6 Tips to Speed up SBA Loan Approval

Last week, the Wall Street Journal reminded small business owners that time is running out to get fee-free SBA loans.

Barring another act of Congress, SBA-backed loans will revert to their pre-Recovery Act status by the end of November or December. November is more than two months away, but given that the SBA loan approval process can take as long as 120 days, applicants had better get cracking, says Dave Mulcahy, the director of the Small Business Development Center at Lamar University in Beaumont, Texas.

The article recommends the following 6 tips to speed up the loan approval process:

• Update your financials
• Tax a preferred lender
• Ensure the lender is the right fit
• Hedge your bets with a backup lender
• Offer more backup with your application
• Get help

AFRs for September

The Applicable Federal Rates (AFRs) for September are as follows:

	Annual	Semiannual	Quarterly	Monthly
Short-term	0.84%	0.84%	0.84%	0.84%
Mid-term	2.87%	2.85%	2.84%	2.83%
Long-term	4.38%	4.33%	4.31%	4.29%

IRS reminder of worker classification issues

The issue of worker classification, meaning the issue of is whether you treat someone as an employee or as an independent contractor, remains a key focus of the IRS. As we've posted here and here, the government is looking to close the tax gap by going after businesses who treat workers as contractors that should really be treated as employees. Last week, the IRS again reminded taxpayers of the need to consider this issue carefully, publishing the following Ten Tips for Business Owners:

1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.

2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.

3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.

4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.

7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

8. Workers can avoid higher tax bills and lost benefits if they know their proper status.

9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.

10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.

For more information on the topic, please visit the FAQ section of our website.

Hobby or business?

Taxpayers often wonder if they can deduct expenses related to an activity that is a mixture of both business and pleasure. If an activity is truly a business, you can deduct a net loss, which can offset income from other sources such as wages or investment income. But if an activity is really a hobby, you cannot deduct a net loss. This is a murky area in the tax law, and one that is closely examined by the IRS. Here's a few key points from the information sheet the IRS published this week titled Eight Important Questions for Hobbyists: Summer is a time many Americans take their fishing poles and gardening tools out of storage. Hobbies – such as woodworking, stamp collecting and scrapbooking – are often done for pleasure, but can result in a profit.

Here are eight questions that will help determine if your activity is a hobby or a business.

1. Is the purpose of your activity to make a profit?
2. Do you participate in your activity just for fun?
3. Do you depend on income from the activity?
4. Have you changed methods of operation to improve profitability?
5. Do you have the knowledge needed to carry on the activity as a successful business?
6. Have you made a profit in similar activities in the past?
7. Does the activity make a profit in some years?
8. Do you expect to make a profit in the future from the appreciation of assets used in the activity?

Good to Great

The Construction Contractor's Digest provides a summary of Jim Collins' best selling book, Good to Great - Why Some Companies Make the Leap and Others Don't. Matt Stevens applies the book's in-depth study and conclusions to construction contractors and their challenges.

Worker's Comp rates likely to rise

From the Sacramento Bee: Get ready for another round of workers' compensation insurance premium increases next January. An influential group controlled by the insurance industry Wednesday recommended a 22.8 percent rate increase. The Workers' Compensation Insurance Rating Bureau of California, in arguing for the higher rates, said rising medical costs are largely the reason. The findings are advisory but generally set the pattern for the industry. Insurers raised rates nearly 10 percent on average in July after the bureau called for a 23.7 percent increase. Rates generally are set twice a year, in January and July. Workers' comp is a hot-button issue for many employers and is often blamed for the state's reputation as an expensive place to do business. Backlash against sky-high premiums prompted the Legislature to overhaul the system twice, in 2003 and 2004, and rates are about 60 percent lower than in 2003. But as rates have begun to creep back up, economic development officials from states such as Nevada have been pointing to workers' comp costs in their efforts to lure companies from California.

Recovery Funded Ultra-Low Interest Loans

Here's an excerpt from a press release yesterday from the Office of the Governor: Public Energy Efficient and Renewable Energy Projects Eligible The California Recovery Task Force today announced that one percent interest loans funded through $25 million in American Recovery and Reinvestment Act (Recovery Act) funds are available for eligible public energy efficient and renewable energy projects in California. Available through the California Energy Commission, the loans will help local jurisdictions stimulate their economies and job growth while investing in energy efficiency and reducing greenhouse gas emissions - all in a cost effective manner. Cities, counties, special districts, public schools, colleges and universities, public care institutions, and public hospitals are eligible to apply. For more information and criteria about low interest loan programs or other energy-related Recovery Act funding and programs go to the California Energy Commission’s Recovery page at http://energy.ca.gov/recovery/index.html

FTB Notices sent to Head of Household Taxpayers

Last week, the Franchise Tax Board (FTB) sent more than 140,000 audit letters to pre-selected individuals who used the “Head of Household” (HOH) filing status on their 2008 state tax returns.

