical presence.

One of the biggest challenges for retailers, at least those that operate online, is utilizing a system that enables them to do business everywhere and charge the right amount of sales tax. Then they need to pay that sales tax to the appropriate governing bodies.

A lot of states, including Arizona, have certain sales thresholds for remote sellers in their areas to be subject to the nexus rules. In 2021, Arizona considers online retailer with gross retail sales in the state of more than $100,000 to have an economic nexus here.

The one benefit of working with affiliate platforms like Etsy or Amazon is they can automatically handle sales tax collection and remittance (paying the state). However, those platforms do take a cut of what you sell, which is why many e-retailers prefer not to operate through that system. Platforms like Square can automatically calculate taxes as well as billing solution providers like Avalara and Vertex .

If your Arizona clothing business is expanding into digital sales, you should strongly consider speaking with a business tax preparer and business consultant about your options for minimizing the per-purchase cost of remaining in tax compliance with every jurisdiction in which your customers may reside.

Getting the Most Out of Your Deductions

Business tax deductions are a valuable way to minimize your commercial tax burden, but what a retailer can and can’t safely deduct isn’t always obvious.

You may benefit from deductions for the cost of goods sold, tax-deductible rent payments, employee salaries, paid sick and vacation time and employee retirement plan contributions. You will also likely be able to write off equipment, either by depreciating it for a yearly discount or by using Section 179 to get an immediate lump-sum write off on the purchase of depreciable assets.

Clothing retailers may also be able to use charitable donations to collect some compensation for inventory that’s simply not moving. You may be able to write of the fair market value of the inventory you donate to charity.

Some businesses can also take a write off for selling retail items they can’t move at a loss. This can also offer significant ax benefits for sellers of damaged or out-of-date goods.

Not every clothing retailer in Arizona will be eligible to receive every potential tax write off. The only way to know for sure how you can minimize your business’s tax burden is to speak with a knowledgeable business tax preparation professional.

At H&H Accounting Services we help many local Arizona businesses minimize their yearly state and federal tax burden . Contact us at (480) 561-5805 to find out how we can help you. Initial consultations are free , and we’d be happy to come to your place of business.

Why Do Corporations Get More Tax Cuts Than I Do?

Fri, 16 Jul 2021 22:49:19 GMT

There’s a relatively simple reason corporations seem to receive generous tax cuts and loopholes – economic development is good for states and the country as a whole. States want big companies to open headquarters and regional offices in their cities because those offices employ hundreds or thousands of local residents. Those workers buy homes and spend their money at other local businesses, which has a cascading positive effect in the local economy.

A business’s revenue may also be taxable and bring in more funds. In some cases, companies also foot the bill for infrastructure improvements. For example, consider Internet Service Providers. They’ve recently changed their tune on whether or not they should be considered a utility, but for the most part they have funded expansion of broadband infrastructure over the past couple decades, which has been good for states.

If a state can get a private company to pay for laying fiber optics all around town, it may be worth giving them a tax break for the trouble.

Corporations operate on a larger scale than sole proprietorships or partnerships. Business tax credits, which aren’t all that different from personal tax credits, are given for various activities the government wants to encourage and incentivize. Even small businesses and people who are self-employed can benefit from special business tax credits , but they aren’t as robust as those available to large corporations.

What Kind of Taxes Do Companies Pay?

Like most people, corporations pay two forms of taxes: federal taxes to the United States government and taxes to the state. Local state taxes usually take a few forms: corporate income tax, sales tax they collect from their customers and business franchise tax. Income tax is essentially the same as personal income tax – it’s a tax on eligible revenue. Franchise taxes generally aren’t based on income but are instead more akin to fees based on the size of their business. In some states a business may have to pay franchise taxes based on their net worth or their gross receipts for the year, but in many cases they’re just flat fees.

What Are Tax Credits?

Tax credits are not deductions. They work similarly, but instead of being subtracted from revenue they allow a company to subtract all or part of specific business expenses from their income tax bill. The amount that they are able to deduct is limited on a yearly basis.

How a tax credit is calculated is based on the credit. For example, the Work Opportunity Tax Credit (WOTC) is specifically intended to incentivize the hiring of ex-offenders, welfare recipients, low-income or disabled veterans, and other people who might be difficult to employ. If a business needs low-skill and low-wage workers, they can potentially knock between $1,000 and $5,000 per eligible worker off their tax bill each year through the WOTC.

How Tax Credits Work

Some of the criteria for tax credit programs include the company's industry, the amount of money they invest, their location, the number of hires they had for the year and what wages they pay them.

Corporations lobby for the creation of tax credit programs to benefit their operations, but they are created by laws passed by federal and state legislatures. Tax credits cannot be negotiated on a per business basis, they must be codified into law, which is why they are considered entitlement subsidies.

Tax Deductions Vs Tax Credits

Deductions are subtracted from a company's profit before the amount of tax is calculated, ultimately decreasing the amount of taxes owed. Tax credits are deducted from the amount of taxes owed.

Deductions are made, and then tax credits must be claimed. Every state is different and has different state tax credits available to business owners. You should always discuss eligibility for tax credits with a tax expert like those at H&H Accounting Services .

Companies must claim tax credits when they file their tax return. They will usually be required to submit documentation to prove they are eligible to receive the tax credits they are claiming. Some companies are audited to confirm their yearly tax credit, which is why it is important for businesses to always have an accountant and tax expert work with them to make sure they are in compliance with state and federal law.

Need Help With Business Tax Credits or Tax Deductions?

Aren’t sure which tax credits or tax deductions your business might be eligible to receive? Contact the business consultants and tax experts at H&H Accounting Services . We can help you determine which business tax credits and deductions your business can qualify for and help you avoid potentially invasive audits. We can also help businesses that may be facing audits or questions about their past tax filings.

Call us at 480-561-5805 to request a free one-hour consultation . We’re happy to go out to your place of business to get the discussion started.

Will Fintech Lead Banks in Accounts in the Next Decade?

Fri, 16 Jul 2021 20:17:33 GMT

What is fintech? Fintech is short for financial technology. They usually take the form of innovative ways to leverage technology to make financial transactions easier for businesses and consumers.

Most types of fintech are still relatively new, developing slowly over the past couple decade and only becoming truly mainstream over the past few years. Fintech integrates finances and banking with technology, aiming to make operations streamlined and more automated.

If you have used PayPal, Venmo or your bank’s smartphone app, you have participated in the growth of fintech. However, fintech extends far beyond payment apps. Now you can invest and manage finances and insurance with fintech applications.

One of the notorious ways in which fintech has grabbed headlines recently were the highly publicized problems with Robinhood. The commission-free stock trading app grew faster than it could handle thanks to cryptocurrency and a viral movement to boost the price of shorted stocks.

According to 2020 Google use statistics, 73 percent of smartphone users have used an app to manage their finances in the past month. Investment related app searches have grown 115 percent YoY. Fintech’s explosion in popularity poses a threat to traditional banking and investment institutions that choose not to develop their own fintech platforms.

Fintech Growth Over the Past Ten Years

The last ten years have set the foundation for financial technology and advancement. Use of fintech has progressed in:

Digital Payments
Money Transfer
Budgeting
Digital Banking
Alternative Lending
Low Costs Investing and Trading

Consumers have taken a liking to the ease and accessibility that these services offer. Google reports 67 percent of financial app users prefer them because they store their preference and make future activities easier. Companies in finance, banking and investing are capitalizing on the feedback from users.

Who Are the Leaders in Fintech

A handful of industry leaders have paved the path for smaller fintech startups. Some of the most profitable fintech players in 2021 include Ant Financial , Stripe , Klarna and Kraken . With many other companies following and startups jumping in for the competition, financial technology is blasting off.

Banking Reimagined With Fintech

Leaders in banking and merchant accounts are going to be among the first to make serious changes to traditional brick and mortar banks. Ally, Bank of America and Capital One have already begun to implement AI virtual assistants. With text and voice-enablement, users can take care of all their banking needs – such as making payments, transferring money and making deposits – without ever needing to visit a bank branch or ATM, and in some cases without even needing to touch their device.

Fraud detection is another major part of mobile banking that companies are investing significant resources into improving. Security specialists in the sector are partnering with banks to secure applications and make them safe platforms in which users can confidently store personal information and perform transactions.

The popularity of fintech has led to the creation of “Neo Banks”. Neo Banks, like Chime and Varo, are completely mobile banks that provide financial services, banking, investment and savings accounts all on your phone. These banks do not have physical locations. In coming years, they may win a larger portion of consumer banking market share and have a significant impact on the financial industry and the way it’s viewed.

Could Traditional Banking Be Obsolete in the Next Ten Years?

As financial technology in banking progresses, it’s possible that traditional bank branches may go the way of Blockbuster Video Stores or telephone booths. However, some people still prefer to go to the bank. There will likely be fair number of holdouts that question the security, privacy or reliability of the cloud and the internet when it comes to their finances.

A recent report from Consumer Affairs revealed that about 20 percent of Americans with bank accounts would rather go to their bank than use a digital service. However, banks are currently more interested in the 80 percent that are happy to embrace digital services.

There are ancillary benefits for the big traditional consumer and business banking institutions that embrace fintech, like saving money by not needing as many branches or employees to run them. For example, digital banking chatbots are expected to save the banking industry $7.3 billion in annual customer service costs by 2023.

Your Phoenix Accountant Isn’t Going Anywhere

Whether consumers like it or not, they may find themselves being forced to participate in fintech for banking. Your local bank branch might fall victim to the rise of fintech in the not-so-distant future, but your local Phoenix accountants at H&H Accounting Services are here to stay.

We’re always ready to help you with your finances so you can make the right decisions about your personal income taxes or business accounting.

Call (480) 561-5805 to schedule a consultation with H&H Accounting today and learn more about our tax, accounting and business consulting services.

Tips for Staying Profitable as a Business

Wed, 23 Jun 2021 21:34:08 GMT

Profit is a deceptively simple concept. Revenue minus expenses equals profit. Unfortunately, understanding the formula doesn’t also give you the ability to snap your fingers and improve profitability.

Every business owner has an incentive to find ways to increase profits and improve profit margins. Finding realistic and effective ways to do so isn’t always straightforward.

Increasing Sales and Reducing Expenses

The basic suggestion for improving profits is usually something along the lines of “sell more” or “reduce overhead.” While both of those things could potentially improve profits, they also have the potential to do the opposite.

You can reduce your total expenses by cutting or eliminating your marketing budget, but that might also have a dramatically negative effect on your business’s revenue. Finding creative ways to do more with less is one of the most reliable ways to increase profit, and there are several potential avenues for accomplishing that goal.

Negotiate Better Contracts or Find Superior Vendors

Any business that relies on vendors for inventory, production or services has options. Maybe one of your existing vendor’s competitors offer better pricing. You might find a vendor that offers a better product or more efficient service that helps enable you to increase revenue. Going with the cheapest option isn’t always the best course of action, especially if it will have negative ramifications for quality or sales.

Stop Overhead Creep

Things like payroll, utilities and supply costs are frequently contributors to overhead creep. Many businesses pay overtime that could be avoided by adopting staggered schedules or through the implementation of other staffing strategies.

There’s also no reason you can’t find ways to cut utility costs in your offices. How many offices in Phoenix are too cold or have ACs that run when no one is there? Many commercial HVAC systems are also just old and inefficient.

Also keep an eye out for wasteful costs in inventory, either from spoilage or slow-moving products that are taking up valuable resources and space. If you’re worried your inventory practices aren’t very efficient you should consider investigating alternative inventory management strategies.

Increasing Revenue

Improving sales is rarely straightforward. One of the oldest, most tried-and-true methods is through marketing.

You’ve likely utilized several marketing strategies in the past to varying degrees of success. Some probably worked better than others. Businesses are always best served by investing heavily in those marketing strategies that develop the best, most conversion-prone leads at the lowest cost.

Maybe the easiest and most effective way to increase revenue is to focus on services and products with the highest profit margins. A good exercise is to organize your clients, services or products into four categories:

High Sales High Profits
High Sales Low Profits
Low Sales High Profits
Low Sales Low Profits

It’s best to just focus on the services in the two high profit categories. Look to upsell and grow your business in the low sales high profit categories while nurturing and safeguarding the high sales high profit opportunities.

Raising Prices

There are really two obvious ways to raise revenue – increase sales and raise prices. The easiest of those two options is raising prices. How much you can raise prices depends on a lot of factors that are likely unique to your business. In any business with high sales volumes, even small price increases can sometimes have a dramatic effect on profitability and profit margins.

The Pitfalls of Some Profit Strategies

There are several potential problems with profit-increasing strategies. Many of those pitfalls can be avoided by keeping a close eye on your profit margin.

There are many scenarios where increasing your revenue could potentially result in a drop in profit margin, mainly when increasing sales or production requires higher-than-normal investments. If your profit margin is going in the wrong direction, you aren’t really making meaningful progress unless you can further reduce expenses while maintaining those revenue gains.

Reducing expenses could also result in a drop in revenue. You can cut a marketing budget, but it might also result in the loss of leads.

