Author: Stephen Nelson
Source: articleage.com
I live and work, quite literally, down the road from the main Microsoft campus. No surprise, then, that I'm commonly asked by freelance consultants for the best ways that these self-employed independent contractors can minimize their income taxes.
If I can, I try to weasel my way out of the discussion, offering up such basic tidbits as, "Well, be sure to look at the home office deduction." And "make sure you're taking advantage of deductions for health insurance and pension funds."
Usually, those simplistic answers work. Everyone once in a while, though, I encounter some guy who's really motivated to save on taxes. Usually, someone now making good money consulting or contracting… When I can't deflect their questions in some other way, I tell them about the three best ways that independent contractors have to save on taxes.
Technique #1: Smooth Your Income
Whatever you think of the US Internal Revenue Code, you need to know that it's quite progressive. That progressivity means the more you make, the more you pay. The progressivity also means that if your income fluctuates, your income taxes go up even if you make the same money on average as someone else makes.
To give you an example of this, suppose that you compare two consultants, John and Jane. If John makes a steady $60,000 a year and has a mortgage, a spouse and couple of kids, he might pay about $1000 over four years (net of tax credits for these like his children.)
In comparison, suppose that Jane averages $60,000 a year, but sees her income fluctuate between $30,000 a year and $90,000 a year. If she also has a spouse, two kids and a mortgage, she'll probably pay $8,000 to $10,000 over those same four years.
Please note that over the same four years, the two consultants make the same amount of money: $240,000. But what they pay in taxes differs radically. Jane pays eight to ten times what John pays. Bummer.
What can Jane do? Well, let's bring this back to the example of working consultants. Jane can probably smooth her income. She can make sure that she's not stacking two big retainers or performance bonuses in the same year. She can spread out year-end payments over the ending and beginning year in ways that smooth her income out. She can even try to stuff more of her expenses into the good years. In the good years, for example, she can buy new computers, take those graduate classes, or top off her pension.
Technique #2: Setup an LLC and Elect S Corporation Status
I've written and talked much about how S corporations save taxpayers money and how the right way to set up an S corporation is first create a limited liability company and then ask the IRS to treat the LLC as an S corporation for tax purposes.
Let me review the basics here again, however. Suppose that you're making $90,000 a year as a consultant or contractor. If you just treat your business as a sole proprietorship, you might pay $12,000 in income taxes on the $90,000 and then another 15.3% self-employment tax, or roughly $13,500 on the $90,000.
If you set up an LLC and have the LLC treated as an S corporation, you'll still pay the same $12,000 in income taxes. But you'll only pay the 15.3% self-employment tax on that portion of the profit that you categorize as wages. If you categorize, say, $50,000 of the profits as wages, you'll pay $7,500 in self-employment taxes. (The other $40,000 in remaining profits, by the way, gets paid out as a dividend-like "distribution.")
Note, then, that the S corporation saves you roughly $6,000 every year. Sweet, right?
Two quick points about S corporations: First, S corporations require some extra tax and accounting so you don't get to spend all of your savings. Some of the savings go to the lawyer, the accountant, and the bank. Second, you absolutely must set your salary to a reasonable level.
Technique #3: Relocate Your Residency
One final, easy planning gambit if you telecommute. Remember that there are states like Alaska, Florida, Nevada, Texas and Washington that don't charge residents state income taxes. Accordingly, if you relocate to one of these states, you'll automatically drop your overall tax bill because you won't have state income taxes.
Sometimes, one of the benefits of independent contracting and freelance consulting is that is that you do get to live wherever you want. Why not choose a place that doesn't tax your income?
But a caution: Do be careful that you don't get blindsided by the other taxes a state levies. For example, Washington state where I live charges a one and half percent excise tax on service revenue. This is probably still less than the income taxes that many other states charge. But it highlights an important caveat: Before you move to some other state, you definitely want to run the numbers and compare your current state to the possible new state.
Florida LLC formation expert Stephen L. Nelson CPA has written more than 150 books. Formerly an adjunct tax professor at Golden Gate University, Nelson is also the author of Quicken for Dummies. Copyright ฉ by 2006 by Stephen L. Nelson.
Monday, November 9, 2009
Saturday, November 7, 2009
Tax Debt Attorneys
Author: Max Bellamy
Source: articleage.com
Tax debt attorneys advise tax defaulters or tax creditors, or go to court on their on their behalf. Tax debts might be incurred by the defaulter due to financial problems like layoffs, divorce, prolonged unemployment, illness, or accidents. Tax debt attorneys work on how to get a good deal for their clients who have unpaid tax dues.
