Monday, July 2, 2018

Tax Consequences of Crowdfunding

Crowdfunding websites such as Kickstarter, GoFundMe, Indiegogo, and Lending Club have become increasingly popular for both individual fundraising and small business owners looking for start-up capital or funding for creative ventures. The upside is that it's often possible to raise the cash you need but the downside is that the IRS considers that money taxable income. Here's what you need to know.

What is Crowdfunding?
Crowdfunding is the practice of funding a project by gathering online contributions from a large group of backers. Crowdfunding was initially used by musicians, filmmakers, and other creative types to raise small sums of money for projects that were unlikely to turn a profit. Now it is used to fund a variety of projects, events, and products and in some cases, has become an alternative to venture capital.

There are three types of crowdfunding: donation-based, reward-based, and equity-based. Donation-based crowdfunding is when people donate to a cause, project, or event. GoFundMe is the most well-known example of donation-based crowdfunding with pages typically set up by a friend or family member ("the agent") such as to help someone ("the beneficiary") pay for medical expenses, tuition, or natural disaster recovery. Reward-based crowdfunding involves an exchange of goods and services for a monetary donation, whereas, in equity-based crowdfunding, donors receive equity for their contribution.

Are Crowdfunding Donations Taxable?
This is where it can get tricky. As the agent, or person who set up the crowdfunding account, the money goes directly to you; however, you may or may not be the beneficiary of the funds. If you are both the agent and the beneficiary you would be responsible for reporting this income. If you are acting as "the agent", and establish that you are indeed, acting as an agent for a beneficiary who is not yourself, the funds will be taxable to the beneficiary when paid--not to you, the agent. An easy way to circumvent this issue is to make sure when you are setting up a crowdfunding account such as GoFundMe you clearly designate whether you are setting up the campaign for yourself or someone else. 

Again, as noted above, as the beneficiary, all income you receive, regardless of the source, is considered taxable income in the eyes of the IRS--including crowdfunding dollars. However, money donated or pledged without receiving something in return may be considered a "gift." As such the recipient does not pay any tax. Up to $15,000 per year per recipient may be given by the "gift giver." 
Let's look at an example of reward-based crowdfunding. Say you develop a prototype for a product that looks promising. You run a Kickstarter campaign to raise additional funding, setting a goal of $15,000 and offer a small gift in the form of a t-shirt, cup with a logo or a bumper sticker to your donors. Your campaign is more successful than you anticipated it would be and you raise $35,000--more than twice your goal. 

Taxable sale. Because you offered something (a gift or reward) in return for a payment pledge it is considered a sale. As such, it may be subject to sales and use tax. Taxable income. Since you raised $35,000, that amount is considered taxable income. But even if you only raised $15,000 and offered no gift, the $15,000 is still considered taxable income and should be reported as such on your tax return--even though you did not receive a Form 1099-K from a third party payment processor (more about this below). 

Generally, crowdfunding revenues are included in income as long as they are not:
Loans that must be repaid; Capital contributed to an entity in exchange for an equity interest in the entity; or Gifts made out of detached generosity and without any "quid pro quo." However, a voluntary transfer without a "quid pro quo" isn't necessarily a gift for federal income tax purposes.
Income offset by business expenses. You may not owe taxes however, if your crowdfunding campaign is deemed a trade or active business (and not a hobby) your business expenses may offset your tax liability. 

Factors affecting which expenses could be deductible against crowdfunding income include whether the business is a start-up and which accounting method (cash vs. accrual) you use for your funds. For example, if your business is a startup you may qualify for additional tax benefits such as deducting startup costs or applying part or all of the research and development credit against payroll tax liability instead of income tax liability. 

Timing of the crowdfunding campaign, receipt of funds, and when expenses are incurred also affect whether business expenses will offset taxable income in a given tax year. For instance, if your crowdfunding campaign ends in October but the project is delayed until January of the following year it is likely that there will be few business expenses to offset the income received from the crowdfunding campaign since most expenses are incurred during or after project completion. 

How do I Report Funds on my Tax Return?
Typically, companies that issue third-party payment transactions such as Amazon if you use Kickstarter, PayPal if you use Indiegogo, or WePay if you use GoFundMe) are required to report payments that exceed a threshold amount of $20,000 and 200 transactions to the IRS using Form 1099-K, Payment Card and Third Party Network Transactions. The minimum reporting thresholds of greater than $20,000 and more than 200 transactions apply only to payments settled through a third-party network; there is no threshold for payment card transactions.

