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Business Growth

Patti ONeill and Gale Bergado’s System To Turn Upset Clients Into Happy Clients

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I am simultaneously eager while also being slightly horrified that tax season has officially begun. Horrified, simply because the IRS has been significantly behind the 8-ball this year, and I still can’t believe that we’re already halfway through February 2021. EAGER … well, because there are so many new credits available to San Francisco Bay Area business owners this year, and I’m pretty thrilled about the opportunity to save YOU some money on your tax obligations. That said, the newest round of PPP loans have been plagued by delays and confusion, and while there are fantastical rumors of the next round of stimulus … I’ll believe it when I see it. And it might not be as weighted to SMB owners as previous rounds have been. We’ll keep you posted. This has been an interesting year (to say the least). Even in the middle of the intensity of the busy tax filing season, we can occasionally become the target for somebody’s frustration. Over the years, and especially when things are busy and stressful, we’ve had to learn how to best handle matters when a San Mateo client is becoming (for some reason or another) very upset. Again, this is rare — but in some cases, the client displaces their anger towards the IRS and puts it into their interactions with us. (“No, John, we actually aren’t the ones who are sending you all of that audit correspondence. That would be the nice people at the Department of Treasury.”) However, what we’ve discovered is that when we handle it rightly, we can leave upset clients even happier with us than even some of our most “reliable” and happy clients. And I should hasten to add that “John” is a fictional name, and we wouldn’t ever be as rude as what I just typed up there. 🙂 No, we have tried to train our people with an actual plan for handling such matters, so that in the rare instance it does occur, we handle things properly. Patti ONeill and Gale Bergado’s System To Turn Upset Clients Into Happy Clients “Always forgive your enemies; nothing annoys them so much.” -Oscar Wilde In ANY San Francisco Bay Area business it is inevitable that there will be an instance of misplaced expectations between the customer and business. And you can choose to allow these interactions to happen at random, trusting in the emotional competency of your staff … or, well, you can develop procedures that will make things right and do so almost every time. We came across a simple system years ago that I’ll share with you now — because no matter what level of frustration comes forth, this is truly the best way to regain happy clients. It can be summarized by the acronym “HEAR”… 1) Hear the customer and don’t interrupt. You don’t interrupt for two reasons: A. It’s rude to interrupt B. When people are upset they practice what they are going to say. And they practice it from the beginning. If you interrupt, they are going to start all over again and go off script.  So … don’t interrupt. Obviously, if the client is getting loud and unruly you may need to quietly interrupt. But, in almost all cases, don’t. 2) Mirror back (Empathize) with something like: “I can understand why you’re upset.  I would be upset too.” Or, “I’m really sorry that happened to you.” 3) Ask: “What can I do to make this right?” It doesn’t get much easier than that. Often, you won’t even have to ask the question because it’s pretty obvious what needs to be done. What’s most important in this step is that the attitude is right. Empathy is everything! 4) Resolve – Unless the request is absolutely ridiculous, DO IT! What’s so great about this approach (and this has been studied, proven, and established with myriad scholarly studies): Often you leave the San Francisco Bay Area customer even HAPPIER with you than before the problem occurred! Yes, that’s actually a likely scenario because they will appreciate how you bent over backwards to make them happy again. When you put in place a regularized plan, good things happen. We’re here to help. Let me know if you have any questions. Use this:(408) 241-4100  I’m grateful for our partnership and for your referrals. Warmly, Patti ONeill and Gale Bergado (408) 241-4100 ONeill & Bergado Feel free to share this article with a San Francisco Bay Area area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Business Growth

How San Francisco Bay Area Small Businesses Should Handle A Crazy Customer

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We’re keeping our powder dry over here at ONeill & Bergado, as it relates to the “American Rescue Plan” proposed by Biden. There’s plenty of talk about it … but as of yet, nothing has passed. I prefer to live in the world of what *is* — instead of speculation. When something gets passed, I’ll have more to say to my San Mateo small business tax clients. In the meantime … it’s tax time. If you need to get on our calendar, NOW would be a good time to do so:(408) 241-4100 The March 15th deadline for San Francisco Bay Area corps is coming, and while extension is always an option … it would feel great to get things handled. Clean up your 2020 books, and let us dive in on your behalf. Now … last week I wrote to you about some of those struggles, specifically as to when you and your team are dealing with angry customers over some sort of problem. And I gave you a framework for that which involves hearing the customer and making things right. However … sometimes that’s actually not enough because you are dealing with a customer who has completely lost control. (Sadly, I’ve heard from some San Francisco Bay Area business owner clients who deal with a large volume of customers that this kind of behavior has increased over recent years; which I find concerning for our culture.) So, here are some ideas for that particular circumstance… How San Francisco Bay Area Small Businesses Should Handle A Crazy Customer“Being deeply loved by someone gives you strength, while loving someone deeply gives you courage.” – Lao Tzu Last week, I wrote about handling upset customers, and I laid out a simple four-step method: 1) Hear the customer and don’t interrupt.  2) Mirror back (empathize) with something like: “I can understand why you’re upset.  I would be upset too.” Or, “I’m really sorry that happened to you.”3) Ask: “What can I do to make this right?” 4) Resolve – Unless the request is absolutely ridiculous, DO IT! But what happens if the customer in your San Mateo business is completely ridiculous? It starts here: as the owner or general manager of the business you’ll need to decide just how much empowerment you’ll give your staff to resolve an issue. Let’s assume you have 3 levels of personnel in your business — front line, manager, and you. You might give the front line person the authority to give $100 worth of satisfaction (credit, whatever) when the customer isn’t just being ridiculous — and up to a $50 credit even if the request is ridiculous. You might then give the manager the authority to give up to a $300 credit even if the customer is ridiculous — and a $1,000 credit otherwise. Notice that the ridiculous requests still get handled, just … not as generously. Credits over this amount may need your personal approval. You’ll need to determine where these levels are and put them in writing. But just as important as where the levels are, is how everyone is trained to handle the ridiculous customer. If your people think the client is being ridiculous, or the amount is more than they are comfortable with, they should be trained to pleasantly stall for time and refer it to you later with something like, “I’m sorry, I’ll need to talk with my supervisor about this.  I’m sure you’ll be hearing back before noon tomorrow. And if we can’t, I’ll be sure to call you.” Then be absolutely certain to get back to the client before your associate said you would. When you have a PLAN in place, you can handle just about anything in your San Mateo business. No matter how crazy. We’re here to help. Let me know if you have any business tax or financial questions. Use this:(408) 241-4100  I’m grateful for our partnership and for your referrals. Warmly, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado Feel free to share this article with a San Francisco Bay Area area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Business Growth, Business Tax Planning