Sometimes, taxes accumulate if you don't pay regularly, don't file returns, or the tax return is filed by the IRS but tax is not paid. Adding to that, the penalties levied on accumulated taxes can make the situation even worse. Since it is difficult to get tax debts completely waived, a good debt tax attorney can help decide what is the best method of paying up, and negotiate on the behalf of the IRS so that some relief can be granted to the defaulter. Since voluntary disclosure of tax dues or a genuine problem in clearing them go a long way in getting some consideration for the client, a debt attorney looks for mitigating circumstances that can stand in favor of his client. Filing for bankruptcy should be the last option, and taking your tax debt attorney into confidence will help you avoid such a drastic step.
The "Offers in Compromise" program is where the federal government reaches a compromise by letting the defaulter pay part of the tax debt. A skilled tax attorney must negotiate with the IRS and get the best possible deal for his client. Payments can be made in installments, and your tax attorney will guide you through the difficult process of negotiating an installment plan that suits your financial state.
Timely advice from your debt tax attorney will help you avoid garnished wages, confiscation of property, bankruptcy, and prison.
Tax Attorneys provides detailed information about tax attorneys, income tax attorneys, international tax attorneys and more. Tax Attorneys is affiliated with Tax Lien Certificates.
Source: articleage.com
Tax debt attorneys advise tax defaulters or tax creditors, or go to court on their on their behalf. Tax debts might be incurred by the defaulter due to financial problems like layoffs, divorce, prolonged unemployment, illness, or accidents. Tax debt attorneys work on how to get a good deal for their clients who have unpaid tax dues.
Sometimes, taxes accumulate if you don't pay regularly, don't file returns, or the tax return is filed by the IRS but tax is not paid. Adding to that, the penalties levied on accumulated taxes can make the situation even worse. Since it is difficult to get tax debts completely waived, a good debt tax attorney can help decide what is the best method of paying up, and negotiate on the behalf of the IRS so that some relief can be granted to the defaulter. Since voluntary disclosure of tax dues or a genuine problem in clearing them go a long way in getting some consideration for the client, a debt attorney looks for mitigating circumstances that can stand in favor of his client. Filing for bankruptcy should be the last option, and taking your tax debt attorney into confidence will help you avoid such a drastic step.
The "Offers in Compromise" program is where the federal government reaches a compromise by letting the defaulter pay part of the tax debt. A skilled tax attorney must negotiate with the IRS and get the best possible deal for his client. Payments can be made in installments, and your tax attorney will guide you through the difficult process of negotiating an installment plan that suits your financial state.
Timely advice from your debt tax attorney will help you avoid garnished wages, confiscation of property, bankruptcy, and prison.
Tax Attorneys provides detailed information about tax attorneys, income tax attorneys, international tax attorneys and more. Tax Attorneys is affiliated with Tax Lien Certificates.
Service Industry Workers Beware, the IRS is Targeting You and Your Job
Author: Boris Tomson
Source: articlesbase.com
Service Industry Workers Beware, the IRS is Targeting You and Your Job Common Problem: You're being watched. Visit Here http://gov-debt-grantbenefit.blogspot.com The IRS has determined that people in the service industry are the most likely to commit Tax Fraud than most. Especially people in cash intensive industries, like mechanics, hairdressers, waiters, and anyone else who works for cash or tips. The temptation for not reporting the cash income is very high. But don't get too tempted, because you will get caught. The Crime: Not reporting you whole income is a Criminal Offense. But don't panic. The IRS usually doesn't bring Criminal Charges against you unless you owe a huge amount of money. However, you are guaranteed to end up with a huge Tax Debt if you get caught! IRS Weapons: If you ignore your IRS debt, they'll have no choice but to unleash their deadly weapons of collections. The top 3 most commonly used weapons are: 1. Bank Levy: The IRS will freeze your bank account, then swoop in and take all your money 21 days later. After the 21 day holding period, you cannot get your money back. 2. Wage Levy: The IRS will claim a portion of your paycheck as their own. A Bank levy is a one-shot deal. But the IRS can garnish your paychecks until your debt is paid in full. 3. Asset Seizure: If you ignore the IRS long enough, the IRS can send an IRS Hitman to your door to seize your property. Break Out: After you're in debt with the IRS, there's really only one way to get out of it. And that's to face the facts and pay your debt. Here are a couple of good options: 1. Paying in Full: If there is any way you can pay in full, I highly suggest you get to it! The IRS is going to add interest and fees to your account for every month the account is not paid in full. Even if you are paying on the account in monthly payments! So take out a loan or borrow from your uncle if you have to. If paying in full is still