Many businesses benefit from thinking ahead. Branding efforts or improving quality assurance strategies may not seem like obvious drivers of profit, but reputational changes might win your businesses a larger share of the market.

There’s No Guarantee for Success in Business

Working with the right bookkeeper , accountant and business consultant is often the best way to find effective profit-improving strategies. The team at H&H Accounting Services in Phoenix is committed to providing not only reliable, money-saving payroll services but also thorough, valuable business consulting services.

Give us a call at (480) 561-5805 to request a free, no-obligation one-hour consultation . We’d be happy to visit your business and discuss how we can help.

What Do I Do with My 401(k) If My New Job Doesn’t Offer One?

Wed, 23 Jun 2021 21:16:48 GMT

Most people choose to either leave their 401(k) with the company that manages their previous employer’s 401(k) program, or they roll their 401(k) over into an individual retirement account (IRA).

If your previous employer’s 401(k) plan provider was Charles Schwab, Employee Fiduciary, ADP, Vanguard or a similar company, chances are you can leave your 401(k) parked with them indefinitely. You’ll still be able to rebalance the funds in your 401(k), but you will no longer be able to contribute to it.

Today’s Workers Might End Their Career with Dozens of Separate Retirement Accounts

One recent Gallup poll found 21 percent of millennials changed jobs in the previous year. It’s not uncommon for some workers, especially those in younger generations, to move to a new employer every two to five years. They may end up having many individual 401(k)s parked all over the investment world by the time they retire, which generally isn’t ideal.

A lot of workers prefer to have all their retirement savings in one centralized spot, which is why they choose to rollover their 401(k) to their central investment account. You can find lists on websites like bankrate.com that provide many online broker options for 401(k) rollovers.

There are also potentially scenarios where you might be forced to move the money in your employer-provided 401(k). This often occurs if you contributed less than $5,000 to the 401(k) while you were working for the company that provided the account. Employers have to pay 401(k) plan providers to manage their employees’ accounts. Small sums of money might not justify the expenditure on their end.

If you had less than $1,000 in the account, you might just get the money mailed to you as a check. If that happens you should immediately deposit it into some kind of retirement account to avoid IRS penalties related to early withdrawal of retirement funds.

In some cases, an employer may just move all the money in the 401(k) into an IRA in a practice known as an involuntary cashout.

Whether you get to keep your employee match funds currently in the 401(k) depends on whether the contributions required you to be fully vested. If you needed to be fully vested to receive those employee match contributions but you left the job before you reached that point, your employer can reclaim unvested contributions.

Can You Withdraw Your 401(k) Money After You Leave a Job?

Yes, you technically can, but that’s rarely a good idea unless you’re immediately putting it into another retirement account.

Thousands of people have left a job to start a new business or pursue some new opportunity and have mistakenly assumed their retirement savings is the best way to fund it. If you’ve got a sure-thing and you just need seed money, then you’ll probably make more in profit than you’ll lose in early withdrawal fees, right? Probably not.

You should always perform your own thoughtful cost-benefit analysis before prematurely withdrawing from a retirement savings accounts. Not only can it put you in a bad position in the future, but it will also result in a significant loss of savings. You’ll lose 10 percent of your savings right off the top as a penalty, then you’ll need to pay taxes on the total amount that you’ve withdrawn since it is considered income.

There are a rare handful of scenarios where you can withdraw retirement savings early without suffering the penalty, but you should still think carefully about whether that’s the best option for you.

Vesting and How It Could Affect Your Retirement Savings

Many workers don’t actually own all the money in their employer-provided 401(k). Your own contributions are 100 percent vested, but contributions made by your employer are sometimes on a vesting schedule.

Vesting schedules are usually based on years of employment. Many employers, especially those in industries where recruitment is tough or the experience of their employees is vital to their success as an organization, use vesting schedules as a retention tool.

For those employers, retirement matching funds might be a significant part of an employee’s benefits package. The risk of losing that benefit prevents those valuable employees from jumping ship.

There are different methods of vesting. Some employers might employ a cliff-vesting schedule, which means employees are not vested at all until a specific date, usually a few years after they’ve worked at the company. After that date they are fully vested.

Graduated vesting schedules are those in which your percentage of vesting increases each year. If you are 20 percent vested each year, then at five years of employment you’d own all the funds in your 401(k).

Need Help Deciding What to Do with Your 401(k)s, IRAs or Retirement Savings?

Withdrawing money from your retirement accounts can have a number of tax complications. Whether you are required to begin minimum withdrawals soon or you want to learn more about the potential tax ramifications of different retirement plans, the personal tax accountants at H&H Accounting Services can help.

Call us at (480) 561-5805 for a free initial consultation .

How to Set Up Payroll for a Small Business

Mon, 24 May 2021 17:45:20 GMT

The basic process for setting up payroll is:

Get an Employer Identification Number (EIN)
Collect the necessary employee forms from your workers (W-4s for withholding taxes, W-9s for contractors and I-9 for verification that they can legally work in the United States)
Set up your payroll in some kind of platform (or find an experienced bookkeeper)
Make sure there’s adequate money in the necessary account to fulfill payroll

A More Detailed List of Considerations for Small Business Payroll

Before you pay any employees – whether they’re fulltime or contract employees – you’ll want to have an Employer Identification Number. You can fill out a Form SS-4 and submit the form through fax or mail, but the easiest way to complete the process is through the IRS’s online form .

The IRS assigns unique EINs to every business for tax purposes. When you fill out any tax forms you will likely need to include this EIN.

Arizona-Specific Rules

Some states require employers to get their own unique state-specific version of an EIN. Arizona doesn’t require you to do that, but you will need to register your EIN with the Arizona Department of Revenue (ADOR) in order to file your payroll withholding returns.

You can see all of Arizona’s payroll withholding filing obligations here .

Arizona business owners should also be familiar with the record keeping requirements for unemployment taxes , which includes payroll journals and check stubs.

Tax Penalties for Failure to do Payroll Withholding and Deposits Correctly

The IRS also levies penalties against businesses with unpaid payroll taxes. If you’re curious about all the legal tax implications and IRS rules to which you will need to adhere, you may want to read through the IRS’s Employer’s Tax Guide for 2021 .

Are My Employees Actually Independent Contractors?

Whether or not you need to withhold any taxes for your workers depends on whether they’re your employees or independent contractors. Independent contractors are frequently:

Not told exactly when, where and how to do their work
Required to cover their own expenses and use their own tools and supplies
Contracted to work on a project-by-project basis
Not paid for time off, sick days, etc.
Not given benefits like health insurance

The line between what is and isn’t an employee isn’t always straightforward. There may even be incentives for you to treat employees like contractors when you’re just starting your business. In most cases, if someone is working for you fulltime and not on a temporary basis, they will be considered an employee.

This distinction will have a big impact on your payroll and withholding responsibilities. Independent contractors must do their own withholding and pay their own Medicare, Social Security and unemployment taxes. You must withhold those taxes for employees and are accountable to pay for half of them.

Decide on Pay Periods

In Arizona, employers are required to pay employees at least twice a month (pay periods can be no longer than 16 days). You must pay employees no more than five days after when the money was earned. Companies with payroll processing located outside of Arizona, which is common for nation-wide chains or employers, have 10 days to pay instead of five.

Choose Your Payroll Process and Platform

A payroll process is simply determining how you’re going to track time or salary workers. If you’re paying workers hourly, you should purchase a reliable hour tracking tool to avoid incorrectly counting hours and over- or underpaying workers for their time. Salaried workers are easier to pay since each period you’ll essentially be paying their annual salary divided by 26.

If you are going to handle payroll yourself you will need to subscribe to and acquaint yourself with a bookkeeping platform, like QuickBooks. Most SMB owners outsource payroll to bookkeepers who do it professionally for an affordable rate.

Get Help With Your Payroll in Phoenix

The team at H&H Accounting Services perform bookkeeping and payroll services for dozens of businesses throughout the Valley. Our team understands how important your payroll is to you, your employees and your ability to operate. We are committed to punctuality and accuracy in our payroll and bookkeeping services.

We also offer an array business tax and consulting services . If you just want to learn about your payroll options from a local Phoenix accountant or are looking for advice on local regulations or help choosing employee benefit plans, we can help.

Call us at (480) 561-5805 for a free consultation – we’ll come to you!

Will the Corporate Tax Increase Impact My Small Business?

Mon, 24 May 2021 17:25:57 GMT

First, no corporate tax increase has passed. President Biden floated a long list of wants for a proposed tax plan to a Joint Session of Congress on April 28, 2021, but presidential speeches don’t make legislation.

You can read the Fact Sheet for the American Jobs Plan on the White House’s official website. Rolled into the American Jobs Plan is the Made in America Tax Plan. The goal of the Made in America Tax Plan is to strongarm U.S. companies into bring production and jobs back home from overseas.

Biden’s complaints were specifically, “profitable corporations should not be able to get away with paying little or no tax by shifting jobs and profits overseas.”

If your SMB does neither of those things, this tax plan likely isn’t targeted directly at you, but that doesn’t mean it won’t make ripples that could impact your business.

The Made in America Tax Plan

It should once again be reiterated that neither of these tax plans have been passed, but the essential goal of this proposal is to:

Incentivize job creation and investment in the United States instead of overseas
Stop profit shifting to tax havens
Make sure large corporations pay their fair share (according to Biden that is 28 percent of income)

To accomplish those goals, the plan will:

Set the corporate tax rate to 28 percent
Increasing the Global Minimum Tax for U.S.-based multinational corporations
Prevent U.S. companies from acquiring or merging with foreign companies in order to claim they’re actually a foreign company
Deny expense deductions for offshoring jobs or credits for onshoring jobs
Enact a 15 percent minimum tax on corporate “book income”

Current tax law allows multinational corporations to benefit from a tax exemption on the first 10 percent return on foreign assets and get the other 90 percent taxed at half the domestic corporate tax rate.

Will These Corporate Tax Increases Happen?

Anything is possible – but getting the bulk of these proposals through congress, especially a congress that is relatively evenly split and likely to go Republican during the 2022 midterms, is highly unlikely.

It’s possible Democrats will quickly push for an increase to the current 21 percent corporate tax rate, but it’s unclear whether the White House will get the 28 percent it seeks.

If you do own a C-corporation in Arizona then yes, it is possible your corporate income taxes will increase. However, it is unlikely that congress or the president will push for a return to the 35 percent corporate tax rate imposed on the nation’s corporations before the Tax Cuts and Jobs Act (TCJA) of 2017.

Many small businesses are limited liability companies, sole proprietorships or S-corporations, which means owners are frequently taxed at the personal income tax rate . In those cases, how much you personally make will determine how much proposed income tax increases will affect you.

Biden’s proposed plan would increase the 37 percent top income tax rate to 39.6 percent . The current 37 percent top rate applies to people with incomes higher than $523,600 or couples with $628,300, so many small business owners might not be affected at all.

The proposed increase on capital gains likely won’t affect the vast majority of businesses, but it does represent a significant increase. Biden proposed raising the current 20 percent capital gains tax up to the same level as the income tax rate, so top earners would be charged 39.6 percent on capital gains.

The Biden administration argues their proposed plans will be a boon for small businesses nationwide by:

Improving infrastructure, which they believe will reduce shipping delays for small businesses
Increasing federal contracts awarded to small businesses
Investing $110 billion into small business financing and technical assistance

The Truth Is No One Knows What’ll Happen with Small Business Taxes

It’s hard to say how a proposed tax plan will affect small businesses until the proposed law is reviewed by a group like the congressional budget office . Even then, the U.S. House or Senate may require significant changes to pass it – or it could fail to win passage at all.

It’s probably too early to start making predictions on exactly how you could see your taxes change, but there are things you may be able to do today to protect your business.

The business tax accountants and consultants at H&H Accounting Services is committed to helping business owners minimize their tax burdens while maintaining compliance with all necessary rules and regulations. If you want to make sure your business is prepared for whatever comes next, we’d be happy to help.

Call us at (480) 561-5805 to schedule your free consultation .

How Do I Report My Investment Income Over the Last Year?

Tue, 20 Apr 2021 23:23:33 GMT

How you report your investment earnings depends on the types of earnings they were and what vehicle you were investing in.

The IRS designates stocks, bonds, mutual funds, ETFs and in some cases real estate as “investment property.” They also qualify these investments as “unearned income.” In many scenarios you don’t owe anything on investments that appreciate until you actually sell those investments and make a profit.

There’s also a direct correlation in the complexity of your taxes and your investments.

Profit is defined as any money you get at sale over the “basis” – the amount you paid for the investment. If you bought a stock in 2017 for $7 (basis) and sold it in 2020 for $10 then you would have made a $3 profit.

Taxpayers who trade equities and bonds through a broker should be given a 1099-B form by their broker. This form should list each sale and transaction separately, including all the different profits and losses you made on each trade.

Determining the basis of some investment types, like real estate, can be complicated. Additional costs you incurred when purchasing real estate, like commissions and transfer fees, could potentially be added to the purchase price basis.

