3 Possible Answers to the Question: Where Did the Money Go?

3 Possible Answers to the Question: Where Did the Money Go?

Pain Points

3 Possible Answers to the Question: Where Did the Money Go?

 

3 Possible Answers to the Question: Where Did the Money Go?

Author: Nissa Fowler

In my experience, one of the most common problems that entrepreneurs struggle with is understanding where the money goes.  For example, you do a job with a high price tag and then think that the cash is just building up in the bank.  Then tax time comes and your accountant thinks you made much more than was ever in your bank account.  So the question you probably have is – where did the money go?

1)      You already spent it on job materials and/or labor: too many skilled professionals are not considering the exact expenses that the business pays in order to complete the job.  Often the cost of parts and labor aren’t even being identified on the invoice to the customer.  Not only can skipping this information be confusing to the customer, but it can also mean that you lack the information that you need that would help you run the business properly.  The issue is that you can’t focus on being cost-efficient if you don’t track what each job is costing.

2)      You took a family vacation from the business account: we call this “commingling”.  The reason this is an issue is because not separating out your personal spending from the business leaves you confused about your profitability.  For example, your tax accountant knows that the tickets to Disney were not a business expense, which means that expense won’t be deducted when calculating how much of the money you earned during the year will be taxable. Understandably, this can get confusing and cumbersome when you are considering the trip to the grocery store where you pulled out the wrong credit card, but the payoff of knowing exactly where your business stands, in real time, is immeasurable. In order to successfully run your business, you need someone who can help you with cash flow analysis.

3)      Your customer never paid the invoice you sentyou would think that customers should always pay their invoices, especially when they’ve just received services from a skilled professional, but unfortunately it happens all the time.  That’s why it is so important that you have a clear and user-friendly system in place in order to properly track customer accounts.  If not, you could basically be giving your work away for free!

These are just a few of the issues you might be dealing with when it comes to money coming in and out of your business.  So in order to address these issues and more, the first thing that every entrepreneur’s business should have straightened out is the accounting side of the business.  Let’s face it, your time is more valuable doing what you do, which is why doing the bookkeeping yourself, or worse, having someone who isn’t trained to know what to look out for, is not your best choice.

Think about it this way – I may know what a check valve is, but I can’t install a manifold to properly plumb my in-floor heating zones which is why I need a skilled plumber.  I hate cold feet and unexpectedly high heating bills, so I’m going to turn to a professional to do what they do best.  The same goes for getting a handle on where your money goes in your business.

An accountant should be able to advise you on better options for invoicing and get a set up in place for tracking job costs.  Having the chart of accounts working smoothly in your company books will mean that any personal spending from the business account is correctly booked and will not skew your bottom line.  Most critically, an accountant should help any entrepreneur understand what really drives their profits and what money saving opportunities are waiting for them to take advantage of.

 

This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.

Hiding a Pregnancy from an Employer

Hiding a Pregnancy from an Employer

Hiding a Pregnancy from an Employer

How many of you have considered, or have actually, hidden your pregnancy from your employer? Maybe you had concerns about being fired, being looked over for a promotion, or  you were in the position of potentially being hired by a new employer and worried about your chances if the employer knew you were pregnant.. 

Although legally, employers are not allowed to discriminate against a woman for being pregnant, many women still face challenges such as being passed over for job opportunities and other career-halting situations related to becoming, as well as being, a mom. 

Some women are so concerned and have so much fear about how their pregnancy will affect their job, that they’ll completely hide their pregnancy from their employer, and then take the lie even further by continuing the secret even after their child is born. 

In an article by Huffington Post titled “I Hid My Pregnancy And The Existence Of My Second Child From My Job. Here’s Why”, the author discovered a woman who had been working remotely and hatched a plan to keep her employer out of her pregnancy loop.   She wanted to keep the job she had worked so hard to obtain and feared her employer would “lighten the load” if they found out.

She had seen similar things happen to other women within the company, where they had gone on maternity leave or were coming back to work after taking it.  She was well aware that firing her was not an option, but by making her a temp employee, they could easily stop contracting her for projects.

She worked for a city agency that started out as a temp position, but they ended up keeping her on. However, in the four years of working for them, they never offered her a permanent position, benefits, or paid time off. 

She made it through her first trimester and reached the point of announcing her pregnancy when she received an opportunity that would also include a raise, and without much forethought, took on the project, determining she would figure out the logistics later. The project was set to start around the same time she was expecting to be in labor.

At this time she decided she was not willing to risk them offering the opportunity to someone else, and continued to keep her pregnancy a secret. 

She discovered that it was pretty easy to keep the pregnancy a secret as a remote worker, with the help of clever camera placement. Several times she considered coming clean, but as the project was near launching, she just kept focusing on completing a successful project. 

Delivery day for her baby involved several emails to team members that she had a “family emergency” and would be unavailable for the day. 15-hour induction later, and a sweet baby boy was brought into the world. 