not an option, there's another way to pay on your IRS Debt. 2. Installment Agreement: You can pay on certain amount on your debt every month until it's paid off. The IRS will choose the amount you can pay based on your income. You'll basically only have enough money left over to pay for the most basic of needs after your IRS debt is paid. When you apply, the IRS is going to look very closely at your income and your assets. If they determine you can pay your debt in full, you will not be approved for the Installment Agreement. Back to Work: Don't tempt the IRS. If you end up in debt, you'll be trapped. And the only way to get out of it is to pay up. You're not really saving money when you're withholding income. So get it right the first time, and make sure you report all your income. Even the tips!Visit Here http://gov-debt-grantbenefit.blogspot.com
Source: articlesbase.com
Service Industry Workers Beware, the IRS is Targeting You and Your Job Common Problem: You're being watched. Visit Here http://gov-debt-grantbenefit.blogspot.com The IRS has determined that people in the service industry are the most likely to commit Tax Fraud than most. Especially people in cash intensive industries, like mechanics, hairdressers, waiters, and anyone else who works for cash or tips. The temptation for not reporting the cash income is very high. But don't get too tempted, because you will get caught. The Crime: Not reporting you whole income is a Criminal Offense. But don't panic. The IRS usually doesn't bring Criminal Charges against you unless you owe a huge amount of money. However, you are guaranteed to end up with a huge Tax Debt if you get caught! IRS Weapons: If you ignore your IRS debt, they'll have no choice but to unleash their deadly weapons of collections. The top 3 most commonly used weapons are: 1. Bank Levy: The IRS will freeze your bank account, then swoop in and take all your money 21 days later. After the 21 day holding period, you cannot get your money back. 2. Wage Levy: The IRS will claim a portion of your paycheck as their own. A Bank levy is a one-shot deal. But the IRS can garnish your paychecks until your debt is paid in full. 3. Asset Seizure: If you ignore the IRS long enough, the IRS can send an IRS Hitman to your door to seize your property. Break Out: After you're in debt with the IRS, there's really only one way to get out of it. And that's to face the facts and pay your debt. Here are a couple of good options: 1. Paying in Full: If there is any way you can pay in full, I highly suggest you get to it! The IRS is going to add interest and fees to your account for every month the account is not paid in full. Even if you are paying on the account in monthly payments! So take out a loan or borrow from your uncle if you have to. If paying in full is still not an option, there's another way to pay on your IRS Debt. 2. Installment Agreement: You can pay on certain amount on your debt every month until it's paid off. The IRS will choose the amount you can pay based on your income. You'll basically only have enough money left over to pay for the most basic of needs after your IRS debt is paid. When you apply, the IRS is going to look very closely at your income and your assets. If they determine you can pay your debt in full, you will not be approved for the Installment Agreement. Back to Work: Don't tempt the IRS. If you end up in debt, you'll be trapped. And the only way to get out of it is to pay up. You're not really saving money when you're withholding income. So get it right the first time, and make sure you report all your income. Even the tips!Visit Here http://gov-debt-grantbenefit.blogspot.com
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Thursday, November 5, 2009
Painless Strategies Of Paying Off A Student Loan
Author: Darnell Scott
Source: articleage.com
Graduation day is over; bulk in hand, the air-conditioned absoluteness of your apprentice accommodation is looming large. You do not alpha repaying you accommodation until 6 months afterwards graduation. If accommodation claim begins, you accept to pay at atomic $50 a ages until your absolute apprentice accommodation and absorption is paid off.
It makes faculty to accord the accommodation bulk early, so that you trim the interest, which will abide architecture on your loan. Banking planners acclaim that you pay the minimum antithesis on your apprentice accommodation and try to save as abundant as you can for retirement. In any accustomed month, you can opt to pay off added than your account claim after penalty.
There are mainly four options of claim which you can accept from. If you acreage up with a acceptable job already out of college, and can allow to accomplish abrupt account payments, go with the accepted transaction schedule. Under this option, you can pay off your debt aural 10 years with the best absorption rate. It's the quickest way to pay off your loans. However, it requires top account payments.
Graduated transaction is an advantage if you apprehend to accomplish a bashful but steadily accretion wage. The transaction requirements will alpha off gentle, and will gradually access every brace of years for the next 10 to 30 years.
If you're in a commission-based or melancholia business, your assets will alter accordingly. In this case, your account transaction bill will be proportional to the bulk you are currently making. You get a burden of get up to 15 years to pay it all off your apprentice loan.