Those costs might also be included for stock and bond purchases, which may actually be good news for many investors.

If your broker charged a 50-cent fee for every $7 stock purchase in 2017 then the basis would be $7.50, which means you’re only paying taxes on $2.50 of profit rather than $3.

If you owned equity in a company that went bankrupt, you’d report that loss in a Form 8949 . The IRS treats those losses as if they were sold on the last day of the tax year. Thankfully, you won’t have to pay taxes on money you lose, and losses may be able to offset your other income to lower what you owe.

It’s also important to report tax-exempt interest you accrue in your appropriate 1040 form , even when it doesn’t affect your tax calculations either way.

Who Qualifies for Which Version of the 1040 Form

Conveniently called the 1040-EZ , this much simpler form is available to filers who are:

Filing as single or married with no dependents and less than $100,000 of income
Taking the standard deduction
Earning income from wages, salaries, tips and taxable scholarships/grants
Under the age of 65 with only $1,500 of taxable interest or less

Investors who make less the $1,500 in investment profits don’t need to file a Schedule B with their 1040-EZ.

The slightly more complex version, the 1040-A , has some of the same restrictions but isn’t capped at $1,500 of interest:

Still must take the standard deduction but can have dependents and take credits for care expenses
Income from salaries, wages, tips and scholarships or grants, plus capital gains distributions, interest, dividends, annuities, pensions, IRAs, unemployment and taxable Social Security
Is available to people over the age of 65
Isn’t available to filers who have an alternative minimum tax (AMT) adjustment from stock acquired through a stock option
You can take deduction for IRA contributions, student loan interest payments, educator expenses or tuitions and fees

The regular Form 1040 is for every investor who isn’t eligible for the 1040-EZ or 1040-A. As with most tax forms, you have more deduction and credit options as a filer when you struggle through the longer version.

Need Help Reporting All Your Investment Income?

There are a lot of rules for interest and gains you make through the sale of investments.

Even if you reinvest your dividends without ever taking money out of an investment account, you still have to report that income and pay taxes on it. The tax rate for dividends can vary based on whether the reinvestments are considered ordinary or qualified , with qualified being the lower rate.

Reporting on standard retirement vehicles, like 401(k) plans, can be complicated too. For example, people who make contributions to a 401(k) lower their tax liability and reduce what their employer withholds each check but can’t take an end of year deduction for contributions.

H&H Accounting Services can help with your personal tax filings if you have questions like:

Do I need to report certain investments?
How do I write off losses in the market?
Is there anything I can do to minimize my tax burden on retirement disbursements or investments?
What are my best pre-tax and post-tax retirement plan options to save money in the long run?

Our team of personal income tax preparation specialists and tax advisors are committed to helping Phoenix and Scottsdale tax filers maximize their credits and deductions and minimize their tax burdens where legally possible.

Give us a call at (480) 561-5805 to get started .

Normal Small Business Taxes Versus Franchise Taxes in Arizona

Tue, 20 Apr 2021 22:52:29 GMT

Every traditional corporation is subject to corporate income tax and must collect sales tax on goods sold, but some businesses in some states must also pay a franchise tax or privilege tax. Arizona has a corporate income tax (4.9 percent) but does not have a franchise tax.

Not every small business is a “C” corporation. If you’re a sole proprietorship or a limited liability company, you won’t be subject to state corporate tax on income. Sole proprietors and LLC owners who generate revenue for their own personal needs are taxed like any other salaried or wage-earning person through their personal income tax on the state and federal level.

There are alternative options for companies that want to incorporate but don’t want to pay the 4.9 percent state corporate income tax rate. Companies that file for “S” corporation status with the IRS don’t have to pay traditional federal or state income tax in most cases. Instead, revenue and profits are paid directly to the owners of the corporation who then pay personal federal and Arizona state income tax on the proceeds.

There may be exceptions to the rule for your situation, so speak with a local business or personal tax professional in Arizona for more information.

Might Arizona Companies Have to Pay Franchise Taxes?

Yes, any business that’s operating in another state or city that imposes a franchise tax will have to pay it there. Although they’re sometimes referred to as “franchise taxes,” these privilege taxes don’t just apply to franchises.

In some cases, these taxes are just a flat fee, so even companies that operate at a loss in some states or cities will be charged a franchise tax. In other places the franchise tax rate might be based on gross receipts or share value.

What qualifies as doing business in a state or city depends on their local laws. Some states only charge businesses with actual physical locations in the state or city the franchise tax. However, the rules are inconsistent across the country, and may be more nebulous where you operate.

Franchise taxes may not be levied solely against corporations. Even LLCs could potentially be subject to local franchise taxes and business operations fees.

Why Is Delaware So Popular for Business Incorporation?

Delaware has a uniquely business-friendly set of tax laws that attract many business owners to incorporate there, even if they don’t plan on operating in Delaware. Unlike most states, Delaware doesn’t impose any corporate income tax on its businesses. People who own shares in Delaware-based companies also don’t have to pay taxes on their shares.

The state also has a robust corporate law court system that is renowned for the consistency of its decisions. Legal disputes in Delaware’s “ Court of Chancery ” are often preferable to business litigation in states with less predictable judges.

Delaware has essentially made incorporating the nation’s businesses into a business, which is why they’re also extraordinarily fast at doing it. They often process incorporation requests the same day they’re filed.

Owners of businesses incorporating in Delaware also aren’t required to live there. Plus, the state doesn’t require the disclosure of the names of a business’s officers or directors.

Delaware also has a rule that allows a corporation to have the same director, officer and shareholder, which means a small business owner doesn’t need a complex corporate structure in place to get incorporated.

All of these benefits make Delaware incorporation the preferred solution for venture capitalists and angel investors. If a company is seeking venture capital funding, they may be more inclined to incorporate in Delaware.

Does This Matter for Arizona Businesses?

Arizona businesses that incorporate in Delaware still have to pay Arizona state income tax, so there’s no real tax savings. Delaware also has a franchise tax based on each incorporated company’s share values, even if you don’t actually do business in Delaware.

Arizona businesses incorporated in Delaware also must meet any necessary licensing and operational requirements in Arizona, not in Delaware. Arizona business owners that incorporate in Delaware will need to use an in-state “Delaware registered agent” for legal filing for their business, and if they ever do get involved in a dispute in Delaware they might need to travel there for court.

If an Arizona business owner were to consider incorporating in Delaware it would likely be for the tax and shareholder benefits, but it might not do much to reduce their local state corporate income tax burden.

Get Help With Your Phoenix or Scottsdale Business’s Taxes

Most business owners would like to know if there’s anything else they can do or steps they can take to reduce their personal and business income tax burden . At H&H Accounting Services we’re committed to providing reliable, knowledgeable advice on all things business and personal tax related. We can also provide invaluable business accounting , bookkeeping and business consulting assistance.

Give us a call at (480) 561-5805 for a free one-hour consultation .

How to Create a Budget for a Small Business

Tue, 16 Mar 2021 17:39:06 GMT

How to Create a Budget for a Small Business

There are four fundamental income and expense variables you’ll need to take into account when developing a budget for your small business:

1. Your business’s income

2. Fixed expenses

3. Variable expenses

4. One-time purchases and investment

All of those figures put together should give you a basic, rough budget idea for your business.

Tallying Income Sources

How easy or difficult keeping track of income is depends on your business. Contractors who may only have a few jobs a month that net tens of thousands of dollars each will likely have an easier time tracking their revenue than a retailer that makes dozens or hundreds of smaller sales per day.

Having a system in place to keep track of sales and revenue is hugely important, not just for budgets but also for tax purposes.

The basics of any budget, whether for your personal finances or for a business, is similar; you want your income to be more than your expenses.

Fixed Costs

You likely won’t have too many costs that are permanently fixed, but many of your expenses should be considered fixed due to the infrequency of their changes. Your internet provider, for example, may raise the rates every couple of years, but for the most part you’ll pay the same for internet service each month. Same with your commercial office lease, business vehicle loan payments, business insurance or your website hosting. Those costs should be the same each month, making them easily predictable fixed expenses.

Some businesses may also have reliable operating costs from a production standpoint. Maybe a company manufactures a set number of units each month. They know how many components they need to purchase every month, and if their supplier has stable prices those expenses might also be fixed.

Variable Costs

Many SMBs have a lot of variable costs. If you have fleet vehicles and you generally take a certain number of jobs each month you should have a general idea of how many gallons of fuel you require each month. If you have a month with elevated job volume or several jobs further from your headquarters than normal, you may have slightly elevated fuel consumption. Even if a business’s fuel use falls within a predictable range, the price of gas fluctuates quite a bit month to month and year over year.

Labor costs can also fall into the variable or fixed cost category depending on your business. Stable SMBs that don’t expand or contract frequently and employ salaried workers may have fixed labor costs for most of the year. Others that are growing rapidly, have high turnover or require seasonal help may have different labor costs every month. Businesses that let employees take overtime when needed would also consider labor a variable cost.

A lot of service businesses and retailers will have variable supply costs. A tire store may maintain a certain level of inventory. They might sell more tires one month and have higher resupply costs for that month.

Some restaurants that have steady, predictable business, like franchise fast-casual eateries, may be able to accurately predict their ingredient costs on a weekly and monthly basis. In many cases a restaurant’s food costs will vary based on produce seasonality, fluctuating supplier prices or ingredient availability.

One-Time Investments

The further out you can predict large purchases the better it generally is for your business. If you run a plumbing company and want to add a third or fourth fleet vehicle you will likely plan on it for months in advance. You may be able to put aside some revenue each month to save up for that large purchase.

In other cases, a business may be forced to finance an unexpected one-time purchase. If a restaurant’s fryer breaks down, they likely can’t afford to wait till they have the cash for a new one. They may be able to finance that one-time expense and pay it off over months or years. Many of these one-time investments are for equipment that will last for years or even decades.

However, it’s not a bad idea to keep track of depreciation and the age of the equipment and tools you rely on. You can somewhat avoid being caught flat footed by keeping some liquid capital to at least cover down payments if something important breaks or requires replacement.

Get Help with Your Small Business Budget

Many small businesses in the greater Phoenix, Scottsdale and Tempe area trust H&H Accounting Services for reliable and accurate business accounting , business tax preparation and SMB consulting services . We pride ourselves on providing friendly, personalized assistance that puts your business first. If your business needs help creating a stable budget, you’re seeking advice on benefits plans or you just want to know how to improve your cash flow, our accounting experts and CPA can help.

Call us at (480) 561-5805 to schedule an in-person consultation – we’ll come to you!

Understanding Risk Management and Forecasting for Your Small Business

Tue, 16 Mar 2021 17:05:52 GMT

Risk management and forecasting are both valuable exercises for small businesses. Risk forecasting can help you predict and prepare for risks, both those that are obvious and likely and the unlikely or unforeseen. Forecasting is often necessary for securing financing and to ensure your business is well situated for continued prosperity.

Risk Management

Everything in life has some degree of risk. Getting in your car and driving to work carries risk. Going out for a jog or a hike has risk. Every business, no matter its size, faces some risks.

Risks of all kinds can be mitigated. You can wear a seat belt when you drive and adhere to defense driving techniques to reduce your accident risks while driving. You can stretch before a run to reduce your injury risk.

Your business can also predict and plan for potential risks.

There are three broad steps that go into risk management for a business:

· Identifying risks

· Predicting the impact of those risks

· Planning for those risks

Business risks often fall into one of two categories: internal risks and external risks. Internal risks are problems that can arise from within your business. You have the most control over preventing internal risks. External risks come from outside of your business, so you may not have as much preventative control over external risks.

Internal risks can include something like losing a key employee, having equipment breakdowns or even employee malfeasance like theft.

External risks can be something like a pandemic (COVID-19) or a natural disaster. The economy can slow down, a new competitor might open in your area or the government may impose new regulations on your industry.

It’s harder to prevent external risks, but in some cases you may be able to plan for them or at least give your business breathing room to adapt to them.

If you’re making a formal risk management plan you should consider listing out these risks and then ranking them by probability. The most likely risks are the ones for which you should put serious thought into creating a plan to address.

It may turn out the expense of mitigating some risks costs more than the risk itself. Consider grocery stores and power outages. Many grocery stores don’t have backup generators because they are expensive and power outages are few and far between. Grocery stores have established procedures for the risk of power outages, namely they keep all the freezer doors closed. If a power outage goes on for too long and food thaws out, they will just have to eat the loss.

A store in Phoenix might operate for decades without ever experiencing a long-term power outage that leads to inventory loss, making the investment in multiple generators for a low probability risk an inefficient use of funds.

A store in an area where power outages are frequent may make a different calculation and decide the extra cost of a generator is less than the frequent replacement cost of inventory lost to spoilage.

A business that relies on fleet vehicles can minimize the risk of breakdowns by keeping up with preventative maintenance. Regular maintenance extends the life of their vehicle investments and reduces the risk that a vehicle will suffer a catastrophic breakdown and require costly replacement.

