My CFO on the Go!

Everyone wants to be a millionaire, right? To join the ranks of that exclusive club, whose members have proved to the world that they have made it. Well, maybe not so exclusive. According to CNN.com the number of millionaires in the world has grown to over 10 million! And the worldwide number of super-rich, those with more than 30 million dollars in assets, has grown to over 100,000.

Most of the new millionaires are coming from countries with fast emerging economies, India, China and Brazil. But the United States is still home to the highest number of millionaires.

But of course, a million dollars isn’t what it used to be. Thanks to inflation, a million dollars today is only equal to $783,000 in 1998 dollars, and a pitiful $568,000 in 1988 dollars.

It is interesting to look at where the millionaires are putting their money today. For the most part they are not investing in Forex, Real Estate, or other fast money schemes. With today’s economy millionairs are putting 40% of their assets in those “save and boring” investments, money market funds, bonds, and preferred stocks.

Would you like to join the millionaire club? You are most likely to get there not by winning the lottery or finding the perfect get rich quick scheme. The best way to get there, make saving a priority, spend less than you earn, own your home, and avoid consumer debt.

I was on a forum, and there it was. A poster declaring that you don’t have to pay taxes, that taxes are illegal, just watch this video and it will explain everything. I didn’t watch the video, I’ve seen too many of them I know how it goes. There will be a discussion of how the 16th amendment was never properly ratified, or a new definition of Income, maybe an explanation of how to file a Zero income tax return. Probably followed by an appeal to send just $49.95 for your un-tax kit.

So I replied to the forum poster that the IRS has probably heard his argument before, and dismissed it. Also, like it or not, they are the ones making the rules. I told him the best way to lower your tax burden was to either find a good tax professional who knew the tax law, or buy yourself a good tax book (like the JK Lasser book) and learn how to work within the laws to create the lowest legal tax liability. The other alternative is to not make much money. A married couple with 2 children who’s income is from earnings can make over $30,000 without owing federal income taxes.

He didn’t like my response. And gave the typical response of tax protesters everywhere. He said that if everyone knew they didn’t need to pay taxes I’d be out of a job. He claimed I probably knew that people didn’t have to pay taxes, but I wouldn’t tell them because I was working with the IRS to keep everyone “slaves to the system”.

That argument always makes me laugh. If I knew a legal way for people to avoid taxes I’d be the most popular tax adviser in the country. I’ve seen how much money people will pay for a tax scam, I can only imagine what they would pay for the real deal.

So before you hand over your money to “crack the code” or “un-tax” yourself, do me a favor. First read the IRS’s free PDF on the most popular tax scams. Then check out the Quatloos site for more information on scams, and the scammers that run them. Finally, take a look at eTaxe.com for some interesting commentary on the major tax protester arguments.

Now, I’d love to hear your tax story. Have you tried one of these “systems”? What did it cost? Have you heard from the IRS?

Most of the time, a small business owner can save money by wearing many hats in the business. If they consult with an accountant a few times a year they usually do just fine. Things change when you decide to add an employee or two. I cannot stress this enough, when you have employees, even if you have only one employee, you need to hire a professional.

Unlike almost anything else you will do in business, when you hire your first employee you are now under the jurisdiction of a number of different government entities, all with their own set of rules, reports, and regulations! You will need to worry about labor laws, worker’s compensation insurance, wage garnishments and benefits administration, as well as federal and state withholding requirements.

If you are not ready to hire a whole HR (Human Resource) department, then a good way to go is with a PEO service like NationalPEO.com. PEO stands for Professional Employer Organization. On a contractual basis, the PEO takes over the HR responsibilities of the employer. In effect, the PEO becomes the employer and leases the employees to the small business.

This frees the small business owner from many responsibilities and liabilities of being an employer. The PEO will provide all required HR services, including payroll services such as time card management, government reporting and tax payments, benefits administration and worker’s compensation insurance. And more importantly, they will verify that your employees are eligible to work in the U.S. NationalPEO uses E-verify to insure that every employee you hire is legal to work. They will also work with the employee to quickly resolve any discrepancies.