The New Stimulus Update and Tax Issues for San Francisco Bay Area Filers

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The “American Rescue Plan” has been finalized. And there are things about the new stimulus update our San Francisco Bay Area clients should know. While I normally write weekly, there is information in this strategy note that you need to know about now that might even impact how you proceed in the following days. As of this writing, Congress has agreed — but this is so fresh off the presses that many of my industry colleagues are scrambling, and the research services are still compiling all the data. But I felt it important to get ahead of all of that on your behalf. If you know anyone in San Mateo who needs assistance, we are tracking all of this for our clients and are taking on new clients even now. Feel free to send people our way, and have them use this to get in touch: (408) 241-4100 There is a lot to discuss about the new stimulus update, and I will have more to say early next week, but this is important for you to know about NOW. So let’s dive in… Stimulus Payments (and how they might impact your tax paperwork) These are different from previous stimulus programs: $1,400 dollars per taxpayer and dependent (with significant income limitations). 1) Previously, if you had a child over 16, or an adult dependent, they would not qualify. In this round, you’ll receive a payment for yourself and each dependent — depending on your income. 2) The “phase out” for this is significant and steep. What this means is that in previous rounds, the phase out was much more gradual. The phase out began at the same numbers (75K for individual,150K for joint-filed return, and112,500 for HOH), but they were so gradual that it didn’t significantly impact filing decisions. Now — you will NOT receive these payments if your income is anything over 80K for individuals or 160K for joint. How This Might Impact ~ProfileMarketArea~ Taxpayers NOW (Tax Planning) We want to get you the most out of the new stimulus update as we can. And once the IRS issues you a stimulus payment, it’s yours. TIMING matters, and so might how you file (in certain unusual cases). TIMING: If your 2020 income increased versus 2019 … Congratulations on your income increase … and let’s work on other ways to reduce your tax obligations in the future. If your 2020 income decreased versus 2019 … The new stimulus update has two phases for distributing payments. In phase 1, the IRS will take the data it already has and pay out of that. If you didn’t file a return in 2019 or 2020, you will not get a stimulus. But fret not … in phase 2, there will be a second date on which the IRS will calculate stimulus payments. This will be for those who had an income decrease. That date will be the earlier of 90 days after the tax deadline day (whatever it might be — more on that later), or September 1. So as long as we get your taxes filed on time, you WILL get it. You do not have to FILE YOUR TAXESRIGHT NOW. Don’t let any scammy San Francisco Bay Area tax pros or marketers tell you differently. Fortunately, this issue was (miraculously) considered within the text of the bill. HOW YOU FILE: In certain odd cases, it might actually make sense to file “married filing separately” for your 2020 taxes even though you will (as a result) pay slightly more in taxes — because by doing so, you will be able to receive a greater stimulus payment. It would then outweigh the greater tax you might pay. This will not be the case for most of my clients, and it mostly will concern San Mateo filers whose income hovers around the phaseout thresholds. If this is you, get in touch with us: (408) 241-4100 “When Will I Get My Stimulus?” Unclear, but likely these will begin by the end of this month for those who already are under the thresholds and qualify. For the rest, it will be after the second phase that I already mentioned. Unemployment Now (Partially) Non-Taxable (for most)I already mentioned in a recent post, and it has been confirmed in the the new stimulus update– the first 10,200 of unemployment benefits are untaxable — but only for those whose income is below 150K. This is a very real benefit for many, probably meaning about 1,500 in savings. But the timing on this will take some time because the IRS will have to issue guidance. If you know anyone in San Francisco Bay Area who has unemployment who has already filed their return, it is likely that they might have to amend … but not necessarily. We are here to help if you want to make sure: (408) 241-4100 There are (obviously) many more elements to the new stimulus update, and I will unpack them in the following weeks. There are changes to child tax credits, earned income credits, and more. Look out for my update next week on those items. In the meantime … know that we are in your corner. (And also, extend us grace as we are handling these matters for a variety of clients, many of whom have very difficult circumstances. We are here to serve, and have prepared for these kinds of legislative curveballs … but they are curveballs nonetheless.) Warmly, Patti ONeill and Gale Bergado