Form 1099-K includes the gross amount of all reportable payment transactions and is sent to the taxpayer by January 31 if payments were received in the prior calendar year. Include the amount found on your Form 1099-K when figuring your income on your tax return, generally, Schedule C, Profit or Loss from Business for most small business owners. 

Again, tax law is not clear on this when it comes to crowdfunding donations. Some third-party payment processors may deem these donations as gifts and do not issue a 1099-K. This is why it is important to keep good records of transactions relating to your crowdfunding campaign including a screenshot of the crowdfunding campaign (it could be several years before the IRS “catches up†) and documentation of any money transfers.

Don't Get Caught Short. 
If you're thinking of crowdfunding to raise money for your small business or startup or for a personal cause, consult a tax and accounting professional first. Don't make the mistake of using all of your crowdfunding dollars on your project and then discovering you owe tax and have no money with which to pay it. 

Saturday, June 30, 2018

Tax Breaks for Businesses Hiring New Employee

If you're thinking about hiring new employees this year you won't want to miss out on tax breaks available to businesses with employees.



1. Payroll Tax Deduction for Startups
As part of the Research & Development Tax Credit, for tax years 2016 and beyond, startup businesses (C-corps and S-corps) with little to no revenue that qualify for the research and development tax credit can apply the credit against employer-paid Social Security taxes instead of income tax owed. Sole proprietorships, as well as Partnerships, C-corps and S-corps with gross receipts of less than $5 million for the current year and with no gross receipts for the previous year, can take advantage of the credit. Up to $250,000 in payroll costs can be offset by the credit. 

2. Work Opportunity Credit
The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers that hire employees from the following targeted groups of individuals: 
A member of a family that is a Qualified Food Stamp Recipient
A member of a family that is a Qualified Aid to Families with Dependent Children (AFDC) Recipient
Qualified Veterans
Qualified Ex-Felons, Pardoned, Paroled or Work Release Individuals
Vocational Rehabilitation Referrals
Qualified Summer Youths
Qualified Supplemental Security Income (SSI) Recipients
Qualified Individuals living within an Empowerment Zone or Rural Renewal Community
Long Term Family Assistance Recipient (TANF) (formerly known as Welfare to Work)
The tax credit (a maximum of $9,600) is taken as a general business credit (Form 3800, General Business Credit), and is applied against tax liability on business income. It is limited to the amount of the business income tax liability or social security tax owed. Normal carryback and carryforward rules apply. 

For qualified tax-exempt organizations, the credit is limited to the amount of employer social security tax owed on wages paid to all employees for the period the credit is claimed.
Also, an employer must obtain certification that an individual is a member of the targeted group before the employer may claim the credit.

Note: The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) retroactively allows eligible employers to claim the Work Opportunity Tax Credit (WOTC) for all targeted group employee categories that were in effect prior to the enactment of the PATH Act, if the individual began or begins work for the employer after December 31, 2014 and before January 1, 2020. 

For tax-exempt employers, the PATH Act retroactively allows them to claim the WOTC for qualified veterans who begin work for the employer after December 31, 2014, and before January 1, 2020. 

3. Disabled Access Credit
Employers that hire disabled workers might also be able to take advantage of two additional tax credits in addition to the WOTC.
The Disabled Access Credit is a non-refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full-time employees in the previous year; they may take the credit each, and every year they incur access expenditures. Eligible expenditures include amounts paid or incurred to: 

1. Remove barriers that prevent a business from being accessible to or usable by individuals with disabilities;

2. Provide qualified interpreters or other methods of making audio materials available to hearing-impaired individuals;
3. Provide qualified readers, taped texts, and other methods of making visual materials available to individuals with visual impairments; or
4. Acquire or modify equipment or devices for individuals with disabilities. 

4. Architectural Barrier Removal Tax Deduction 
The Architectural Barrier Removal Tax Deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized. Businesses claim the deduction by listing it as a separate expense on their income tax return. 
Businesses may use the Disabled Tax Credit and the Architectural/Transportation Tax Deduction together in the same tax year if the expenses meet the requirements of both sections. To use both, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed.

5. State Tax Credits
Many states use tax credits and deductions as incentives for hiring and job growth. Employers are eligible for these credits and deductions when they create new jobs and hire employees that meet certain requirements. Examples include the New Employment Credit (NEC) in California, the Kentucky Small Business Tax Credit, and Empire Zone Tax Credits in New York. 

6. FICA Tip Tax Credit
Certain food and beverage establishments can claim a credit for social security and Medicare taxes paid or incurred by the employer on certain employees' tips. The credit is part of the general business credit. To take advantage of this credit, restaurant managers must complete IRS Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. If the restaurant employs more than 10 tipped employees, then IRS Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips is used to report tips and determine allocated tips for tipped employees. The credit is not refundable (there must be taxable income); however, unused FICA credits may be carried back one year or carried forward up to 20 years.
Questions?