Another benefit of using a PEO is that it is a cost effective way for small employers to offer large company benefits, such as health insurance, cafeteria plans, and 401(k) plans to their employees.

This is one area where it just doesn’t make sense to try and save money by doing it yourself. A small mistake can lead to expensive consequences including lawsuits and government fines. Before you even interview your first potential employee, hire a professinal. In the long run, it will save you time and money.

Starting a new business? Most new businesses are bootstrapping it, trying to get the business going while spending the least amount of money. But at what point does it make sense to hire a professional? This is the first in a series on how and when to hire professionals for your business.

After 20 years of offering accounting services I can tell you when most new businesses finally hire an accountant. It is when their business has hit it’s first growth spurt and they are running to keep up with business, their accounting system (or lack thereof!) isn’t working for them, and maybe they have even gotten a letter from the IRS. Things tend to be in chaos and the business owner(s) have no idea if they are making money or not. They are just trying to keep up. I’d like to suggest hiring an account before crisis hits. You’ll save money and maybe even your sanity. Here are some times when it makes sense to visit an accountant.

Right Before You Open Your Business

This is probably the most important time to consult with an accountant. During these initial first sessions a good accountant will give you advice on how to set up an effective accounting system, how to maximize your tax deductions, and which type of business entity is best for your business. (Corporation, LLC, Sole Proprietor, etc.) They will also point you in the right direction as far as what payments and reports you need to file with various government agencies.

Tax Time

You may be an expert when it comes to doing your own taxes, but the rules are different for businesses. Not only that, with tax law constantly changing, you are probably too busy running your business to keep up on the latest tax law. Often a good tax accountant will save you more in taxes than you are paying them in fees. At the very least, have an accountant prepare your taxes the very first year you are in business.

When You Are Looking For Investors

Smart investors with lots of money don’t get that way by trusting business owners. When you have an Independent Auditor review you books you give investors the assurance that financially everything is on the up and up. They then know that your financial statements are a true reflection of your business.

When Gross Receipts Reach $100,000

Preferably earlier, but once your gross receipts reach $100,000 you need professional accounting . At this point the accountant’s knowledge of money management and tax savings will almost certainly be cost effective. And your time will be better spent running and marketing your business.

Make sure that you are not “penny wise and pound foolish” when it comes to hiring an accountant. At the very least, consult with an accountant during these key times in your business. If you are searching for an accountant, one resource I found was AccountingAisle.com. They provide a service where they will match you with a local accountant based on your specific needs. You can also check with your local chamber of commerce, or ask other successful business owners in your area to give you a referral.

The Land of Opportunity Forever: Energizing America

by Stephen Manoj Thompson, Ph.D

One of the great things about the internet is being able to find books by unknown authors that are outside of the mainstream, yet have compelling and interesting content. Land of Opportunity is one of those books.

In The Land of Opportunity Forever: Energizing America Dr Thompson looks at two major world economies. The first chapter looks at America and how it became the superpower of the world. The next two chapters detail some of the social and cultural issues that are challenging America’s status as a superpower. Then the attention turns to India, a country which is becoming a major world economy.

Specifically he looks at social conditions in India and America and shows that the weakening of American culture and moral appearance is at the root of it’s economic problems. He contrasts that with India’s strong national culture and pride of country and its growing presence in the world economy. He then finishes with suggestions on the changes America needs to make to remain a super power.

I found The Land of Opportunity Forever: Energizing America a very interesting read. I had to agree with many of the suggestions. Especially those regarding America’s education system. The current system is failing with unacceptable high school drop out rates. We need more college graduates with degrees in science and engineering. We need to encourage people to get out of debt and start saving. We need to encourage strong families. By looking at the social and cultural influences that are fueling India’s economic growth we can see what needs to be done for America to maintain its position as world super power.