Business Growth, Business Tax Planning

What San Francisco Bay Area Business Owners Need to Know About Commercial Real Estate Mortgages

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Does the thought of paying rent to your San Jose area commercial landlord for eternity make you cringe? Do you get a little bit of FOMO when you hear stories about other people building empires with real estate? The decision to purchase your own space from which to operate your San Francisco Bay Area business is a major one. MAJOR. And one of the biggest complexities of that decision has to do with the vagaries of commercial real estate mortgages. Before we get into that, we do have a very time-sensitive notice for San Mateo restaurant owners: THIS WEEK, the SBA opened applications for the Restaurant Revitalization Fund (RRF). This new program provides relief funds for restaurants, bars, and other food and drink establishments that have lost revenue due to the pandemic. To read the SBA program guide, go here. Please share this helpful info with any San Francisco Bay Area restaurant owners you may know, to make them aware of this program. It is expected that the funds allocated to this program will go quickly, so we want to make sure that all San Francisco Bay Area restaurant and bar owners are aware of it. Now, let’s explore how to make your dream of owning your office, store, or shop a reality. What San Francisco Bay Area Business Owners Need to Know About Commercial Real Estate Mortgages“You just can’t beat the person who won’t give up.” – Babe Ruth For many people, the American dream includes a cozy home with a manicured lawn, and our home loan system is merrily set up to make this dream a reality for quite a few people. But for entrepreneurs dreaming of owning their own store, shop, or office location, the dream is a lot murkier. There are quite a few differences between residential mortgages and commercial real estate mortgages, and you need to be sure you fully understand what you’re getting into before taking the plunge into commercial property financing in San Francisco Bay Area. Primary Differences from Residential LoansThe United States has some of the best home loan options in the world. The most common loan type, which you’re probably familiar with, is a 30-year, fixed-rate loan. These residential loans are readily available, have low interest rates, fairly low fees, and carry no prepayment penalties. Commercial real estate mortgages tend to be the polar opposite. Commercial mortgages tend to be much shorter time periods. Five to ten years is a typical loan term. The monthly payment is often calculated based on a 20 or 30 year time period, but the loan itself comes due much sooner. At that time, a balloon payment is required, which means that you must either have the cash to pay off the loan, or you must refinance it. Most business owners end up refinancing into a new loan. But you don’t want to refinance too soon. No, no. Unlike residential mortgages, commercial loans almost always have a prepayment penalty for refinancing too early. For example, a five year loan will typically have a two or three year prepayment penalty. It’s pretty common for a 10-year loan to have a 5-year prepayment penalty. These penalties are pretty stiff, also. A common structure is to have a gradually decreasing percentage of the loan balance as the penalty. For example, a loan with a 5-year prepayment penalty period might charge 5% of the loan balance if you pay it off in the first year, 4% in the second year, 3% in the third year, 2% in the fourth year, and 1% in the fifth year. This is referred to as a step-down prepayment penalty. There are also other methods for assessing this penalty that get pretty complicated. You may be able to avoid prepayment penalties by agreeing to other terms that benefit the bank, such as a floating rate loan. As the name suggests, this is a loan with a variable interest rate. Your mortgage contract may stipulate a min and max interest rate, and the time period in between adjustments. In a low interest rate business environment like we have right now, it can be a difficult decision to choose between fixed and floating rate loans. You’ll also find that interest rates on commercial mortgages will usually be higher than on residential loans. This is because of the government-backed entities, such as Fannie Mae and Freddie Mac, that buy up residential loans. Since this doesn’t exist in the commercial mortgage world, banks must manage their lending risk themselves, and thus they tend to charge higher rates for that risk. Commercial properties are going to require significantly greater down payments than residential loans. While no money down, 3.5% down, and 5% down loan programs are quite common for homes, commercial loans will almost always require a minimum of 20% to 30% down. Lastly, the fees that you’ll pay in obtaining a commercial mortgage might make you shed a few tears. Residential mortgages tend to have total fees in the range of 1% to 2% of the loan amount, whereas commercial mortgages frequently have fees in the range of 3% to 5% of the loan amount. Still craving your own San Mateo office building? Let’s talk about qualifying for this loan… Commercial Mortgage QualificationAs crazy as this may sound, it’s absolutely possible for a person to buy a home with no money down, a 580 credit score, a bankruptcy filing on their record, and even while owing back taxes to the IRS. Such loan programs not only exist but are also promoted and backed by federal agencies. Qualifying for a commercial real estate loan is another beast altogether. Qualification for commercial real estate mortgages is primarily based on the ability of the property to support itself. In other words, banks want to see that the property can generate enough rent to cover the mortgage payment, taxes, insurance, and other expenses, plus have a little extra left over every month. This is far more important than your own personal credit score or personal income. A lender will want to evaluate

