Dealing With A Layoff

A layoff can occur unexpectedly, without warning and be a scary ordeal. You may be asking yourself, “Why me?” Getting laid off is never easy and it’s certainly never a good feeling. Beyond the initial shock, concerns over your short and long-term financial security and stability can make a difficult situation worse. It’s important to plan ahead for worse-case scenarios and have an established reserve fund (refer to my post Planning For A Rainy Day) to fall back on and help mitigate some of the immediate impact. Don’t rely on severance and/or unemployment benefits as your only fallback. Severance isn’t guaranteed (ex: if the company doesn’t offer severance, if you don’t meet the company’s requirements for severance or if the company abruptly folds) and unemployment benefits will only provide partial wage replacement for up to twenty-six weeks. If you don’t currently have an established reserve fund, make it a priority to start building one now.

When you’re informed that you’re going to be laid off, listen and focus on the information provided to you and be sure to ask questions if you don’t understand something. While it may be an emotional period, it’s important to compose yourself and gather as much pertinent information as it will be extremely vital when it’s time to figure out your next steps. The person(s) taking you through the process (ex: HR Manager) should go over a variety of areas including, but not limited to: the layoff effective date and your official last day, standard procedures when an employee is let go, severance (if applicable), final payroll and wages, health insurance coverage termination date, eligibility for COBRA, 401(k) distribution paperwork (if applicable), who to contact for additional questions or inquiries and so forth.

You may given a termination letter or related documents pertaining to your layoff. Again, review the information carefully. Ask questions. Get copies of all relevant documents for your records. Be sure you know who to contact if you have additional questions or need to follow-up on outstanding matters. You may also be provided with information so that you may apply for unemployment benefits. Be sure to check with your state’s Unemployment Office for eligibility requirements, how and when you should apply for benefits. You’ll want to apply for benefits as soon as reasonably possible once you become eligible as your first unemployment payment may take a few weeks.

Do not burn bridges with your employer! Avoid the knee-jerk reaction! Stay professional! You may need references from your former employer, managers or supervisors and burning bridges won’t help the situation.

If you haven’t kept your resume and portfolio (if applicable) up-to-date, get on it right away especially if you plan to get right back into the workforce. You’ll want to get your resume and portfolio (if applicable) updated, polished and out there for prospective employers to see. There are options available for job seekers including posting resumes online and searching through job boards (ex: monster.com, indeed.com, careerbuilder.com, ziprecruiter.com, etc.), working with hiring consultants and/or staffing firms, attending networking events and traditional word-of-mouth, just to name a few. You may also want to consider looking at freelance, project or part-time work that offers you short-term income until you can find a permanent, full-time position. Keep in mind that temporary or part-time work may affect unemployment benefits so check with your state’s Unemployment Office for further information and guidance.

Capitalize on this period of unemployment. Learn new skills or brush up on existing skills, take some classes or seminars, reconnect with friends and network, pursue a side hustle and take some time to focus on your own health and wellness. This is also a good time to reflect on your short and long-term goals and objectives. Perhaps it’s time to pursue a career change or explore starting your own business. Don’t let a layoff knock you down! Turn this negative situation into positive opportunities!

Getting Ready for the Tax Season

With the holidays passed and the New Year upon us, it’s time to take some proactive steps in preparing for the upcoming tax season. That’s right! Now is a good time to start gathering and organizing all your 2018 financial/tax documents in preparation for the tax season. Don’t wait until it’s time to have your tax returns prepared to start hunting for all the crucial documents. Get a head start now by putting together a checklist of all the applicable documents you’ll need and start building a file if you haven’t already begun to do so.

Everyone has their own tax situation so first and foremost, if you have an Accountant, CPA Firm or Certified Tax Professional, get in touch with them to review 2018 and go over the documents that you’ll need to have ready to provide to them to prepare your tax returns. Due to changes in the tax law last year, you hopefully have been actively communicating with your Accountant, CPA Firm or Certified Tax Professional to discuss any applicable tax changes that could potentially affect you in the upcoming tax season. It’s also a good practice to reach out to your Accountant, CPA Firm or Certified Tax Professional in the fourth quarter of the year (if your Accountant, CPA Firm or Certified Tax Professional has not already done so), to discuss any applicable year-end tax matters and/or appropriate actions that need to be taken prior to year-end.

If you are a business owner, you’ll want to get in touch with your personal Accountant, CPA Firm or Certified Tax Professional to discuss any tax matters, issues or concerns applicable to your personal tax situation while also getting in touch with the company’s Accountant or CPA Firm to make sure the company is on the right track for year-end.

On a personal level, some of the financial/tax documents you should gather include:

  • Form W-2s from all employers that you worked for in 2018. Employers are required to furnish Form W-2s to their employees by January 31, 2019. A Form W-2 is considered “furnished” if it is postmarked by January 31, 2019. Most payroll companies also provide employee access to electronic copies of Form W-2s.

  • Form 1099-MISC from all companies/businesses for which you performed work or services as a non-employee/independent contractor in 2018. Companies/businesses must issue Form 1099-MISC if you were paid $600 or more during the year for work or services performed. Form 1099-MISC must be furnished by January 31, 2019. You are still required to report all applicable income even if you do not receive a Form 1099-MISC.

  • Form 1099-INT from all banks/financial institutions for which you earned interest income in 2018. Banks/financial institutions must issue a Form 1099-INT if you earned $10 or more in interest income during the tax year. You are still required to report all applicable interest income even if you do not receive a Form 1099-INT.

