Preparing for the Tax Man: Tips for Architects, Engineers, and other small business owners (guest post)
Miss me yet? No, I’m “not dead yet” (for you Monty Python fans). Nor have I fled to Hong Kong (a la Edward Snowden). And no, contrary to rumors, I am not working on a Middle Eastern documentary with Jon Stewart. Ahem. My MIA status was simply due to too much work. Good problem to have, right?
Regular posting will resume next week. In the meantime, since it is, once again, tax time for quarterly filers, I thought this guest post on tax issues particularly appropriate. Even if you don’t file quarterlies, pay attention now to save heart ache at the end of the year!
Looking for a few small-business tax tips? Consider this shortlist to help streamline your process:
1. Proper record-keeping: Year-round record keeping ensures that come tax time, your paperwork will be in order. Make sure that you save all documents relating to deductions in case your business is audited. Because tax credits and deductions change from year-to-year, keeping excellent records allows you to adapt while being able to reference previous years simply by checking your filing.
2. Keep two Acts in mind: Both the Small Business Jobs Act and the Patient Protection and Affordable Care Act (aka “Obamacare”) help you manage your tax burden. The first has over 17 tax provisions that decrease taxes for small businesses, all of which can win your business great savings. The Affordable Care Act allows small businesses to cover 35 percent of the health care premiums that they pay to provide health insurance to employees. In 2014, the amount will increase to 50 percent.
3. Avoid an audit: Audit traps are indicators to the IRS that they need to investigate your business dealings further. Avoid this scenario by keeping the following details straight:
Home Office Deduction rules: Know what qualifies a home office and make sure yours abides by the IRS definition before claiming one. Not all home-based businesses qualify for this deduction.
Properly classify your employees: Independent contractors and employees are not one and the same from an IRS perspective and should not be treated as such. Non-compliance with proper classification is a red flag to the IRS that your business may be attempting to avoid payroll taxes and can result in back taxes and penalties.
Miscellaneous deductions: Be cautious with your deductions, as a large amount of itemized deductions can raise suspicion. Be sure that you have all of your paperwork to support any deductions and claim them in a clear and specific manner.
Business and personal expenses do not mix: While Turbotax encourages freelancers to combine business with pleasure and write off the expenses, the IRS does not welcome this blended method and will scrutinize individuals who combine their business and personal expenses too often. Maintain separate bank accounts for your personal life and business and maintain meticulous records to ensure that your actions do not require further attention.
Whether you have an accountant or do your business taxes yourself, knowing the proper way to file is an excellent policy for a small and growing business. By maintaining clean records and staying aware of IRS policies, you can make the most of business deductions and enjoy a penalty-free tax season.
Chelsea Terris provides online content for Meticulous Plumbing, a family owned company located in Portland, OR. Chelsea is passionate about helping small businesses thrive.
Thanks Chelsea for the tax tips!
Today, we have a guest post by Hayley Spencer, a freelance writer and attorney, on behalf of Martindale.com. She enjoys writing articles on contract law, law careers, and employment agreements.
Got a Job Offer? Now What? Engineers and Architects: Think Before You Sign!
Architects & Engineers are not immune from employment agreements. Those who go to work for a larger companies, especially, may be required to sign a contract of employment. This form may be standard and identical for each employee, or each employee may have a contract with the employer that applies solely to him or her. Alternatively, there may simply be an oral contract about the type of work the employee will perform, benefits to be provided, and bonuses which are applicable. If there is no oral or written form of agreement, the behavior of the professional parties involved can be identified as an implied employment contract. Some relationships may be that of a traditional employer and employee, while others may be set up as some type of an independent contract. Regardless of the specific details, it is always wise to have a qualified attorney review all such agreements before you sign them.
Why Do Engineers and Architects Need Employment Agreements?
Barring terms and policies that are actually illegal, anything and everything can be integrated into these types of agreement. Nonetheless, for engineers and architects, the law provides several safeguards regarding what can and cannot be negotiated upon as terms of employment. Furthermore, due to the gradual decrease in unemployment rates, employers have had to propose contracts for transitory workers loaded with language to safeguard them as much as possible. The sheer volume of potential variation, therefore, makes written contracts wise.
What Should You Consider Before Signing an Employment Agreement?
There are several particularly important regulations and policies of which you should be aware before signing any type of employment agreement.
First, is there a probationary period? Professionals do not just utilize probationary periods to analyze their new recruit’s fit. Setting a probationary time frame enables them to dismiss for purposes that would otherwise be inconsistent or inadequate.
Second, are oral offerings included in the contract? As with any relationship, optimistic forecasts of the future are common at the beginning of a work relationship. Nonetheless, your attorney can guide you through a list of solutions for engineers, architects and other specialists if employers’ pre-employment expressions were created negligently or if promises did not materialize.
What Common Aspects of an Employment Agreement are Generally Acceptable?
A professional confidentiality agreement is a part of a contract wherein the engineer or architect promises never to share any data regarding the details of how the employer’s enterprise is carried out, or of the employer’s confidential procedures, plans, solutions, information or equipment.
Similarly, a non-competition clause generally states that for a specified amount of time following the date the engineer or architect stops working as a part of the company, that person will not become employed by a competing firm or a firm focusing on an identical form of business.