The HOH filing status generally provides a lower tax assessment for unmarried taxpayers who cared for a dependent for over half the year and paid more than half the cost of maintaining their home. Taxpayers who do not qualify will have their tax reassessed at either a single or married-filing-separate filing status. More than 2 million California taxpayers use the HOH filing status each year.

FTB advises taxpayers who received an audit letter to promptly submit a completed questionnaire by using any of these methods:

• Go to FTB’s website ftb.ca.gov and use the HOH Audit Letter Web Response page. Taxpayers will need their Social Security number and the “FTB ID number” listed at the top of the questionnaire letter.
• Fax pages 3 and 4, and any supporting information to 866.223.8195.
• Mail the questionnaire using the pre-addressed envelope provided with the audit letter.

Failure to respond could result in a penalty. FTB provides an HOH “self-test,” answers to many frequently asked questions, and Publication 1540, “CA Head of Household Filing Status,” in English and Spanish on its Website at ftb.ca.gov. Feel free to contact us for additional information.

The ABCs of SBA Lending

This week, the AICPA published "The ABCs of SBA Lending", which discusses the key benefits of recent law changes, reasons to apply for an SBA loan, and the application interview process. Information is also available at the SBA website. Related posts:

• Interest-free SBA Loans
• Obama proposal for small business lending
• Treasury to focus on small business
• Funds for Small Business

IRS Alerts Public to New Identity Theft Scams

The scammers continue to abound, and the IRS warns people to beware of identity theft scams, including these three: (1) fraudsters ask recipients to register their account information with a fake web address to obtain a tax refund or a refund of the Making Work Pay Credit; (2) recipients receive an email claiming to come from the Treasury Department stating that they will receive millions of dollars in recovered funds, lottery winnings, or cash if they provide certain information; or (3) fraudsters modify a genuine Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding) to request personal and financial information. The IRS reminds taxpayers that it does not discuss tax account matters by email, and the only genuine web site is www.irs.gov.

5 Tips to Prepare for Next Year’s Tax Season

Few people enjoy thinking about taxes during the summer. But those who are willing to do a little prep work throughout the year can find tax time a bit less taxing. www.mylifeROI.com recommends these 5 Tips to Prepare for Next Year’s Tax Season:

1) Pretend You’re a Fortune 500 Company. Divide your year into quarters, or if it’s easier to keep track of, seasons:

• Summer – In the summer, you should start organizing your records. As of a few months ago, you actually filed your taxes. And what a relief that was. However, taxes never stop. You should make sure your filing system is intact and ready to go with the new year’s tax records, starting back in January. Make sure that the past 6 months look good and that you are ready to go for the rest of the year.
• Fall – Begin estimating your end of year annual income and taxable income. You should have a pretty good idea of your salary, hourly wages, commissions, bonuses, etc. This obviously won’t be exact, but you should have an approximate. This will let you know if you are behind or ahead on tax payments.
• Winter – The year is practically over (or is over depending on what part of winter it is!). Start preparing to file your taxes. Get all of your documents ready to go. Start gathering the different tax forms you will need. Separate receipts you will need from ones you won’t need.
• Spring – Actually file your taxes, now. If you have kept up to date over the past 3 seasons, you should be able to file relatively quickly! But, it’s not over. Continue on to “summer” and do it again!

2) Practice Good Record Keeping

What kinds of documents should you keep extra secure?

• Birth certificates for you and your family members
• Any wills that have been drafted or published for you (and your spouse)
• Stock and/or bond certificates for large holdings
• Deeds to any real estate holdings

3) Adjust Your Withholding on Your W-4

As discussed in the linked article, you usually want to adjust your w-4 to maximize your earnings, which in tail minimizes your refund or payment. The closer you can get to $0 owed the better.

There are a few thought processes:

• A tax refund is an easy way to save. It is, in a way, a forced savings plan. You probably wouldn’t have the willpower to save the money otherwise, so getting it all in one lump sum may help you apply it towards debt or towards a goal.
• A tax refund means you threw money away. Had you received the money you would have put it in an investment vehicle that pays interest. You gave the government a tax-free loan.

In the end, do what’s right for you.

4) Keep Your Receipts

The linked article will give you a lot more depth. But the gist of the article is that you should keep all important tax records filed for up to 7 years (different times for different kinds of documents).

An overview of a few of the forms you need to keep on file:

• Paycheck stubs
• W-2 Forms/1099 Forms
• Receipts for any items you can deduct if you plan to itemize
• Insurance and medical records
• Charitable records

5) Pay Your Taxes Before You File

You are required to pay your taxes. If you don’t believe me, click on the above link and see the awesome picture of Wesley Snipes.

Adjust your withholdings accordingly and make sure you pay your tax rates all throughout the year.