Some industries have a real risk of having top tier talent poached by competitors. Those businesses can put non-compete clauses in their employment contracts and protect themselves from employees moving to a competitor or starting their own company and taking their book of business with them. If a worker were to do that, the employer could sue, which minimizes that risk. Employers can also offer competitive compensation to ensure they’re attracting and keeping top talent.

Businesses can also invest in certain types of insurance, like business interruption coverage, to ensure they are compensated if a known risk occurs, and they lose revenue or inventory as a result.

Financial and Sales Forecasting

A business consultant or commercial accountant may be able to help your business develop pro forma financial statements, or essentially a set of projected future financial statements. They can be developed based on growth expectations using past years performance, expected growth and industry health.

Knowing where you want or expect to be in the quarters and years ahead can help you adjust your business as performance meets, falls short of or exceeds those goals.

Forecasting can also help with risk management by spotting trouble before it becomes a potentially fatal problem for your business. Some businesses seeking significant financing may even be required to develop three- and five-year pro forma statements for lenders or equity investors. If you are shopping your business to venture capitalist or angel investors, chances are they will expect to see pro forma financial statements.

These statements often include things like:

· Sales growth projections

· Your product schedules and projected increases in production

· Your projected operating expenses

· Projected revenue and profit, if all goes according to plan

The key to developing pro forma forecasts is usually sales or service projections. If your expenses are linear based on fixed or variable production costs, it’s just a matter of calculating what your expenses would be for that level of production. Then you can calculate revenue and profit based on projected sales and operating cost calculations.

Get Help with Forecasting and Risk Management

H&H Accounting Services in Phoenix is proud to help small and medium-sized businesses in the Valley develop plans to mitigate risks and develop reliable financial forecasting reports. Our experienced business accountants and business consultants would be happy to sit down for a free initial consultation to discuss your business and how you can grow and safeguard it. Call us at (480) 561-5805 to get started

How Do Businesses Merge?

Wed, 10 Feb 2021 18:30:55 GMT

A typical merger occurs when one company buys another company. This can happen in a variety of ways.

If a company is publicly traded it occurs when one party buys a majority share of stock in a company, giving them control over that company.

If a private company wants to merge with another private company it usually happens when one business owner buys out another business owner’s interest in that business. Two businesses could also decide to combine resources and start a new company, but that usually means dissolving the existing businesses and reapplying for licenses, getting new tax IDs, etc.

Mergers aren’t always a sign of a failing business. Maybe an auto shop owner or the owner of an HVAC company is retiring and sells his company to a local competitor. The owner can get a lot of money to retire on and the purchaser gets a turnkey expansion.

Acquisitions

When a profitable business is bought out by other business it’s known as an acquisition. The end result is similar to a merger in that the purchased company merges into the parent company.

Companies like Alphabet (Google) and Amazon are particularly known for this practice.

Nest was growing in popularity and were making all kinds of widely adopted advancements in home automation. Google wanted to expand in that market, so they bought Nest, essentially giving Google all that knowledge and Nest’s intellectual property overnight.

The same motivation led to Amazon’s acquisition of Ring. Those were both successful businesses that got merged into juggernauts because they were so successful.

Types of Buyouts

The terms buyout and acquisition are sometimes used interchangeable.

There are a few specific types of buyouts, including management buyouts and leveraged buyouts.

A management buyout is when a company’s management buys more of their own company’s stock, giving them greater control over decision making.

A leveraged buyout is when one company, managers or an investment firm borrows money to finance the buyout of a company.

Both management buyouts (MBOs) and leveraged buyouts are often used to take a company private (putting all the shares in the hands of management or another company).

Control over a company requires at least 50 percent of a company’s shares. Some private investors, investment funds or private equity firms will seek out companies that are underperforming for correctible reasons or companies that are undervalued, acquire them, turn them around and then sell them or take them public for a profit. There are even specialized buyout firms that can help a company’s management initiate leveraged management buyouts.

MBOs are popular for both private and public companies. Some companies may want to consolidate their resources on a core business function and encourage leaders in some ancillary part of their operations to buyout that part of the business.

Merger of Equals

Mergers in the traditional sense generally happen when relatively equal companies combine. The companies come to an agreement where they trade common stock (Company A gives half of their common stock to Company B and vice versa) in a stock-for-stock agreement. This exchange of stock isn’t on a one-to-one basis. It may be something like Company A gets one share of the new company for 2.5 shares of their own stock.

How Stock-for-Stock Mergers Work

Company A makes an agreement to enter into a Stock-for-Stock Merger with Company B and its investors
Company A pays Company B a million in cash and Company B stockholder receives one share of Company A for every 2 shares of Company B they own
Company B shares can no longer be purchased after the merger but the number of shares of Company A will increase on a 1-for-2 basis (if there were 1,000 shares of B there would now be 500 new shares of A)

Shareholders generally get a vote on stock-for-stock mergers, but the average consumer investor likely doesn’t have as much sway as large institutional investors that hold significant percentages of the involved companies.

Are You a Phoenix or Scottsdale SMB Owner Interested in Merging or Buying Out Another Company?

Small and medium sized businesses frequently buyout or merge with local competitors. Even more frequently a business owner who is about to retire will want to pass ownership of their company on to children or the managers they’ve been training for decades.

Any person either buying or selling a business should work with experienced CPAs , business accountants and business consultants who can help with thoroughly analyzing the books of a potential acquisition. The team at H&H Accounting Services can assist with valuation and analysis to ensure your business’s merger or sale a good, fair investment.

Call (480) 561-5805 for help with your business accounting needs.

Useful Ways to Manage Your Companies Operating Cash Flow

Wed, 10 Feb 2021 18:18:13 GMT

When a business’s failure is attributed to a financial cause, it turns out to be inefficient or unsustainable cash flow an estimated 82 percent of the time.

For a majority of those failed businesses the outcome was likely inevitable, but there are certainly some situations where business failure could have been prevented had operating cash flow been better managed.

A business can’t artificially generate demand for their products and services, but they can make choices that will decrease wasteful spending while improving efficiency and cutting costs where possible.

The Difference Between Cash Flow and Revenue

Revenue is the amount of money a business takes in from the products it sells or the services it renders. Revenue is a one-way street.

Cash flow is the measure of money going into and out of a business. There’s an old idiom that, “revenue is vanity, profit is sanity, cash flow is reality.” While that may be an oversimplification, there’s a lot of truth to it. Business owners often brag about revenue, but having lots of revenue doesn’t equate to long-term stability if you’re spending more than you take in.

Positive Cash Flow and Negative Cash Flow

These two types of cashflow are relatively self-explanatory. Positive cash flow is when you’re taking in more revenue through sales than you’re spending on operations. Negative cash flow is when your cash outflows exceed the revenue you’re earning.

Some businesses will have negative cash flow some months then positive cash flows others, especially businesses that have long order or payment cycles where they may not get paid for a job till it’s over three months after it started, for example.

Cash flow management is especially important for businesses that operate with Net 30/60/90 payment terms. Those business eventually need to return to positive cash flow, and they must have adequate cash on hand to survive their months of negative cash flow.

There are some basic cashflow rules of thumb that can help every business maintain positive cash flow or better weather periods of negative cash flow:

First and most importantly monitor your cash flow regularly
Don’t let your invoicing fall by the wayside
Get deposits or at least partial payments up front on long-term contracts or large product orders
Consider adopting incentives to get customers to pay early
When possible delay payments to vendors (unless there’s incentive to pay early), but don’t risk late fees
Upsell existing customers (retaining customers and generating more revenue from them is always more cost effective than finding and onboarding new customers)
Tighten your credit requirements for clients
Secure business lines of credit before your situation becomes dire
Rely on business credit cards to provide a cushion for your cash flow during difficult times (credit cards also allow for easier tracking and categorization of business purchases)

Accrual Accounting and How It Affects Managing Cash Flow

Cash basis accounting is the easier method for monitoring cash flow and ensuring your revenue is exceeding your operational costs, but not every business can utilize the cash accounting method.

Manufacturers, marketing companies and some contractors or construction companies may not get paid for their services or products up front, but still record those payments when the initial transaction occurs, which is known as accrual accounting.

On paper companies that use accrual accounting may appear cash flow positive even though they have yet to be fully paid.

There’s nothing inherently wrong with utilizing accrual accounting, but it can potentially be misleading if you don’t stay on top of collecting what clients actually owe.

The cash method is a bit more straightforward and leaves less room for error or a false sense of security. However, there is a potential downside for cash basis that’s essentially the reverse of accrual accounting.

If a cash method company has a lot of accounts payable (bills they owe to vendors) they could appear to have positive cash flow when, in fact, they would have negative cash flow were they to actually pay all those bills.

Which accounting method is best for your business largely depends on your operations, how your vendor and client payments work and which method you, the business owner, feel most comfortable tracking. All that really matters is that stakeholders understand how misconceptions occur, so they know to avoid them.

Get Help with Your Cash Flow in Phoenix or Scottsdale

H&H Accounting Services provides an array of business accounting , consulting and tax preparation services in the Valley. Our CPA and team of accountants excel at analyzing operational cash flow and can help you identify ways to better track your income and expenditures and provide advice that could help you save money, obtain financing or speed up payments.

Call us at (480) 561-5805 for a free consultation – we’ll come to you!

What Happens If I Don’t Pay My Taxes on Time or at All?

Tue, 12 Jan 2021 23:18:12 GMT

There are a lot of reasons you might not pay your taxes on time – or at all. Maybe the deadline just snuck up on you and you forgot about it. Maybe your employer doesn’t have adequate withholding and you simply don’t have enough cash on hand to pay what you owe. Or, like many people, maybe you just procrastinated and then couldn’t find all the W-2s, 1099s and other forms you needed to get your tax filing done on Tax Day.

If, for whatever reason, you didn’t get your taxes filed or paid by Tax Day, there’s both good news and bad news. If you know ahead of time you won’t be able to file by April 15 it’s easy to request an extension. If you file but don’t pay right away the tax penalty with be fairly low – your refund might just be a bit lower than it would have been if you had filed on time.

The bad news is if you just blow off your taxes and hope the IRS won’t notice the penalties can get massive.

The Difference Between Failing to File and Failing to Pay

There’s a significant difference between the penalties of these two infractions, despite being relatively similar in that the end result is you didn’t pay your taxes on time.

If you file your taxes but don’t pay the IRS the failure-to-pay penalty is usually 0.5 percent per month up to 25 percent.

If you don’t file your taxes at all and subsequently don’t pay the IRS the penalty rate is 10 times higher – five percent per month up to 25 percent.

Either way the max they the penalties will add up to is 25 percent on top of what you would owe had you paid on time. In one scenario you’ll reach that max after 50 months and in the other scenario you’ll reach that max in just five months.

The IRS will also charge interest on your unpaid taxes at the federal short-term rate plus 3 percent. You will ultimately need to pay your taxes + 25 percent + short-term interest + 3 percent.

Requesting an Extension

You can request permission to be late on your taxes by filing for an extension. There are legitimate scenarios where you may not have all the documentation you need to file your taxes accurately and completely by the tax deadline.

The IRS would prefer you file accurately and pay them everything you owe, so they will usually give you an extra six months to pay if you request it – generally until October 15.

If you do need an extension you should fill out this IRS Form 4868 . There are even options to file a Form 4868 electronically .

This form is surprisingly simple for an IRS form, you just need to include your address, Social Security number and a few lines pertaining to your estimated tax liability. There’s also an option to pay some of your estimated tax liability, which is recommended.

Despite popular belief, an extension does not actually give you more time to pay your taxes. What it essentially does is allows you to accrue a penalty at the lower failure-to-pay rate instead of the failure-to-file rate. That’s why paying at least some of your taxes, if you can accurately estimate them and afford them, will reduce the interest accrued on the amount you still owe.

Approval on extensions is generally pretty straightforward. Most filers requesting an extension won’t even need to explain to the IRS why they’re requesting an extension.

Some filers may want to request an extension for reasons other than simply not having all the documentation they need by April 15. There may be scenarios where you’ll save more than you’ll accrue in penalty fees and interest by waiting to file and pay. For example, you may need more time to file a gift tax return or establish a simplified employee pension retirement plan if you’re self-employed.

It’s also important to note filing extensions must be submitted before April 15. No more extensions can be given after the tax deadline.

Will the Tax Deadline Be Extended in 2021?

In 2020 filers were given an extra 90 days to file their taxes due to the coronavirus pandemic. As of now it appears the tax deadline is still April 15, 2021. That doesn’t mean something won’t change before then, but so far the IRS has made no announcements about extending the 2021 deadline.

Get Help Filing Your Business or Personal Taxes on Time in Phoenix

Do you need help getting your business taxes or personal taxes filed on time this year? Are you trying to figure out how to write off significant 2020 losses you incurred due to the COVID-19 pandemic? The income tax and business tax experts at H&H Accounting Services can help. We offer an array of tax preparation services for individuals and businesses throughout the Phoenix area.

Call us at (480) 561-5805 to request a free one-hour no-obligation consultation .

