Archive for the ‘Franchising’ Category
Tax season is just around the corner, and many taxpayers are already trying to calculate just how much they’ll get back – or how much they’ll owe! – come tax time.
If you have children, you may know about the $1,000 per-qualifying-child Child Tax Credit, but did you know that the Earned Income Tax Credit and Child and Dependent Care Tax Credits could also help you keep some of your hard earned dollars in your pocket?
Here’s a quick overview of the top tax credits for couples and singles with children:
Child Tax Credit. The Child Tax Credit is worth up to $1,000 per qualifying children under the age of 17. What’s a qualifying child? Qualifying children must meet five specific criteria:
- Child must be your biological child, step child, foster child, brother, sister, stepbrother, stepsister, or a descendent of any one of these (so long as they are younger than the person claiming the credit)
- Child must be under 17 years of age by the end of the tax year
- Child must not have provided more than 50% of their own support costs during the year
- Child must have lived with you more than half of the tax year
- Child but be a U.S. citizen, U.S. national, or resident of the U.S.
There is no limit to the number of eligible dependent children you can claim this credit for.
However, it’s important to note that you must have earned at least $3,000 in income during 2009 in order to receive any benefit from this credit. It’s also important to note that this earning threshold is valid only through 2010, as indicated in the ARRA. After 2010, that threshold may be adjusted upward once again.
Earned Income Tax Credit. As we’ve already pointed out, there’s some great news about this year’s EITC. What’s EITC? The EITC is a refundable federal income tax credit specifically designed to assist low to moderate income individuals and their families make ends meet. You do not have to have a child to qualify for EITC, but you must have worked at some point during the year. The amount of the credit also goes up the more dependent children you have.
For tax year 2009, the credit and dependent allowances have increased! So, if you have 3 or more children, you qualify for an even larger tax credit (no more two-child credit cap). The tax credit limit for individuals with no children has also been increased, as has the earned income limit. See our previous post on the 2009 EITC 2009.
Child and Dependent Care Tax Credit. If you paid someone this year to take care of a child, spouse, or dependent, you may qualify for the Child and Dependent Care Tax Credit. This credit is designed to help offset some of the expenses for child and dependent care that families face.
If you have qualifying care expenses, you can claim a percentage of expenses up to $3,000 for one child or dependent and up to $6,000 for two or more children or dependents. Note that the percentage you can claim will drop depending on your income, and will never be more than $2,100. It’s also been created to offset your federal tax liability only: it’s not a credit that will be refunded to you.
In order to qualify, the care expenses must have been provided for one or more qualifying children/dependents under 13 years of age. Spouses and certain specified individuals who are considered mentally or physically incapable of caring for themselves may also qualify. The care must have also been necessary in order for you and/or your spouse to work.
Note also that in order to take this credit, you must be filing single, married filing jointly, head of household, or qualifying widower with dependent child.
Everyone must file a tax return if their income is above a certain level. But Instant Tax Service (and the IRS!) generally recommends that everyone file a tax return. Here’s why:
Small Income, Big Refund
There are many tax credits you can only benefit from if your file your tax return. Tax filing was required to receive stimulus payments back in 2008, and as the down economy lingers, it’s entirely possible that more stimulus-like payments could be on the way. Also, you can only claim many of the new ARRA tax credits on your tax return. As the tax code changes, many taxpayers are finding it in their best interests to file even if they don’t meet the IRS income minimum.
Here are some good reasons to file your taxes… even if the IRS says you don’t have to!
Cash Credits
Money in your pocket. If you don’t meet the minimum income requirements for tax filing, you’re generally going to be due a refund if any income tax was withheld from your pay, if you had estimated tax payments, or if you applied any prior year overpayment to this year’s tax return. Check with your local tax preparer to be sure.
Earned Income Tax Credit. The Earned Income Tax Credit, or EITC, is a refundable tax credit that could qualify you for a significant refund if you worked during the tax year but did not make a substantial amount of money. The EITC amount increases based on the number of dependents you support, up to three. More details here.
