Thompson & McCarty, P.C. CPA

President Bush signed a stimulus package into last week and most of the attention has been on the tax rebates for individuals. However, the bill also contains several provisions that should benefit small and midsized companies.

The bill gives companies a 50 percent bonus deduction on new equipment and increases the limit on expensing capital expenditures to $250,000, double the regular $125,000.

The Section 179 expensing and Bonus depreciation provisions of the bill will help small businesses in terms of providing them with cash flow to expand their businesses.

Here are some factoids about the taxes we pay.

• In 2005 the federal government took $2.4 trillion out of the pocket of the American people. That is about the same size as the entire 1959 U.S economy in 1959 in inflation adjusted terms.
• According to the Tax Foundation, three fifths of taxpayers believe their taxes are too high. About 2% think they are too low (WHAT!?)
• 80% of taxpayers believe that the tax system is too complex. 3% actually thinks the tax system is fine the way it is. More than 2 out of 3 say they would give up major tax deductions (mortgage interet, taxes) for lower tax rates. (This is a tax spend politicians dream come true. He'll just cut the dedcuction and then say we can't afford the rate cut)
• In 2005 mortgage interet dedcutions account for tax saving of $62 billion with 72% of that going to those with incomes under $200,000.
• The child credit saved taxpayers $46 billion almost all of it claimed by the middle class (That's because this was targeted to the middle class).

The decision that all business owners will eventually face is how to handle their accounting needs. Good accounting is an essential piece of real business management. Accounting is the collection and or capture of financial transactions and the subsequent presentation of that data in the form of an income statement, balance sheet, and statement of cash flows. The very basis for measuring the effectiveness of an entities transactions is present on the statements listed above. Therefore, it is impossible to manage a business without an effective accounting model. There are two basic choices for creating an accounting system. One can outsource the accounting function or it can be set up as in house business activity. This article will cover the advantages and disadvantages of both methods in the hope of assisting business owners with making a decision on what is best for their companies.

This may seem like a dumb question but I will go on record here and say that 90% of the people that I come into contact with on a daily basis never really understand what business management really is. The typical entrepreneur has this idea that management is making it happen. How he makes it happen has more to do with his personality and willingness to work until the job is done than management skill. I will repeat that. The typical business owner makes his business successful due to his commitment to work until he completes his task, no matter what. That attitude has nothing to do with good business management.