She explained in the article that hiding a pregnant belly was one thing, but hiding a crying new infant was a completely different thing altogether.  She wondered how she was going to keep the secret going as she navigated breastfeeding, nap time, a 4 year old, and work meetings. 

After the project was successfully underway, she once again considered coming clean to her secret, but she never did, just focusing on working hard in order to have a successful project.

Unfortunately, once the project ended, so did her employment as she was let go as a contractor for the agency.

Sadly, she never did reveal her pregnancy to her employer, but even more sad is the fear she had, that led her to keep it a secret in the first place. .

The U.S. Department of Labor says that nearly 85% of women will become mothers during their career, the Pregnancy Discrimnation Act that was passed in 1978 is meant to protect women in the workplace when they become pregnant, and yet tens of thousands of discrimination claims are filed every year with the Equal Employment Opportunity Commission (EEOC) and the Fair Employment Practices Committee (FEPC). 

The unfortunate reality is that many women face the same issues and fear the potential discrimination because they have seen it happen time and time again to other women. While pregnancy should not be viewed, or treated, as a career halting situation, many women’s experience says differently.

Thankfully the woman in the article was hired a year later, for a full-time position, by a family friendly company, with benefits and paid time off. Her new employer embraces parenthood, and supports mothers raising their children. 

What do you think of this mother’s story? Do you relate to her fears and insecurities? Does your employer support raising a family? You are not alone.

Source: https://www.huffpost.com/entry/hidden-pregnancy-work-employment-rights_n_61083720e4b05ae33bf8ad28

Fighting Against Identity Theft

Fighting Against Identity Theft

Fighting Against Identity Theft

While the pandemic has brought several programs and much needed assistance during this unprecedented time, these helpful programs have also become a preying ground for cyber criminals. As cyber criminals have ramped up their efforts in identity theft, the IRS has also been initiating warnings and awareness about cyber security risks. 

This summer, the IRS and its partners have been pushing a public awareness campaign regarding cyber security risks that tax professionals need to pay attention to, especially in the area of identity theft. 

The campaign is called, “Boost Security Immunity: Fighting Against Identity Theft” and it’s asking professionals to take those necessary steps to avoid data breaches. 

The IRS states that more data thefts have been reported so far in 2021 than the previous year, and those numbers are on the rise.

It is important for tax professionals to take the appropriate steps to protect their clients and their businesses. Cyber criminals have taken advantage of the pandemic, and unfortunately the various assistance programs have added easier targets for scammers to steal data and money from victims. 

Now that the IRS knows some of the signs to detect identity theft, they are sharing those areas to keep a close eye on.

Tax professionals should look out for:

  • Rejected tax returns due to Social Security Number having previously filed
  • More e-file acknowledges than returns filed
  • Emails being responded to by clients that were not sent to them by their tax pro
  • Unusually long processing times
  • Changing numbers when not touching keyboard
  • Mouse cursor moving without being touched
  • Unexpected lock out of network or computer

Cyber criminals continue to become more creative in ways to scam individuals and businesses, and tax professionals are a good mark due to the sensitive nature of their business. Stolen data from a tax professional allows criminals to file false returns that are incredibly difficult to detect due to the fact that the information used is real financial information.

Tax professionals and business owners need to consider the strength of their cyber security, as an attack on their business could negatively impact their reputation, brand, and overall success.

A few IRS safeguarding tips for tax professionals are:

  • Multi-Factor authentication
  • Anti-Virus software
  • Strong passwords
  • Virtual private networks
  • Encourage Identity Protection PINs to clients

One of the largest scams tax pros should be conscious of is false unemployment filings. Many individuals received year-end state unemployment forms to report taxable unemployment income that they never filed for or received.

“Spear Phishing” is another scam often targeted towards tax professionals. Carefully curated emails are sent to tax professionals posing as interested clients. After several days of communication, they will send a link or attachment that once opened will download a software that will provide them remote access to the professionals systems. 

Tax professional should take note of what clients report to them such as:

  • Receiving IRS authentication letters when they have not filed a return
  • Tax refund received when they have not filed a return
  • Receivable of tax transcripts not requested by them
  • Emails from their tax professional not initiated by them
  • Phone calls from their tax professional not initiated by them
  • IRS online account notification without their consent
  • IRS disable their online account
  • Unexpected IRS notice that someone accessed their IRS online account

If a firm is breached, it is important to immediately report this to the local IRS Stakeholder Liaison. They will in turn report this to the IRS Criminal Investigation and other appropriate parties. The quicker the report is in, the sooner the IRS can take measures to stop any fraudulent filings.

Also, it is good practice to report identity theft to the Federation of Tax Administrators, and many states also require that the states attorney general be notified as well. 

It is more important than ever for accounting professionals to do their due diligence to protect themselves and their clients from the risk of cyber criminals.

Sources:

https://www.accountingtoday.com/news/irs-warns-tax-professionals-about-identity-theft-signs

https://www.accountingtoday.com/news/irs-urges-tax-pros-to-beef-up-security-this-summer