Understanding the Three Areas of Cash Flow

Tue, 12 Jan 2021 22:55:40 GMT

Cash flows on your business’s “Statement of Cash Flow” are broken out into three different activities: operating, investing and financing. Each of these sources of cash or expenditures are obtained or spent through fundamentally different methods, and what they mean depends a lot on your industry and the health of your business.

Cash flow statements go hand in hand with balance sheets and income statements. While they’re not required for every small to mid-sized business, they are required by the Financial Accounting Standards Board for any public companies.

Although small private businesses aren’t required to work up cash flow statements, they can be hugely beneficial for analysis purposes and for obtaining business financing.

Operating Cash Flow

Income and expenditures from any activities relating to the operation of your business would fall in the operating cash flow category.

This is maybe the most obvious form of cash flow for any business. When you perform a service or sell a product the amount you’re paid is recorded as a credit for cash flow. On the other side of the ledger, paying workers or purchasing inventory would be recorded as a debit.

Some examples of operations that might contribute to operating cashflow include things like:

Receipts for selling goods or performing services
Income tax or interest payments
Purchases of supplies or services from other businesses
Property rent payments
The wages and salaries paid to employees

Investing Cash Flow

Investing in the cash flow sense isn’t the same as investing like you may do with your personal finances. Investing debits and credits aren’t related to stocks or bonds purchased by a company but rather investments in long-term assets on the Fixed Assets section of a balance sheet.

Buying another truck to expand your business’s fleet might be debited in investing cash flow. Purchasing a new building for your business or acquiring a new piece of equipment for your business are also examples of expenditures that might be recorded in investing cash flow.

Sales of those assets – like selling an old truck in your fleet or selling your old building after moving to a new location – would be reflected as a credit to investing cash flow.

Financing Cash Flow

If your business takes out a business loan or sells stock, those cash inflows would be reflected in the financing cash flow. A business that pays out dividends to investors would also record those cash payments as debits in the financing cash flow section of the Statement of Cashflow.

Is Negative Cash Flow Always a Bad Thing?

This really depends on a company’s business model and the industry in which they operate. A frequently cited example is Amazon. On paper the company had a loss of operating cash flow of $38.5 billion but a loss of $24.3 billion in investing cash flow and a loss of $10.1 billion in financing cash flow in 2019.

While that’s not negative cashflow, Amazon has had many years in the red and certainly doesn’t run positive in investing or financing most years. But there are a lot of positive figures on the income statement and balance sheet:

38.5 percent total asset growth
20.5 percent sales growth
15 percent growth in net income

All of those things combined provided confidence for investors and lenders that Amazon would remain a strong going concern for the foreseeable future and was positioning itself for increased operating cash flow in upcoming years.

Not Every Business Is Amazon

If you’re an investor or business, there are often good reasons to be concerned by negative cashflow. While there are a lot of scenarios where investments may temporarily make a company’s cashflow look deceptively negative, there are also cases where negatives in operating cash flow may be indicative of a struggling business. Relying too much on financing cash flow may also indicate a business that’s struggling to remain in the black.

A cash flow statement is a useful analytical tool to determine how well a company is managing its cash inflows and outflows, especially when combined with the balance sheet and income statement. Looking at annual cash flow statements over several years can tell a story of a business’s growth and health.

Even Small Businesses Can Benefit from an Accurate Cash Flow Statement

Small business owners sometimes overlook the value of cash flow statements or other analytical tools compiled by business consultants and certified public accountants (CPAs). It’s not always easy to spot long-term trends when you’re focused on the day-to-day operations of a business and aren’t regularly looking at your business’s finances from a bird’s eye view.

Cash flow statements can help you zoom out and holistically examine your business’s finances. It can help you spot trends, find missed opportunities for increased savings or identify warning signs of upcoming shortfalls.

H&H Accounting Services in Phoenix offers an array of business accounting and consulting services for local businesses across the Valley. We would be happy to sit down with you for a free one-hour consultation and explain the benefits of increased transparency for your business’s financial health.

Call us at (480) 561-5805 to schedule – we’ll even come to you.

What the Difference Between Capital Gains & Capital Loss

Tue, 12 Jan 2021 22:25:27 GMT

Why Do I Have to Pay Taxes?

Sat, 12 Dec 2020 00:29:52 GMT

Frequently Overlooked Aspects of Bookkeeping

Fri, 11 Dec 2020 23:39:10 GMT

Poor Record Keeping

Misplacing receipts for petty cash purchases or failing to make note of small expenditures may not seem like a big deal right now, but they will ultimately lead to inaccuracies if you attempt to analyze your business’s performance. These inaccuracies may result in you losing out on tax deductions or give you a flawed view of your business’s assets, performance, expenses and cashflow.

Some of these issues can be rectified in the future, but others are harder to track down after the fact. It’s much better to have a disciplined record keeping and bookkeeping system in place now rather than try to retroactively determine how much was spent on what.

Categorizing Expenses Incorrectly

If you want to use different measures of income and expenses to better analyze your business’s profitability, it’s important to properly categorize those various expenses. Profitability ratios, like gross profit margin, operating profit margin and net profit margin can only be calculated if you have accurate measures of your operating income, gross profit, net income and revenue.

Failing to Reconcile Bank Accounts

Business owners, especially sole proprietors, frequently fail to separate their personal finances and business finances. If one day you or your business is audited by the IRS, they will expect to be given complete business records separated out from your personal financial activities.

Correctly reconciling your monthly business bank statements is also a good way to catch discrepancies or little problems that could potentially snowball into much bigger problems down the road.

Neglecting Cloud or Physical Backups

Plumbing floods, fires, theft or hard drive failures are all things that can potentially wipe out your business’s records. We can’t overemphasize just how important it is to have backups of your important business records and bookkeeping information. Making backups is affordable and easy, with many automated systems available that will do it automatically on a schedule without you ever having to think about it.

Failing to Pay Sales Tax

You may think sales tax is a rip-off or the numbers are so small that no one will notice if it sometimes doesn’t get added to invoices. Unfortunately, hoping no one will notice is not adequate defense if state tax revenue collectors ever come knocking on your door. You’ll spend less by accurately reporting sales tax than you will by dodging it and eventually having to pay fines and penalties.

Incorrect Employee Classification

There are significant tax liability and accounting differences in the way contractors and employees are treated in terms of a business’s legal and tax obligations. It’s not uncommon for businesses relying on DIY bookkeeping to make categorization mistakes that result in avoidable tax overpayment. If you’re worried about this issue for your business, you should consider consulting with H&H Accounting Services .

Time Management and Opportunity Cost

Most business owners are familiar with the concept of opportunity cost. You fail to realize some profits because you decided to invest resources into a less lucrative alternative. It’s the measure of choosing to do one thing instead of doing another, better thing – the loss associated with a missed opportunity.

This theoretical measure can be applied to a lot of things in life, including your time. There’s an opportunity cost to trying to do your own bookkeeping rather than relying on a vendor.

For the sake of the hypothetical, let’s assume it takes you three times longer to do bookkeeping yourself rather than hire a professional. You also make a number of avoidable mistakes or fail to use QuickBooks to its full potential, resulting in missed savings opportunities.

Maybe you save $1,500 a year, after the cost of the software, by doing your own bookkeeping. If you had invested those hours into your actual business, you would have made $3,000 of revenue.

That $1,500 opportunity cost, plus whatever tax incentives or operating inefficiencies you missed by doing it yourself, is a loss from a business perspective.

This hypothetical is just an example and the numbers may not be representative of the reality for your business. It’s also difficult to estimate some of the tax credits or write offs you may have missed that a CPA could have found or utilized on your behalf.

Get Help With Your Business’s Bookkeeping in Phoenix, Scottsdale and Tempe

Business owners from Chandler and Gilbert to Glendale and Avondale can trust the bookkeeping professionals at H&H Accounting Services for accurate and efficient accounting services . We’re ProCertified in QuickBooks and can provide an array of other value-added services like business consulting , tax planning and preparation and even help with employee benefit packages.

If you think you may be making bookkeeping mistakes or just want some advice on improving your business’s cash flow, our CPAs and accountants can help. Call us at (480) 561-5805 for a free one-hour consultation .

Frequently Asked Bookkeeping Questions for Small Business Owners

Fri, 11 Dec 2020 20:57:17 GMT

What’s the difference between a bookkeeper, controller and an accountant? Do I need all of them?

Accountants prepare a variety of financial statements, audit financials and can prepare taxes. The reports they develop can offer a big-picture view of a company’s financial health. Accountants may also be consulted on an array of topics, from benefits packages and supply chain optimization to loans and debt consolidation. An entrepreneur just starting out isn’t required by law to have an accountant – but having one can help a lot, especially for businesses with complex financials.

Bookkeeping is the day-to-day financial record of a business’s operations. Accounting can be thought of as being informed by bookkeeping, like a compilation of all the bookkeeping into big-picture statements (often on a quarterly or annualized basis). The financial statements an accountant prepares are a way to analyze the figures recorded in bookkeeping.

A company’s controller is generally the chief accounting officer (CAO). They would be the person in charge of the bookkeeping and accounting practices of a company. A company could have a controller and still utilize third party bookkeepers and accountants.

What accounting software is best for bookkeeping?

QuickBooks is considered the gold standard for bookkeeping software by many accountants thanks to its robust set of features and reporting capabilities. At H&H Accounting Services we have QuickBooks ProAdvisor Certification and can sync QuickBooks bookkeeping with Gusto for payroll services.

Business owners can invest in QuickBooks themselves, but the software is complex and utilizing all of its capabilities for maximum accuracy and analysis does take training and experience. A new QuickBooks user may not have the experience or training to translate the available analytical functions into actionable advice .

There are a variety of QuickBook tiers for different sized businesses and different types of professionals, but the more expensive tiers utilized by professional bookkeepers and accountants provide significantly more customization and analytical output.

If you have questions about QuickBooks or want to know why you may want to consider working with a professional, certified bookkeeper or accountant in the Phoenix, Scottsdale and Tempe areas, don’t hesitate to contact our team at H&H Accounting Services.

What certifications are there for bookkeepers?

The National Association of Certified Public Bookkeepers (NACPB) offers some certification and licensing options to people who are interested in pursuing a career in bookkeeping, but certified public accountants (CPAs) like those at H&H Accounting Services and professionals with QuickBooks certifications also excel at providing bookkeeping services to businesses of all sizes.

I haven’t done a good job of keeping my business’s books up to date, can you help?

Yes, it’s not uncommon for business owners to schedule their free initial consultation specifically to discuss ways to get their accounting and bookkeeping in order. We can take what you do have, organize it and compile your existing records in a platform like QuickBooks to provide the accuracy and transparency your business needs in an accounting system.

Although it’s a feasible for a dedicated business owner to take on this task themselves, getting your bookkeeping on the right track isn’t always fast or easy. The sooner you take steps to rectify the situation the easier it will be to accomplish.

If your current system isn’t cutting it, we encourage you to call us for a free one-hour consultation. One of our CPAs would be happy to come to your place of business or meet wherever is most convenient for you to discuss the best solutions for your business.

What is double-entry bookkeeping, and do I need it?

Newton’s third law of motion, “For every action, there is an equal and opposite reaction,” applies surprisingly well to accounting. For example, if a company borrows money their cash increases and their debts increase on the opposite side of the ledger. A properly updated balance sheet should have assets that equal liabilities plus equity. Any entry on one side requires an entry on the other.

Utilizing double-entry bookkeeping systems enables an accountant or bookkeeper to provide better analysis and reporting materials, like income statements, balance sheets, cash flow statements, etc. If you really want to have a transparent, comprehensive view of your business’s financial health, utilizing double-entry systems are integral.

If you’re concerned that your current DIY bookkeeping processes don’t qualify as double-entry bookkeeping, our team can help.

I think my business needs bookkeeping services. Where should I start?

At H&H Accounting Services we value transparency and (unsurprisingly) accountability. Providing thorough and accurate bookkeeping services is an important part of what we do.

If you want to know how your business is doing, understand various production or cashflow bottlenecks and get a better sense for where and how your business can improve, bookkeeping is indispensable.

Our team would be happy to explain your various bookkeeping options and set up a system that will help you better monitor the health of your business and make it a lot easier to do your business’s taxes.

We have the know-how and capabilities to providing bookkeeping and accounting services for all types of businesses, from entrepreneurs and sole proprietorships to larger SMBs and organizations.

Call us at (480) 561-5805 to schedule you free one-hour in-person consultation .

Presidential Tax Plans (Infographic)

Sat, 14 Nov 2020 00:31:44 GMT

The Good and the Bad of Payroll Tax Cuts

Sat, 14 Nov 2020 00:16:08 GMT

Payroll tax cuts have been in the news a little more than normal thanks to an idea floated by President Trump to extend a temporary payroll tax holiday to workers in lieu of an additional stimulus check. Whether people think this is a good idea, a bad idea or are entirely neutral on the idea depends largely on their political persuasion.

Getting a stimulus check for $1,200 in the mail is something that’s easy for everyone to wrap their heads around. A payroll tax cut isn’t quite as obvious. Here’s how it would work and some of the arguments for and against the idea.

