Dealing with Unemployment...

This is a big issue. Just last year I have helped a lot more than usual new (and old) clients file their income tax returns who are dealing with unemployment. It is not a secret that unemployment had raised to a record high since the great depression. Some states have it harder than others.

As long and taxes were paid by your last employer then you should qualify for unemployment for six months, then you can extend it "if you qualify," and later get the federal extension "if you qualify again". Up to now, nothing new.

But with anything in life, I do suggest you plan for this "unsuspected events". I'm not saying you have to plan to be unemployed, no, what I'm saying is that "you want to have a plan B ready just in case anything happens".

With this troubled times, is best to have a plan A, plan B, plan C, plan D, plan E. and stick to it, meaning hope (and work hard, very hard) for plan A to happen, but in the mean time put in place plan B until you are certain plan A can take place.

People who know me can say: "Enrique is a very pragmatical person," and I'm not going to give you that "hope crap" that a lot of people bought a few years ago. "Things in life do not happen just because your desire for them, or just because you want them, no, things in life do happen when you work for it and make it happen".

Since I don't want to give you real examples from people I know "I do not want to get face a lawsuit," I can tell you what happened to me instead.

I planned for my plan A for about six years, but when things seemed to "ignite" my plan A, then the whole real estate crash began. Back then, I did not have a plan B. plan B came to me just as another choice, whether I was unemployed and I "hope" for plan A to happen, or I take plan B, stick with it until times get better and plan A is in the "cooler" for now

I can also tell you by experience "if you are going to have a plan B, it better be something that you enjoy almost, or "at least you like" as much as you enjoy/like plan A". Some people have called it a second career, and yes I would say that too, but I like the word plan B better. "It's all about choices."

It is not a secret that this whole thing about the record unemployment started with the collapse of real estate and construction, we all know that quite well, and coming from someone who use to work in those two fields at the same time, just when all these started “not fun” let me tell ya.

I have a lot of friends in the construction field, real estate as well, seems to me that the ones in real estate are dealing better with this mess. But not only these two had been affected, but also whole economy. Everywhere you go somebody you know had been touched by a sudden pay cut, personnel reduction, been fired (employers like to call it "laid off") is the same thing!

It is very common to find people who had been laid off. I had changed jobs (my day time stable one) a few times myself. Companies tend to hire over qualified people nowadays just because it is cheaper and because they can (just like purchasing real estate deal) but that itself can be "another blog."

Going to the point. While unemployed I would say the most important thing to do is "choose" to have your taxes taking out of your weekly pay checks; Why? Simple: because you don't want to have "another bill to worry" when the time comes. And chances are "you will be short of money". Who wants to owe money when you have no funds to pay for it? So, ALWAYS pay as you go.

Just keep in mind that Taxes are not (it won't be) wiped out by Bankruptcy.

My second suggestion is to develop another source of income while unemployed, how? I would say start your own business when your unemployment just kicks in, why? Because chances are "you will have a lot of time in your hands while receiving a secure pay check at the end of the week," they're just "2 best things you can do with that time" first choice is "develop an extra income" or "study something that will lead you to what?... another income".

You will get your money back anyways... whether with your business losses (lowers your tax liability and makes you get a bigger refund) "nobody is expected to make a great income when you started a business," or you will get an "education tax break" that should be up to $ 4,000 for 2011 if it stays the same as 2010. Don't wait until the last unemployment extension to make a "realistic decision" PLEASE!

Another choice is to gain experience in something you want to pursue while unemployed. In my case I'm "volunteering" in a job field I want to develop for the near future, but in my specific case I'm doing it while I'm fully employed, "secured pay check at the end of my week," but in my case this is "income: "money earned," unemployment is not income, but still fully taxable.

I'm don't want to be rude, but I have to let it out: "BE REALISTIC ALWAYS". I've seen some people just going deep into some financial mess by just living in "La la land". Some waited until the last minute to make a realistic decision "usually when it is way too late. Or worse by just wasting it".

A piece of advice for you: do not waste this money! Wasting my unemployment money? How? Taking trips, eating out, going shopping, taking pottery classes, etc. I know we all deal with problems in a different way, but just wasting this little money just to keep your mind away of the problem will just make matters worse at the end of the rode.