Business Growth

5 Helpful Tips for San Francisco Bay Area Businesses To Be More Resilient in Crisis

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The overall economy is on a tear right now, but for some businesses, things don’t look so rosy. By the way, if that is you and your business (not so rosy), there are a multiplicity of grants, tax credits, and very favorable loans available — though doing it properly can be tough to navigate. Let us help you: (408) 241-4100 According to the latest federal estimates, about 200,000 MORE businesses permanently closed last year than would have in a normal year. And I sincerely hope that your business is either back open, will be soon, or never fully shut down in the first place. But regardless of which bucket you fall into, there are a number of “best practices,” which have been put forth by management consultants, business advisors, and those MBA “thought leader” types about howlargebusinesses should be opening back up. So, I thought it would be useful today to distill some of those lessons down into practical tips for small San Francisco Bay Area businesses to become more resilient in crisis. A couple quick reminders first… Now, let’s dive into some tips for getting your San Francisco Bay Area business back up to speed as the events of 2020 start to fade into the rear-view mirror… 5 Helpful Tips for San Francisco Bay Area Businesses To Be More Resilient in Crisis“The future belongs to those who believe in the beauty of their dreams.” – Eleanor Roosevelt As the economy reopens and things begin to return to normal, one thing is clear: Normal ain’t what it was. I cringe every time I hear the phrase “new normal,” so I won’t use that phrase. Oh, drat, I just did. That was the only time, I promise! So, as lockdowns are lifted, vaccines are doled out, and people leave their caves to see sunlight for the first time in a year, what can San Mateo business owners do to not only ease the transition back into business-at-full-speed, but also make your business resilient in crisis? TIP #1 To Be More Resilient in Crisis: Make a Plan You Can Believe In We don’t get into politics around here. We understand that everybody has different opinions on various things, and we respect that. Whatever your personal opinion happens to be about various actions over the past year, what’s been done has been done. That’s just the reality of where we are. Thus, your San Francisco Bay Area business re-opening plan has to take that reality into account. As you re-open your business, expand services, and the like, you need to be comfortable with how you operate. So do your employees and customers. If they don’t feel safe interacting with your business, then employees won’t show up for work, and customers won’t give you business. Be sure to have a rational conversation with your employees about their expectations (and yours) regarding things like disinfecting surfaces, use of PPE (which is tax deductible!), social distancing, and other factors. Everybody should be on the same page, and you can’t get there with your employees if you don’t have the conversation. Most importantly, don’t ignore your customers. Develop an understanding of what YOUR customers will want your business to look and feel like as things return to normal. This doesn’t even necessarily have to be about whether you require customers to wear masks or not. No, this is about bigger picture things, and I want those in San Mateo to be bigger picture thinkers. For example, many consumers have been spoiled by home delivery. This is now a permanent part of the business paradigm. Is this something San Francisco Bay Area customers expect? Can you increase revenue by adding this service if you don’t already have it? Consider the different products and services that you sell. Will some start to sell again faster than others? For example, it’s a great time to be a homebuilder right now because demand is so high. Figure out what will be in highest demand from your customers, and be prepared to meet that demand with extra inventory or expanded service capability. If your business requires you or your employees to physically visit San Mateo job sites, make deliveries, or other on-site services, what are your customer requirements going to be for your staff? Some businesses are mandating that visiting service personnel be vaccinated, for example. You’re going to need to determine how to address this within your own business and with your own staff. TIP #2 To Be More Resilient in Crisis: Shore Up Your Supply Chain Sawmill shutdowns (resulting from a combination of government orders and sick employees) have caused the price of lumber to more than triple. Computer chips (and a current shortage of them) needed to make everything from cars to talking children’s toys have caused shortages of other goods and price spikes. One tiny boat plowing into the sand disrupted the global supply of motorcycle parts. Supply chain disruptions happen all the time. Always have, always will. But as the business norm has shifted in recent years to “just in time” delivery, these little hiccups cause more harm than they used to. Just because you’re a small San Francisco Bay Area business doesn’t mean you’re immune to them. Several of our clients have already shared such stories with us. Here are some quick tips to help ensure the survivability of your supply chain: TIP #3 To Be More Resilient in Crisis: Embrace the Digital Another permanent change to the economy is a greater reliance on all things digital. If you’re a bit of a technophobe, or you know that your business is technologically backwards, it’s time to step up to the plate. There are certainly some big changes such as some jobs now becoming permanent work-from-home situations. If you have jobs like this in your company, you’ve already had to embrace the change. If not, take the time to evaluate which roles can be performed in this manner, and embrace the change. Some employees may need it, plus it can reduce your costs in other areas, like how much office space you need to lease. Certain sales and service items are worth moving online

Business Growth, Business Tax Planning

Expense Reimbursement vs Company Credit Cards: What San Francisco Bay Area Business Owners Need to Decide

