Accounting and Tax Tips and Information

written by Lauren Bakken, owner of Bakken CPA PC and co-author of the book, One-Income Household

Bakken CPA PC is dedicated to providing timely, professional, personalized service to businesses and individuals.

Tag Archives: accountant

Are Your Children Being Educated About Money?

Three out of ten parents don’t talk to their children about money or have had just one major talk with their children on the subject, according to a U.S. survey conducted for the AICPA. Children tend to be over the age of ten by the time their parents first talk to them about money.

Above talking to children about finances, parents are more likely to talk to them about other important topics, such as:

  • The importance of good manners
  • The benefits of good eating habits
  • The importance of getting good grades
  • The dangers of drugs and alcohol
  • The risks of smoking

It is important to teach children the right lessons about financial responsibility and help them to be prepared for a sound financial future.

Some tips for how to get these ideas across to your children:

  • Start Early. Your children learn at a young age to want items, such as toys, clothes, or games, at this time, you should start teaching them about saving. Have them practice saving by putting away some of their birthday or allowance money to purchase the item they want, give them a goal to meet and once it has been met, let them buy the item. This will teach them the basics of delayed gratification and budgeting for a goal.
  • Speak in Their Terms. Your child may have no interest in learning about the compounding interest on their college savings account; they are more likely to care about money to spend with friends or to buy a toy. Take this opportunity to teach about savings by relating it to something they will care enough about now to listen.
  • Repeat Often. The more often you talk to your children about good financial decisions, the more likely it is to stick with them in their future. At meal times, talk about saving for big purchases, like vacations, and how it might affect budgets.
  • Walk the Talk. As they say, actions speak louder than words. By giving in easily to your children if they make a fuss over a toy at store, then you will have a hard time convincing them that delayed gratification and sticking to a budget is effective.

Teaching your children now about the benefits of saving and budgeting is just as important as teaching them to be polite. These are basic skills that your children will need to know to be a well-rounded adult. For more information on what other financial knowledge you should be passing on to your children, contact your accountant today.

Does Your Elderly Loved One Need a Daily Money Manager?

Has your parent, friend or other family member gotten to a point where they are no longer able to keep their financial affairs in order? A daily money manager is someone who can take on the task that others can no longer complete.

On an ongoing basis, a daily money manager (DMM) reconciles bank accounts, ensures that bills are paid, keeps track of assets, does investment and insurance reviews, coordinates with other financial professionals, and even sorts through the mail. He or she can also consult with the client to answer financial questions and help him or her complete essential tasks.

Demand for these types of services is growing largely due to the rapid aging of the U.S. population. Consider the following:

  • The number of Americans at least 80 years old increased by more than 20% between 2000 and 2010, according to the 2010 U.S. Census. The number of 90-year-olds soared by 30%.
  • The first set of baby boomers turned 65 in 2011. Between 2000 and 2010, the number of people age 60 to 64 jumped more than 55%, while those age 55 to 59 soared 46% these are the two largest increases among all U.S. age groups. As of the 2010 Census, there were slightly more than 40 million people age 65 and over.

In previous generations, children were around to help their parents with these tasks and would not have needed to hire someone. It is much more common practice now to move away from home during adulthood. Sometimes it is not possible to be around daily to help so; the need for a DMM has emerged.

DMMs not only work with elderly clients, but can also fill the needs of very busy professionals. People that may not have the time or interest in dealing with their own personal finances can hire a DMM in the same manner.

This type of professional can give your loved one the attention he or she needs to be sure their financial matters are being handled. To find out more about a DMM contact your accountant today.

Is Your Small Business Ready To Take On Its First Employee?

Whether you just recently started a small business or you have been up and running for a while and working as the entire staff on your own, there may come a time when you decide you need to hire your first employee.  Before you jump into adding new staff to your workforce, be sure you are ready for it, as there are things you need to have set up in order to start off correctly.

If you think you are ready to take that step, here are a few reporting and regulatory issues you should think about:

  1. Determine the General Position: Think about why you are looking to hire a new person. Is this person going to be someone that will manage the store some of the time that you will not be there?  Is he or she going to do administrative tasks to free up some of your time to do billable work? Will the new employee work full or part time? And what are you willing to pay the person for their services? These are few very important questions that you will need to think about before you even begin looking to add a new person to your business.
  2. Obtain an EIN: Before you hire your first employee you must request an Employer Identification Number from the IRS. If your company is a partnership or corporation, you will already have one, but a sole proprietor will most likely need to request one.
  3. Employer Requirements: Check to be sure your soon to be employee can legally work in the United States. Once you’ve hired someone, you must report this to your state employment department. Before you start paying the new hire, get everything ready to easily pay in income tax withholdings to the IRS and state, FICA taxes at the appropriate rates, and unemployment taxes.
  4. Decide on Benefits: Depending on your state and if your new employee is full time or part time, there may be certain requirements on benefits you must offer. Look into rules on benefits, such as sick time and health insurance.
  5. Ask a Professional: Although you can find out a lot about rules on hiring employees online, it does not always cover every detail you may need to know. You should still contact a professional, whether it is an accountant or a payroll service provider, they can guide you to making sure you have all of your bases covered. In the end, it will save you time and help you avoid penalties for non-compliance.

Contact your accountant today to set up an appointment to go over your strategy for your new hire. They know the requirements for the type of business you own as well as for the state your business is in.

Tips for Controlling Your Spending

The most effective way to add financial security to your life for the long term is by taking control of your spending habits, which then allows you to save on a regular basis.

This can be a challenging task and certain options will be more useful for certain people given their finances. Some people may choose to get a feel for how the average American spends their paycheck and use this to guide their spending. You can check this data by going to the Bureau of Labor Statistics’ Consumer Expenditures Survey, and filter the results down to the categories you’d fall into.

The most commonly recommended method is a budget plan, using your actual income and expenses to come up with a realistic amount that you should be able to save. You can have a budget created by either having an accountant prepare one for you, or doing it yourself. To have an accountant prepare your budget, you’d need to submit all of your income and expense habits, as well as your goals and let him or her draft the budget for you.

To prepare a budget yourself, we recommend using either a software program or online site, such as www.Mint.com to guide you through your budget creation. This site can access all of your financial accounts and retrieve your transaction history to set a starting point of what you are already spending so you can see the totals and cut them down as suitable. It will then frequently check back into your accounts and update your actual spending as compared to the budget. From there you can create goals and monitor the goals as you progress throughout the year.

These are simple ways to keep a budget and stay on top of your spending. This can help you to save money over the long and help improve your long term financial prospects.