How to Efficiently Scale With Capital

rocket growth

The goal of most startup companies is to achieve growth and profitability. However, the process of achieving those goals can be different for every company. The key to long-term success for most startups is to scale with efficiency, but that is not always easy. I recently read an interview by Alan Olsen, CPA and Managing Partner Greenstein, Rogoff, Olsen & Co., LLP a regional CPA firm of Montgomery Kersten, an angel investor and Independent Board member of several startups in Silicon Valley. Alan mentioned to Monty that many well-known startup companies have a reputation of burning through a lot of cash quickly. So Alan asked him how he helps companies scale and balance spending with growing their profits to a break-even point?

Old-Fashioned Approach

Monty said when it comes to scaling he is much more old-fashioned than many of the current crops of big-name startup companies, including Uber, which raised huge amounts of funding and have a massive marketing footprint. He has nothing against what these companies are doing.  But Monty believes in capital efficiency and building huge shareholder value with small injections of financing. “I like the old fashioned way of modest capital, great productivity, profitability; conserve and build cash, after you have to burn it for a short period of time.”

Startup Bubble Time?

Alan asked Monty if we were currently in a startup bubble? “Everybody has their own view. I strongly feel that we are in a startup bubble. We’ve had a record amount of venture capital dumped into companies that aren’t profitable and that aren’t having exits. We have almost no IPOs and many fewer acquisitions and a whole lot of unicorns with no way out for investors. I think there’s a big bubble that’s going to pop here and I think Silicon Valley traffic patterns are going to get easier for our commutes in the next year.”

More IPOs Needed

Alan asked Monty about the fact that there are no exits? “It’s a very, very serious problem because the venture capitalists promise their investors returns that are liquid cash. They have to return cash or public stock to their limited partners, as a way to pay them back and reward them with returns on their capital. If they have no acquisitions of their own investments and they have no IPOs they don’t have any value yet, beyond just the paper stock certificate that they can give back to their limited partners. So there is an imperative to break the log jam in IPOs and to have acquisitions happen more frequently.” Monty foresees a revisiting of the dot.com bust; not so much in dot.com businesses today but in young startups that have raised too little and spent too quickly. Those companies that have too thin a business model and didn’t have a plan to win customers and turn profitable in time could be in trouble. “I think you’re going to see a lot of washouts intentionally let go by the venture capitalists so they can concentrate on the stronger horses they have running in the race.”

To view the whole interview between Monty Kersten and Alan click here

Approaching “Star Trek”-Like Medical Technologies

medical tech

The world of technology is constantly evolving. In fact, new and emerging technologies have become a part of just about every industry in the business world. The medical world is no different and, in fact, many of the most amazing and groundbreaking technologies are created by and for the medical and healthcare industry. Thanks to wonderful new technologies, people are now enjoying some of the greatest medical advantages the world has ever known, many of which were never thought possible just a few years ago. With so many previously far-fetched advancements now becoming a reality, some wonder if we will soon see some fictional sci-fi technologies actually created for medical purposes.

Where Is Healthcare Headed?

I recently watched an interview by Alan Olsen, CPA, Managing Partner Greenstein, Rogoff, Olsen & Co., LLP (GROCO) of Joe DeLuca, CEO and Managing Practice Director of IT Optimizers. Joe founded IP Optimizers in 1998 after he successfully negotiated the sale of his former firm to a large defense contractor. In his current roles at IT Optimizers, Joe oversees internal strategy, planning and operations. On the client side, Joe’s domain expertise includes high-risk projects as well as complex, multi-organizational initiatives. Joe has many professional affiliations, including Fellow, American College of Healthcare Executives; Member, Healthcare Financial Management Association Member; Healthcare Information and Management Systems Society; and Past Affiliate, Institute for the Future. Additionally, Joe received the ACHE Regent’s Senior Leadership Award. He graduated with an MA in Health Services Administration from the University of Wisconsin, Madison and with a BA from Lawrence University in Appleton, Wisconsin.

Game-Changing Medical Technologies

Alan asked Joe how realistic some of these futuristic technologies depicted in Star Trek really were. “I think some parts are very realistic. My roommate in graduate school, who was a medical student, often talked about the “tri-quarter” reading and said that someday we will be able to do sensor based physiology without having to do some form of biometrics around you. We are moving in that way. There are different approaches trying to get at moods or blood pressure using very minimally invasive technologies if invasive at all. So I think some parts of it are moving very well and some parts of it are obviously theoretical.”

Are Genetic Alterations Coming?

Alan also asked about current genetic studies and modifications, if we’re dealing with science fiction or reality in that area? “We are approaching reality on that. The core principles around that have been around for a while, but what we haven’t known is how certain diseases like cancer work as an organism. So once we discover that, then we can do things, which will actually allow your system to be programed to attack the cancer based off of new genetic traits. Either you get a new gene introduced to your system or you do something that would attack the cancer. So that’s going on right now. That research continues and it’s actually moving into therapies for individuals. It’s a long way from going to the drug store and getting something over the counter or even a prescription pill, but it’s actually very real. What is more science fiction in the future is changing our bodies to be different biologically and to basically become a cancer-proof organism.”

