Category: Finance (page 1 of 4)

How To Reduce Taxes On Your Bonus Check

If you are fortunate enough to be employed in this sluggish economy, thats good news. If youre even more fortunate to receive a bonus check, then you probably noticed a sizable percentage of that bonus check was lost to taxes.

Uncle Sam wants part of your bonus

The Percentage Method isnt a household name, yet it affects many Americans even if they know nothing about it. Its time to get educated. This is the method by which taxes are withdrawn from your bonus check. Its not necessarily fair or favorable if youre an average taxpayer.

At the federal level, this is a flat tax of 25% thats withheld from your bonus. Its a flat percentage at the state level as well, and the number varies depending on which state you are in. A flat tax is the same, no matter your income level or tax bracket. Even if usually get to keep 90% of your check, this flat tax is applied to your bonus check no matter what.

What can you do?

This flat tax is hard to avoid. We all hear about what happens to those who dont pay their taxes. They are fined or, if the dollar amount is high enough, must serve time in jail.

Is there any way to reduce the taxes on your bonus check? Sometimes you can reduce your taxes, depending on the situation. One way to avoid paying too much in taxes is to plan ahead. If you know that a bonus is in the future, increase your withholding allowances during the year. Withholding allowances during the year will translate into less income tax being withheld from your regular paychecks. This will in turn offset the high tax withholding from your bonus which will result in paying fewer taxes all the way around.

Thats not your only choice. You might also want to raise your withholding allowances after you get the bonus and then fewer taxes are withheld for the rest of the year. Either way, you are paying less in taxes.

Not as easy as it sounds

Most of the time, a bonus check comes at the end of the year. So these are difficult strategies in that you dont want to risk under-withholding unless you are absolutely sure the bonus is coming. Otherwise it could turn into quite a mess.

Another method?

The Aggregate Method might be better for your situation. Allowed in many states, the aggregate method bases the amount of tax withheld on your wages. It also takes into consideration your tax withholding up to the date of your bonus check. The Aggregate Method allows your taxes to be calculated like your bonus is just a regular paycheck.
You will still be paying taxes. The Aggregate Method wont change that. Unfortunately, payroll software doesnt have the ability to recognize that your bonus is simply a single payment. In other words, the payroll software just assumes that your bonus check for $5,000 is a regular payment that will increase your annual income. For just that one bonus, the software thinks that more taxes need to be withheld because it thinks you are now in a completely different and higher tax bracket. So it taxes you at that higher rate. Even with bonuses that are smaller, too many companies never realize there is a method to this madness and as a result, too many incorrect software calculations create bigger bonus problems for employees whod like to keep as much of this extra money as possible.

The problem with bonuses

Even if your employer is on top of things and figures out your bonus correctly, your bonus is probably a higher dollar amount. Its usually higher than your regular paycheck and therefore there will be more taxes withheld. Such taxes are usually magnified. So this leads you to receive a smaller bonus check than you expected.

What else? If you are in a high tax bracket, and your employer uses the percentage method to determine the tax rate, you might end up under-withheld at the end of the year. For example, perhaps your federal tax rate is 35%, and only 25% is withheld. If you believe this could happen, call Human Resources or your Payroll Department and request that more taxes are withheld from your bonus check. Your employer is authorized to withhold more if you ask them. They just wouldnt be able to withhold less.

If you are getting a bonus and want to determine how much of the bonus you will get to keep, check out bonus calculators online. While youre at it, research the many ways you can understand your paychecks. You can learn about different numbers of allowances and how those different scenarios affect your withholding situation. You can find both regular paycheck and bonus calculators as well. Make sure to select your state to get accurate results.

Catherine Durkin Robinson is a contributing writer for BillSavings.com, your information resource and community for money-saving tips and offers so you can shop, compare, and save money on just about everything.