What Is the Payroll Tax?

In the most basic of terms, a payroll tax is money taken out of your wages by your employer and given to the government. In addition to this withholding, employers also chip in a portion – generally half of your Social Security (6.2 percent), half of your Medicare (1.45 percent) and federal unemployment tax.

People only pay the payroll tax (income taxes) if they’re employed and are getting paid. The amount you pay is a percentage of your income, whether it’s a salary, hourly wage or tips. If you are tipped directly you still technically owe payroll tax on those cash tips, but it becomes your responsibility to report and pay it.

Most workers understand payroll taxes on a basic level, even if they’re not super familiar with the ins and outs of payroll taxes. People generally notice it when they get their first entry-level hourly job.

The discovery probably goes something like this (the scenario varies based on age and minimum wage laws at the time…)

Kid gets job making pizzas for $7.50 an hour
Kid works 20 hours a week and expects to get a check for $300 after two weeks
Kid gets check for about $270
Kid is frustrated, confused and wonders what these Medicare, Social Security, federal income taxes and state income taxes are on their paystub

The Criticism of Payroll Taxes as Stimulus

For a lot of workers, a payroll tax holiday would be a significant boon. Their take home immediately goes up a lot. Someone making $60,000 a year ($2,500 a pay period) would suddenly have a bit more than $500 extra every two weeks. That money could go towards savings, mortgages, pay for childcare, pay down student loans or be put back into the economy through the purchase of consumer goods.

However, as a stimulus designed to help everyone it’s not entirely effective:

You only benefit if you have a job
People in higher tax brackets, likely the people who least need stimulus, get the most out of it
People in lower tax brackets may get enough back to make much of an impact on their life

Consider the kid making $7.50 an hour. Getting an extra $30 every two weeks likely won’t make a measurable difference in their life, but they also likely weren’t trying to make ends meet based on that income alone.

A stimulus for COVID-19 would ideally benefit everyone, especially people who may have lost their jobs and can no longer pay their mortgages, utilities or even put food on the table. A payroll tax holiday wouldn’t help these people.

Additionally, programs like Social Security and Medicare do require funding, as do other federal government programs. Temporarily eliminating the payroll tax, on either the employer or employee side, does reduce revenue for government assistance programs.

All of the above is just conjecture on how actual payroll tax forgiveness would work. Although the White House was exploring ways to forgive payroll taxes rather than defer them, they were never quite successful in going all the way. All the executive order really did was defer the 6.2 percent Social Security tax through December 31, 2020.

But we’ll explore some of the arguments for and against payroll tax forgiveness as stimulus anyways.

Some Help Is Better Than No Help

Even if you are in the lowest tax bracket and making just $25,000 a year, you still pay the 7.38 percent federal tax, 2.7 percent state tax and the 7.65 percent Social Security and Medicare combined each paycheck.

During a real payroll tax holiday that worker would get an extra $185 each pay period, or $370 a month, which is not nothing.

People who entirely dismiss payroll tax forgiveness as having no benefit for working families are wrong, but it’s also not the same as cutting people a stimulus check.

The actual Social Security deferral – which does eventually have to get paid back – is arguably pretty unhelpful in the long run.

Low-Income Workers Did Not Benefit from the Recent Boosts to Unemployment Benefits

Critics of the payroll tax holiday as stimulus sometimes forget the bonus people on unemployment were getting thanks to the CARES Act. The federal government was kicking an extra $600 a week to people on top of their normal unemployment (through July 31 ^st ). Although that program is over, unemployed people in Arizona have also benefited from Trump’s August 8, 2020 memorandum that granted an extra $300 a week (through December 31).

In Arizona, the maximum unemployment a person can normally get is $240 a week . For a while, some of those people were getting $840 a week ($1,680 a pay period). If they were unemployed and benefiting from the executive order signed in August, they would have received $540 a week ($1,080 a pay period).

That worker making $25,000 a year from our previous example would have been taking home $857 (after payroll deductions) a pay period ($428.50 a week) during those same months.

Also keep in mind the infection risks many low-wage, frontline service sector workers were assuming, such as those working as cashiers in supermarkets, drivers for Uber Eats or attendants at a convenience stores. It’s easy to make the case that a bit of hazard pay would have been warranted.

A real payroll tax forgiveness plan would have at least provided some incentive for those workers to maintain their employment and give them some stimulus to compensate for any tough times their families may have been going through financially.

As it was, in the weeks during spring and summer 2020, a lot of people were getting paid a lot more by being unemployed and safe at home than those who were putting themselves at risk to keep basic services available. Payroll tax forgiveness could have been a good way for a nation to show its appreciation to those workers.

Do You Have to Pay Taxes on All That Unemployment Income?

Yes, people who receive unemployment benefits will have that income taxed. That income is typically exempt from the Social Security and Medicare portions of federal taxes, but the rest of that income needs to be taxed at whatever federal and state income tax rate you’d normally pay for your bracket.

A lot of beneficiaries don’t realize this, and then get a rude surprise when it turns out they owe more than they expected. If you have questions about your federal or Arizona taxes, feel free to contact the Phoenix accounting and tax preparation experts at H&H Accounting by calling (480) 561-5805.

What Impact Would Increased Capital Gains Taxes Have on 401(k)s?

Fri, 13 Nov 2020 23:58:06 GMT

People have a lot of opinions about capital gains taxes. Those on the left tend to think the wealthy people who can afford to invest should be taxed on the money they make in the market. They figure people with the money to invest can afford to pay “their fair share.” There’s an undercurrent in this position that the exponential wealth generation of equity investments, which requires little to no work on the investor’s part, shouldn’t be gained tax free or at a discounted tax rate.

People on the right tend to argue that capital gains taxes are essentially double taxation, which is unconstitutional (according to the U.S. Supreme Court). Investors already paid income taxes on those dollars they’re investing, so why should they be taxed again with capital gains taxes? There’s also the matter of risk and reward, plus the incentive of investing for the betterment of the national economy.

People on the left may disagree with the context of that position, suggesting double taxation in the context of the Supreme Court decisions were more about states taxing out-of-state income that had already been taxed by another state.

Taxing 401(k)s throws both of these arguments into a blender. People all over the socioeconomic spectrum have 401(k)s – they are by no means exclusive to wealthy people. Teenagers getting jobs at McDonalds or Pizza Hut often have access to company matching funds to begin growing their retirement nest egg before they even officially reach adulthood (which is good and should be encouraged).

The money they put into their 401(k)s are pre-tax dollars, which negates the double taxation argument. However, people on the left – and a lot of people on the right too – would argue people in lower income brackets responsible enough to save for retirement in a 401(k) shouldn’t be subjected to high capital gains taxes. Unreasonably high taxes could further devalue a nest egg that has the potential to keep them off of government assistance programs in the future.

What Are the Current Laws on 401(k) Taxes?

Currently a person’s 401(k) withdrawals are taxed at the owner’s current income tax rate as income. If you take out $45,000 a year, you will be taxed on the money as if you are earning $45,000 a year in income.

Owners who withdraw money before 59 and a half years old have to pay an additional 10 percent penalty, and people who are 70 and a half years old or older are legally required to make yearly withdrawals.

Roth 401(k)s are different because contributions to those accounts are after-tax dollars. In most cases withdrawals from a Roth 401(k) would not be taxed as long as the account owner making the withdrawals is 59 and a half years old and the account is at least five years old.

Money you put into a Roth IRA is not subject to capital gains taxes since those are after-tax dollars. You can put after-tax dollars into a self-directed Roth IRA and buy and sell equities like a normal investment account and keep any proceeds you make from sales tax-free up to your total contribution.

What that means is if you put $50,000 into a Roth IRA you can withdraw $50,000 tax free (if you follow the age rules). If you turned that $50,000 into $200,000 the other $150,000 of disbursements would be considered income unless you meet certain requirements (at which point the withdrawals become “qualified”).

If you wait until you’re 59 and a half and have had the Roth IRA for at least five years, it would be considered qualified for tax-free withdrawals. Other qualifying events include becoming disabled or using the money to buy your first home.

You can’t claim tax deductions for money you put into a Roth IRA, but contributions in a traditional 401(k) are deductible.

Even though 401(k) withdrawals are taxed as income, retirees generally pay lower taxes because most people are withdrawing less than what they made when they were working and are therefore in a lower tax bracket and pay a lower rate.

Retirement savings account disbursements are generally not subject to capital gains tax except in specific circumstances. For example, if someone was holding employer stock in a 401(k) and got net unrealized appreciation and growth above basis, that gain would be taxed as capital gains not income.

When Is Capital Gains Tax Different Than Regular Income Tax

If you’ve had the asset for more than a year and sell it for a profit it will be charged capital gains tax, not income tax, except for in qualified retirement accounts. Whether it’s an equity, a bond or your home, if you sold it for more than you paid for it and you owned it for at least a year and a day, you’d be charged the capital gains tax.

Capital gains tax rates are based on your income:

$40,000 or less it’s $0
$40,000 to $441,450 it’s 15 percent
$441,451 or more it’s 20 percent

Those rates are still a lot lower than normal income tax rates for most brackets.

CARES Act Effects on 401(k)s, Roth IRAs and Taxes

The CARES Act, passed in response to the COVID-19 pandemic, allowed people to withdraw 401(k) dollars as a loan without the 10 percent penalty for early withdrawal as long as account owners meet economic hardship requirements (provision expired September 23, 2020). Those dollars are still treated as income though, so people who take the money out early will need to pay tax on it. The cap on CARES Act-allowed withdrawals is $100,000.

It should be noted that the tax burden can be spread over three years, which lowers the overall impact on people who may have had to withdraw from the 401(k) in an emergency situation.

During normal times, or if you don’t meet the CARES Act requirements, you will be charged a 10 percent penalty for withdrawals before you turn 59 and a half years old, on top of the normal federal and state income tax.

Interestingly, part of the CARES Act also allowed people over the age of 70 and a half to defer their yearly distribution requirements. If they already took mandatory disbursements, they may be able to return those funds to their IRA or 401(k).

The penalty forgiveness has some catches. In most scenarios if people want to completely avoid penalties, they are expected to return the money they withdrew early within three years.

Planning Your Disbursements

What if you’re a retiree who could use a little more money but don’t want to take out so much from your 401(k) that it knocks you up into a higher tax bracket?

What if you retired early, aren’t claiming Social Security, don’t really need the money from your 401(k) or IRA minimum disbursement to live comfortably and would rather avoid being taxed on money you don’t need?

How do Medicare and supplemental plans factor into these taxes during retirement ?

These are all good questions the team at H&H Accounting Services can help you answer. Give us a call at (480) 561-5805 to schedule a free, no-obligation one-hour consultation. We’d be happy to come to you for an in-person meeting or do your consultation over the phone – whatever is more comfortable and convenient for you.

Benefits of Hiring a Personal Accountant vs. Tax Software

Thu, 15 Oct 2020 21:26:24 GMT

Fiscal Year Planning – Do You Need to Hire an Accountant?

Thu, 15 Oct 2020 21:15:45 GMT

Developing a new strategic business plan isn’t necessarily a must-do activity each year, especially if a business’s operations and fiscal position underwent relatively few changes over the previous year. It is, however, more common for small businesses to underutilize strategic planning than to suffer from an excess of planning.

Businesses should strongly consider reworking their strategic plan for the next fiscal year when:

There’s been an organizational change
Products or services have changed and their target market along with them
They’re in the midst of rebranding
Realities beyond a business’s control caused it to miss targets
Revenue either decreased or increased dramatically – especially unexpectedly

All of these scenarios may necessitate a need to retool your business plan for the year. If you or your business is going through any of the above – which is more likely in 2020 than just about any year in recent memory – there are a number of planning steps you should consider taking as we head into 2021.

One of those steps for many businesses (and some individuals) will be hiring an accountant. Many of the things we’ll discuss here can be greatly facilitated by a business consultant or CPA with the education and experience to provide knowledgeable guidance on these topics.

Reframe your business and reestablish your goals. There’s a good possibility your overarching business goals are unchanged, but if any of the previously listed things happened, they may have forced a period of introspection and potentially inspired you to recalibrate your definition of success or failure.
Look at your previous fiscal year’s plan. Are the goals you set previously still relevant? Do some projects need to be abandoned? You may need to develop new key performance indicators (KPIs) or change the way you’re tracking existing KPIs to better track current-state success.
Establish ways to track progress for the ideas you’ve laid out in steps one and two. Also take the time to determine what is and isn’t working from your existing performance measuring methods. Did your business miss a goal, but it went unnoticed and unaddressed? If things are falling by the wayside, now is the time to figure out how to prevent that from happening next year.
Get everyone onboard and informed. Making a new business strategy for the upcoming year is only effective if everyone is in the same boat and rowing in the same direction. This may take several internal and even external meetings with management and stakeholders. Comprehensively communicating business changes is always important, especially when big adjustments are in order.
Figure out your transition from current-state to future-state. Making dramatic modifications to a business’s strategic plan generally isn’t as simple as flipping a switch. People need to be re-tasked, made to focus on new goals and reoriented on business direction. Old business needs to be closed out so new business can be opened. The act of executing strategic changes is an action that often requires its own planning.