If you're a business owner and are wondering what tax breaks your business qualifies for, don't hesitate to call the office and speak to a tax and accounting professional you can trust. 

Monday, February 26, 2018

Building Wealth & Creating Legacies




The New American Chamber of Commerce
Will Host Its First Annual Business, Real Estate & Wealth Building Expo

BROOKLYN, February 26, 2018 B The Chamber Coalition ─ New American Chamber of Commerce (NACC), the African-American International Chamber of Commerce (AAICC) and the Hispanic-American International Chamber of Commerce (HAICC) ─ in partnership with Equity Smart Realty, Inc., is proud to present its first Annual Business, Real Estate & Wealth Building Expo on Saturday, March 24, 2018, at the Sheraton Brooklyn Hotel, 228 Duffield Street, Brooklyn, NY 11201. This is the ideal expo for the novice, information‑seeker, prospective and current home owners, realtors, investors, entrepreneurs, marketing and salespersons to come together and learn how to create, keep and build wealth.

The Business, Real Estate & Wealth Building Expo promises to be high‑energy and impactful. The day starts with a Welcome VIP Breakfast B Be Equity Smart, and continues with empowering seminars, an exhibiting hall of businesses and a Real Estate Investing Luncheon.


Brian Figeroux, Esq., Founder of NACC, said that the “American Dream is twofold: that of starting a business and owning a business. At the New American Chamber of Commerce we seek to empower our members and the wider community to achieve those goals. That’s why we are having our Annual Business, Real Estate and Wealth Building Expo. The theme of the Expo is ‘building wealth and creating legacies’ and that is, what it is all about. How are we going to pass wealth from one generation to another? How are we going to create a legacy? By owning a home, starting a business and investing in property.

“According to the NYC Comptroller’s Office, ‘working New Yorkers are struggling through an affordability crisis. With rents rising and wages stagnant, the very people who helped build their communities up…well, they’re being priced out.’ Almost every minority community is facing gentrification. How do we fight gentrification? What is the solution? Answer: Home ownership.

“Also, the unemployment rate is highest in the minority community. How do we bring it down? Again what is the solution? Answer: Starting a business. Guess what? In addition to family and friends, one has a tendency to hire those who look and sound like them.

“Save the date: March 24, 2018. It’s a day of opportunity and we invite all to come. Lao Tzu said that ‘The journey of a thousand miles, begins with one step.’ The path to building wealth and creating legacies starts on Saturday, March 24, 2018. It's that first, one step. Don’t miss it.”

Victoria Falk, CEO of Passionate Travel Inc., Vice-President of AAICC and President of BlackCEO NY Chapter, says
"I highly recommend that if you are in business, or seriously thinking about starting a business, that you attend the upcoming Business, Real Estate &Wealth Building Expo. In this age of high technology, connecting with people on a personal level is still very important.  We do business with people we know, like and trust.  There's no better way to establish initial rapport with a potential client or business partner than at the Expo.  So bring your business cards, a positive attitude, and be prepared to network with other professional people who want to meet you.  Attend the seminars and learn from people who have quality information to help you get to your next level. Personally, I have gained new customers and business partners, as well as valuable information that have put me ahead of my competition at previous expos presented by the New American Chamber of Commerce.  So mark your calendar and prepare to attend the Business, Real Estate & Wealth Building Expo on Saturday, March 24, 2018.”

To learn more or register now, visit www.businessexponyc.com


Tuesday, February 20, 2018

Rachel Roy's 5 Tips for Aspiring Entrepreneurs

Rachel's 5 Tips for Aspiring Entrepreneurs

On January 11th, Rachel Roy sat down with IVY in Los Angeles to discuss her journey toward building a highly successful business, and all of the highs and lows in between. Here are 5 tips that Rachel shared for aspiring entrepreneurs:

1.     Get Started! 
The difference between entrepreneurs and non-entrepreneurs is the start, because a lot of people have great ideas, but not everyone acts on those great ideas. If you find yourself thinking, What do I need to start? When can I break away from my salary job and start working on my own passion? Just know that you have to be brave enough to jump and grow your wings on the way down. You’re never going to have wings before that - it just doesn’t work like that. That’s not how the universe is set up, and it’s not how we’re set up to succeed. There’s so much that is accomplished even in taking that first step to start.