First Time Homebuyer Credit. If you bought a home this year as your primary residence, you’re only going to get the new (up to) $8,000 tax credit for it if you file your taxes! Remember, in order to qualify, you cannot have owned a home within the last three years.
Fast Filing
If you want to take advantage of fast tax filing (for a faster refund!), we recommend electronic filing. Electronic filing, or e-filing, is even more popular than ever. Over 90 million tax returns last year were filed electronically with the IRS. That’s nearly 70% of tax returns! E-filing is faster, more convenient, and much more secure than traditional paper filing. When you e-file, you also receive immediate confirmation from the IRS that they’ve received your tax return.
And yes, faster filing means… a faster refund! According to the IRS, the average tax refund last year was $2,429! All of our Instant Tax Service stores can file your taxes electronically. Stop by this tax season, and we’ll give you a detailed run down of the tax credits you may qualify for.
Did you know there’s an adoption credit available to families who adopt an eligible child during the current tax year? Here’s some great in formation directly from the IRS about the adoption credit:
- Generally, if you’re married, you must file a joint return to take the adoption credit or exclusion. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements. Check our irs.gov or ask your local tax preparer for details.
- You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child (including a child with special needs). The adoption credit is an amount subtracted from your tax liability.
- Qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child.
- An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself.
- The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final.
- Under the dollar limit the amount of your adoption credit or exclusion is limited to the dollar limit for that year for each effort to adopt an eligible child. If you can take both a credit and an exclusion, this dollar amount applies separately to each.
Read the rest over at irs.gov.
As the year winds to a close, singles may want to start planning for more than where they’ll spend their next New Year’s bash. It’s commonly believed that all the tax credits go to married folks, but there are some tax tips and credits particular to singles that you should be aware of if you plan to continue your swinging singles life into the New Year.
1) Check your status. If you’re a single parent, you may qualify for head-of-household status. This will give you much better tax rates than filing single. Sometimes even a married person with a dependent child can qualify for head-of-household rates, which beat the rates for those who are married-filing-separately. Not sure if you qualify? If you need help, don’t be afraid to visit a qualified tax preparer or tax professional to find out.
2) Check your adjustments. Sometimes singles think that because they don’t itemize their tax return that they can’t take deductions. It turns out that there are certain deductions that are allowed whether or not you itemize your tax return. These include IRS and certain pension contributions, moving expenses, medical savings accounts, and student loan interest. If you’re self-employed, you can also take a health insurance deduction and a deduction for half of the self-employment taxes you pay.
3) Take the exemption you’re owed! One of the biggest mistakes that single filers make is not taking a tax exemption for themselves on their W-4. Even if you’re single and have no children, you can still take an exemption for yourself. If you don’t, your employer will hold MORE taxes than you actually owe from each paycheck. Sure, that means you have a great refund coming in April. But do you really want to give the government an interest-free loan until then?
4) Job expenses may be deductible. Let’s face it, it’s rough out there, and looking for work – especially if you’re single – can feel like a full-time job. The good news is that many job-seeking expenses are tax deductible, including travel and transit expenses, employment agency fees, phone calls, and any money you spent for the creation, typing, printing, and mailing copies of your resume to potential employers.
5) Open a retirement account. Singles tend to put off saving for retirement longer than couples and married folks. If you aren’t already contributing to your company’s 401(k), open an Individual Retirement Account (IRA), and start saving now in the amount up to the limit of the tax deduction you can take (this varies based on your age). Contributing to an IRA or 401(k) is also a great way to decrease your taxable income. If you’re single, the contribution you make to your IRA if your work doesn’t offer an option – up to $4,000 if you’re under 50 – is also fully tax deductible. Rules are less clear-cut if you contribute to an employer-sponsored plan. Check with your local tax expert or preparer if you have questions.
Great news coming out of the Senate this week as unemployment benefits are extended by up to 20 weeks in states hardest hit by job loss. The good news also extends to those interested in buying a new home who don’t foresee making the November 30th deadline for the first-time homebuyer’s credit. The credit is due to be extended through June 30th, 2010.