Small Business Accounting

Understanding the Value of Small Business Budgeting Abstract Take the intimidation away from small business budgeting and learn how these simple exercises will benefit many facets of your business. Plan for the future, make more money and control that profit better with budgets. A better, more profitable business is the result. Article Body Although it may seem like a lot of work, budgeting is an essential process for your business. It will help you to plan for the future – this year and over the next decade.

Budgeting will assist you in decision making, goal setting and many other types of planning. It also helps to control the actions of your business. Planning and control work together, but are not actually the same thing. To plan in a business involves laying out the direction and goals. Control comes when you’re in the process of working towards those goals.

If the plan is to purchase a large asset in five years with cash reserves, the control comes into the picture when decisions are made that ensure you have enough cash when that time actually rolls around. Small business budgeting is the tool to help you plan well and exercise control. And it’s the key to your business’s financial success. Budgeting can be done in simple, straightforward methods now using computers, spreadsheets and even specialized software. You can create a master budget easily by starting with your long-term sales forecasts. Once you have a realistic idea of future sales you can plug those numbers into a Sales Budget, which also helps with a Purchasing Budget and an Ending Inventory Budget. Inventory can be a tricky thing within every business and the information gathered in these budgets is extremely helpful.

The Sales Budget also helps to create a Budgeted Income Statement. This particular accounting financial statement is helpful for potential investors to assess the likely profitability over the next few years. Long-term sales forecasts are also the first step in creating an Operating Expenses Budget and a Capital Budget. These figures help with day to day business as well as working to ensure a healthy future. When you can budget for capital expenditures based on sales forecasts and then maintain control on the way there, your business will thrive.

The Cash Budget is often the most useful for small business owners. Knowing how much cash you are likely to have at the end of a period is important and planning to keep a -safe amount- on hand for debt repayment or other things is simpler with a cash budget. Using the Sales Budget, the Operating Expenses and the Capitol Budgets, combined with past habits and events, you can create a reasonable Budgeted Income Statement and Balance Sheet. Those are used to bring about the Budget of Cash Flows, an essential tool for small business. Find out what you can realistically afford in the future and keep a handle on your company.

Remember that budgets are a continual exercise and will be updated frequently as new information arises. Small business budgeting is a flex thing and will need regular attention. Participation within the company is important. Involving managers in the planning stages will give them ownership of the goals and help them feel more connected with the end result.

Your business will benefit when more people work together on the budget.

Accounting Enron Scandal

The company had to come up with a new business strategies to generate profits and cash flow in order to survive. Kenneth Lay, CEO, hired McKinsey & Co. to help in developing Enrons survival business strategy. A gas pipeline company climbed it’s way into the worlds largest energy-trader by scamming investors, the accounting Enron scandal was a real systematic manipulation of fiduciary rules to create an illusion of a very successful company. Enron accounting scandal was discovered and proved that they made deliberate attempts to alter its financial statements to make them look more attractive to investors and lenders. Following these manipulations many parties have been affected and will continue to be affected in the future, more specifically, many years. The accounting Enron scandal that lead to the Enron collapse was due in great part in the activities of their C.E.O., Jeffrey Skilling. Not only was he in charge of controlling one of the largest energy companies in the world, he was also in charge of many other side undertakings that may have been in a conflict of interest with his main job as Chief Executive Officer of Enron. The baffling part of this situation was that the other members of the Board of Directors for Enron all voted on this and passed it. There are three specific ways in which the accounting Enron scandal occured by misrepresented figures on its financial statements.