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If you’ll forgive us, we’re going to get pretty geeky today. You probably didn’t realize that there are actual pros and cons to expense reimbursement for employees, etc. or using a company cc. Oh my San Jose area readers, we’re going to take you down a little rabbit hole today, yes we are. But first, a quick update on some relief programs we’ve previously discussed. First, the SBA has stopped accepting new PPP applications as most of the funds for the program have been allocated. So, if you didn’t already apply for a PPP loan for your San Jose business in this funding round, you’ll no longer be able to do so. Second, the Restaurant Revitalization Fund (RRF) program that kicked off last Monday is now in full swing. So far, the fund has received almost 200,000 applications from bars, restaurants, bakeries, and similar businesses. In our opinion, this is still a small proportion of those who actually need it. If you run such a business in San Francisco Bay Area, or know somebody that does, funds are available to help with payroll and rent. Funds are on a first come, first serve basis for approved applicants. So, just like applying for PPP loans, timing is of the essence. This is a great program for the right business. To read the SBA program guide on the RRF, go here. And as we mentioned last week, please do forward this email to any San Jose area restaurant owners you may know to make them aware of this program. It is expected that the funds allocated to this program will go quickly, so we want to make sure that all San Francisco Bay Area restaurant and bar owners are aware of it. Now, let’s dive into handling business expenses paid by employees. Expense Reimbursement vs Company Credit Cards: What San Francisco Bay Area Business Owners Need to Decide“The secret of getting ahead is getting started.” – Mark Twain You gotta spend money to make money. All businesses need supplies, materials, and services to help produce their own goods and services. Depending on the nature of your business, your employees may need to make independent purchase decisions on a frequent basis. Empowering your employees to make these purchases on their own can make your business run much more efficiently. After all, do you really need to be involved in the decision to buy a new toner cartridge for the printer? Common expense types your employees may need to pay for include: All of these expenses, and many others, are necessary to complete tasks required to run your San Francisco Bay Area business. The critical question you need to address up front is this: Will you reimburse employees for expenses they pay or provide them a company credit card to pay such expenses? This decision comes with important tax and accounting consequences, and you as the business owner need to know the pros and cons of each method. Time SavingsOn the surface, issuing employees a company credit card may seem to be the better option in terms of saving time. With a credit card there are no expense reports to be completed, no reimbursement checks to be cut. Sounds good, doesn’t it San Mateo friends? But think about this: Do you need to allocate expenses to specific clients? If your employees are, for example, purchasing parts and materials needed to complete a job for a customer, then those credit card charges ultimately need to be assigned to that customer’s account for invoicing. This means somebody has to go through the credit card statements and reconcile them against receipts and job orders. Oops! There went the time savings. If you don’t need to do this for tracking expenses back to specific customers, then a company credit card can certainly save a lot of time. Otherwise, having employees complete expense reports and reimbursing them for business expenses they paid out of pocket may actually be faster and easier for your business. Trust IssuesWhen you provide a company credit or debit card to an employee, you’re placing a significant amount of trust in that person. You need to have faith in your employees that they won’t go on a wild Amazon shopping spree. If this is a concern, running a reimbursement program might be the better way to go. We’d say this is particularly true if you happen to have a fair amount of employee turnover, or if you operate multiple locations inside and outside of San Francisco Bay Area wherein you don’t necessarily know each and every employee. As your business grows, you won’t have direct connection with every single team member, which can exacerbate trust issues. Use Tax AuditsAs more people have worked from home over the last year and have taken their company credit cards with them, one issue in particular has grown quite a bit larger. This has been compounded by state budget issues, causing states to step up their enforcement efforts in order to collect more revenue. What are we talking about? Use tax. Use tax is a tax you’re supposed to pay when sales tax wasn’t paid on items used in your San Mateo business. If your employees are working from home and order supplies online, for example, those supplies may be being ordered on a website that doesn’t collect and pay sales tax in our state. Thus, you’re supposed to pay the equivalent sales tax in the form of use tax and file a separate tax return for this purpose. The credit card statement that shows the transactions your employee is making can be demanded by the state when they conduct a use tax audit. As they scrutinize purchases that you may not even really be aware of, they’re looking for those online transactions for items used in your business that were shipped in from out of state, and then you may be liable for a use tax bill or, at the very least, have to pay the cost of us to represent you to fight that tax bill. This is a clear downside

