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Don’t be an April Fool – Backup your important files

A new McAfee report estimated that the global financial losses businesses felt in 2018 as a result of cybercrime totaled in the $600 Billion range.  Cybercrime is a very real and present danger to businesses of all sizes but can be even more damaging to smaller businesses that don’t have the capital to weather the storm.  But what if we told you that there was one simple tool you could implement that can reduce the risk of data loss if your system is breached or a device is lost or stolen?

Backing up your data can be the key delineator between a business that survives a data loss and one that doesn’t.

How to Backup Important Files

There are three main ways to achieve an effective backup solution for your business – and the more the merrier.

Backup to the Cloud – This is the process of using the internet to seamlessly back up all the files on your network.  As long as the network is up and connected to the internet, your system will automatically trigger a backup at random intervals throughout the day.  These can also be set to be more of a manual process if you prefer, but the most important thing is that they happen on a regular basis.

Backup to an External Drive – This option is best as a secondary solution, as external devices have the challenge of being portable, and unstable after a time, they do enable you to back up important files without the need of an external connection.

Backing up your files shouldn’t be done in a vacuum.  It is a good idea to consult a backup specialist, the same way you would consult a CPA when filing your taxes.

March 31 is World Backup Day

Every year has a designated backup awareness day, and this year the date falls on March 31.   The purpose is to bring awareness to more users about the very important need to backup your important files and systems and prepare for the unpredictable.  We invite you to learn more at http://www.worldbackupday.com/en/ and take the world backup day pledge “I solemnly swear to backup my important documents and precious memories on March 31st.”  Oh, and friends don’t let friends go without a backup – so set a calendar reminder and tell your friends.

Prepare For The Unpredictable

If 2020 prepared us for anything, it was how to react to an unprecedented event.  This last year felt like living a real-life science fiction event dreamed up by the likes of Stephen King.  But even with the challenges we encountered, the pandemic also showed all of us the strength of the human spirit to overcome significant, unexpected challenges.  Now that we have all lived an event of such a large scale, we have the benefit of hindsight as we move forward.  In order to prepare for potential future events, we first need to look back at what happened.

PwC has taken the time and created a very helpful guide to direct businesses as they go about this process.  We thought we would share with you an overview of their suggestions, especially in regards to crisis recovery plans.

 

Communication is key in all aspects of our lives and businesses, but nowhere else is it as important than it is when navigating a crisis.  Shockingly, PwC reported that only 37% of business leaders felt their board fully understands their company’s crisis management plan.  Now that things are moving back towards a return to normal is the best time to look back on what went right and what went wrong.

7 Questions to Ask Yourself

PwC states that now is the perfect time to take a look at what happened, what worked, and what didn’t.  By doing this exercise, your business will be better prepared, more agile, and better able to navigate the global crises.  Here are 7 questions they recommend you ask throughout the review process.

  1. Did we have the right crisis team in place?  Were the correct executives, internal stakeholders, and outside experts involved?  And is the team you created sustainable if there should be an even longer crisis?
  2. Did we have a crisis plan?  Was it the right one?  Did we even use it and was it effective?
  3. Was there a clear delineation of tasks and decision-making responsibilities?  Did it take too long?  Did we find any bottlenecks that affected our ability to react swiftly to the changing dynamics?
  4. How well did we communicate?  Was the communication timely with the right amount of frequency?  Should we have been more bold – or less?
  5. Did we have all necessary stakeholders involved and did we address all their concerns?
  6. How well did we respond to feedback from both stakeholders and customers?  How well did we understand what our competitors were doing during the crisis and were we able to respond effectively?
  7. When looking at our technology, did you have the right tools and data in place? Is there a technology solution we should have had in place that would have eased the burden of the crisis response?

Are you ready? 

No one likes to plan ahead for a crisis, whether natural or caused by humans.  It’s like planning your funeral before you get sick.  However, chaos thrives when you fail to plan effectively.  As painful and hard as it can be, it is vital to your business’s ability to survive and thrive when once-in-a-lifetime events, such as a global pandemic, arrive.

It’s the most wonderful time of the year

“There are parties for hosting, marshmallows for toasting and caroling out in the snow!” It’s the Most Wonderful Time of the Year by Andy Williams

We all look forward to the holidays, right?  The family, friends, joy in the air.  The decorations and lights and music warm our hearts and give us cherished memories for years to come.

But right after the holiday season….we enter tax season.  The most wonderful time of the year for tax accountants and the IRS….but usually filled with frustration and stress for the rest of us.  But it doesn’t have to be.  We took the time to gather a few simple tips you can use to help turn tax time from the worst part of the year to one of the best (because let’s be honest, it will never be the best).

Tip #1: Make a Smart Plan for Paying Taxes

First and foremost, just like when you create a cybersecurity strategy, you need a plan.  The experts at Merrill Lynch advise that you make a plan as early in the year as you can, as having an idea of what your tax liabilities maybe can help you make a plan as to how you will have the cash available to pay those taxes in the next year.  They recommend that you speak with an accountant if you don’t have one on staff and determine if you are better off paying your taxes quarterly than as a lump sum in April, or if opening a line of “credit” with the IRS is possible.

Tip #2: Determine if you qualify for different tax treatment

The majority of small businesses can deduct 20% off the top of the business income when paying federal taxes – but this is not automatic.  Merrill Lynch explains that this is because the deduction comes in from “pass-through” income where the business owner pays the business taxes from a personal account rather than the business.  Tax law, however, has limits on what and how much can be deducted depending on your field.  In some cases, it may be advantageous for you to consider changing from a pass-through to a c-corporation.  Absolutely discuss these questions with your tax advisor to see what will help you keep the most of your hard-earned money with you.

