Archives for November 2013

Over 70% of Employees Missing Out on Pretax Dollars for Medical Expenses

In 2013 fewer Americans than ever put pretax dollars a way to cover future medical expenses but changes in 2014 will make these flexible spending accounts bit more attractive. These new changes will actually give taxpayers a bit of extra time to use their money.

Only 22% of eligible employees used the available flexible spending accounts that large companies were giving, meaning that they missed out on these tax-deferred plans that would have let them set aside up to $2500 to cover any out-of-pocket medical expenses that they might’ve had.  While it’s only a slight dip from 2012 (23%) it still means that over 75% of eligible employees aren’t taking advantage of this excellent program. The reason isn’t that large employers have cut back because they haven’t, it’s just that people aren’t aware of the extra money that these plans would give them or are confused about how they can use this money.

In fact, the low number of people taking it vantage of these plants is due to the fear that they would lose their cash if for some reason they miscalculated their medical expenses. That’s why the fix that was just announced for next year should be helpful because it will more than likely make these people more comfortable with using the plan. The fix, announced by the Treasury Department in October, will allow taxpayers to carry over up to $500 of their plan’s balance into the next year. This puts an end to the “use it or lose it” restrictions that have been in effect for over 30 years, restrictions that meant a person would forfeit their remaining balance if they didn’t use it.

The reason for the change is that, since the Affordable Care Act capped FSA contributions at $2500 (down from $5000), the strict use it or lose it rules became less necessary. It’s expected that low to middle income families will find the plan more appealing in 2014 because it will give them more time to use their money. It will  more than likely also reduce the unnecessary need for year-end spending that most taxpayers perform because they worried about losing their cash.

It was a valid fear, to be sure. The fact is that nearly one in four FSA participants was actually forfeiting their money come  year end, even though some companies were actually giving their employees a 2 ½ month grace period. According to the new treasury rules these companies will, in the future, be allowed to either give the grace period or the carryover but not both. It’s been reported that some companies are actually letting workers take advantage of the carry-over option this year as well.

Of course what that means is that all employees should definitely check with their employer to find out if they will be able to carry over any unused funds into next year starting this year. Since many companies already require their employees to decide this year how much they want to contribute next year it’s believed that many more people will opt to contribute at least up to $500 because they know that they will have a few years to use the funds on medical expenses like copayments, prescriptions and deductibles.

Employees who contribute the maximum of $2500 and are in the 25% tax bracket could actually save themselves over $600 on taxes while people who contribute $500 could save $125. In either case, the new rules will make it much easier for people to take advantage of this program without fear that they’ll lose any money.

5 Mistakes that Successful Entrepreneurs Wish they Would have Avoided

Many successful small business owners and entrepreneurs made mistakes when they started their businesses that they wish they could go back and correct. Spending too much money on unnecessary equipment or on an office that was too big as well as wasting money on advertising that didn’t work are just a few of the mistakes that they made. Today’s blog puts together some of those mistakes so that, instead of making the same, you can learn about them here and do your best to avoid them. Enjoy.

  1. Not knowing or underestimating what your startup costs will be. This is possibly one of the biggest mistakes that new entrepreneurs make in that they underestimate, sometimes greatly, the amount of capital that they’re going to need in order to get their business up and running. Not only that but to keep it running for the first 1 to 3 years, during which time most businesses don’t usually turn a profit. Most entrepreneurs can calculate the set costs like renting a retail or office space, the equipment that they’re going to need, their inventory and all of the legal expenses that are going to face. The problem starts when it comes to things like marketing and promotion, advertising, insurance costs and, in some cases, utilities.
  2. Going “off plan” and losing focus. Many entrepreneurs that we talked to spoke about how they went after every potential source of revenue that they could find but that, at the end of the day, it sidetracked them and prevented them from taking care of their true customers. While reevaluating your original goals every so often is a great idea, making sure that you are headed in the right direction and staying the course is the best way to ensure long-term success.
  3. Failing to delegate responsibilities. When most entrepreneurs start their business it’s just them or maybe one or two more people. What can happen as they grow and become more successful is that they refuse to relinquish control of everything that needs to be done and take on way too much responsibility. The fact is, if your business is doing well and you want to keep doing well, hiring people to take care of the less important but still necessary tasks is not only a good idea, it’s vital to keep the business going and growing. The fact is, if you hire excellent people and train them to do things the way you want them done, your business can only grow bigger and better. One solution to help eliminate this problem is to outsource your inventory management.  Outsourcing your inventory management to a company that can oversee your inventory and shipping will greatly help to increase your efficiency.  This will allow you to ensure that all products are sold at their appropriate price point and shipped efficiently allowing you to focus on the many other aspects of your business.
  4. Hiring the wrong people. Many entrepreneurs get so overwhelmed by the dozens of tasks that they need to accomplish daily that they will gladly take on any available set of hands in order to get a little bit of help. The problem is that many times they hire someone who either lacks the skill or the motivation to help them succeed and, in time, this person can end up being more of a hindrance than a help and add to the problems more than help them. These days there are so many temporary staffing agencies and online solutions that there’s really no need to even hire full-time help so, until it’s actually necessary, you can avoid it and avoid the hassle until you’re ready to hire someone full-time.
  5. Letting your new business take over your life. Many of the entrepreneurs that we talked to lamented that, at least during the first few years, they did nothing but eat, sleep and breathe their business. While this is necessary in order to lay a strong foundation for any business, it can also lead to burnout that can lead to health problems and apathy. The fact is, if you haven’t had a real vacation in more than two or three years and you don’t remember your son’s name, it may be time to step away from your business and get yourself a little bit of R&R. Trust us, your business will still be there when you get back and you’ll have a refreshed attitude and spirit that will be a real boon to the entire operation.

Hopefully the mistakes above are mistakes that you haven’t made yet and, now that you know about them, you can avoid them. (Don’t worry, you’re sure to make a few of your own.) If you have any questions about setting up the finances for your new business venture, please let us know and we’ll help you out in any way that we can with information, advice and solutions.