Business Growth, Business Tax Planning

5 Tax Planning Tips to Give Your San Francisco Bay Area Business a New Look This Summer

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Before we talk about some tax planning tips to give your business a new look this summer, we first want to say that we hope your Memorial Day weekend was special. Even though this San Francisco Bay Area business owner had some work to do, a quiet office is my friend. In thinking about the spirit of this past weekend, we are reminded of how very grateful we are for our servicemen and women who made the ultimate sacrifice. May all of us live our lives as a reflection of their honor and the gifts we too easily take for granted. Let us never take those freedoms as “automatic.” And as Memorial day also serves to remind us, summer is finally here.But, lest you think we just sip margaritas by the pool all day after tax season… What we really spend a lot of time doing in the summer issitting down with San Jose area business owners to carefully analyze their tax situation — BEFORE the winter strikes and the moves become much more limited. This is called “tax planning,” an essential move to get the maximum tax savings possible. And with what *might* be coming down the pike from Congress, wisdom says it’s time to get your ducks in a row and plan for what lies ahead. If you’re ready for some tax planning tips, let’s chat: Patti (408) 241-4100  Gale 408-775-7800 These sort of issues are what we specialize in worrying all about — so you don’t have to. Because YOU have to keep your head in the bigger picture. Some thoughts for that below… 5 Tax Planning Tips to Give Your San Jose area Business a New Look This Summer“If you think you are too small to be effective, you have never been in the dark with a mosquito.” – Betty Reese Entrepreneurs know that hard work and a great idea don’t guarantee success. Fortunately, most of them also know that failure isn’t final — almost every successful business owner has crashed and burned at least once in their career. One of the best ways to pick yourself and your San Jose business back up off the ground is to take a fresh look at things you “thought” were set in stone. Here are some strategies that could give your business a fresh lease on life this summer… Tax Planning Tip #1: Re-target your market.In the heat of start-up passion, entrepreneurs frequently try to interest too broad a market: “Everyone will want to buy this!” The result: getting lost in the crowd. The more closely you define your market, the more success you’ll experience. Tax Planning Tip #2: Re-examine your price.Price is obviously supremely important. See how you can lower your overhead or cut production costs. Perhaps there’s a new way to package your products, so that your average transaction value can go up? Tax Planning Tip #3: Identify and push your best product.Focus on what works. If your hot product is coffee cups, look for ways to highlight and expand that niche instead of veering into new territory. How about different colors and holders for those cups? Tax Planning Tip #4: Make your marketing materials more memorable. Emphasize the benefits — SPECIFICALLY how features of your product or service will improve business or the quality of life for your customer. And scrutinize your advertising. Using big media is not always the answer, especially when you have narrowed your market. Don’t overlook narrowly-targeted marketing efforts or joint promotions. Tax Planning Tip #5: Keep promoting.Make sure your message sinks in. Find affordable ways to reach your target market, and use these avenues as often as you can. Try social advertising! These are just a few ideas to get you started. There may be longer conversations to be had. And that’s what I’m here for. To getting things done, Patti ONeill and Gale Bergado

Business Growth, Business Tax Planning

Patti ONeill and Gale Bergado’s Three Business Tax Penalties To Avoid When Possible

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With May 17th behind us (though for those in Texas, Louisiana and Oklahama — this was just another day. June 15th is coming at us fast!), we’re turning towards the planning and optimization part of our calendar. But before we leave taxes in the rearview, let’s address an unfortunate reality: as a business owner, you have a greater number of tax reporting obligations than a regular person has. (Of course, you have MANY more tax-savings opportunities as well.) But with those increased obligations comes increased opportunity for things to slip through the cracks, potentially resulting in business tax penalties and interest charges from the IRS. Some of these penalties are straightforward and simple. Others get really complex in how they’re calculated. Of course, your best course of action is to just let us deal with all of this for you. This is, after all, what we do. But just in case there’s any question in your mind about what your filing and payment responsibilities are to the IRS for your business, let’s run through them from the perspective of the business tax penalties that can be assessed if you don’t take care of them. Buckle up, partner. There’s lots in here… Patti ONeill and Gale Bergado’s Three Business Tax Penalties To Avoid When Possible“Tell me and I forget. Teach me and I remember. Involve me and I learn.” – Benjamin Franklin Your San Francisco Bay Area business may have a variety of tax return filing requirements. The exact forms you need to file will depend on the legal structure of your business, whether you have employees or utilize independent contractors, and the dollar amounts of some of the taxes you have to pay. There are over 150 different penalties in the Internal Revenue Code. In this Strategy Note, we’ll cover the most common ones you need to be aware of. Business Tax Penalty #1: Income Tax Return Penalties Just like you need to file a 1040 return each year for your personal income taxes, your San Mateo business has tax return filing requirements, too. If you operate your business as a sole proprietorship, your business tax return is the Schedule C that gets attached to your personal 1040 return. If you don’t pay in enough tax money throughout the year, you may end up owing an Estimated Tax Penalty from your self-employment income. In addition, you could be subject to Failure to File and Failure to Pay penalties, which we’ll go into detail below. If your business operates as a partnership, you must file a Form 1065, Partnership Income Tax Return, each year. If you file this partnership tax return late, you’ll be charged an IRS penalty of $210 for each month it’s late, times the number of partners. This penalty is maxed out after 12 months of being late. So, for example, if your business has four partners, and you file the tax return 14 months late, your penalty would be: $210 x 4 x 12 = $10,080. That’s a big check to write to the IRS for a tax return that normally doesn’t have any taxes due! But wait, there’s more! Since each partner in the partnership is required to receive a Form K-1 from the partnership, reporting their share of income, the IRS imposes additional penalties for failure to provide these K-1 forms. This penalty starts at $280 per K-1, and increases significantly if the requirement to issue the K-1 was “intentionally disregarded.” This intentional disregard is difficult for the IRS to prove, but if they can do so, the maximum penalty against the partnership can be up to $3,392,000. That’s not a typo. The maximum penalty can be over three million dollars. Such penalties are incredibly rare, but they do happen. If your business operates as a subchapter-S corporation, you must file a Form 1120S each year to report the business’ income, expenses, and other information. The same $210 per month penalty applies, multiplied by the number of shareholders of the corporation during the year. In addition, the same $280 penalty can be imposed for not providing the appropriate Form K-1 to shareholders on time. Bottom Line: File these returns on time! There is usually no income tax due on a 1065 or 1120S return, so you should have no concerns about paying a balance due. The issue that most businesses face is that their bookkeeping isn’t up to date to get these returns prepared. We can help you get caught up and get returns filed to avoid these massive penalties. Business Tax Penalty #2: Employment Tax Penalties If you have employees within your San Francisco Bay Area business, then the payroll taxes that you pay to the IRS in relation to those employees are one of the highest enforcement priorities for the government. Over half of all the tax debt owed to the IRS is employment tax debt. These taxes consist of income tax withholding from your employees, plus both halves of Social Security and Medicare taxes. Depending on your total payroll tax liability for each quarter during the previous year, the frequency with which the IRS expects to receive employment tax payments from your business can change. However, the vast majority of small businesses must deposit these taxes on a monthly basis. If your business fails to make the required tax payment, you may be subject to a Failure to Deposit (FTD) penalty. This penalty is pretty stiff, and increases the longer it takes you to pay. The penalty is: In addition to making these routine tax deposits, most businesses also need to file a quarterly tax return to report wages, income tax withholding, and Social Security and Medicare taxes, among other items. If you file this tax return — Form 941 — after the due date, you can also be subject to a Failure to File (FTF) penalty of 5% per month, which caps out at 25%. On top of these two penalties, the IRS will charge you a Failure to Pay (FTP) penalty on top of the FTD and FTF penalties. This penalty will accrue at the rate of: This FTP penalty has a maximum cap of

