Monthly Archives

February 2016

When Ballin’ Overseas

By | Athletes | No Comments

It tears my heart when I hear that someone has been taken for granted due to a lack of information.  We hear stories every day about good people that just caught out there due to innocent ignorance.  Believe it or not, I hear these stories and have these conversations more often than I would like to with professional athletes.  Below are a few tips that professional athletes should consider when accepting professional, independent contractor positions overseas.

 

1 – Set up a business entity and DON’T just sign agreements as an individual player.  First, in this cyber security environment, they shouldn’t be signing these agreements with their SSN and second, there is no liability protection from the stand point of other endeavors they may be involved in on the home front while playing abroad.

 

2 – The professional player’s business entity should be set up before negotiations and before they decide to go and play overseas.  Even if they have other business ventures they want to get involved in, setting up this entity to start with can better further those objectives if planned properly.

 

3 – Overseas contracts should be paying the business entity, not the individual player.  The player should be paid via proper payroll planning.

 

4 – The individual needs to account for their own payroll taxes to the U.S. NO MATTER WHAT the contracting country is deducting.  This will mean that contract negotiations should factor in tax allocations that the player will need to pay from the bottom-line.  A number to consider is 30% (that should be added to the contract’s bottom-line during negotiations).

 

5 – This is the ideal time for professional players to bring on a reputable tax professional.  Their tax professional should be plugged into their payroll and processing ALL of their accounting (they can’t get deductions if they don’t have accurate books and records).

 

Playing professional sports may be your love and livelihood, but it’s also your business and you’ve got to start treating it as such.

photo credit: sports.vice.com

Tax Fact for Solopreneurs Part II

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Tax Fact #7: You do not have to file jointly if you’re married.

If you’re married, you and your spouse have the OPTION of filing taxes jointly. It’s not a requirement, however, and you can also file separately. Neither option is “more right” than the other, and whether or not you file jointly or separately depends upon the circumstances of you and your partner.

 

With that said, filing jointly usually nets married couples a few tax breaks that filing separately doesn’t. It’s usually a good idea to file jointly for this reason – but if you’re not sold, that’s fine too. Talk to a tax professional to help you explore your options before filing.

 

 

Tax Fact #8: Poochie pooch and kitty witty are not tax deductible.

Pets can be expensive – especially if you have to deal with medical conditions and veterinary visits. I quite often get questions about whether or not you can write your pets and/or their related expenses off in your taxes. In general, the answer is no.

 

If your animal is a guide or service animal, the answer might be different. It really depends upon whether or not they’re a registered service/guide animal or just being used in that fashion, for example. For everyday pets – regardless of how much you pay in medical bills or how much you think your pet is worth – you cannot claim them on your taxes.

 

 

Tax Fact #9: Your bank statements are not sufficient enough records of your business’ income and expenses.

We’ve talked about the need to file taxes and keep your finances separate when it comes to personal versus business… but how do you know what kind of records you should be keeping?

 

First of all, don’t write this off as being as simple as printing off bank statements and submitting them should you wind up in an audit. Bank statements alone are not sufficient records of your business expenses and income, although they are one good kind of record to keep. You should also be keeping hard copies of things like cash register receipts, deposit information, invoices, credit card statements and receipts, and checks. The idea is to document all of your transactions as well as you can.

 

 

Tax Fact #10: Your tax professional is not a miracle worker.

I know you want to believe that a tax professional can just make everything roses, but that’s not the case. If you walk into a tax professional’s office with an audit notification, and all you have to document your expenses for the past five years is perhaps a few bank statements, you’re going to have a hard time. While very, very good at what they do, your tax professional cannot wave a magic wand and create a world where there are no consequences for your actions.

 

If you end up in a bind with IRS, you should absolutely seek out a tax professional’s help. What you SHOULDN’T do is expect them to make everything better and get you off without fines or back payments.

 

 

Tax Fact #11. “I didn’t know,” is NOT a sufficient excuse to an IRS auditor.

As reasonable as it might seem to you, telling an IRS auditor that you simply didn’t know about a tax or a filing requirement will not result with you winning that audit. What do you think the most common excuse is that the IRS hears? I’m betting the old “I’m sorry, I didn’t know” line is right up there. It’s the easiest excuse to use – and whether it’s true or not, using it won’t get you out of trouble.

 

Whether or not you knew about a tax when you failed to file, you’ll be paying the penalties the IRS assesses. Be careful when filing your taxes, and always speak with a tax professional for help if possible.

