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File cash transaction reports for your business — on paper or electronically

Does your business receive large amounts of cash or cash equivalents? You may be required to submit forms to the IRS to report these transactions.

Filing requirements

Each person engaged in a trade or business who, in the course of operating, receives more than $10,000 in cash in one transaction, or in two or more related transactions, must file Form 8300. Any transactions conducted in a 24-hour period are considered related transactions. Transactions are also considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.

To complete a Form 8300, you will need personal information about the person making the cash payment, including a Social Security or taxpayer identification number.

You should keep a copy of each Form 8300 for five years from the date you file it, according to the IRS.

Reasons for the reporting

Although many cash transactions are legitimate, the IRS explains that “information reported on (Form 8300) can help stop those who evade taxes, profit from the drug trade, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through the payments reported on Form 8300 and other cash reporting forms.”

What’s considered “cash”

For Form 8300 reporting, cash includes U.S. currency and coins, as well as foreign money. It also includes cash equivalents such as cashier’s checks (sometimes called bank checks), bank drafts, traveler’s checks and money orders.

Money orders and cashier’s checks under $10,000, when used in combination with other forms of cash for a single transaction that exceeds $10,000, are defined as cash for Form 8300 reporting purposes.

Note: Under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports.

E-filing and batch filing

Businesses required to file reports of large cash transactions on Form 8300 should know that in addition to filing on paper, e-filing is an option. The form is due 15 days after a transaction and there’s no charge for the e-file option. Businesses that file electronically get an automatic acknowledgment of receipt when they file.

The IRS also reminds businesses that they can “batch file” their reports, which is especially helpful to those required to file many forms.

Setting up an account

To file Form 8300 electronically, a business must set up an account with FinCEN’s BSA E-Filing System. For more information, interested businesses can also call the BSA E-Filing Help Desk at 866-346-9478 (Monday through Friday from 8 am to 6 pm EST) or email them at BSAEFilingHelp@fincen.gov. Contact us with any questions or for assistance.

© 2020

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Forecasting Financial Results For A Start-Up Business

There’s a bright side to today’s unprecedented market conditions: Agile people may discover opportunities to start new business ventures. Start-ups need a comprehensive business plan, including detailed financial forecasts, to drum up capital from investors and lenders. Entrepreneurs may also use forecasts as yardsticks for evaluating and improving performance over time.

However, forecasting can be challenging for a business with no track record, especially during today’s unprecedented conditions. Here’s an objective approach to developing forecasts based on realistic, market-based assumptions.

Starting point

Revenue is a critical line item in the forecast, because it drives many other accounts, such as direct costs, accounts receivable and inventory. To create a credible estimate of your start-up’s revenue-generating potential, consider the following questions:

  • What’s the size of the potential market?
  • How many competitors are vying for market share? What positioning strategies will the start-up use to compete?
  • How will the start-up price its products and services? Will its prices fall below, match or surpass those of competitors?
  • How will the start-up distribute products or services?
  • How many customers can the start-up support with its existing infrastructure? How will the start-up scale its operations to meet forecasted increases in demand?

It’s generally a good idea to develop multiple revenue scenarios — best, worst and most likely case. Then weight each scenario based on how likely it is to happen.

Costs and investments

Next, the costs directly attributable to producing revenue, such as materials, utilities and labor, need to be identified and quantified. These variable costs are typically stated as a percentage of forecasted revenue.

Some expenses — such as rent, insurance and administrative salaries — are fixed. That is, they remain constant over the short run, though they often have limited capacity. For example, you might need to add office space and headcount once a start-up grows beyond a certain level.

Besides expenses that are recorded on the income statement, start-ups may need working capital to ramp up operations. They may also need to invest in fixed assets, such as equipment, furniture and software. These expenditures are typically capitalized (reported) on the balance sheet and gradually depreciated their useful lives.

Finally, it’s time to focus on the missing puzzle piece: financing. You may need an initial round of capital to acquire (or produce) inventory, purchase essential assets and generate buzz about your new offering. Plus, start-ups often need ongoing access to capital — such as a revolving line of credit — to help fund the cash conversion cycle as the business grows.

Don’t let a competitor beat you to the punch!