Tip #3: Make note of the general rules

According to the tax software, Quickbooks, businesses are “generally allowed to deduct the costs of carrying on the trade or business.”   But to be deductible, the IRS requires that the expenses be ordinary and necessary.  What does that mean?  Ordinary means the expense is common across the industry as necessary, and to be necessary, the expense is helpful and appropriate to the success of the business.  Examples listed include salaries, rent, and interest on a company-paid loan.

Tip #4: Make the most out of a down year

2020 was a rough year for all of us.  But for small businesses, there may be a silver lining.  The CARES Act enables some businesses to apply a net operating loss generated in 2018, 2019, or 2020 to income from the past five years for an immediate refund!  You may even have the option to amend past returns and carry losses forward for future tax years, according to Merrill Lynch.  Just another reason to talk to your tax advisor.

Tip #5: Contribute to charities

Not only does contributing to a charity fulfill our social obligations and provide your business some extra goodwill, but it can help to reduce your tax liabilities as well.  The typical deduction is usually equal to the fair market value of the donation.  However, there are some differences for businesses that operate as a pass-through and you should consult a tax specialist to determine how much of a deduction you would qualify for.

Tip #6:  Don’t forget those Christmas Gifts

Did you know that those holiday gifts for your customers and other business connections are deductible?  Well, it is, if they meet certain criteria.  There is a $25 yearly limit per person, but this does not count if the item is a promotional item (i.e. Calendars, pens, cups, etc) and has the taxpayers name clearly and permanently imprinted.

Tip #7:  The Silver Lining of COVID-19?

COVID-19 has affected all areas of our daily lives, both personally and professionally.  Small businesses, especially, have been hit hard by the pandemic but there may be a silver lining in the form of additional tax breaks thanks to the CARES act and the COVID-related payroll tax deferment.  As a part of this act, businesses are able to defer paying their 6.2% share of Social Security payroll taxes incurred between March 27, 2020, and the end of 2020.  However, half of the deferred funds will have to be paid by the end of 2021 with the remaining done by the end of 2022.

Tip #8: Understand how that PPP loan will be taxed

If your business was one that secured one of the highly sought-after Paycheck Protection Program loans through the CARES Act, it is possible that these loans can be forgiven.  But it’s not as simple as it seems.  According to Merrill Lynch, because the IRS has enabled otherwise deductible expenses, like payroll, will not be tax-deductible IF you used a PPP loan to procure the item.  Merrill Lynch advises that for “tax planning purposes, you may have taxable income that you are not expecting” and to consult with your tax advisor to full determine the issues and benefits of this type of deduction.

Tip #9: Evaluate Section 179 for Businesses

We all know that you can deduct the cost of any business-related expenses over several years but did you know that you can actually deduct the full price in the year it was purchased?  Section 179 makes this possible.  You have the option of deducting up to $25,000 of business equipment purchases in that same year, assuming the equipment meets the legal requirements.

Tip #10: Take advantage of larger deductions for equipment

For equipment purchased before December 31, 2020, you could be entitled to a federal tax deduction of up to $1.04 Million US Dollars, according to Merrill Lynch.  The amount does begin to phase out once you exceed spending amounts over $2.5 million, but a bonus is that certain types of equipment purchased and put in use after September 27, 2017 are eligible for a 100% depreciation deduction.  This is up from 50% and can be applied to particular used as well as new equipment.

Tip #11: Accelerate income levels or defer expenses

Does your business operate on a cash basis?  If so, you’ll want to take a close look at this tip.  If your profits were lower in 2020, and you expect them to grow in 2021, you might want to consider accelerating your cash collection or delay deductions by paying staff bonuses in 2021 instead of 2020.  Merrill Lynch says that income in 2020 may be taxed at a lower rate than 2021 income so it might be in your best interest to take advantage of the lower tax rate.

Tip #12:  Take advantage of paid family and medical leave

Thanks to the Tax Cuts and Jobs Act (TCJA) a new credit was implemented for employer-paid family and medical leave.  This allows the business to claim a credit for wages paid to any employee who was on paid leave and starts at 12.5% for 50% salary and goes up to 25% if the employee was paid 100% of their normal salary for up to 12 weeks per year.

Tip #13: Get a Good Accounting System

Want to start off on the right tax foot?  Then you need to keep track of what you are bringing in and what is going out.  Small businesses are able to itemize a lot of expenses, so you need to make sure you have records and receipts for any of the costs you are writing off.  Having an accounting system that is organized and regularly updated will help you get the most out of your taxes going forward.

Tax time can be stressful, but hopefully, these tips will help you navigate the constantly changing world of business taxes.  As always, consult a tax professional to determine the best plan of action for your business to properly get those taxes filed.

Letter from Michael

World Backup day is fast approaching.  Backing up our data is not usually something at the top of our mind, not when we have other important issues to solve throughout the day as a business owner.  But we can’t let it fall behind – we don’t want to be the April fool.  Having effective backup strategies in place can help ensure that instead of having April showers, we will have May flowers.  What is your backup strategy?  If it takes you more than 5 seconds to come up with your answer…you may need to reconsider your backup plan.  If you need help, please feel free to reach out and take advantage of our free backup audit to make sure you are protected if disaster strikes.

Michael Marquardt

619 840-7490

 

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