MDS Funding Newsletter
First Quarter 2006
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In This Issue
* Ten Ideas for Improving
Cash Flow
* Are You Ready for Tax
Season?
* Did You Read about
Factoring in Inc.com Magazine?
* Faced with a Tax Liability
that seems Out of Reach?
* Who Pays Estimated Taxes?
* Estimated Filing Schedule
* More Businesses are Paying
Taxes with Credit Cards
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Are You Ready for Tax
Season?
As tax season reaches its
peak, business owners are not only busy preparing their annual returns but are
faced with the often dreaded quarterly estimated payments due for FICA, sales
tax, estimated income and unemployment. Can't afford to pay your tax bill?
There are a number of
strategies available to fulfill your tax obligations that don't tap into your
working capital.
The first option is to pay
by credit card. As you'll read in the article below, the IRS has entered into
agreements with several companies that will allow you to make your estimated
quarterly as well as your annual tax payments via credit card. This
increasingly popular option has found favor in a society where we pay
everything with plastic -- because it is convenient and in many cases credit
card holders are able to collect frequent flier miles or membership points. But
business owners need to carefully consider this option. With the so-called "convenience fees" of roughly 2.49%
combined with accruing interest, delaying the payment of your tax debts by
putting them on plastic can quickly become a very expensive decision.
An increasingly popular
alternative to paying by credit card is factoring. Some companies who were
initially reluctant to factoring are now recognizing it as a much more viable
and cost-effective alternative to credit cards. Be sure to check out the
article from Inc.com magazine that demonstrates how factoring has become a
mainstream financial tool.
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Did You Read about Factoring
in Inc.com Magazine?
In case you missed the
article in the February 1 issue of Inc.com magazine entitled "Factoring
Gets a Face-Lift (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.inc.com%2Fmagazine%2F20060201%2Fhandson-finance.html),"
Catherine Curan points out
that "Factors are undergoing a customer-friendly makeover" and then
proceeds to tell the story of how a fashion design house is gaining
international attention thanks in part to his business partner relationship
with a Factor.
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Faced with a Tax Liability
that seems Out of Reach?
Consider these options to
reducing and potentially eliminating tax debt:
* Make a Deal: If you find
yourself in
hot water with the IRS,
don't fret. In some
instances, you may have an
opportunity to negotiate
a reduced settlement.
* Meet the IRS halfway: If a
revenue
agent refuses to budge, you
can always request a
meeting with his or her
supervisor (who may have
greater authority to cut a
deal). But if that effort
fails, taxpayers have the
right to request an
appellate conference.
* Evaluate an IRS
Installment Payment
Plan: Don't assume that a
payment plan is your
best option -- there are
definite drawbacks. The
biggest is that interest and
penalties continue to
accrue while you still owe.
Interest is adjusted
quarterly. Combined with
penalties, the rate is often
13% - 15% per year. That's
why more and more
taxpayers are looking to
other payment options like
credit cards and factoring.
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Who Pays Estimated Taxes?
Estimated Tax Payments are
based on income that is
not subject to withholding.
This includes income from
self-employment, interest,
dividends, alimony, rent,
gains from the sale of
assets, prizes and awards. You
also may have to pay
Estimated Taxes if the amount
of income tax being withheld
from your salary,
pension, or other income is
insufficient to meet tax
obligations.
"The problem,"
Linda Durand, a CPA with McQuade
Brennan in
Kay Bell, "is that too
many folks who have a windfall
get excited about the extra
cash and immediately
spend the proceeds without
any thought to the tax
implications. Even people
who earn a steady stream
of money that isn't taxed
upfront put off filing
estimated taxes because they
want or need the cash
now. They figure they'll
make it right with Uncle Sam
come April 15."
"That's not a good
idea," she continues. "If you end
up owing $1,000 or more in
April, the IRS could add
penalties and interest to
your tax bill for not paying
tax on your earnings as you
got them."
Instead, Durand recommends
setting aside a portion
of the new cash for the
taxes. And get ready to
send it in before the spring
tax deadline, she says,
because "the IRS wants
people to be paying their
taxes during the year."