Time is of the essence if you want to capitalize on emerging opportunities. So that you can focus on starting the business, we can help create an objective, defensible financial forecast for your start-up and benchmark your forecasted results against other successful businesses. This diligence will help impress prospective investors and lenders — and build value over the long run.

© 2020

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Short Bits

CREDIT SCORE CONCERNS

A recent WalletHub survey reveals that 87 million Americans are worried about their credit scores as a result of the COVID-19 pandemic. To help track changes, potential errors, and identity fraud, Annualcreditreport.com now offers free weekly credit reports rather than free annual reports. Consumers should also know that by reaching out to lenders for help with payment flexibility, their loans will be reported to the credit bureaus as current, according to guidance from the Consumer Financial Protection Bureau.

MILLENNIAL JOB HISTORY

According to the U.S. Bureau of Labor Statistics, Americans born in the early 1980s averaged holding 8.2 jobs over a 14-year span of adulthood. Over half (57%) of those jobs ended in less than a year. Additionally, the study found that women were more likely to obtain a bachelor’s degree than men (29% compared to 22%, respectively).

LONG-DISTANCE MOVES DROP

A recent study from the Joint Center for Housing Studies of Harvard University revealed that long-distance moves have reached an all-time low. Moves crossing state lines accounted for 3.3% of the population in 1990, but have fallen to just 1.5% today. Part of the decline is attributed to the large Millennial demographic aging out of the time of life in which they’re most likely to move. Another deterrent of more frequent moves is housing affordability.

SMALL BUSINESS OUTLOOK

Near-term outlooks for both real sales expectations and economic uncertainty were negative in the National Federation of Independent Business (NFIB) April SB survey. But the survey also revealed that the number of owners expecting better business conditions in the next six months jumped 24 points compared to the previous month.

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Questions and Answers

QUESTION:

I was an unemployed graphic designer, but now I’m working as a freelancer from home. What expenses can I deduct?

ANSWER:

Transitioning from unemployed to self-employed changes the way you file taxes. There are many deductions that could apply to your situation, from home office space, supplies and equipment to retirement contributions and health insurance premiums. It is important to consult a tax specialist and track expenses early on so that you do not overlook any deductions to which you are entitled. You can also refer to the IRS website for tips on how to deduct your small business expenses:
https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

QUESTION:

I live in a condo and my homeowners association (HOA) is imposing a special assessment on residents to fund new roofs. Can I deduct the assessment on my 2020 taxes?

ANSWER:

No. If it is your residence, like any other homeowner, repairs are not tax deductible. However, you can use the assessment as a deduction if you rent out all or part of the property as a landlord, although rentals come with a whole set of different rules. Home improvements that substantially enhance the value or usefulness of the property are deductible, however.

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Identity Protection

With identity theft commonplace, it’s important to understand available options to help safeguard your online information.

FRAUD ALERT

This free alert requires companies to contact you to verify that you want new credit before they approve it. You only need to contact one of the three credit reporting agencies to initiate this alert.

CREDIT FREEZE

A credit freeze will prevent anyone, including you, from opening a new account. You’ll need to ask all three major reporting agencies—Equifax, Experian and TransUnion—for the freeze. Victims of identity theft receive this service for free, but each reporting agency can charge $5 or $10 each time you freeze and unfreeze your credit.

CREDIT LOCK

A credit lock is good for people who have experienced identity theft and don’t plan to open new credit in the near future. Generally, this service will cost a monthly fee charged by each agency and the lock ends when your agreement ends or when you unlock it.

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College Graduates Seeking Jobs

Jobs in gold text.

Graduating in 2020 has been unconventional to say the least. From ending the semester with online coursework to virtual graduation ceremonies, graduates now face a very different economy as they set out to start their careers. Honing job-hunting skills is critical in this environment. Consider these tips to get started:

EXPAND THE SEARCH

Regardless of your major, take a creative approach to your job search and consider companies off the beaten path or those that have grown in recent months, rather than those that are still trying to recover (like travel and hospitality, for instance). Pharmaceuticals, telecommunications, grocery, and online retail are hiring at all levels, including marketing and administration positions. Many job search platforms have created hiring hubs that focus specifically on remote opportunities and in-demand positions. Also consider temporary or contract work to gain experience.