I've seen people just wasting their secure pay checks while pursuing "nonsense dreams," do you want me to mention some examples? Even though you are dying to hear it and I'm dying to say it, I rather not.

I would like to tell you several more options, but probably it won't make any sense to you, different tax breaks applies differently to different people, and to different situations too.

As a tax person I would say: “as long and you pay your taxes with every pay check, you should be fine.” and ofcourse, DO NOT GIVE UP HOPE, "a realistic hope", I think that alone is the most important.

I wonder, if they are millions of undocumented wokers working "and paying taxes", if they could find a job, kept it, and made a living out of it, SO DO YOU! you have all your papers in order, so go for it!

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Hey Entrepreneurs, lets go in to business…

My 8-to-5 Accounting view, and I love it !

Everybody have their own specific Tax issues and needs, for example “entertainers”, such as being employed for different gigs for a few weeks, days, hrs, and the lucky ones for months or years. In that event I end up with entertainers with a bunch of W-2 forms every year (that’s really good because it means they were employed and paying taxes at the same time) at the other side I have the unlucky ones with no W-2’s or even worse the 1099 forms for independent contractors (that have to pay their own taxes, out of pocket!)

With this economy is not uncommon to find entertainers that have collected unemployment for a few months (or most of the year) there’s nothing wrong with that, as long and you choose to have your taxes deducted every week, and I tell you why in a moment. I have a personal friend who gets acting jobs, always getting pay by job and later collecting unemployment, on and off all the time. For such a no-so-Monday-to-Friday-9-to-5-job it is very important to pay your taxes as you go, little by little, as you to be paid, why? Because later when you are in the low side and you don’t have any steady income (or worse, any money in your pockets!) and you are stuck a bill from Uncle Sam, let me tell you, and he thinks “that’s not cool”.

I have a friend who told me a long time ago that he is always choosing to overpay his taxes so he has money coming back to him, at the beginning it didn’t make any sense to me, why? Why should I pay money to somebody to later claim it? I have tax teachers telling me in the past “just pay what it’s fair, no more”. But later a whole bunch of other issues came along to me (after I mastered the art pf preparing taxes for my clients). Like in life, different people have different goals in life, different approaches and different way to do things. Example of this is paying your taxes and how you do it to fit your life style and your goals as well.

Some people pay as they go, little by little in every check (the best choice if you ask me) some people pay in big chunk at the end of the year (the lucky ones that have the will power to save the money without touching a penny of it, they can do that), others like my friend overpaid little by little with every pay check, and later when tax season came along he received a big income tax refund check. I tried it for the first time. It is really easy by just claiming “cero” instead of claiming “1” for yourself, then you end up paying a few dollars more every time, but later you receive a big check, your money that dear uncle Sam saved for you, and who can you trust more than uncle Sam to store money? Later I also thought that by overpaying taxes during the year you can save yourself from some contingencies like when for some reason you have to pay more taxes, or other events that can trigger something like that, whatever can happen, you overpay taxes and you won’t be bothered later. I’ve tried the first time and I still do it, and never stop doing it I think.

When you have a business that's another totally different animal! It has its own beauty on its own, and the best time to do it (from my own experience) is when you are fully employed, while you pay your taxes, while you have a steady income) why? Because that's an extra income you don't need at the moment that you don't need to have that you are not under pressure to make it happen. If it happens, then it happens. If not, not a big deal, you paid your taxes already.

Anybody can go in to business!!!

When you want to enter to the business world, a whole new world "literally" opens for you, why? Because you are entering the "business expenses world," and like in any game "if you learn how to play your cards right" then you can have a successful business going on while having a little extra something at the end of the month to pay for those extra expenses you always wanted but never could afford.

 If you are fully employed, pay rent, have a computer, that's all it takes for you to start a business, you can just start a hobby and charge money for it, start with your friends, then if you provide services or sell something, the next step is when your friends start referring you to their friends, and they start referring you to their friends, etc, and a chain reaction starts, well, that's just if whatever you do is well enough for people to keep calling you for more. While you're employed you don't have to worry about paying rent, your internet, your car insurance bills on time, and on your spare time you can check your Craig list, eBay, Amazon account and see if you sold those items you decided to sell (if you decided to start a selling business).