 

 

Tax Fact #12: You DO have to pay income taxes on monies earned online.

If you earn all of your money online, you’re home free when it comes to taxes, right? No! That is NOT correct. Regardless of whether or not you earn money in person or on the internet, you are going to have to pay income taxes. Even if you think that you’ve got your online stuff squared away and “hidden”, I assure you that the IRS will figure it out. This is especially true if you’re being paid through a service like PayPal.

 

Don’t risk it. You have to claim money earned online when you file your taxes.

photo credit: taxreceipts.com

Tax Facts for Solopreneurs Part I

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Tax Fact #1: The IRS is very strict about comingling funds.  Keep your personal and business funds separate.

 

When you first start your business, it’s a whirlwind of activity and financial worries that will leave you blinking in confusion and exhaustion. I think this is one of the most common reasons that people don’t think about setting up business versus personal bank accounts. It’s so easy to just deposit money into one account and use it for all of your expenses, right? Especially when your business expenses are essentially coming out of your own pocket anyway, and you need anything the business earns to help pay your bills. I get it.

 

I get it, but I don’t agree with it. I’m not gonna mix words here: comingling your personal and business finances is a stupid idea. The IRS is crazy strict about this, and dumping all of your funds into a single account is a great way to make yourself an attractive audit possibility. If you DO get audited, not keeping track of your income and any investments and expenses you’ve had is going to be a nightmare. After spending dozens of hours staring about bank records and trying to figure out where the heck you spent your excess funds, you’ll definitely never comingle again… but it’s a better idea to just never start doing so in the first place.

 

Set up a business account and deposit funds from your business into it. Transfer funds to your personal account as needed, and do this for any personal purchases you’re making (don’t use a business debit for groceries). Keep track of your personal and business expenses using software like QuickBooks, and you won’t have a problem when it comes time to file taxes.

 

 

Tax Fact #2: As an entrepreneur, you may be required to file quarterly tax returns.

Filing taxes is a must, but understanding exactly when to do so can be hard when you’re just starting out (or even if you’ve been at it for awhile). Which forms should you use, how much should you pay, and when should you be paying them?

 

Some entrepreneurs will be required to make quarterly tax returns. You need to estimate the amount that you expect to claim on your tax return for the year, and make a total of four quarterly payments. You don’t have to pay the same amount in each quarter as long as you eventually meet the estimated tax numbers you calculated. Don’t forget to keep state taxes in mind when figuring this all out!

 

 

Tax Fact #3: W2 employees file tax returns once a year.  Entrepreneurs and 1099s may be required to file more often.

When you work for someone else as an employee, your employer is responsible for withholding the correct amount of taxes from your paycheck. This means that you file taxes once a year and might expect a tax return about as often.

 

If you’re running your own business or working as a self-employed individual or independent contractor, however, then you’re responsible for your own taxes. You have to withhold money and make payments to the IRS – and if there’s a mistake, you’ll be the one paying for it.

 

Some entrepreneurs might have to pay taxes quarterly instead of once a year. If this is the case, you’ll need to estimate your annual income and start paying as quickly as possible to help avoid fines.

 

 

Tax Fact #4: Claiming the home office deduction DOES NOT automatically trigger an audit.

More and more people are working from home these days, and that includes entrepreneurs. Working from isn’t just comfortable – it’s often more economically efficient than renting an office space.

 

If you work from home, you might be eligible to claim a home office deduction on your taxes. This would enable you to claim your home office as your principal place of business, and means that you might be able to deduct things like office repair and even parts of your utilities bill.

 

While a lot of people might qualify for the tax break, few are willing to actually claim the office on their taxes. There’s a misconception that filing for the home office deduction will automatically trigger an audit. This is not the case, and if you qualify for the deduction then you should definitely consider taking advantage of it.

 

 

Tax Fact #5: Filing an extension does not mean you get an extension to pay the the monies due (if any).

So you hear the phrase “tax extension” and breathe a sigh of relief knowing that you’ve got more time to pay, right? Wrong.

 

While filing a tax extension will get you some more time to file, it does NOT get you more time to pay. Your payment is due on the original due date of the return. If you do not submit your payment by that date (usually April 15th), you will have to pay interest on the money yet to be paid.

 

To avoid paying extra money, pay as much as you possibly can by the original tax return due date.

 

 

Tax Fact #6:  There is no such thing as the “student exemption” to paying taxes.

I know a lot of college students who think they’re blessedly exempt from filing taxes simply because they’re in school full time. Listen, the IRS doesn’t care what you’re doing with your time if you owe money. Student or full-time employee, you’ve got to pay your taxes.