With a abiding transaction advantage you'll be accustomed to pay the atomic accessible bulk per ages for 10 to 30 years. That about agency that in 30 years you may accept paid bifold the aboriginal bulk of your loan. You accept the adaptability of allotment to about-face from one transaction advantage to another, depending on your banking status.
However, if you acquisition that you artlessly can't accumulate authoritative account payments, no bulk how small, you can accept to adjourn your loans. This agency that for an bulk of time that's adjourned amid you and your lender, you will not pay any bulk appear the loan. Interest, however, will abide to accrue, unless your accommodation subsidized.
Everyone is not able for accommodation deferment, unless you can prove that you are trapped in banking difficulty. Unlike deferment, abstinence gives you a beneath three-month breach from your accommodation repayment. Your about may not admission you forbearance, unless he finds your appeal reasonable.
Student accommodation alliance is addition well-trodden aisle called by graduates anniversary year. It allows you to put calm your abstracted apprentice loans into one big loan. This is a saviour if you can't allow to carapace out a ample sum anniversary month.
Debt alliance will array your apprentice loans into one, with a individual accommodation bulk which will be abundant bottom than paying assorted loans. Some aswell accept alliance because it's easier to accumulate clue of the bill.
Source: articleage.com
Graduation day is over; bulk in hand, the air-conditioned absoluteness of your apprentice accommodation is looming large. You do not alpha repaying you accommodation until 6 months afterwards graduation. If accommodation claim begins, you accept to pay at atomic $50 a ages until your absolute apprentice accommodation and absorption is paid off.
It makes faculty to accord the accommodation bulk early, so that you trim the interest, which will abide architecture on your loan. Banking planners acclaim that you pay the minimum antithesis on your apprentice accommodation and try to save as abundant as you can for retirement. In any accustomed month, you can opt to pay off added than your account claim after penalty.
There are mainly four options of claim which you can accept from. If you acreage up with a acceptable job already out of college, and can allow to accomplish abrupt account payments, go with the accepted transaction schedule. Under this option, you can pay off your debt aural 10 years with the best absorption rate. It's the quickest way to pay off your loans. However, it requires top account payments.
Graduated transaction is an advantage if you apprehend to accomplish a bashful but steadily accretion wage. The transaction requirements will alpha off gentle, and will gradually access every brace of years for the next 10 to 30 years.
If you're in a commission-based or melancholia business, your assets will alter accordingly. In this case, your account transaction bill will be proportional to the bulk you are currently making. You get a burden of get up to 15 years to pay it all off your apprentice loan.
With a abiding transaction advantage you'll be accustomed to pay the atomic accessible bulk per ages for 10 to 30 years. That about agency that in 30 years you may accept paid bifold the aboriginal bulk of your loan. You accept the adaptability of allotment to about-face from one transaction advantage to another, depending on your banking status.
However, if you acquisition that you artlessly can't accumulate authoritative account payments, no bulk how small, you can accept to adjourn your loans. This agency that for an bulk of time that's adjourned amid you and your lender, you will not pay any bulk appear the loan. Interest, however, will abide to accrue, unless your accommodation subsidized.
Everyone is not able for accommodation deferment, unless you can prove that you are trapped in banking difficulty. Unlike deferment, abstinence gives you a beneath three-month breach from your accommodation repayment. Your about may not admission you forbearance, unless he finds your appeal reasonable.
Student accommodation alliance is addition well-trodden aisle called by graduates anniversary year. It allows you to put calm your abstracted apprentice loans into one big loan. This is a saviour if you can't allow to carapace out a ample sum anniversary month.
Debt alliance will array your apprentice loans into one, with a individual accommodation bulk which will be abundant bottom than paying assorted loans. Some aswell accept alliance because it's easier to accumulate clue of the bill.
Wednesday, November 4, 2009
Don't Delay In Managing Irs Tax Debt
Author: Brad Stroh -
Source: articledashboard.com
Debt Resolution, IRS Settlements Offer Help for Serious Tax Problems
San Mateo, Calif., - With tax day behind us, consumers and business owners who owe the IRS are not out of the woods. But while death and taxes are the big two inevitabilities, those with serious tax problems should know that it is possible to negotiate with the IRS to reduce past-due tax penalties and payments, according to Bradford G. Stroh, co-founder and CEO of Freedom Financial Network, LLC.
Americans, carrying more debt than ever, are also more likely to have tax problems than in the past. In 2004, the total of uncollected IRS taxes reached upwards of $250 billion. The number of levies (a key enforcement tool in which the IRS takes possession of assets to collect on unpaid taxes) topped 2 million during fiscal year 2004 - a 21 percent increase from 2003 and triple the 2001 number.