Business Growth

Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund

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Pretty sure we’ve said this before. We’ll likely say it again, too. If there’s one thing the past year has taught business owners, it’s that the “unexpected” can occur at any time. Managing your San Jose area business during good times is hard enough; rough times make it all the more difficult. To get you through the next rough time — and there will be another one — you need to have contingency plans in place. And one of the best ways to protect yourself from economic calamity is to have cash reserves (aka a business emergency fund). But before we get to that, just a quick reminder that second-quarter estimated tax payments are due June 15. If you operate your business as a sole proprietorship, then you may have an estimated tax payment obligation. Give us a call to discuss this if you haven’t already. Now, let’s talk about that business emergency fund. Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund“Luck is what you have left over after you give 100 percent.” – Langston Coleman Prior to the economic fallout from 2020’s happenings, the typical American small business only had 28 days worth of cash reserves on hand. Meaning, the average small business in this country couldn’t survive for a full month if revenue was suddenly turned off. As a result, Congress had to prop up small businesses through programs such as the EIDL and PPP loans that you’re sick of hearing about by now. As the economy rebounds strongly, it’s a good time to set aside a business emergency fund for your San Jose area business to tide you over during the next period of economic upheaval. This isn’t doom and gloom thinking, it’s simply the reality of the business cycle: There will be another recession at some unknown point in the future. You Need To Know How Much Is EnoughIn many ways, your business emergency fund follow the same rules that your personal emergency fund should. We typically advise both individuals and businesses to maintain an emergency fund equal to at least three months of expenses. These monies should be held in something like a business savings account, business money market account, or other readily accessible, low-risk account. What expenses go into that three-month calculation? Take a look at the income statement that we provide to you, and add up all the recurring expenses for a typical month. Don’t include rare expenses, such as big-ticket repairs, and don’t include sales taxes. But definitely include payroll, payroll taxes, supplies, materials, rent, utilities, fuel, your favorite accountant, and the like. Then, multiply that number by three. This is going to be your initial target. After saving three months of cash reserves, we’ll then going to encourage you to build up to six months of reserves. But we’ll start with the easier goal first. How to Actually Save Up the CashBuilding a business emergency fund starts the exact same way as any other savings process: With action and discipline. Successful companies create documented processes to be used for repeating activities, including how revenue is allocated each month. The biggest tip we can give you is this: Treat your savings goal like any other fixed expense. For example, if the lease on your office is $5,000 per month, then every month you know you need to cough up that $5,000. The same goes with, say, monthly insurance premiums. It’s a fixed expense that you know you need to budget for every month. Treat the amount that you’re going to stick into the reserve fund every month as a similar fixed expense. In fact, we’d suggest taking this a step further and set aside your reserves first. Meaning, at the start of each month, sock away whatever fixed amount. It may take you a while to get there, but by paying your emergency fund first each month, it will prioritize this “expense” item for you and help you build resiliency for your business in the long run. Is it going to take you a while to get there? Yes, it might. As an example, if you have $20,000 per month in base costs to run your San Francisco Bay Area business, your business emergency fund target is $60,000. If you can set aside $5,000 per month, it’s going to take you 12 months to build up your cash reserve. That might sound painful right now, but your business will thank you later. Once you develop this savings habit in your company, an interesting thing will eventually happen: You’ll get by just fine without spending that money every month. When to Call Upon Your ReservesWhile many San Jose companies and small business owners might have already thought the process out this far, the next step in the process is actually the most difficult. You should create a set of rules for when and how you’ll use the cash reserves. This business emergency fund shouldn’t be used for non-emergencies, obviously. By having written criteria for when you’ll use it, you’ll avoid the temptation of dipping into it when you shouldn’t. For example, you might create a written rule that these reserves can only be touched after you’ve done one round of layoffs during a recession. That’s a harsh stance to take, but a necessary one in planning to survive an economic downturn. By taking the time to create and document the process and having the discipline to treat business emergency fund contributions as a fixed expense that’s non-negotiable, a significant amount of liquidity can be put away for emergencies. In some cases, those funds should remain strictly liquid, but in other cases, having them invested in easily liquidated, low-risk investments can help ensure your money continues to work even when it’s in “reserve.” Need some help determining how big your business emergency fund should be? Are you looking for other smart ideas to make your San Jose area business more resilient in the event of future economic uncertainty? Let’s connect, and put together a workable plan for the future of your business: Patti (408) 241-4100 Gale 408-775-7800 To getting things done, Patti ONeill and Gale