An ownership of inventions clause applies to specialists who create or invent something as part of their work. By agreeing to this type of clause, the worker agrees that anything he or she creates while employed, or during a specified period of time following the contract termination, is treated as the creation or invention of the company and not that of the engineer or architect.
A no extra compensation clause specifies that if the worker becomes some type of executive or manager for the firm, he or she will not be subjected to extra compensation for accomplishing these duties.
Of course, this brief guide will be insufficient to help you navigate all the potential issues involved with these types of employment contracts. Their details can vary widely, so seek out a professional for assistance.
Thank you, Hayley, for your post. North Carolina employees should be aware that unless there is a specific employment contract, you are generally an “at will” employee. That means that you can be fired for any reason or no reason whatsoever, so long as it is not due to your being a member of a protected class (race, religion, sex, etc.). Also, covenants not to compete must be deemed reasonable to be enforceable.
Any questions for Hayley? Please post, below. And, if you haven’t already, please sign up to get email delivery of all posts directly to your mailbox, by going to the sign up form. At the same time, you’ll get the download link to my free white paper on the 7 Critical Mistakes that Design Professionals Make during Contract Negotiation and Execution that Sabotage their Projects & Invite Litigation.
Photo: (c) Aidan Jones via Creative Commons license.
Year-end economic indicators demonstrate that private commercial construction may be increasing in 2012, primarily as demand grows for new projects built in the United States.
According to an article in Businessweek, the Architecture Billings Index held at 52 in December, indicating a modest expansion in the market. The American Institute of Architects said that the commercial and industrial component of the number climbed to 54.1 in December, the highest in 10 months.
The information is confirmed by data from the Census Bureau that shows that spending on lodging, office, commercial and manufacturing buildings grew 8.2 percent in November to $9.2 billion from a year ago. These types of commercial and industrial projects are historically canaries in the mine and are usually the first part of the industry to improve as the economy expands.
Other indicators, including vacancy rates, are also pointing towards recovery. U.S. office vacancies fell in the fourth quarter to 17.3 percent, the lowest since 2009, from 17.4 percent in the prior period and 17.6 percent a year earlier.
The architecture association’s billing index historically has been ahead of improvements in building activity by about nine to 12 months; because this recovery has been so weak, a construction rebound is coming later in the economic cycle, according to leading economists.
What about you– do you think construction is on the upswing? Are clients still shy to pull the trigger on ambitious projects? Share your thoughts on what these numbers mean to you in the comments section, below.
And if you haven’t already, sign up to get your free copy of the white paper, “7 Critical Mistakes that Engineers & Architects Make During Contract Negotiation and Execution that Sabotage their Projects & Invite Litigation”. You can download your copy by going to the form on the right hand side of the blog.
Photo (c) freefoto.com
A fellow blogger sent me this link, which contains a few nuggets of good information. The post title is “Top 30 job sites for commercial construction” and it is a compilation of sites that list construction projects up for bid, construction jobs, and related construction information.
Some of the links are better than others, but you might just find a great go-to database that meets your needs. Check it out!
Photo: (c) Horia Varlan via CC
Today we have a guest post by Joel H. Miles, President of Miles Consulting, Inc., a management consulting firm specializing in the construction industry. Joel has 40 years’ experience in the industry, working in the areas of finance, strategy, operational management, ownership transfer, mergers and acquisitions, valuation, and litigation support.
The construction industry has been one of the hardest hit by the economic turmoil of the last several years. Generally, non-residential construction is experiencing volume levels roughly half of those of 2007. According to Engineering News Record, the level of unemployment in the industry is 16.3% (in May 2011, compared to 7.4% in 2007).
While there have been a number of bankruptcies already among construction firms, as well as suppliers to the industry, in the last two years, there is reason to believe that there could be a significant number of new failures in the next year. One reason is that for a long time after the onset of the recession, contractors were working off the backlogs of uncompleted work acquired during the strong years of 2005-2007. This has merely postponed the day of reckoning. In an industry traditionally known to have overcapacity, the downturn in the overall amount of work will exacerbate this problem, and inevitably lead to a number of firms “leaving” the market, either voluntarily (strategic decision making) or, more likely, involuntarily (bankruptcy or insolvency). There appear to be a number of general building, specialty trade, and civil contractors who are in financial trouble.
A telling statistical indication of trouble for the immediate future is the Carolinas AGC Construction Activity report for the first quarter of 2011. The dollar amount of construction awards for the first quarter, by category of work, with the percentage change from the same quarter of 2010, are as follows:
This means that already-depleted backlogs are getting worse, not better. There will be further financial “dislocations”, bonding companies will probably be taking over work where their surety bond customers are unable to complete on-going projects, and construction litigation will almost certainly increase. This is not a pretty picture, and those who have long predicted that the overcapacity problem will be corrected by a reduction in the number of contractors may finally prove their case.
Those with a vested interest the financial health of the contractors and construction industry suppliers (i.e., owners of on-going projects, banks with outstanding construction loans or other loans to contractors, surety companies, and employees of affected contractors) may be in for a period of uncertainty and those with the ability to mitigate the ensuing damage should make every effort to do so.
As with all periods of major change, opportunities are presented. For the strongest in the industry, the time is right for strategic acquisitions (when valuations certainly are favorable to buyers). For banks and bonding companies, active participation may mitigate losses, as opposed to a reactionary stance after the damage has become unavoidable and large. An industry specialist can help.
Joel and I welcome your thoughts and opinions in the comments section, below.