According to Stroh, taxpayers with tax debts under $10,000 usually can manage the payment on their own or via an installment plan arranged with the IRS. "Tax problems merit professional help when individuals cannot pay tax liabilities of $10,000 or more," Stroh says. "At that point, specialists can negotiate directly with the IRS on behalf of these consumers, helping them obtain settlements."
Tax relief specialists usually are attorneys or certified public accountants with special training and experience. Stroh explains that these experts can navigate the intricacies of IRS forms and calculations, help consumers understand the criteria the IRS imposes, and then help them get back into good standing with the IRS.
Depending on the severity of an individual's situation, two types of IRS settlement are available:
An offer in compromise reduces the principal amount owed to the IRS.
An installment agreement is a payment plan for the amount due and often includes reduced penalties.
"Remember that you cannot let overdue taxes languish," Stroh warns. "The IRS is serious -- and increasingly aggressive -- about tax collection and evasion. Tax debt can result in a lien on a house or garnished wages."
Advisors can help consumers with the following steps:
Evaluate the situation and determine the amount of taxes owed to the IRS.
Ascertain whether the situation meets IRS standards for "doubt as to collectability" (i.e., unable to pay the full tax burden), "doubt as to liability" (i.e., consumer might not owe the tax), or "economic hardship."
Establish the full amount owed, including taxes, penalties and accumulated interest, and understand whether collection limitations or penalty cancellations are possible.
Determine the best method for managing and eliminating the tax debt.
Negotiate with the IRS to settle on an agreed course of action and resolve the debt.
While facing and handling tax debt can be painful, last year's bankruptcy reform legislation made it even more crucial for consumers to act. Historically, consumers in severe IRS debt might file for Chapter 7 bankruptcy protection or wait for the 10-year statute of limitations on tax liability to expire. Now, people are much more limited in the ability to obtain Chapter 7 filings. The bill's new "means test" leads many consumers instead to file Chapter 13 bankruptcy, which establishes a repayment plan, rather than wiping out all debt. Consumers with tax debt may find it much less costly and simpler to work with a debt resolution firm's tax relief service, which allows individuals to set up tax payment plans while avoiding court fees, attorney fees and bankruptcy judgments on their records.
"Whatever means you choose, tax season means it's time to face the inevitable and manage your tax burdens," Stroh says. "Fortunately, experts are available to help you along the way."
Freedom Tax Relief, LLC (http://www.freedomtaxrelief.com) provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that can often result in savings of up to half the amount owed. Based in San Mateo, Calif., Freedom Financial Network serves more than 5,000 clients nationwide and manages more than $200 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation.
Source: articledashboard.com
Debt Resolution, IRS Settlements Offer Help for Serious Tax Problems
San Mateo, Calif., - With tax day behind us, consumers and business owners who owe the IRS are not out of the woods. But while death and taxes are the big two inevitabilities, those with serious tax problems should know that it is possible to negotiate with the IRS to reduce past-due tax penalties and payments, according to Bradford G. Stroh, co-founder and CEO of Freedom Financial Network, LLC.
Americans, carrying more debt than ever, are also more likely to have tax problems than in the past. In 2004, the total of uncollected IRS taxes reached upwards of $250 billion. The number of levies (a key enforcement tool in which the IRS takes possession of assets to collect on unpaid taxes) topped 2 million during fiscal year 2004 - a 21 percent increase from 2003 and triple the 2001 number.
According to Stroh, taxpayers with tax debts under $10,000 usually can manage the payment on their own or via an installment plan arranged with the IRS. "Tax problems merit professional help when individuals cannot pay tax liabilities of $10,000 or more," Stroh says. "At that point, specialists can negotiate directly with the IRS on behalf of these consumers, helping them obtain settlements."
Tax relief specialists usually are attorneys or certified public accountants with special training and experience. Stroh explains that these experts can navigate the intricacies of IRS forms and calculations, help consumers understand the criteria the IRS imposes, and then help them get back into good standing with the IRS.
Depending on the severity of an individual's situation, two types of IRS settlement are available:
An offer in compromise reduces the principal amount owed to the IRS.
An installment agreement is a payment plan for the amount due and often includes reduced penalties.
"Remember that you cannot let overdue taxes languish," Stroh warns. "The IRS is serious -- and increasingly aggressive -- about tax collection and evasion. Tax debt can result in a lien on a house or garnished wages."