2.     Take Risks
You can do the exact opposite of what the experts recommend, and have it be a great success. In 2008, the economy wasn’t doing very well with retail, and I started a secondary collection. At that point, not a lot of other designers had secondary lines, so I didn’t have very much competition in the market at that price point. When I had to stop my designer line, I still had my secondary line, which has become very successful over the years and if I did not take the risk and launch during a recession I may not have a business now.

3.     Protect Yourself
I worked as a licensing manager for seven years, and I learned that whatever you write in a contract is really all you have to protect you. Even if someone says that they have the same values as you, if you don’t put it into a contract, it’s probably not going to happen. With my first licensing deal, I put into the contract that I wanted to produce product by women in third world countries. It was very important to me to employ women who were seamstresses and who had a really hard time finding work. I wrote that into the contract so I would never have to have that uncomfortable talk with the people who are sustaining my business. I wouldn’t have to beg for it, because we had it in writing.

4.     Take Control of Your Life
Instead of placing blame on your circumstances and on the people around you, you can take control and take ownership of your choices. Every day within every moment, you have a choice. As soon as it can click that we are in charge of our choices, we realize that we are in charge of our happiness. After all, the happiest people are the sexiest people.

5.     Trust Your Gut
My proudest moment came when my first partners no longer wanted to fund my company, but they also didn’t want my company to exist. I could have done what other designers in my situation did – which was absolutely nothing – or I could fight. I went to many successful people in the fashion industry to ask for advice (including Anna Wintour and the president of the CFDA), and the majority told me not go through a lawsuit because I wouldn’t be able to handle it. Ultimately, I didn’t take their advice. They were right – it was horrible, but I went through it and I got my name back. Now for the designers that have creative control, there’s a law that prevents this from happening to any other designer in the future.

When you are ready to realize your American Dream of Entrepreneurship, call the Chamber at 718-722-9217 to schedule an appointment for a FREE Small Business Consultation.

Thursday, August 17, 2017

Selling to the Government

Government Contracts Overview for Small Businesses

Welcome to government contracting! U.S. federal government contracts represent a tremendous sales and revenue opportunity for small businesses because:
  • The U.S. Government is the world’s largest customer
  • It buys all types of products and services in both large and small quantities
  • It is required by law to provide opportunities for small businesses

The Government’s Contracting Objectives

As you might expect, the government is very particular about how it purchases products and services. The general aims of the rules and regulations governing federal contracts are to ensure that:
  • Competition is fair and open—The process of requesting proposals, evaluating bids, and making awards should take place on a level playing field with full visibility. Any business that is qualified to bid should be considered.
  • Products and services are competitively priced. The government seeks pricing that is commensurate with its formidable buying power.
  • The government gets what it pays for—The government protects itself by carefully defining requirements, terms and conditions for all purchases. Contractors must document that they have fulfilled all requirements and met all terms in order to be paid.
  • Both the government and contractors comply with the law—Different rules and regulations apply to different types of purchases. The Federal Acquisition Regulation (FAR) or Defense Acquisition Regulation Supplement (DFARS) apply to most federal agencies. Individual organizations often have their own rules as well.

Types of Government Contractors

There are two broad categories of government contractors:
  • Prime contractors bid on and win contracts directly from government agencies. After award, the prime contractor company is the entity that is legally responsible for all aspects of fulfilling the contract, such as interacting with the government customer, recruiting staff, organizing and managing teams of subcontractors, and meeting all delivery requirements. Both large and small businesses can serve as prime contractors.
  • Subcontractors join prime contractors’ teams, usually to provide a specific capability or product. Subcontracting is an excellent way to enter the government contracting market and to participate in larger-scale opportunities. The advantage of being a “sub,” is that you’ll be responsible only for your area of expertise, not managing the entire contract. You can gain valuable experience (called “past performance”) that will qualify you for future contracts. But note that you’ll be serving two customers:  Your prime contractor will determine what percentage of the work (called “workshare”) and which assignments (called “tasks”) you will receive. You may or may not work directly with the government, at the discretion of your prime.
To serve as either a prime or a sub, you’ll need to qualify as a small business and register as government contractor. Then you can begin to seek both prime contractors and federal agencies as customers

Government Contracting Opportunities for Small Businesses

The government is particularly concerned to include small businesses as it buys goods and services for several reasons:
  • To ensure that large businesses don’t “muscle out” small businesses
  • To gain access to the new ideas small businesses are great at providing
  • To support small businesses as engines of economic development and job creation
  • To offer opportunities to disadvantaged socio-ethnic groups
To these ends, most government agencies “set aside” a percentage of their acquisitions (what they buy) for small and disadvantaged businesses. In some cases, these set-asides might consist of certain types of tasks on larger contracts. In other cases, entire contracts may be designated for small businesses.