To view the full interview with Alan and Joe DeLuca click here

Top Tips to Remember When You Can’t Pay Business Taxes

man paying bills or taxes

Business taxes can be a nightmare for a lot of companies; especially small businesses that are trying to stay afloat. Things can get even tougher when it comes time to file your return and you end up on the wrong side of the ledger. So what should you do if you end up owing more business taxes than can afford?

First, don’t panic. There are steps you can take to get through the process. Then, make sure you still file your taxes on time, even if you know you don’t have the money. By delaying your filing you will be penalized further and owe even more money. So, file on time. If you’re already late, file as soon as possible.

If you can’t pay your debt in full at tax time, you do have some options. You can still make full payments a little late by filing for an extension. If you will have the funds shortly then this is a good option. Keep in mind, though, that you will be charged interest until the full amount is paid off.

You can also agree to the installment method, which allows you to make monthly payments until you pay off the debt in full. This requires a one-time set-up fee but it also allows you to choose the terms and the method of payment. You can also go with the offer in compromise route, which could lower your total bill if the IRS accepts your offer. Lastly, you could request that the IRS delay its collection if you absolutely don’t have the means to pay off your debt. This is called a temporarily delay collection.

Whatever method you choose, it’s always best to pay off whatever you can as soon as you can, and thus avoid further interest and penalties. If you find yourself in this situation, contact GROCO. We’ll help you determine which route is best for you. Call 1-877-CPA-2006, or click here.

 

How Will the New President Change Taxes for the Wealthy?

trump and cruz presidential debate

So which side are you on? Trump, Cruz, Clinton, Sanders, a write-in candidate, or are you still hoping for an optional third-party independent candidate? The fact is, when it comes to taxes, no matter which candidate you vote for, things will likely be changing for the nation’s wealthiest taxpayers in 2017. Whether or not you see those changes as positive or negative depends on which side you fall on.

The Tax Policy Center has released some interesting numbers that give a good picture of how the wealthy will be affected based on who is elected as our country’s next president. The general picture is that if a democrat candidate is chosen then the tax system would become more progressive and the wealthy would be hit harder. On the flip side, if a republican wins the nomination then revenue would be cut and the tax system would take on a more regressive approach.

Here is how the top candidates’ plans would affect the wealthy:

  •  Bernie Sanders – households that fall into the top 0.1 percent would see an increase of more than $3 million in taxes on average in 2017.
  •  Hillary Clinton – households in the same income level would pay an additional $500,000 more.
  •  Ted Cruz – households in the top 0.1 percent would see taxes cut by $2 million.
  •  Donald Trump – households in the highest income level would see taxes cut by $1.3 million.

Whoever the country elects as its next commander in chief, the majority of taxpayers will be affected one way or another. If you count yourself among the nation’s wealthiest, then you will feel that change even more, for better or for worse.

 

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Why Is Almost Half the Country Paying no Federal Income Tax?

One of the biggest tax debates that will likely always exist is whether or not the nation’s wealthy are paying enough in taxes? It’s easy for some to argue that they don’t but there are many factors that must be considered. Plus, all the while, nearly half of the country’s would-be taxpayers don’t actually pay any federal income tax at all. No, they aren’t guilty of tax fraud. These Americans are doing something that is perfectly legal and quite common.

In fact, would you be shocked to know that many of these individuals not only don’t pay any federal income tax, but they still receive a refund? According to the Tax Policy Center, it’s estimated that more than 45 percent of Americans owed no federal income taxes for 2015. According the Center, the number of total households that fall into this category has been increasing each year since 2011.

Some might think many of the wealthiest taxpayers are included among the more than 77 million people who fall into this category in 2015, but they don’t. About half of these households have no taxable income, period, and the other half qualify for enough tax breaks to help offset the amount they would owe. Therefore, these are individuals with a negative tax rate, not the nation’s highest earners.

The wealthiest 20 percent of the country, meanwhile, pays almost 87 percent of the nation’s entire federal tax bill. So, next time you hear someone claim that the wealthy don’t pay enough in taxes, just consider these numbers from the Tax Policy Center.

 

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First Half of Current Fiscal Year a Record-Breaker for U.S. Treasury

It’s been another record year for the federal government so far, which is in the midst of its current fiscal year. At the end of March, when the government reached its halfway point of the 2016 fiscal year, it had already collected $1.48 trillion. One might think that this massive haul would help ease the nation’s federal deficit. However, despite the record intake, the federal government still finds itself in the hole to the tune of $461 billion.

According to the U.S. treasury Department, the amount of taxes it has collected from October 2015 through March of this year has been greater than any other previous fiscal year on record. That even takes adjustment for inflation into consideration.

The Treasury Department counts revenues from several sources, including individual income taxes, unemployment insurance taxes, social insurance and retirement taxes, estate and gift taxes, corporate income taxes, excise taxes and a few other items. Of the $1.48 trillion collected so far this fiscal year, the majority comes from individual income taxes, which accounts for nearly half of the total, at $675 billion.