Advisors can help consumers with the following steps:
Evaluate the situation and determine the amount of taxes owed to the IRS.
Ascertain whether the situation meets IRS standards for "doubt as to collectability" (i.e., unable to pay the full tax burden), "doubt as to liability" (i.e., consumer might not owe the tax), or "economic hardship."
Establish the full amount owed, including taxes, penalties and accumulated interest, and understand whether collection limitations or penalty cancellations are possible.
Determine the best method for managing and eliminating the tax debt.
Negotiate with the IRS to settle on an agreed course of action and resolve the debt.
While facing and handling tax debt can be painful, last year's bankruptcy reform legislation made it even more crucial for consumers to act. Historically, consumers in severe IRS debt might file for Chapter 7 bankruptcy protection or wait for the 10-year statute of limitations on tax liability to expire. Now, people are much more limited in the ability to obtain Chapter 7 filings. The bill's new "means test" leads many consumers instead to file Chapter 13 bankruptcy, which establishes a repayment plan, rather than wiping out all debt. Consumers with tax debt may find it much less costly and simpler to work with a debt resolution firm's tax relief service, which allows individuals to set up tax payment plans while avoiding court fees, attorney fees and bankruptcy judgments on their records.
"Whatever means you choose, tax season means it's time to face the inevitable and manage your tax burdens," Stroh says. "Fortunately, experts are available to help you along the way."
Freedom Tax Relief, LLC (http://www.freedomtaxrelief.com) provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that can often result in savings of up to half the amount owed. Based in San Mateo, Calif., Freedom Financial Network serves more than 5,000 clients nationwide and manages more than $200 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation.
Monday, November 2, 2009
Practical Accounting 2
Author: Peter Robertson
Source: articleage.com
Different methods of allocating costs
First, we will start with Direct Costs. In the previous article I indicated that it is advisable to allocate direct or (known) costs to the product or service whenever possible.
There are a number of methods used. The most common one being used by service type industries such as the local mechanic:-
DIRECT COSTS
Job Costing
For some, this takes the form of a docket book in which they write down each expense relative to the job being undertaken. In larger workshops and small factories there is often a job sheet or card that follows the product along the assembly line. These can be specially printed, or with many of the Small to Medium Enterprises (SME) the accounting package used may print one.
On jobs that extend over a longer period if these cards are collected and entered into the accounting program then the value of Work in Progress for each job may be obtained. It is also possible to see how actual costs compare with those in the quotation.
One of these expenses is of course Workshop Labour. Few firms are ever able to track each employee's direct labour cost as the employee often is shifted from one job to another too frequently for this to be practicable. The clerical cost of this recording of labour is also prohibitive.
Once a firm has been able to establish a cost history for labour the most sensible way of allocating this is to establish how many different categories of employee are on the payroll. That is, an average cost may be established for a supervisor, another average cost for leading hands, another for permament tradesmen and yet another for casual employees. With apprentices, there may be different average rates based on years of training.
All these labour rates should take into account not only gross wages paid, but also such extra costs as employer superannuation contribution, WorkCover levy, any regular tool or car allowances, and any salary sacrifice costs that affect the employer.
Process or Batch Costing.
The theory here is not much different to Job Costing except that instead of the costs being allocated to a specific job to be charged out, they are being allocated to a production run of some product. The end result is that an average cost can be established for one of a number of products being processed at one time.
Standard Costs
These are established by larger firms such as automotive manufacturers. When a production run is scheduled the costs are accumulated at standard contract rates as soon as Purchase Orders are issued. A detailed analysis is subsequently undertaken of the costs of over or under supply of materials and labour. Even the costs of wear and tear of plant are charged against the run based on standard machine hours that should occur. I consider that it is unlikely that any SME would need to consider seven variable Standard Cost reporting.
INDIRECT COSTS
These are usually associated with the cost of running the front office, sales team costs, advertising and any other cost that can not be reasonably allocated direct to the Job or Process Cost.
As mentioned in the previous article all costs have to be recovered, and provision made for replacement of plant (as distinct from depreciation of historic cost by the Tax Agent), and of course a profit for the investors. The most usual method of applying these indirect or on-costs is as a percentage to be added to the Direct or known costs.
Modern accounting software for SME provides for Plussage to be added to purchase cost e.g. in MoneyWorks Gold, and when the selling price is shown, the percentage mark-up can be set to also show on the screen. This then enables the salesperson to know how much they can safely reduce the price if bargaining is practiced.
A future article will deal with the concepts of budget setting in more detail.