Business Growth

How To Digitize Your Business by Patti ONeill and Gale Bergado

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It seems as if the world is getting drenched in tech. It’s literally falling from the sky (we’re looking at you, rocket boosters). Because there is so much technology around us, it can be easy to become numb to it. We can quickly start to view it as just a “thing” that’s always there, rather than taking the time to contemplate how best to use it. In business, technology can help you operate more efficiently. And I like to say that in business, efficiency = profitability. Oh, and you know, I like that. Embracing technology and digitizing various aspects of your San Francisco Bay Area business can be daunting, I get that. But as you’ll see in today’s strategy note, it doesn’t need to be as scary as you think. Let’s leave the paper behind… How To Digitize Your Business by Patti ONeill and Gale Bergado “It’s amazing what you can accomplish if you do not care who gets the credit..” – Harry S. Truman The last 30 years has seen a massive shift in how we interact with technology. Tech used to be a thing that was mostly “in the future”, but now it’s part of all aspects of our lives. From how we communicate to how we make purchases to how our cars work and more, tech is ubiquitous. While most big companies have embraced all things digital, many San Francisco Bay Area small businesses have struggled to keep up with tech. Sound familiar? As a small business, it’s just more difficult to pick and choose what technologies to embrace — not to mention that some things end up being a bigger part of your budget. I get it, since we face the same challenge in our business.Tax preparation software, accounting software, tax planning software — these things are all expensive for us to purchase and keep our staff trained on. But, we use them because they help us do a better job for you. What are the equivalents in your business? What can you digitize to make things better for your clients? While there is no one-size fits all answer, there are certainly general areas to consider for going digital. Garbage In, Garbage Out (GIGO) More than just a classic computer phrase, this is a philosophy about going digital. To understand what you can digitize, you need to view your business as a series of systems. If you haven’t yet taken the time to create systems in your business, this is the first place to start. By analyzing how your business operates and creating processes to do things, you can then look at which of those processes can be digitized. Sure, things like mail, invoices, contracts, and the like can all be scanned to the cloud, for example, but if you’re used to just shoving paperwork in a drawer and sorting it out later, digitizing all that may not make a whole lot of sense. But with an actual system in place, it becomes more about utility, rather than just organization. So, what exactly is “digitizing”? For starters, it could mean becoming a paperless office. This isn’t just about “going green”, but also about saving money and time. One study, by Nucleus Research, found that small businesses that go paperless see a return of more than $8 in cost savings for each $1 they spend on digitization. That adds up in a hurry. Other studies have shown that paper creates more data breach risks than being digital. In large companies, paper records account for nearly ⅔ of all data breaches, according to the US Department of Health and Human Services. Final data point: According to research firm IDC, the time wasted by employees from handling paper leads to an average productivity loss of 21.3%. That’s basically an entire day out of each work week that is unproductive due to the way in which paper actually impedes workflows. OK, so how do you start going paperless? To start with, consider the low-hanging fruit: Where you go from the basics will depend on your industry and line of work. If your business is capable of running with a remote workforce, then you could become a virtual operation and use a variety of digital technologies for communication and project management. The last year has taught us that more people can work remotely than was previously anticipated, with entire companies moving into the cloud and actually saving money on commercial real estate costs in the process. Digital Reporting No, I’m not talking about the new journalism division of your business. Think about all the information that flows through your company. Your bank already provides account information digitally. You make your payroll tax deposits online via EFTPS. You might even renew your business license online, pay your state taxes online, place orders for parts and inventory online. In short, you’re probably doing more digitally than you think. Look back on all the things that you do with data. Sit down with pen and paper — errr, I mean, a Word document — and make a list of all the information streams that you interact with digitally each week or month in the process of running your San Francisco Bay Area business. Then, critically analyze the workflow around that data. Are there bottlenecks caused by doing things in an “analog” fashion? For example, all accounts receivable and accounts payable should run through a software system. Bills that need to get paid are entered into the software, and then never again shall they see the light of paper, if that’s how the bill came in. Then, to track the health of your business, reporting should be done electronically through the software — there’s no need to physically print the data. What about information related to production, deliveries, or sales? There may be industry-specific software you can use, or find a project management or customer relationship management (CRM) software to your liking to handle these tasks for you. These systems can manage this information more efficiently, and help you actually use your data for better

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