 

If you’re still not sure if you need to pay or not, take your current status and simply remove “student” from the equation. If you’re under 65, single (as in not married), and earned income, then you need to file your taxes. Attending classes doesn’t excuse you from that.

photo credit: taxreceipts.com

What is the Jock Tax?

By | Athletes | No Comments

The “jock tax” is a tax that targets athletes and entertainers visiting a city or state in order to make money.  Most often hit by the tax are professional athletes who travel across the country to play with their teams. The jock tax demands that these individuals pay income taxes in every state where they play, and the amount can quickly ramp up.  It’s worth noting that individuals subject to this tax have to file separate returns for each state, making their taxes an unwieldy and confusing process.

 

There has been quite a bit of criticism leveled at the jock tax in recent years. The fact that it seems to be fairly arbitrarily enforced, with wealthy professional athletes (“jocks”) often targeted, is a bone of contention among various analysts.

 

Bottomline, professional athletes and even up-and-coming entertainers traveling to different venues and getting paid for shows need to have a tax professional that knows what they’re doing.

 

photo credit: efile.com

 

Look the Part Solopreneurs!

By | Advice | No Comments

Alright, y’all – let’s talk about looking the part.  I know folks are going to have an opinion about this post, but that’s too bad because this is an important issue.  Dressing for success is an important part of finding and emulating success as an entrepreneur. You might be surprised by this – after all, isn’t the best part about owning your own business is being able to conduct conference calls in your pajamas?  Yeah, that’s one of the perks, but it doesn’t change the need to look presentable when the occasion calls for it.

 

Look, I like dressing in my “lazy” clothes as much as anyone else.  Now, lazy for me is an old pair of broken in yellow Reebok Classic Nylons (yes, I have sneaker folks) and an Old Navy track suit I wear on almost every flight.  However, there’s a time and place for casual clothes.  The “time” isn’t a client meeting, professional conference or at a 1:1 with a prospective joint venture partner.  Here are two super basic fashion rules that I swear by…

 

  1. I wear what reflects my position – Boss Lady.
  2. I add flair to make my look my own.

 

Let’s break that down, because we gotta understand this – your attire is important.  If you ask me, tech-start-ups got the rest us thinking it’s okay to do business meetings in yoga pants!  Never conduct meetings underdressed, just don’t even think of doing it.  A first impression will always be a lasting one and whether or not you realize it, the way you dress has an impact on how other people see you.  Do you want people to see you as some “wannabe”?  I think not.  You want to be seen as a capable, knowledgeable entrepreneur. We already encounter all sorts of skepticism and pushback as solopreneurs – I don’t think we really need to give people more reasons to doubt our aptitude.  The truth is, people will judge your ability to run your business or represent theirs based on your appearance.

 

I know I’m going to get some chatter about this topic – someone is bound to say that it shouldn’t matter how you’re dressed as long as you can still walk the walk and talk the talk, right? That’s fair.  I even agree that how we dress doesn’t matter much if we can’t deliver on our claims… but let’s be real for a second: that’s not how life works. If you ain’t Mark Zuckerberg or Oprah already, people are gonna have perceived notions when it comes to all sorts of different things – and trust me, business attire isn’t exempt from this.  You will be judged on your physical presentation, whether or not you think it’s relevant.

 

So let’s talk about dressing for your profession. This is pretty easy to follow – dress in whatever passes for appropriate business attire in your industry. I wear stylish clothes and heels, for example, but a construction worker probably doesn’t need to go to the same lengths because expectations about what constitutes “professional” for a construction worker isn’t the same as say for a lawyer.  Here’s what I would like you to ask you yourself: if had two contractors (each owners of their prospective companies) with the same credentials come to your house to give you an estimate for a project, how would you feel about the one wearing the sheetrock sweatshirt and tar-stained jeans?  And, how would you feel about the one wearing a sport coat and dry cleaned khakis?

 

With that said, you always want to look like you put some effort into your look.  Regardless of what your job is – whether you’re delivering papers or conducting conferences all day long – make sure that you look like you care.  Don’t walk around with messy hair and wrinkled clothes.  And don’t get me started on bad hygiene or too much perfume/cologne.  I ain’t got time in this post.  Just if you’re into wearing jeans and a nice shirts, you want to make sure that your clothes fit you well and reflect your sense of professionalism.

 

Don’t make the mistake of overlooking your own appearance when it comes to building as a successful solopreneur.