The accounting Enron scandal case was broadcast on television news for months in 2002. The accounting Enron scandal story was around the news for a period before and after the downfall of the company. Now days, however, one seldom hears about Enron or its top executives ? and the reason is not because they are all lodged safely in a federal prison. Rather, it because (a) the president and the congress gain no longer gain points by grandstanding on the issue, (b) the Department of Justice finds its difficult to put the top brass in the docket, although the Department has pressured some lower-level Enron executives into confessions, and (c) the public appears to be beyond caring. The accounging Enron scandal, however, was and is an important development for American society. The scandal demonstrated just how easily ethical standards can be discarded at the highest corporate levels when the price is right. This paper examines the accounting Enron scandal from a perspective of ethics in management. The phrase ethics in management in management is an unfortunate one.It implies that the set of ethical principles applicable in corporate management may be somewhat different from the application of ethical principles in other societal endeavors. Perceptions of that sort by top managers at Enron may have made it easier for them to pursue the courses of action that landed themselves and the company in the troubles that eventually emerged. . . . es in the trading of energy market was the manipulation of prices to created inflated and unwarranted profits for Enron at the expense of utility companies and utility consumers. Ultimately, however, the inflated profits contributed to the creation of a false representation of Enron’s performance that created financial benefits Enron selected executives at the expense of investors and the public. Similarly, the immediate intent of deceptive accounting practices involving Enron and fictitious business entities was to shield from investor and governmental regulators the fact that Enron was not a profitable company as was being reported publicly. Additionally, however, the deals between the company and fictitious entities diverted large amounts of money from the company to selected high-level executives at Enron. These behaviors were injurious to Enron employees, investors, and consumers (Axtman & Scherer, 2002). One may attempt to assess the behaviors of the offending Enron executives (all at senior levels of the organization) within a framework of business ethics. The term “business ethics” appears to imply that behaviors that are ethically unacceptable in other facets of society may be acceptable in the business realm. The accounting Enron scandal will go down in history as one of the most notorious case for American society.

Self Employed Accounting Software Review And Importance

The best choice is often dependent upon the size of the business and the employment of full time accountants, accounting staff, bookkeepers or management of the accounting records by the proprietor. Every business needs to choose the most appropriate accounts package according to both the requirements of the business and the capabilities of the person or people who will operate the accounting solution.

Many small businesses do not benefit from sophisticated accounting software if the technical requirements of that software exceed the abilities of the users to produce efficient financial records and use the full capabilities of the accounting software to maintain a high level of financial control.

Alternatively a simple bookkeeping package may not offer the degree of financial control over such financial matters as debtors and credit control, creditors and cash flow liquidity that may be required. Financial control and cash flow is of supreme significance and importance when credit is tight.

Every business needs to maintain a set of books and accounts to satisfy the legal obligations to calculate the net taxable profit which has to be both declared to the taxation authority and provide sufficient financial records to support that calculation.

Up until the mid twentieth century it was common practise to produce accounts handwritten on paper, Typing being reserved for the final set of accounts for publication as required. Handwritten accounting records are largely obsolete for medium and larger businesses although still used by many small business organisations.

With the advent of computers accounting software has become the norm and there are many simple bookkeeping packages that can be easy to understand and offer sufficient levels of financial control for even the smallest business.

In essence each small business has a choice between preparing a handwritten set of accounts, using a simple bookkeeping package which could be based upon spreadsheets or a more sophisticated accounting software package that almost invariably use a data entry system into a database which can then be queried to produce the required financial control.

Choosing handwritten accounts would only be applicable to the smallest business where the proprietor had no employees, limited numbers of transactions and had full financial control without the need for written information. Such handwritten accounts would not be suitable for any business that required control over debtors and creditors or that needed to produce a balance sheet.

For those businesses that could suffice with handwritten accounts there are better options available such as using computer spreadsheets. Minimal knowledge would be required and the benefits substantial compared with being handwritten.

An accounting package based upon computer spreadsheets is suitable for most small business as it can be no more difficult than maintaining handwritten accounts but in an organised format. The sophistication of the format would be according to the ability of the designer of the accounting solution or the bookkeeping knowledge of the person preparing the accounts.

Accounting software written on computer spreadsheets have advantages in that they can save time in data entry, improve accuracy, can be changed to correct errors, highly visible and provide all the basic bookkeeping needs of a small business. Accounting solutions written on spreadsheets are normally limited in relation to financial control and medium sized businesses that require additional control over debtors and creditors may be more suited to a database accounting software system.