By way of comparison, last year, the federal government collected a total of $3.24 trillion in taxes for the entire 2015 fiscal year.

 

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Should the IRS File Your Taxes for You?

Imagine a world where you didn’t have to file your own taxes. Of course, you can use an experienced and professional tax and accounting firm like GROCO to do your taxes for you, but what if you didn’t even have to send your tax return information to an accountant? Could that ever really happen? In reality, probably not, but that isn’t stopping one U.S. senator from at least proposing the idea.

Democratic senator, Elizabeth Warren, from Massachusetts, has introduced the tax Filing Simplification Act of 2016. The senator hopes to “simplify and decrease the cost of the tax filing process for millions of American taxpayers.” Her proposal would actually force the IRS to come up with a preparation and filing service that all taxpayers could use for free to directly file their taxes with the government.

The service would require the IRS to fill in all the necessary information, which would come from W-2s and 1099s, which the agency already receives. Each taxpayer would then be responsible to make sure the information was correct. Some taxpayers that have very basic tax situations might not even have to file a return at all.

So what is the likelihood of this ever passing? Chances are the bill will not go anywhere, as Congress has always been reluctant to making these kinds of changes in the past. So while this might not ever become a reality, your tax accounting and tax preparation can still be stress-free. Just contact GROCO for help by clicking here or by calling 1-877-CPA-2006.

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Where Is Your Paycheck Going?

where is your paycheck going

While many of the nation’s high net-worth individuals make much of their income through capital gains, those who still collect a paycheck are doling out of cash to the IRS every time they get paid. The same is true for all taxpayers no matter what income level they fall in. In fact, according to a recent report, American taxpayers will spend more on taxes in 2016 than some of the most basic monthly expenditures combined.

The Tax Foundation recently reported that the nation’s taxpayers would pay $3.3 trillion in federal taxes and an additional $1.6 trillion in state and local taxes this year. That is almost $5 trillion in total taxes paid, which represents 31 percent of the country’s income. To put that into perspective, Americans will pay more in taxes this year than they will for housing, clothing and food combined.

So, next time you wonder where your paycheck is going just look to the federal government, because they own about a third of it. The percentage is even higher for high net-worth individuals. Meantime, the Tax Foundation also reported that Tax Freedom Day fell on April 24 this year, one day earlier than last year. Tax Freedom Day represents how long the country, as a whole, has to work to pay off its tax debt for the entire year. So in a sense, up until this point in the year, the nation’s entire workforce has been working for free.

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Unstable Stock Market Could Hurt State Tax Budgets

While many feel the wealthy should be paying more in taxes, the efforts to enforce this strategy does have some consequences for state budgets. Many of the country’s wealthiest individuals hold the majority of their wealth in stocks. That means when the stock market goes down, so do the tax payments of the wealthy.

In fact, several states are currently feeling a pinch in their budgets thanks to the less than favorable conditions of the market. For example, Connecticut governor Dannel Malloy announced budget cuts late last year blaming the stock market’s lackluster performance. Budget analysts expect at least a $200 million deficit, and the governor has already announced several cutbacks.

Meanwhile, in California, the state is also expecting less revenue from capital gains this year and in New York lawmakers have been told to lower their expectations for the state’s upcoming fiscal year. While not all states are affected by the stock market, those that count many of the wealthiest individuals as residents can be hurt dramatically when the stock market takes a downturn.

Another sign that higher taxes could be hurting states’ budgets is happening in Connecticut where some lawmakers believe that many of the state’s wealthiest individuals are moving to other states in order to avoid Connecticut’s high tax rates on the wealthy. With so many high net earners in the state being affected by new efforts to raise taxes on the wealthy, the state’s budget is taking an even greater hit.

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Florida Looking to Lure More Wealthy Taxpayers

The reports regarding many of the nation’s wealthy packing up and moving to different states in order to avoid the high taxes where they currently reside continue to mount. According to one such report, David Tepper, the president of Appaloosa Management L.P., who is the wealthiest resident of New Jersey, is in fact no longer a resident of New Jersey.

Mr. Teppert reportedly registered to vote in Florida last year and then later in December, he took the necessary legal measures to become a resident of state, thus leaving New Jersey in the dust. Then, in January of this year he followed his own move with a business reorganization that also moved his company to Florida. So, why Florida? The state does not have any income or estate taxes.

While those who know him said taxes where not Mr. Teppert’s only motive for the move, his decision could save him hundred of millions in tax dollars. Florida is fast becoming a relocation haven for many of the nation’s wealthiest individuals and state officials recognize the opportunity and are seizing it.

The state has been actively trying to lure many of the wealthiest individuals that currently live in the Northeast, in places like New York, New Jersey, Connecticut and Massachusetts. It appears those efforts are working, as Mr. Teppert is not the only billionaire to make the transition to Florida in the last few years. From 2012 to 2014 the number of firms that run private pooled vehicles, like hedge funds for example, increased in the state from 37 to 62.

It appears that the sunny weather isn’t the only draw to Florida for many of the country’s wealthiest taxpayers.

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