September 25, 2020
Hi. It’s Todd Lay.
I’m going to explain some really great highlights about what happens when reimbursements end up going bad.
I’m getting those set up for your company. As you all know, we work with high six and seven-figure business owners to help them understand their financials on a regular basis. We handle three areas for them.
First, we make them understand how their financials are. What is actually being read and what it actually means to them. Second is cash management on a regular basis. Lastly, we make plans for growth and taxes along the way.
On another note, I am going to advertise our newly created Facebook group for business owners. It’s called the Business Success Tribe. You can get access to it if you’re a business owner. Just click here.
How Can Reimbursements Go Bad?
Going back, I was recently reminded of a business side contractor that we work with. And one of the things that I remember is, before he came to us, he was working on job sites and everything that he does.
He’s got an S corporation and is on a payroll for his corporation as a construction contractor. And what ended up taking place was that his business, in whichever where he has all of his supplies – roofing materials, construction materials, trailers and things like that, is actually renting space from his personal residence.
And so the previous bookkeeper who didn’t have this set up correctly, essentially ended up setting it up on his payroll. Even though he was supposed to be getting reimbursed for the thousand dollars a month, he wasn’t.
His business was actually going to be paying for the monthly rent and then also for his cell phone at $45 a month. And the way that the bookkeeper ended up setting this up in the past is, there was no set up.
It was not set up as a reimbursement on his payroll. They ended up setting it as an additional component to a salary or additional income.
And so, the side effects of what ended up happening is, he lost money. It’s all because nobody was checking this. The CPA that was involved did not check. Nobody went ahead and looked at it. At least until they came to us as a brand new account.
After that, we started digging in and asking some additional questions. Then, we find out it’s happening because it was set up the way that it was as additional compensation or as part of his salary.
As a result, he ended up having to go ahead and take care of the state, disability, insurance, or taxes that were coming out of it. He also checked things like income tax, state taxes, federal unemployment, state, unemployment, social security and Medicare.
So when you look at the thousand dollars that he was supposed to be getting that was not supposed to be taxed, it was gone.
When you look at, roughly 30 percent of that goes in the way of taxes. He was really only getting about $700 of the thousand that he was supposed to be getting.
This is why I always say you gotta know your numbers. You gotta look at this stuff on a regular basis. And if it’s been a while, have somebody take a look at what you’ve got for a setup. It might be worth it to go ahead and get a second opinion.
Now, if you want to go ahead and reach out, send me a message here. I’m happy to go ahead and take a look. Maybe even have an additional conversation with you and find out a little bit more about what you’ve got going on.
2019 Tax Filing
On another note, we’re already coming up towards the tail part of quarter three of 2020. I can’t believe it. We’re seven or eight days away from October. If you still haven’t filed your 2019 taxes, and you’re still trying to get all that put together, or maybe your books aren’t current, feel free to go ahead and reach out to me.
I’m happy to go ahead and take a look. We’ll see if we can get you current so that you can finally get your taxes filed and move on to the next year.
That’s all for now. I’m looking forward to talking again. Our email and chat box is always open.
Chief Experience Officer
“Know Your Numbers, Know Your Business”