NETWORK ONLINE

Networking is often more effective than simply searching posted jobs. Send private messages via email or LinkedIn to people working at companies you’d like to join. Ask for a coffee date to learn more about their work. Always ask for referrals to others who may be hiring. Stay current by joining professional groups on social media platforms like LinkedIn and maximize the impression you make with your personal profiles.

OPTIMIZE SOCIAL MEDIA

Many hiring managers check applicants’ social media accounts. You can shine by actively using your social media accounts. Always keep your profiles clean. Post relevant content to platforms like Twitter and provide thoughtful commentary on issues in your desired field. Posts serve as a part of your resume and can open the door to new connections and opportunities.

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August 2020 Client Profile

Lori is retired and concerned about the fallout from the pandemic affecting her finances. What steps should she take to help protect her investments?

Start by evaluating your income needs and sources. If you rely heavily on investments for income, but your portfolio took a hit, you may have to reduce your spending and withdrawal rate for a while to prevent having too little in your later years.

On the flip side, if you have been taking required minimum distributions (RMDs), but do not need the income, you can skip it this year, because the CARES Act suspended the RMD requirement for 2020. That would leave you with more money invested and save the taxes you’d have to pay on the distribution amount.

Next, meet with your financial professional to review how recent market volatility has impacted your portfolio. Rebalance the asset allocation if necessary, to align with your risk tolerance, and short- and long-term needs and goals.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.

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Cash Flow Solutions

Computer with Cash Flow tools on screen.

A recent study by U.S. Bank showed that 82% of small business and startup failures were due to cash flow issues. Many times, advance planning can help alleviate these problems. Two impactful solutions include:

INVOICE TRACKING

Automated invoicing tools often make sense for the smallest of companies, because they can help track outstanding invoices effectively. This inexpensive platform can save you a lot of time and help expedite payments with automatic reminders and instant delivery. Record keeping is also easier to manage with everything stored in one online location. You can pull data to compare revenue and expenses or look at client payment trends. When tax season arrives, you’ll be well prepared with information for your tax professional.

FORECASTING

Hire someone to keep accurate books and generate meticulous financial statements and reports, then read them regularly. Monitoring everything from expenses, income, inventory, overhead costs, sales, profit margins, debt reduction and more is critical. With the big picture in focus you will be able to better forecast sales in order to capitalize on them, plan inventory efficiently and target resources.

Finally, build a cash reserve with money saved through increased efficiencies. Having three or more months operating expenses available will help prevent you from running up debt when cash flow is limited.

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Document Management

Begin organizing financial paperwork by understanding how long you need to keep the following records, courtesy of the IRS, but you can also use it as a guide to reduce other financial records:

  • Three years for most records if you have reported all your income.
  • Four years for employment tax records.
  • Six years if you under-report at least 25% of your income.
  • Seven years if you filed a claim for worthless securities or bad debt.
  • Indefinitely for years when you didn’t file a tax return or filed a fraudulent one.

Now, put all of your insurance, investment and legal documents in a safe place and tell loved ones where they can find them.

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End Recovery Chaos

Man at computer with hand on chin.

You may have heard the phrase: “Don’t do something—sit there.” That may be sage advice for small business owners who have been hustling to keep their businesses afloat this year. Taking a day to step back and reevaluate your situation and create an action plan that helps move your business forward in an orderly way could pay off in several ways. Be sure to consider these three areas:

COMMUNICATION

Consistently connect with employees in a way that makes them feel included, valued and safe. Transparency is important for both parties. Keep employees informed of any changes in company plans and ask for feedback on how things are working from their perspective. Not only will your employees feel heard, you may also get some invaluable insights.

FINANCES

More than ever, it’s crucial to track every financial detail. Look at sales trends more frequently to evaluate performance. You may find that you need to shift your focus and offer modified products or services. Even if your business model hasn’t changed, you may have different expenses than usual, like personal protective equipment.

Utilizing the expertise of an accountant is helpful as you reevaluate your business financials. Also ask to explore additional tax deductions to make sure you’re taking advantage of every available opportunity.

PROCESSES

Work with employees to streamline or automate some of your processes. Not only will this free up time, but small business management tools can help you scale growth. Time management trackers can also help you learn the true value of certain projects or customers so you know where your time is best spent and which services produce the most revenue.