Do You Need an Accountant for All That?

In most cases having an accountant, business consultant or CPA will help with creating and implement strategic business plans. If you look through some of the business consulting services H&H Accounting offers, you’ll see several things that can either facilitate in the creation of a strategic business plan or help you make decisions about necessary business changes for the upcoming fiscal year.

If your business is carrying too much risk, cost controls are proving inadequate or forecasts are being missed, it may be time to make some changes to your business strategy. Accountants specializing in business consulting and business accounting services can help with all these things. They can:

Help establish new cost controls
Develop realistic forecasts
Create and implement tax planning strategies for the upcoming fiscal year
Make suggestions on how your business can better manage risk
Advise on effective methods of managing cash flow during tough times
Develop budgets
Perform internal audits and reviews
Provide accurate compilations and financial statements

Some of these things may sound expensive. If a business is already struggling to make ends meet, where are they going to find the money to not only hire a business consultant but also implement sweeping strategic changes?

In some of these situations there’s really not much of a choice. It’s either come up with a new plan for the next fiscal year or resign yourself to inevitable insolvency.

Keep in mind that business consultants and accountants are there, in part, to save you money. Their services may end up paying for themselves.

Business accounting services can also be as targeted or as broad as you need them to be. You can request they do as little as deliver compilations without any analysis or you can have them help you completely retool your budgets, payroll processes, employee benefits and internal control systems.

Every SMB is different. There’s no one-size-fits-all solution that will help your business return to profitability or, on the flip side, avoid every growing pain. Speaking with a business consultant is the first step toward figuring out exactly how they can best help your business overcome those hurdles.

Let Us Help You Plan for the Next Fiscal Year

Whether you’re struggling to keep your head above water, or you need to make some changes to your strategic plan because you’ve outgrown your old one, H&H Accounting can help.

As 2020 comes to a close, many Valley-area businesses are taking another look at their financial situation. It’s been a year of significant changes for many small businesses. Strategic plans that were made in late 2019 or early 2020 may not be at all reflective of the reality of how this year turned out.

We encourage you to schedule a free one-hour consultation , which we can do over the phone or in your offices. Call us at (480) 561-5805 to find out what our services entail and what we’d suggest for your business.

Calculating Risk for Small and Medium Sized Businesses

Thu, 15 Oct 2020 21:00:21 GMT

There’s really no single risk indicator or margin that entrepreneurs and small business owners can balance to eliminate every risk. Every small business is subject to risk from a variety of angles. Some of those risks can be identified and mitigated while others can’t.

Just because a business or entrepreneurial idea has risk doesn’t mean it’s not worth pursuing.

Risk is a cornerstone of business and capitalism in general. The reward for taking risks can be astronomical, but the repercussions for ignoring risks or failing to take precautionary steps can also be devastating.

Knowing your potential risks is the best way to cover yourself.

Demand-Related Risk

Every business’s demand risk is different, and some businesses are more susceptible to demand problems than others. The COVID-19 pandemic has provided a stark reminder of demand-side risk.

Toilet paper is a durable product in that households will always need toilet paper.

Restaurants, on the other hand, can have demand-related problems. Even when there is no pandemic, new restaurant owners run the risk of opening an establishment that just doesn’t catch on, meaning there’s very little demand for what they do.

Different industries offer better demand durability than others.

Specific events may also impact a business’s demand-related risk. In early 2020 when there was an apparent epidemic of kids developing lung conditions due to vaping, vape shops across the country saw business plummet .

Many ended up closing, especially after the COVID-19 pandemic followed mere months later and further suppressed their foot traffic.

Contribution Margin

This ratio essentially lets you know how much money you have left over to pay for fixed costs after the sale of a product or service. If you sell a widget for $20 and the variable cost of producing and selling the widget was $5 then you have $15 leftover to pay for fixed costs (and then profit).

A business’s fixed costs are static – like your rent or salaried workers. Those expenses are the same every month. Things like fuel or materials can be variable because those prices can fluctuate based on external market forces. Variable costs also go up or down based on the volume of production.

If you make 100 widgets this month and 200 widgets the next month your variable costs will go up, but your fixed costs remain the same. The rate at which variable expenses increase may also change with volume due to economies of scale.

The contribution margin can help businesses understand which products or services are worth keeping and which are losing them money. Services that lose money increase risk.

An HVAC service provider may find that changing an air filter ends up having a negative contribution margin due to the cost of fuel, technician labor and the cost of the filter. The business can choose to stop offering the service, increase the price they charge or start using a cheaper brand of air filters to get the contribution margin back into the positive.

Operating Leverage Effect

Having high operating leverage means a business’s fixed costs are higher than their variable costs. The degree of operating leverage can be calculated by dividing contribution margin by profit.

It’s great to have high operating leverage if your revenue is increasing because more of each extra dollar is going to profit rather than variable expenses related to production. If your variable costs are high, increasing sales has less of an impact on your net income, but you have lower risk during unexpected downturns.

When most of your expenses are based on production or service delivery costs, those expenses increase or diminish at the same rate as incoming jobs. Those business have lower risk during slowdowns than ones with high operating leverage.

If most of your expenses are in fixed costs that remain the same regardless of whether or not you have new jobs coming in, a downturn could dramatically affect your ability to cover those high fixed costs.

Financial Leverage Ratio

Financial leverage ratios are generally based on your business’s debt compared to assets. They may take the form of debt-to-asset ratios, debt-to-equity ratios, debt-to-capital ratios, etc.

These ratios are a measure of risk, but what the analysis derived from the ratio indicates depends on the industry. Having high financial leverage ratios may be appropriate for some businesses during some periods.

When a high financial leverage ratio becomes a risk is often during downturns, when fewer jobs are coming in and it becomes more difficult to maintain those debts. During good times, when lots of new business is coming in, having a high financial leverage ratio may have an amplifying effect – you can do far more business thanks to an influx of financing that allows you to accomplish more and generate additional revenue and profits.

Combined Leverage Ratio

Analysis of combined leverage ratio is a tool often used by business advisors, accountants and consultants to help business owners understand what effects operating leverage or financial leveraging are having on their business.

Combined leverage examines both the operating leverage and financial leverage to measure things like their impact on earnings per share (EPS) or it can help pinpoint the best finance leverage or operating leverage ratios to maintain.

Get Help Determining and Analyzing Your Risk From Skilled Phoenix Business Accountants

Doing the calculations and figuring out the relevant risk measures of your business is only helpful if you’re taking the right lessons from the information.

Business consultants and accountants can help you make sure the math on these ratios is correct and explain in actionable terms what those numbers indicate about your operations. Most importantly, they can provide suggestions or develop solutions to help mitigate risk and maximize your business’s stability.

H&H Accounting is proud to help Phoenix and Scottsdale area businesses remain viable and profitable with knowledgeable analysis and advice. If your business could use some assistance in this regard, please feel free to contact us at (480) 561-5805 for a free initial one-hour consultation .

Frequently Overlooked Tax Deductions

Tue, 15 Sep 2020 16:11:58 GMT

How to Determine If You or Your Small Business Needs Tax Preparation or Bookkeeping Assistance

Tue, 15 Sep 2020 15:40:40 GMT

When should I hire an accountant for my business or my personal taxes? A lot of income tax filers and business owners ask themselves this question, and there’s no one universal answer. There are several financial factors, time constraints or logistical hurdles that may impact your decision to hire an accountant or not to hire an accountant.

While it’s fairly easy to assert that virtually every business will benefit from working with an accountant, there are scenarios where a tax filer with relatively straightforward income and few potential deductions or tax credits may not benefit greatly from hiring an accountant.

When Should Businesses Hire an Accountant?

The answer to this question is a little bit easier – pretty much right away. Even the smallest businesses can have complex financial and accounting needs. There are also bureaucratic steps you really should take when you start your business to make sure everything is on the up and up.

Business owners may not be able to treat their company’s taxes in the same way they treat their own personal income taxes. You may have your personal income taxes nailed down, but business taxes can be a different ballgame.

Bookkeeping is another service that may be useful for your business, but if you’re essentially just an independent contractor without employees or a lot of expenses you may not need monthly bookkeeping checkups.

There’s more to business accounting than just bookkeeping and taxes. At H&H Accounting, bookkeeping, business tax return preparation and tax planning are just some of the commercial accounting services we offer. We can also consult on budgets, provide money-saving advice on cash flow management, set up and manage your payroll processes and help you choose the best benefit plans for your employees.

Do you need internal control systems or is your business subject to certain local or federal compliance standards? Our accountants can help you establish protocols to meet those compliance standards.

Does your business need financing for an expansion or frequent short-term loans for inventory purchases? We can help you obtain commercial financing and potentially help your business save money on terms and rates.

Business Consulting

There’s quite a bit of overlap between business consulting and business accounting, which is why many commercial CPAs provide both services.

Forecasting or risk management analysis, for example, can help businesses make important decisions about their future. Establishing and implementing cost controls is a consulting service that could potentially pay for itself down the road. Strategic business planning could be the difference between successful expansion or stagnation.

If you’re a small business owner, your skepticism of people who claim their services are integral or will pay for themselves is justified. Being cautious with your B2B relationships is always a smart move, and you’ll be well served by getting to know your business bookkeeper, tax planner or consultant before you hire them.

That’s why we encourage you to schedule a free 1-hour consultation wherever and whenever is most convenient for you. No pressure, no obligations – just a straightforward conversation on what we do and how those services have helped businesses like yours.

When You Should Hire an Accountant for Your Personal Taxes

Nearly everyone could benefit from working with a CPA or professional tax preparer when doing their taxes, but some people could use the help more than others.

You may not benefit that much from hiring an accountant or professional tax preparer if you:

Are a normal W2 employee at a company that does all the income tax, Social Security and Medicare withholding for you
Always use the standard deduction when doing your taxes

If you’re self-employed, own a business, have a lot of investments or generate income from a lot of different sources, you probably have more of a reason to work with a tax preparer.

Accountants can also help you identify and utilize tax credits and tax deductions. There are a lot of taxpayers who just assume the standard deduction is the best option for them without realizing they qualify for a lot of other tax deductions or credits. Some commonly overlooked deductions include things like:

Money spent on childcare
Medical expenses
Interest on student debt or mortgage interest payments
Charitable giving or work
Sales tax

Those are just a handful of the dozens of credits and deductions available to some taxpayers.

Even if you don’t utilize a tax preparer every year, doing so periodically could at least give you an idea of what deductions or credits you may qualify for in the future. A tax professional can walk you through the necessary documentation, explain how to tally up credits and deductions and show you how to apply for them legally.

Avoiding the Dreaded IRS Audits

Using tax deductions and credits properly is arguably more important than missing out on them entirely. It’s better to pay an extra $1,000 to the government because you failed to utilize a deduction than it is to wrongly claim a deduction and get audited as a result.

Professional tax preparation provides a couple of safeguards.

They will prevent you from claiming credits or deductions you don’t qualify for
They can make sure you have the necessary proof to prove you qualify for the deductions you do claim
Many tax professionals are insured and offer guarantees – if they mess up and you get audited, they may fix it and pay for any penalties out of their own pocket

You should, of course, do your research on tax preparers and any guarantees they offer. There may be fine print, like they will only cover up to a certain amount of penalties or they may not be liable in specific circumstances.

Get a FREE Consultation on Business or Personal Accounting Services

Give us a call at (480) 561-5805 for your free one-hour consultation . We’re also happy to have virtual calls over Skype if you’re more comfortable with that format.

How to Do Taxes if You’re a 1099 Self-Employed Contractor

Tue, 15 Sep 2020 15:22:44 GMT

There are pros and cons of being self-employed.

Pro: You get to (kind of) make your own schedule

Pro: You can work from home in your pajamas (regular bathing optional)

Pro: You get to take home all your money because your employer won’t withhold any of your taxes, Social Security or Medicare

Con: Procrastination is way too easy

Con: You may miss having a work team

Con: You are responsible for setting aside money to pay your taxes, Social Security and Medicare…

Doing taxes as a 1099 filer is not as straightforward as it is for people whose employer does all the withholding work and gives them a W2. The employer handles a lot of the math for W2 workers, but most of that math is on you if you’re a 1099 worker.

There’s some good news though. Doing your taxes as a 1099 contractor is not as tough as you may think. You’ll have to do the calculations yourself, remember to make quarterly payments to the IRS and will need to use a special “self-employed” version of the popular tax planning tools most filers use today, but it’s not as daunting as you may assume.

What You Need to Do: The Basics

You can make the required quarterly payments several different ways.

Pay by mail by filling out a 1040-ES voucher every quarter and mailing in a check
Use the official IRS2Go app
Pay by phone with a debit card, credit card or withdrawals from your checking account (IRS phone numbers and website addresses can be found on the bottom of page three of the 1040-ES form)
Make an account with the Electronic Federal Tax Payment System and pay through the website (make sure to remember your password and pin as you’ll need both to login to make future payments)

The Four Quarterly Payment Deadlines

April 15 (Taxes for January 1 through March 31 income)
June 15 (Taxes for April 1 through May 31 income)
September 15 (Taxes for June 1 through August 31 income)
January 15 (Taxes for September 1 through December 31 income)

If You Choose to Mail in Your Estimated Tax Payment, Where Do You Mail It?