Peter Robertson ACIS, CPA, PNA is not a Registered Tax Agent, however, he had forty years of practical experience covering both industrial and government accounting, and including efficiency and effectiveness audits. He has decided to pass on some proven costing and general accounting theories in the hopes that it may assist prospective entrepreneurs. Peter may be contacted through http://www.money-works.com.au.
Source: articleage.com
Different methods of allocating costs
First, we will start with Direct Costs. In the previous article I indicated that it is advisable to allocate direct or (known) costs to the product or service whenever possible.
There are a number of methods used. The most common one being used by service type industries such as the local mechanic:-
DIRECT COSTS
Job Costing
For some, this takes the form of a docket book in which they write down each expense relative to the job being undertaken. In larger workshops and small factories there is often a job sheet or card that follows the product along the assembly line. These can be specially printed, or with many of the Small to Medium Enterprises (SME) the accounting package used may print one.
On jobs that extend over a longer period if these cards are collected and entered into the accounting program then the value of Work in Progress for each job may be obtained. It is also possible to see how actual costs compare with those in the quotation.
One of these expenses is of course Workshop Labour. Few firms are ever able to track each employee's direct labour cost as the employee often is shifted from one job to another too frequently for this to be practicable. The clerical cost of this recording of labour is also prohibitive.
Once a firm has been able to establish a cost history for labour the most sensible way of allocating this is to establish how many different categories of employee are on the payroll. That is, an average cost may be established for a supervisor, another average cost for leading hands, another for permament tradesmen and yet another for casual employees. With apprentices, there may be different average rates based on years of training.
All these labour rates should take into account not only gross wages paid, but also such extra costs as employer superannuation contribution, WorkCover levy, any regular tool or car allowances, and any salary sacrifice costs that affect the employer.
Process or Batch Costing.
The theory here is not much different to Job Costing except that instead of the costs being allocated to a specific job to be charged out, they are being allocated to a production run of some product. The end result is that an average cost can be established for one of a number of products being processed at one time.
Standard Costs
These are established by larger firms such as automotive manufacturers. When a production run is scheduled the costs are accumulated at standard contract rates as soon as Purchase Orders are issued. A detailed analysis is subsequently undertaken of the costs of over or under supply of materials and labour. Even the costs of wear and tear of plant are charged against the run based on standard machine hours that should occur. I consider that it is unlikely that any SME would need to consider seven variable Standard Cost reporting.
INDIRECT COSTS
These are usually associated with the cost of running the front office, sales team costs, advertising and any other cost that can not be reasonably allocated direct to the Job or Process Cost.
As mentioned in the previous article all costs have to be recovered, and provision made for replacement of plant (as distinct from depreciation of historic cost by the Tax Agent), and of course a profit for the investors. The most usual method of applying these indirect or on-costs is as a percentage to be added to the Direct or known costs.
Modern accounting software for SME provides for Plussage to be added to purchase cost e.g. in MoneyWorks Gold, and when the selling price is shown, the percentage mark-up can be set to also show on the screen. This then enables the salesperson to know how much they can safely reduce the price if bargaining is practiced.
A future article will deal with the concepts of budget setting in more detail.
Peter Robertson ACIS, CPA, PNA is not a Registered Tax Agent, however, he had forty years of practical experience covering both industrial and government accounting, and including efficiency and effectiveness audits. He has decided to pass on some proven costing and general accounting theories in the hopes that it may assist prospective entrepreneurs. Peter may be contacted through http://www.money-works.com.au.
Sunday, November 1, 2009
Collecting Rent Owed By A Tenant
Author: E-Renter
Source: articledashboard.com
If you have evicted a tenant for not paying rent the law allows you to collect the money owed you. Even years later.
But, before you can claim the rent, you need to get a court order or money judgement that gives you the right to do so.
When you filed the tenant eviction case in court, a judgement and order i.e. a document signed by the judge authorising the local sheriff / officer to, if need be forcibly evict your tenant / tenants, had allowed you to regain possession of your rental property.
In order, to get a court to issue a money judgement against the tenant, two things are required:
1. Court papers must be personally served on the tenant.
2. The tenant is required to show up in court.
If eviction papers i.e. the court papers and not the notice to pay rent are posted on the door of the unit and/or mailed to the tenant, this generally means you did not get a money judgment from the court.
In this case, can I use Security Deposits by way of unpaid rent?
In case, you took a security deposit from the tenant when he / she moved in, you are legally allowed to apply the amount against anything the tenant owes you for back rent or by way of damages. However, it is necessary for you to comply with state law by notifying the tenant of your intent to use the deposit against the rent owed. And, if you returned the security deposit, despite having done so, legally you are still allowed to sue the tenant for actual rent owed and/or damages incurred to the unit.