The business expenses deductions are those expenses you incurred in order to make that business moment happen. For example, you pay your share of the rent for your bedroom (for that apartment you share with your roommate), let us say $600.00, but you decided to start selling stuff on eBay, then you use half of your closet and/or part of your living room to store your selling items, and that space you use to store your items happens to be 30% of your rental space, then 30% of those $600.00, yes $180.00! are your business expense, then you pay $30.00 for your internet connection and you use 20% to upload and post ads for your sales, then 20% ($6.00) are for your business purposes, then you need people to call you, hey part of your cell phone usage now is for your business, your car payments, your gas, the usage of your oil change, your tires, the utilities, and next thing you know you realized a whole lot of things happened to be used for business purposes and you did not even know it!

And that Dam tax preparer didn't tell you about! Or worse, like happened to me years ago, when I showed up with my shoe box full of paid invoices, that bastard told me as soon as he saw my invoices, words that I will never forget "I won't be organizing and adding up those invoices, so come back when you have those organized, I don't have time for that," I should have said: "OK," then I'll take my business somewhere else, you're fired!. I could have had saved a good chunk of money by claiming my business expenses, or at least itemizing my personal deductions, but thanks to that shady tax preparer that's money I'll never see again because you only have 3 years to amend a tax return, to claim your overpaid money; to claim what is yours.

The next best thing to know is when you are stepping up, firing your past tax preparer and finding one that can help give you excellent tax advice, to make your business born and more important, make it grow, to make it happen!

Don't feel bad if it already happened to you, we all learned from our mistakes; the next best thing you know is that you need a new tax preparer, the one that has the knowledge, experience and the patience to explain you all about these things. A good hint is when your brand new tax preparer is not rushed to pick up your check, and rushing you out into the exit door like happened to me over a decade ago.

My passion? numbers, money, numbers, money... numbers

Once you decided to be in business, what you need to figure out is what is your passion, what makes you happy; I would suggest starting with something easy, and if you have a steady income, then start with something that you would do even for free. Don't put yourself against the wall and just go for something easy.

Getting a business license is not difficult at all. Just walk to your local city hall and apply for one.

Sole Proprietorship

I see an entrepreneur inside everybody and I always try to encourage people to start a business early in life "just like starting a retirement account" 401 (k), Roth, etc. or my favorite... a Roth ira. And yes, you guessed! That's another totally different animal and another entire blog. Yes, I will...

Starting it simple is really important; do not complicate yourself with stuff you don't understand. Start as simple and easy as you can. Do not worry about liability (such as Sole proprietorship, LLC, Partnership, LLP, Corporation, S Corp. Yes, it is another blog) at this point, when you start a business be assertive on what you do, do your homework, take your measurements. If you sell stuff, make sure you have a sales license, if you do massages, make sure your get the right license, you don't want to hurt somebody and not having the proper license; so I suggest doing some research and get your license.

Once you are in business, make sure you start saving all your receipts for everything, even the ones that you don't think would matter "some personal expenses". I have people that tossed away receipts that they thought were not relevant or important, or they just thought they won't be allowable expenses, but later they found out "I told them" these expenses were a part of their business expenses.

Remember, I can help you in business

What I always suggest is to open business account and charge everything for the business from there, pay with ATM or checks ALWAYS. It is easier to keep track with a special bank account than itemized your business expenses from your personal account; and in the case you are in doubt "whether business expenses or not" charge it anyway because its easier to take out "non business" expenses than track and put in the ones that you missed.

I would say this is just the beginning of the "business expense" world, believe me when I say there is a lot, A LOT out there to be self conscious about ALWAYS, but you know what? Do not worry about it for now, that's why you want me around, that's why you ask me questions; for now I can tell you: you don't -need an expensive accounting software to be in business, you do not need to spend your hard earned money to hire a CPA or a lawyer to start a business, just shoot me a quick email or call and we will discuss what best suits your needs for now, and what you need to do in the future to make it happen.

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