According to the National Employment Project, 7,000 people a day are currently losing their unemployment benefits, which are subsidized by a tax on employers. Unemployment has reached a 26-year high of 9.8% and shows no signs of getting any better over the next few months. Extending unemployment benefits is expected to help unemployed workers survive the downturn until the economy improves and more jobs become available.
Lawmakers also hope that extending and expanding the homebuyer’s credit will help revitalize the rocky real estate market and create and/or save jobs in the industry. This reasoning led to the expansion of the homebuyer’s credit to existing home owners in the proposed bill. Existing homeowners who have been in their home for at least five years can now receive a $6,500 tax credit if they purchase a new home.
The current tax credit seems to have successfully stabilized – or at least greatly improved – the housing market. Sales have increased, resulting in slightly fewer homes on the market. Fewer homes and more buyers means an increase in housing values. That’s the idea anyway, and the tax credit expansion is predicted to reduce inventory and increase housing values even more in the coming year.
If you plan on buying a home in the next few months and qualify for these credits, keep an eye on this legislation. It’s expected to pass, but speak with your local tax preparer before you file to be sure you qualify.
Fez Ogbazion, CEO of Instant Tax Service, offers some great advice for entrepreneurs during his interview with Fred Castaneda of The Struggling Entrepreneur.
Check it out!
Fez Ogbazion, CEO of Instant Tax Service, was featured on the program Franchise Interviews on Blogtalkradio today!
In this interview, Fez talks about how he started his business, shares some advice for entrepreneurs, and explains why Instant Tax Service franchise sales are up this year – even in a rough economy.
You can listen to the entire segement here.
Every small business needs funding. Unless you’re independently wealthy or incredibly lucky, yours business is probably one of them.
One of the first questions you ask should be: how much should you budget in startup costs? Every business is different, but there are a couple of startup cost calculators here and here. These calculators give you a very simple, high-level look at what your business startup costs may be.
A good rule of thumb is to make sure you have enough financing to cover not only your startup costs, but your first year of expenses. There are a few lucky businesses that achieve profitability their first year, but most take 2-5 years to start generating real returns.
So how much do you have to make before you start making money? Remember that just because you generated $10,000 in sales this month, it doesn’t mean you made $10,000 in profit. If it costs you $8,000 to acquire, distribute, and sell those goods, you’re only actually making a $2,000 profit ($10,000 – $8,000 = $2,000).
You can calculate your breakeven costs by identifying your variable and fixed costs and applying a simple formula. Click here for a basic online breakeven analysis calculator.
Now that you have an idea of the costs involved in starting your business, how do you plan to fund it? There are lots of options. Young entrepreneurs just getting started might rely on friends, family… and credit cards. For most – especially if you’re looking at a business with high startup costs – this isn’t going to be enough to get your business off the ground.
There are two basic types of outside funding you can get: debt financing and equity financing. Debt financing means you’re taking on debt that you’ll have to pay back. This is financing from traditional outlets like banks. Equity financing, on the other hand, means gathering investments from venture capitalists. Venture capitalists are people who will invest money in your business in the hopes of seeing a profitable return.
The big drawback to equity financing is that you may lose some control over your business – many venture capitalists seek to have some sort control of your company, especially if your business is underperforming. You will also be sharing a portion of your profits with a venture capitalist. Of course, when debt financing, you may also offer up your business, house, or other collateral to the bank if you are unable to pay back the loan (depending on the terms of the loan). So either way, you’re beholden to someone else until your business starts to cash out.
If you decide to open a franchised business, you may also have the ability to tap into the franchisor’s funding resources. This could range from simply getting the franchisor’s backing when applying for a loan to taking out a loan from the franchisor itself. At Instant Tax Service, we offer a variety of funding options to qualified candidates.
At the end of the day, funding your small business requires a lot of research and sweat equity on your part. Be sure to pursue all the options open to you before deciding what kind of funding options are right for you. Many entrepreneurs find success by mixing and matching debt financing and equity financing paired with generous contributions from family and friends. There’s no “right” formula – just whatever works for you and your business.
For more small business funding tips, visit SBA.gov.
At one point or another in your life, you’ve probably dreamed about owning your own business. The independence of being your own boss can bring you benefits like job security, personal income, and the ability to chart your own career path. But how do you avoid the pitfalls of a start-up business?