Friday, June 2, 2017

Get Ready to Become a Paralegal

Get Ready to Become a Paralegal


There are many reasons why a paralegal career is an excellent choice. A paralegal job provides an opportunity to work in the legal field without spending several years in law school. If you thought paralegals only worked in law offices, think again. The skills you learn in paralegal training are transferable to other business environments. With the right skills, you would be able to work in a number of industries, including law firms, financial offices, law libraries, and state, local and federal governments.

Here are 5 great things about being a paralegal:

1. Rise in Pay
Paralegal compensation has risen steadily in the past decade, despite a bump in the road in the depths of the 2009-2010 recession. As paralegals perform a broader and more complex range of tasks (paralegals even represent clients in court in certain countries and administrative tribunals), paralegal earnings continue to rise. The average paralegal salary hovers at around $50,000 per year but paralegals often make more through bonuses. Overtime hours can also add significant cash to a paralegal's paycheck.

2. Explosive Employment Outlook
The paralegal field is one of the fastest-growing professions on the globe. The U.S. Department of Labor, Bureau of Labor Statistics predicts the employment of paralegals and legal assistants to grow 28 percent between 2008 and 2018, much faster than the average for all occupations. Among the factors driving this growth is client demand for more affordable and more efficient delivery of legal services. Since hourly rates charged by attorneys are typically double or triple the rates of paralegals for the same task, law firm economics mandates the increased use of paralegals to minimize costs. As a result, a paralegal career is one of the hottest non-lawyer jobs in the legal industry.


3. Easy Career Entry
Unlike lawyers who must complete seven years of formal education and pass the bar exam to practice law, you can become a paralegal in as little as a few months of study.

4. Intellectual Challenge
Paralegal work is intellectually challenging and involves a range of high-level skills. The most successful paralegals are problem-solvers and innovative thinkers. Paralegals must become subject matter experts in their specialty area and master legal procedure, research, drafting and other skills. They must stay on top of ever-changing laws and new legal trends and developments while interfacing with attorneys, opposing counsel, vendors, staff members, clients and others. The work is varied and each day brings new challenges.

5. Rising Prestige
As paralegals perform more complex and challenging work, paralegal prestige is rising. Paralegals are no longer simply lawyer's assistants; they are assuming management roles in corporations, leadership roles in law firms and entrepreneurial roles in independent paralegal businesses. Over the years, paralegals have transcended the image of glorified legal secretary to become respected members of the legal team.

Ready to Become a Paralegal?
So what do you think? Does a paralegal career sound like it’s for you? If you want to get started on the path to success as a paralegal, the New American Chamber of Commerce (NACC) can help. We go beyond teaching you about becoming a paralegal, we teach you how to be your own boss with our Small Business Boot Camp: Start Your  Own  Virtual Paralegal Business.

Come and learn about our FREE Paralegal Program on Wednesday, July 6, 2017 at 6pm. We are located at 26 Court Street, Suite 701, Downtown Brooklyn.Visit www.freeparalegal.org to register or call  us at 718-722-9217.

Monday, May 15, 2017

Start Your Own Virtual Paralegal Business



Start Your Own Virtual Paralegal Business


Attorneys are searching for ways to reduce overhead costs.  One way an attorney can reduce overhead costs is to use the services of a freelance paralegal.  Therefore, the demand for contract paralegals is increasing.  As the demand for paralegal services increase, the number of freelance paralegal businesses will rise, naturally.

If you have considered opening your own paralegal business, there are certain details you should consider before opening your door and hanging out a shingle.  As with any small business, a freelance paralegal should begin with a strong foundation for a successful business. The New American Chamber of Commerce (NACC) in partnership with the U.S. Small Business Administration offers a 5-week Small Business Boot Camp: Start Your Own Virtual Paralegal Business. This is a great program that puts you in the right direction. 

Topics include:

·        Formulating the Virtual Paralegal’s Business Plan
·        Developing Your Virtual Paralegal Website & Protect Your Business: Legal Contracts
·        Introduction to Marketing & Social Media for the Virtual Paralegal
·        For the Virtual Paralegal: Small Business Solutions
·        Financing Your Business, Strategic Partnerships & Resources for the Virtual Paralegal


The Program is Free to Paralegal Students from the Chamber’s Paralegal Certificate Program. All others: $149. 

Register here: 
http://mynacc.chambermaster.com/events/details/small-business-boot-camp-start-your-own-virtual-paralegal-business-seminar-series-3159