The location you need to mail your voucher and check to depends on which state you live in. You can find the list on page 5 of the 1040-ES form. For Arizona filers, the address is:

Internal Revenue Service

P.O. Box 802502

Cincinnati, OH 45280-2502

Standard Deduction

If you’re using the standard deduction, it is:

Married filing jointly: $24,800

Head of household: $18,650

Single or Married filing separately: $12,400

Figuring Out Social Security and Medicare Self-Employed Taxes

The following is a very basic overview of how you will estimate what you’ll owe for Social Security and Medicare.

You should read through the estimated tax worksheet (and the instructions) on the 1040-ES and make sure you’re making any line-item adjustments that are relevant to your situation.

You will need to estimate your income for the year, which isn’t necessarily easy for every contractor. It’s not the end of the world if you have to adjust quarterly payments later in the year based on changing circumstances.

For the sake of this example we’ll just assume you’ll be making $45,000 this year.

To get your self-employment taxable income you’ll multiply $45,000 by .9235, which is $41,557.50.

Social Security tax is 12.4 percent and Medicare is 2.9 percent for a total of 15.3 percent combined. Multiply 41,557.5 by .153, which is $6,358.30. That’s what you’ll owe for Social Security and Medicare self-employment taxes for the year.

Figuring Out Self-Employed Income Taxes

If you have above-the-line deductions, you can subtract those from your $45,000 income before going further. Examples of potential above-the-line deductions include things like:

Classroom expenses for educators
Some business expenses
Contributions you make to a health savings account
Contributions you made that year to your retirement plan (like a traditional IRA, not Roth IRAs)
Student loan interest

It’s recommended you speak with an accountant, tax preparer or CPA before claiming a bunch of deductions. The IRS gets suspicious of certain deductions and you may need to provide evidence of legitimate expenses or face penalties. To describe IRS audits as inconvenient is an understatement; they are best avoided.

For the sake of simplicity, we’re going to assume you have no above-the-line deductions for our example – and we’re going to assume your filing status is single.

Subtract the single standard deduction from your income to get your taxable income: $45,000 - $12,400 = $32,600.

Now you’ll go to page seven on the 1040-ES form to find the tax rate that applies to you. At that taxable income you’d be in the “Over $9,875 but not over $40,125” bracket, which means your tax is $987.50 + 12% of the amount over $9,875. The math will be:

987.50 + (32,600 – 9,875 x .12) = $3,714.5

And just to show the math:

32,600 – 9,875 = $22,725

22,725 x .12 = $2,727

987.5 + 2,727 = 3,714.5

Putting It Together

You will need to add your self-employment income tax to your SS and Medicare tax: 3,714.50 + 6,358.30 = $10,072.80.

Then divide your total by four to get your quarterly payments: 10,072.80/4 = $2,518.20.

Making Adjustments

If for whatever reason you ended up making an extra $10,000 in Q3, you may end up owing more to the IRS at the end of the year than you initially expected when you were estimating your income in Q1 and Q2.

Just recalculate your necessary quarterly payments and add the difference between your original estimate and your revised estimate to your Q3 and Q4 payments.

The most important thing is not missing payments or underpaying by too much by the end of the fiscal year. Filers who fail to make quarterly payments may have to pay penalties and interest.

Don’t Hesitate to Get Help

This is a very basic overview and it doesn’t get into all the confusing steps like correctly calculating above-the-line deductions or adjusting for special rules that only apply to certain filers.

Depending on your unique situation things could get messy and complicated. If you have questions or aren’t positive on what you should do, it’s likely in your best interest to speak with a CPA or income tax advisor at least once before you start filing quarterly. An accountant should be able to explain the process in more detail, help you maximize your deductions and walk you through doing the calculations moving forward.

The team at H&H Accounting is always here if you need help. Give us a call at (480) 561-5805 to learn more.

Accounting Cheat Sheet For Small Business Owners

Thu, 13 Aug 2020 01:24:50 GMT

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Common Bookkeeping Mistakes Made by Entrepreneurs

Thu, 13 Aug 2020 00:47:37 GMT

Many entrepreneurs are admittedly not numbers people. They are big picture types with imagination, creativity and drive, but spreadsheets and accounting minutiae may not be one of their strengths.

As a result, there are a handful of mistakes new business owners commonly make, especially at the very beginning or in early phases of their business.

Thinking They Can Do It All

Many startups try to handle all the administrative tasks internally with their core team instead of hiring experts or working with vendors or consultants. They often try their hand at DIY QuickBooks to manage all their accounting needs, particularly when the business is just starting out.

The instinct to save money by keeping things in house isn’t necessarily a bad thing. If you can do it yourself that’s one less person or B2B partner you need to hire.

However, there are two main drawbacks of the DIY approach.

Investing a lot of time into managing your own books internally draws focus away from other areas of growth within the business (lead generation, marketing, searching for outside investors, finding the perfect office space, etc.).

Your expertise and energy would be better spent on core competencies and executing on your business plan.

The second drawback is quality and expertise.

Most larger corporations and companies have full-time accounting departments and staff to cover all of their bookkeeping needs and manage the company’s financial health. Unless you and your core team have relevant MBAs and extensive experience on bookkeeping software, there’s a high probability mistakes can be made, which could have repercussions down the line.

Reaching out to a local CPA, business consultant or accounting service provider could be a good medium-ground option for small to mid-size companies. It’s more affordable than hiring an accountant internally and you’ll have peace of mind knowing things are being done right while you focus on what really matters – building your business.

Always Prioritizing Cost-Saving Over Investment

It may seem like more money upfront to outsource to a local CPA, but the costs saved in the long run outweigh the cost paid in the short-term.

The likelihood of being audited is pretty low (about one percent) for the average individual. However, that number increases to 2.5 percent for small business owners. Hiring a qualified CPA or bookkeeping service can help ensure your personal or business tax filings don’t raise red flags and help the process go quickly and smoothly should an IRS audit occur.

CPAs are more familiar with the auditing process, the different types of audits and what commonly triggers them:

·Claiming losses for a business after only one year of operation or for multiple years in a row
Claiming deductions that are disproportionate to sales and income
Mixing up business and personal spending costs
Writing off a vehicle as a total business expense (one hundred percent)

Furthermore, if a company or business has employed the help of an accounting professional early enough, there will be few to no discrepancies in areas such as taxes, inventory, payroll, accounts receivable or accounts payable.

Assuming it’s cheaper to handle your own accounting also overlooks a key service accounting firms provide – efficiency maximization. Accountants and business consultants seek out inefficiencies in your operating procedures and expenses. They can identify opportunities to optimize cash flow and may even pay for themselves in the long run.

Sloppy Bookkeeping Practices

It’s all too easy to lose track of receipts for smaller purchases, incorrectly write off purchases, improperly round figures that are reported to the IRS, fail to keep books up to date or fail to make quarterly estimated tax payments on time.

Reconciling bank accounts, generating income statements and balance sheets and cleaning up the ledger are all essential bookkeeping practices that should be done on a monthly basis. Maintaining these regular accounting touch points helps prevent discrepancies that will make your life difficult down the line.

A fresh set of experienced and impartial eyes will be able to spot any issues with your books fairly quickly, and they will know how to correct problems should they appear.

Failing to Adhere to Regulations and Relevant Laws

Depending on your business you may also be subject to a litany of compliance laws, regulations and federally or locally mandated business policies. Failing to maintain compliance can be a potentially business-ending mistake in some industries. CPAs that offer internal control and compliance services are the experts to trust when you need to develop internal controls to insulate your business from compliance headaches.

Not Hiring a CPA or Accounting Service at All

Learning which tasks to own and which to delegate is a big part of the entrepreneurial process.

At H&H Accounting services, we are well-versed in the needs of businesses of all sizes and in all stages of development. We would be happy to sit down with you and discuss your business and explain how our accounting, bookkeeping and business consulting services could help.

Managing Cashflow During and After COVID-19

Thu, 13 Aug 2020 00:30:20 GMT

Pretty much every business has been affected by COVID-19 in some way. An online vape store, for example, may have experienced a huge increase in demand, forcing them to ramp up hiring and pay overtime, driving up both their expenses and revenue. Then there are businesses that have seen their revenue vanish, forcing them to eliminate nearly all their expenses as a result.

Many restaurant owners have been forced to lay off their workforce, but still have a lease or mortgage that needs to be paid. They likely still have some vendors, like marketers or accountants, with whom they have contractual obligations. Even for businesses that have essentially been forced to shut down, it’s often not possible to completely zero out expenses.

These two hypothetical scenarios don’t do justice to the hundreds of thousands of real-world businesses that have had their cashflows affected by COVID-19

Steps You Can Take to Alleviate Cashflow Problems During the Coronavirus Pandemic

These potential strategies are not universally applicable to every business, are not surefire solutions and may not be realistic for every company, but they are strategies that some could pursue to increase sales or reduce expenses when things get tough.

Offer or Enhance Warranties, Guarantees and Return Policies

When there’s a lot of economic uncertainty across the board, many consumers and businesses are understandably skittish about making investments or big purchases, all of which carry some degree of risk. Warranties, guarantees and return policies are essentially insurance policies that reduce those risks. People are more likely to buy a product when they know:

If it’s defective or breaks they can get a new one without a lot of hassle
If their financial circumstances change and they suddenly can’t afford this purchase, they may have a chance to hit the “undo” button
If the product doesn’t meet their needs or isn’t the right fit, they won’t have wasted some of their limited resources

Not every business has the flexibility to offer this safety-net incentive, but it can help make risk-adverse customers more comfortable with purchasing a product or service.

Providing New Discounts or Pricing Incentives for Loyal Customers

The coveted “super consumers” are customers or clients who you know you can rely on for purchases during normal times. Some of these customers may be pulling back on their purchases (or vendor commitments for B2B businesses) while dealing with their own coronavirus cashflow issues.

As a business, you may be able to offer pricing incentives that are too good to pass up. If it would be an outstanding deal under normal circumstances and the service or product you’re offering is something your customer would benefit from or use when life stabilizes, the appeal of the offer may exceed their risk adversity.

Consider a pizza restaurant offering a free large pizza to anyone who buys a $20 gift card. Customers know they will likely use the gift card anyways, or at the very least give it to someone as a gift, so why not get the free pizza? If a consumer sees an obvious win-win on a product they were likely to buy anyways, it may motivate them to make a purchase, or spend more than they were initially planning to spend to get the “deal,” despite tight finances.

Cut Back on Your Marketing

For businesses that are completely shutting down fulfillment operations and going on life support, marketing is an obvious place to cut costs. But not every business is going completely dark, and not every marketing campaign is intended to drive phone calls today. Certain types of campaigns, like Google ads, may not be necessary if you’re not taking any new jobs right now. Other campaigns, like SEO and branding campaigns that build over time, may still be worth keeping.

Business owners hopefully know which of their marketing efforts are most effective. If mailers and social media provide the lowest ROI, cancel those for the time being.

Get Out of Your Client Acquisition Comfort Zone

When times are desperate it’s sometimes necessary to think outside the box on customer acquisition efforts. Is it possible for your business to offer a free trial period to relevant customers who may not have used your products before? Zoom, for example, is offering elementary school and high school educators free use of their platform , and will likely convert many of these accounts into paying users.

Business owners may want to take this opportunity to think about previously unreached demographics or verticals that could potentially benefit from their products or services.

Optimize Your Inventory Management

Retailers, hospitality businesses, repair shops and all sorts of other service providers regularly have to purchase supplies or products. Some business owners are constantly reassessing their supply costs, finding better, more competitively priced vendor options and adjusting the volume of their purchases based on customer demand and business performance.

Not every business owner has the bandwidth to perform these tasks as often as they want. If you think your inventory management could use an update or changing circumstances during COVD-19 have altered the way your customers buy your products or use your services, now is the time to adjust inventory accordingly.

If your business is suffering, chances are your vendors are as well. There may be deals that can be renegotiated as B2B suppliers seek to lock in longer term contracts that could be favorable to you.

Consider Meeting with a Phoenix Business Consultant

Many Phoenix-area small business owners who handle their own QuickBooks, payroll and business loans end up missing out on potential efficiencies and savings, not from lack of trying but due to understandable inexperience.

Entrepreneurs start a business to pursue a passion, not analyze a half dozen different benefit plan options, implement cost controls or research tax planning strategies.

H&H Accounting’s business is taking these issues off your hands. We strive to provide smart, efficient solutions that save your business money while giving you peace of mind.

COVID-19 has given everyone sleepless nights, but with H&H Accounting you can at least rest easier knowing your payroll is being properly handled, your books are accurate and you’re not overlooking tax or administrative savings opportunities.

Call us at (480) 561-5805 to consult with an experienced Phoenix CPA today.