It’s easy to dream. What you may not know is that making your dream a reality may be easier than you think. For many entrepreneurs, franchising has helped pave the way to business ownership.
Today’s consumers are franchised focused. Burger joints, hair salons and video game stores dot the retail landscape from coast to coast. That’s great news for business owners, because these brands have already created instant customer recognition. Franchise owners benefit directly from the brand identification, successful business methods, and proven marketing and distribution system of a franchise system. In short, franchising is a strategic alliance between you – as the business owner – and the combination of support and operational guidance provided by an established corporate office that’s there to help you every step of the way.
Equally important is the economic impact a franchise business can have on your community. Did you know that franchised businesses have created nearly 21 million jobs, or 15.3% of all employment in the U.S. private-sector? Franchised businesses also create $2.31 trillion of annual output, or 11.4% of all private-sector output in the United States.
Some additional advantages to consider when evaluating whether or not a franchise business is right for you: higher possibility of success (compared to a startup), the speedy development of a customer database (customers have already heard of you!), calculated risk, and the opportunity to achieve a great return on your investment.
Today, about 3,000 different franchise brands operate in more than 200 different lines of business, and one of the fastest growing and most stable segments of franchising is the tax preparation business. Why? Well for starters, it’s a recession-resistance industry (everyone has to do taxes!) and it allows entrepreneurs to work just 17 weeks a year during the tax season from January to April.
According to the IRS, more than 155 million individual income tax returns were filed last year, resulting in over $256 billion in tax refunds. In addition, more than 60% of U.S. tax returns are prepared each year with the assistance of a paid tax preparation service or preparer.
So, if you’re interested in owning your own business, working just 17 weeks a year and want to join Entrepreneur magazine’s 2009 Top New Franchise, the #1 Low Cost Franchise and one of the Top 10 Fastest Growing Franchises, please click here to learn more.
As President Obama recently pointed out, the Small Business Administration (SBA) is on track to back only about half as many loans in 2009 as it did last year. The proof is in the numbers as the agency’s lending data for the first quarter shows some major drops.
The SBA backed $1.59 billion worth of loans in the three months ending March 31, a 47% drop from the same quarter last year. The total number of loans made through the 7(a) program was 8,278, down from more than 19,000 issued a year ago. In the first half of its 2009 fiscal year, the SBA’s total 7(a) loan volume was $3.5 billion, down from the $6.2 billion lent in the first half of last year.
What the numbers bear out is the fact that small businesses are fighting a lot of opposing forces when it comes to seeking a loan. Stiff collateral requirements and other restrictions have put SBA loans out of reach for many entrepreneurs. Banks are also clamping down on alternative small business funding channels like credit cards, credit lines and non-SBA loans. The credit crunch has delivered a major blow to small businesses. But while the outlook may seem grim, there’s still hope for entrepreneurs out there.
President Obama’s stimulus provisions were recently enacted and include temporarily waiving fees for the SBA’s loan programs and increasing – as much as 90% – the portion of each loan it will insure against default.
Also, small business concepts and franchises like Instant Tax Service, among others, have taken matters into their own hands when it comes to financing new franchisees. Remember, when you own a franchise you may be going into business for yourself – but you won’t be in business alone.
For qualified candidates worried about their initial investment, Instant Tax Service offers financing options to get started. In addition, Instant Tax Service can also provide a line of credit through its online supply store with tax season- friendly net terms.
Through programs just like this, the average third-year income tax franchisee is thirty-six years old and started franchising with Instant Tax Service on an initial investment of less than $50,000. Most franchisees had no initial experience in income tax preparation or the income tax franchise business, but Instant Tax Service provided all the tools, training, and resources they needed to open an entrepreneurial small business.
In the end, there isn’t one silver bullet that will solve the funding crunch, but progressive lending programs by companies like Instant Tax Service are paving the way for small business success in the current economy.
If you’re interested in learning a more about what it takes to become an independent business owner as part of Entrepreneur magazine’s # 1 New Franchise, #1 Low Cost Franchise and the #3 Fastest Growing Franchise, please click here.
