Basic Training: Fun (or Not) with Finances

Posted on March 3, 2015 in Money & Finance

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The year is winding down, and it’s a good time to get a handle on your finances and tax situation. Here are few questions of a financial and tax nature that hearken back to that age-old advice:

Get an accountant!

Q.: What do I do with credit card finance charges, late fees and over-the-limit fees? And come tax time, how do I treat them?

A.: What do you do with finance charges? PAY THEM! If you are regularly running late in your payments or going over your credit limits, something is seriously wrong with your bookkeeping system. Get someone in pronto to look at your books and help you put a system in place (whether it’s online banking or something else) to avoid running late. You could be doing some serious damage to your personal credit situation. Your accountant will be able to guide you on how to book the charges and the debt.

Q.: Do for-profit owners receive salaries in addition to being able to receive profits generated from the business? I understand that nonprofit owners get salaries but are not able to get profits generated from the business.

A.: Yes, owners of for-profit companies can receive salaries in addition to profit distributions. However, you run into the issue of paying employment taxes depending on whether you take money from the company as salary or as a distribution. Your accountant can guide you regarding best balance for your tax situation. Nonprofit organizations are held to different legal and tax standards and rules, so you are right that they cannot receive the profits: Those are supposed to go to the programs or projects that benefit the group they’re trying to help.

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