Learn more about Estimated
Taxes by reading Kay
Don't Mess with Taxes (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.dontmesswithtaxes.typepad.com%2F).
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Estimated Filing Schedule
The IRS provides more detail
and the 2006 schedule
for filing estimated taxes.
www.irs.gov/publications/p505 (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.irs.gov%2Fpublications%2Fp505%2Fch02.html%23d0e6371)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
More Businesses are Paying
Taxes with Credit Cards
By Eileen Alt Powell, The
Associated Press
NEW
electronically, they're also
more likely to use credit
and debit cards to pay the
taxes due.
Many consumers find that
using plastic is convenient
and also boosts their
rewards points. On the other
hand, credit experts worry
that the trend suggests
more people are digging
themselves deeper into debt.
The Internal Revenue Service
reported receiving
950,715 credit and debit
card payments in 2004,
triple the volume of 2002.
Kathy Seitz, a managing
partner with CBIZ
Accounting Tax &
Advisory Services in
said she's seeing more
credit card payments by small
business owners, especially
those making estimated
tax payments on a quarterly
basis.
How can you pay online in
2006? Check out the
websites for Official
Payments Corp. at www.official
payments.com (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.officialpayments.com)or
Link2Gov Corp. at
www.pay1040.com (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.pay1040.com).
Both of these companies can accept federal,
state and local tax
payments.
But be aware: Online payment
companies charge
fees of 2.49% of the tax
payment to cover
processing costs. That means
a consumer who uses
a credit card to pay a
$1,000 tax bill would have to
add an additional $24.90 in
processing fees. And if
you can't pay your credit
card balance in
full, the accumulating
interest payments further
increases the cost of your
tax payments.
Contact MDS Funding for a
cost comparison of
Factoring and paying your
taxes by credit card. You
may be pleasantly surprised
by what you learn.
Read full wire story by
Eileen Alt Powell at
gazette.com (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.post-gazette.com%2Fpg%2F05079%2F472448.stm)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Ten Ideas for Improving Cash
Flow
"There are many things
to do to improve your cash
flow in your own
business," Barry Moltz wrote in a
column called It's Cash
Flow, Stupid! Moltz goes on
to share some obvious and
not so obvious
suggestions for business
owners of all sizes. Let me
share with you his "10
tips" for improving cash
flow:
* Establish a business
partner relationship with MDS
Funding. Okay, this option
didn't make Barry
Moltz's list, but it should
have!
* Sell inventory faster and
keep your inventory
levels lower.
* Track your inventory
carefully. Know what sells
quickly and what never moves
off the shelf. Know
how long your customer will
wait for a product and
still be satisfied.
* Get your customers to pay
with credit cards. This
way, you get money you can
use in your checking
account the next day.
* Give customers discounts
for paying their bills
sooner.
* Ask customers to pay a deposit or an advance
for services before you
start the work.
* If practical, bill your customers as soon as
you
perform the service or deliver
the product. Don't
wait until the end of the
month to send them an
invoice.
* Be diligent about collecting your accounts
receivables. State a
specific date that the payment
is due. Call soon after the
bill is sent out to
make sure they received it
and ask when it will be
paid. Follow up early and
often. You have a right to
be paid within terms, so
don't be timid about asking
for your money.
* Alternately, get extended credit from your
vendors. Try to get 60 or 90
day terms in which to
pay your bills.
* If your vendors allow it,
pay your own bills after
30 days with credit cards.
This gives you 30 more
days to pay until your
credit card bill comes due.
To read more of Barry
Moltz's cash flow ideas, visit:
www.barrymoltz.com (http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.barrymoltz.com%2Farticles%2Fpublished%2Fpub_cashflow.html)</a>
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www.taxmama.com - http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.taxmama.com
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www.pay1040.com - http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fwww.pay1040.com
Blog.facteon.com - http://rs6.net/tn.jsp?t=ga48cubab.0.0.9qe8xhbab.0&ts=S0168&p=http%3A%2F%2Fblog.facteon.com%2Fsite%2Fsmb%2F
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