DIVIDENDS November 2011
Cash On Hand vs. Profit
Cash on hand is specifically, all money, cash and cash equivalents in the business cash registers and safes on the business premises, as opposed to cash in the bank.
Profit is a positive sum after expenses are deducted from income of a business as shown on an income statement; the monetary gain obtained from the use of capital in a transaction; the proceeds from property or investment.
The concept of profit is pretty narrow as it only looks at income and expenses at a certain point in time. Cash on hand is more dynamic as it is concerned with the flow of money in and out of the business and the time the movement of money takes place.
A Win-Win with Employee Reimbursements
Employee reimbursements are truly a win-win situation; reimbursements are not subject to any employment taxes (federal income tax withholding, social security and Medicare) but are deductible.
In order to be non-taxable, there must be a business connection to the expense, there must be adequate accounting within a reasonable time period, and excess reimbursements must be returned within a reasonable time period (reasonable depends upon facts and circumstances.)
In order to be reimbursed or deducted, business expenses must be ordinary, necessary and reasonable.
Examples of qualifying expenses include:
- Transportation, meal or entertainment expenses
- Safety equipment, small tools or supplies
- Uniforms required by employer not suitable for everyday wear
- Required protective clothing
- Dues to professional organizations
- Subscriptions to professional journals
- Certain job hunting expenses
- Certain expenses for the business use of your home
- Computer costs
- Work-related educational expenses
The business driving mileage rate increased to $0.51/mile, up one cent from 2010. For medical travel and moving the allowance is $0.19/mile, up two and a half cents, and for charitable driving the rate is $0.14/mile.
It is critical that you keep all records and receipts that document the time, place and business purpose of each expense
Reimbursement Tips - Get the Most From Your Money
These two tips can save time and headaches when it comes time to deduct or be reimbursed for any expenses - ordinary, necessary and reasonable, of course.
On the receipt, write who you were with and the nature of the expense.
Over time, the ink on receipts will fade. Photocopy receipts to ensure that you are able to read all parts of the receipt when needed for deductions or reimbursements.
Critical Upcoming Deadlines
Dec. 15: C Corporations estimated tax payments due