  • If you maintained health coverage through a Health Insurance Marketplace, you should receive a Form 1095-A. If you maintained health coverage through a health insurance provider or non-Applicable Large Employer (non-ALE), you should receive a Form 1095-B. If you maintained health coverage through an Applicable Large Employer (ALE), you should receive a Form 1095-C. These forms provide information regarding the health insurance coverage provided, to whom coverage was provided and when coverage was provided. Except for recipients of Form 1095-A, recipients of Form 1095-B and Form 1095-C generally do not need to wait for these forms to arrive to prepare their tax returns provided you have the information readily available including, who was covered and when, for tax preparation purposes. Keep in mind that for 2018, the Affordable Care Act’s Individual Mandate remains in full force. Individuals who fail to maintain proper health insurance coverage for all of 2018 may be subject to a penalty. You can get more information about these Health Insurance Information/Tax forms on the IRS website.

  • Form 1099-DIV from all financial institutions/brokerages for which you earned dividend income.

  • Form 1099-G if you itemized your deductions in the prior tax year and took advantage of the state/local tax deduction and received a state/local tax refund.

  • Form 1099-R if you received a distribution from a retirement plan, pension plan, profit sharing plan, etc.

  • Form 5498 if you made contributions to an Individual Retirement Account (IRA).

  • Schedule K-1 if you are a member of a multi-member LLC, LLC taxed as a sub-chapter S or a shareholder of a sub-chapter S.

  • Copies of donation confirmation/acknowledgment letters for tax-deductible donations made to qualified charitable organizations.

The list above is not intended to be a complete list of the financial/tax documents that you may need for the preparation of your tax returns nor does it necessarily reflect all the financial/tax documents that are applicable to your specific tax situation. Again, speak with your Accountant, CPA Firm or Certified Tax Professional to review the financial/tax documents that you should gather in preparation for the current tax season. If you prepare your own tax returns, look through the financial/tax documents you received last year while accounting for any applicable changes made in 2018 (ex: opening a new savings or brokerage account, working for more than one employer within the same tax year) as you put together your checklist and gather your financial/tax documents.

A little early preparation and staying proactive can go a long way in helping to make this tax season go smoother and be less stressful!

Best Practices for Small Business Corporate Cards

A business credit or charge card can be helpful for business owners when it comes to making purchases and paying expenses on behalf of your business. However, it’s extremely important to develop best practices when it comes to managing and using these cards.

When applying for a business credit or charge card, determine the type of card that best suits your business needs. A business credit card, just like a personal credit card, will offer you a fixed credit limit and the ability to pay over time while a charge card will have no preset spending limit (not to be confused with unlimited spending power) and will typically require the balance be paid in full each month. It should go without saying that you should only spend what you can afford so that you can afford to pay your monthly bill in full every month. Paying over time will not only cost more in the long run (due to accrued interest) but also set you and your business on the path of accruing unnecessary debt.

As a startup or small business, you’ll want to find cards that offer no annual fee while still offering some bang for the buck (ex: sign-on bonuses, cash back rewards, points for every dollar). As your business grows, you may need to upgrade or switch to a different card that offers you greater benefits and rewards, but keep in mind that you may need to pay an annual membership fee to gain some of those added benefits and rewards. While paying an annual membership fee won’t necessarily break the bank, don’t go off and get a credit/charge card with a $400 or $500 annual fee if the value of the benefits and rewards do not help offset the cost of the annual fee.

A business credit or charge card, unlike a personal card, is intended for legitimate BUSINESS expenses only. Do not get into the habit of mixing business and personal expenses on a business credit or charge card. Cardholder agreements will usually state that business credit or charge cards are only to be used for business expenses. While card issuers may not audit every transaction made on a business credit or charge card, failing to keep your business and personal expenses separate can pose risks and liabilities including piercing the corporate veil and you could face penalties if your business were to undergo an audit by the IRS (ex: treating personal expenses as deductible business expenses). Just don’t do it!

If you are planning on issuing additional business credit or charge cards to employees, be sure to limit the number of cards to only those employees who absolutely require one for legitimate business purposes. Also, be sure to have written policies in place on the proper use of business credit or charge cards. Make sure every employee understands the current policies in place and provide refreshers as needed. As part of your written policies, you may want to include a policy requiring employees to obtain pre-approval or pre-authorization by management before any charges are placed on a business credit/charge card and/or set spending thresholds which require additional management approval.

Make sure that for every transaction on the card, there is a corresponding receipt for the purchase. You should also require that a monthly reconciliation (ex: expense report) for each card be submitted along with copies of all the corresponding receipts for the applicable charges. Be sure to thoroughly review every monthly statement for accuracy and to protect against fraudulent charges. It can also be beneficial to enable alerts on each card and on the master card account and to frequently monitor transactions on the cards. All card issuers should have an online dashboard which allows you to monitor all the card accounts and transactions on your master account.

With some business card accounts, card issuers will allow you to select billing options for your cards. For example, one option would be to receive a single master bill for your business credit/charge card account with a breakdown of each individual card and the respective charges.  The business, upon reviewing and reconciling the statement, can then pay the master bill each month. Another option would be to have individual credit/charge card bills issued to each cardholder. Each cardholder would then be responsible for paying their respective bills and then submit those expenses back to the business for reimbursement. The latter option would add an extra layer of protection for the business to prevent and deter unauthorized spending on a card.

Business credit and charge cards can be a useful and vital tool in helping a business owner manage and run his/her business, but like anything else, they must be used properly and responsibly.