Generally if a business is large enough to employ a full time bookkeeper or accountant then that business potentially has the accounting knowledge and skills within the accounting function to use a database accounting system and achieve the additional financial control elements which become available.

Accounting software that uses a database has the facility to produce regular financial and tax reports, debtors reports and statements, creditors reports and statements, cash flow statements and a set of monthly and final accounting reports such as profit and loss accounts and balance sheets.

The disadvantage of such accounting solutions is that to get the most and best out of the system you also need to understand how the package works and how technically to obtain from it the benefits of increased financial control that are available.

The main priority in choosing any accounting package is to first determine the final requirements you need from that administrative system. If detailed financial control, particularly over individual supplier or client accounts is essential and the business is large enough to employ office based staff including an accountant or full time bookkeeper then a database system may be the appropriate choice.

If the business is smaller and requires detailed accounting records to support the year end financial statements while financial control is already sufficient to be in the hands of the business owner then accounting software based upon spreadsheets would probably be adequate. The degree of adequacy being dependent upon the level of expertise contained and automated within the accounts program.

Handwritten books would be the lowest choice. Adequate for some small businesses but only suitable if a computer based option was impossible.

Payroll Management Software Puts an End to Traditional Accounting Issues

There have been several drawbacks of traditional or manual payroll system; hence, the need of software based solution is dire. The software has numerous features which aid accounting professionals within office greatly.

Accounting tools which are powered by software technologies perfect solution to put an end to all the manual errors those had been affecting the financial progress of an organization. At times, these issues had questioned the reputation of the business enterprises due to the frequency of calculative errors whether they were caused deliberately as a result of favouritism or just humanly mistakes of calculations. It is essential to manage employees’ salary in a glitch-free manner. Hence, it becomes essential to install new age solutions to aid accounting personnel as well as leaving no room for problems related to payroll.

There are varied types of software utilized for managing payroll, yet, your unique business requisites call for customization of the same. In addition to this, you have to make it a point that all the features supported by payroll management software are totally compatible to your corporate pattern. In simple to comprehend terms, you might have policies of compensation, incentives, allowances, deductions or similar factors which other business owner would not necessarily support. Thus, the software you get designed must have particulars with respect to your business in totality. Let us now highlight few of the salient features of this software meant for management of payroll:

Create unlimited users according to the various units of company: It hardly matters whether your company has several branches, units or domains, with the help of HR payroll software, unlimited user range can be defined.

Login manager can determine users along with specified rights: The official who controls the administrative system can determine users and specify rights of accessibility according to the demand of situation. This factor of payroll management system is in turn an enhanced solution which makes sure that none of the unauthorized individual can tamper confidential information.

Tailor-made solution with accurate functionality: It is obvious that if any solution is functional, only then could you make the optimal use out of it. Therefore, HR Software Solutions Private Limited supports tailor-made HR payroll software which is designed by the professionals with rich industrial experience in IT domain. Thus, their dexterity and readily adaptability to distinct business needs enables them to come up with accurate business solutions.

100% automation minimized manual effort: The software constitutes of user-friendly interface which indeed has 100% automation system to manage leave deduction, incentives or related components before actually coming up with the final payroll. Hence, the payroll management software is a revolution in the sphere of accounting which minimizes manual effort. Furthermore, it is a time-saver element that helps officials to accomplish their target efficiently.

Reporting is also focused on effectually: Comprehensive reporting is which you might want your accounting officials to present in accord to payroll. Thus, this software is ideal investment as it has capability to serve the purpose of preparing comprehensive report smoothly.

In a nutshell, it can be summed up that this payroll software is a must add-on to the resources of business entities for attracting appropriate financial solution.

Hr Payroll Software Delhi developed by HR Software Solutions is regarded as one of the best and easy to use software comprising of Payroll management system Delhi both windows and web based modules.

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