In case, the tenant vacated your property before the court hearing, and if you were not able to get a money judgement, you can initiate proceedings against the tenant in the local small claims court for rent owed or damages to your property. A simple process, you can handle it yourself without hiring a lawyer. File the claim before the end of the statute of limitations, which generally ranges from three to six years, depending on the state you live in.
With a money judgment in hand, you can collect rent owed against all non-exempt assets of the debtor. Certain assets, such as retirement accounts are exempt from credit collection. Also, states recognising community property, allow assets of the debtor's spouse to be attached.
But, the easiest targets for credit collection are bank accounts. A copy of a tenant's recent cheque allows you to file for a 'levy of execution' on their bank accounts through the local sheriff. Note, making copies of tenants' cheques each month is good practice as you know exactly where they bank.
If the tenant is employed, you can collect wages, but most states limit collection to 25% of the debtor's wages. Still, a steady pay check allows you to your money back with interest. Getting a judgement transcript recorded in county records will ensure the tenant is not allowed to buy a house in that county without first paying off what is owed you. In case, a tenant owns other real estate in his / her name, the judgement will create a lien on the property, as well.
If you do not know where your tenant has skipped to, start a debtor proceeding in court that will make him / her appear in court to answer questions regarding his / her assets. Failure to comply can result in a warrant for the debtor's arrest.
As a landlord, it is important for you to know the legalities of handling an eviction and getting rent owed you. If a landlord does not know the correct legal way of handling such eventualities, he / she may end up getting sued by the tenant, instead. Therefore, landlords, property managers, resident managers, etc. must keep themselves abreast of all pertinent landlord / tenant laws of their state.
Source: articledashboard.com
If you have evicted a tenant for not paying rent the law allows you to collect the money owed you. Even years later.
But, before you can claim the rent, you need to get a court order or money judgement that gives you the right to do so.
When you filed the tenant eviction case in court, a judgement and order i.e. a document signed by the judge authorising the local sheriff / officer to, if need be forcibly evict your tenant / tenants, had allowed you to regain possession of your rental property.
In order, to get a court to issue a money judgement against the tenant, two things are required:
1. Court papers must be personally served on the tenant.
2. The tenant is required to show up in court.
If eviction papers i.e. the court papers and not the notice to pay rent are posted on the door of the unit and/or mailed to the tenant, this generally means you did not get a money judgment from the court.
In this case, can I use Security Deposits by way of unpaid rent?
In case, you took a security deposit from the tenant when he / she moved in, you are legally allowed to apply the amount against anything the tenant owes you for back rent or by way of damages. However, it is necessary for you to comply with state law by notifying the tenant of your intent to use the deposit against the rent owed. And, if you returned the security deposit, despite having done so, legally you are still allowed to sue the tenant for actual rent owed and/or damages incurred to the unit.
In case, the tenant vacated your property before the court hearing, and if you were not able to get a money judgement, you can initiate proceedings against the tenant in the local small claims court for rent owed or damages to your property. A simple process, you can handle it yourself without hiring a lawyer. File the claim before the end of the statute of limitations, which generally ranges from three to six years, depending on the state you live in.
With a money judgment in hand, you can collect rent owed against all non-exempt assets of the debtor. Certain assets, such as retirement accounts are exempt from credit collection. Also, states recognising community property, allow assets of the debtor's spouse to be attached.
But, the easiest targets for credit collection are bank accounts. A copy of a tenant's recent cheque allows you to file for a 'levy of execution' on their bank accounts through the local sheriff. Note, making copies of tenants' cheques each month is good practice as you know exactly where they bank.
If the tenant is employed, you can collect wages, but most states limit collection to 25% of the debtor's wages. Still, a steady pay check allows you to your money back with interest. Getting a judgement transcript recorded in county records will ensure the tenant is not allowed to buy a house in that county without first paying off what is owed you. In case, a tenant owns other real estate in his / her name, the judgement will create a lien on the property, as well.
If you do not know where your tenant has skipped to, start a debtor proceeding in court that will make him / her appear in court to answer questions regarding his / her assets. Failure to comply can result in a warrant for the debtor's arrest.
As a landlord, it is important for you to know the legalities of handling an eviction and getting rent owed you. If a landlord does not know the correct legal way of handling such eventualities, he / she may end up getting sued by the tenant, instead. Therefore, landlords, property managers, resident managers, etc. must keep themselves abreast of all pertinent landlord / tenant laws of their state.
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