People

There is one common denominator that all companies have.  Whether they’re large or small, no matter if they are super successful or struggling for survival, they all have one thing in common - people.

As a business owner, unless you’re working by yourself from home, your company depends on people.  Employees, customers, vendors and service providers, they are all people.

Understanding how people think, what they want and need, what they like and don’t like, what motivates or demotivates them, and what challenges and obstacles they are dealing with, that’s your business.  As a hands-on small business owner, first and foremost, you’re in the people business.  Your company’s success or failure will be determined by how well you do at mastering the people business.

Believe it or not, the most commonly overlooked area inside most small companies is the people side of the business.  Larger companies have a human resource manager whose job is to focus just on the people within the business, but in a smaller company, it’s not cost justifiable to have a HR manager.  Since the duties then fall back to the business owner, who is already wearing multiple hats, often the administrative side of people management gets delegated to a clerical assistant or an office manager.  The day-to-day motivation, development, and performance management often gets overlooked by owners and managers because they just don’t have the time in their day.

If you had just spent $150,000 for a new piece of equipment, would you invest additional money on performing regular maintenance on the machine?  For most, the answer is yes, of course!  By maintaining the equipment, it operates at peak efficiency. On top of that you have fewer breakdowns and the machine will have a longer lifespan.  People are not that different from machines.  They have needs and desires and need regular attention or they are not going to last long or operate at peak performance. Over time, without development and motivation, people get stagnant or burned out. They may develop issues such as tardiness or absenteeism, or they may just quit altogether.

As a small business CEO, be careful not to make the mistake of overlooking the importance of investing time and resources into developing the people side of your company.  A well designed and executed people attraction, selection, compensation, administration, training, development, motivation and retention process is the key to successfully managing the employees that your company depends on for your very survival.

In closing, let me leave you with this:  Successful people do the things that unsuccessful people are unwilling to do. The most critical component of any business is the people that make it run.  Successful CEO’s invest time and resources in developing people
 
By Todd W. Meyer, President/CEO of MMI Financial Group, Inc.

August 11, 2014

How to handle taxes for household employees

Taxes.  They’re just about the last thing parents might think about when they hire someone to watch over their child.  Yet a hefty tax bill is a possibility for anyone who pays a nanny, adult care-giver, housekeeper, gardener or other household employee enough in annual wages to trigger a bevy of requirements under tax laws.  In 2013, that financial threshold was $1,800, and it makes the person who hired the household employee responsible for paying federal and state payroll taxes on that worker, just like any other business owner.  They also must reflect in their own annual tax return that they had a household employee. ‘‘People think if they pay this person in cash, they don’t have to report it, and the recipient doesn’t have to pick it up as income,’’ says Cindy Hockenberry, manager of research for the National Association of Tax Professionals.  ‘‘But there are taxes due on that money, and the IRS wants their taxes.’’  Here are six tips on how to make sure you’re not running afoul of the tax man when hiring household help:

Sort out: independent contractor or household employee.  Whether you’re on the hook for your nanny, adult caregiver or maid’s payroll taxes, the process begins with determining if he or she meets the IRS’s definition of a household employee, rather than an independent contractor.  The IRS defines a household employee as someone hired to do work in or around a home, at the direction and control of the person who lives in the home.  Meaning, you tell them what to do, how to do it, when to do it, and perhaps provide the supplies; for instance, if you hire someone to mow your yard and they use your lawn equipment.  In the case of a nanny:  ‘‘Any parent would have an almost impossible case to make that they don’t have the right to control the schedule and the work that’s being done in their private home with their child, ’’ says Kathleen Webb, president and co-founder of HomeWork Solutions, which provides payroll and tax services to people with household employees.  Other examples of household workers include drivers, home-health aides and maids.

Determine which taxes you are expected to pay.  Assuming your nanny or other household hire meets the household employee standard, it all comes down to whether you pay the person cash wages of $1,800 or more.  If that’s the case, you are required to pay 15.3 percent of their wages in Social Security and Medicare taxes.  The employer covers half of those taxes (6.2 percent for Social Security and 1.45 percent for Medicare) and can withhold the other half from the employee’s paycheck.  If your household employee is an immediate family member, your spouse, parent, or child under 21, you don’t have to pay any employment taxes.  Be aware that you also could be on the hook for federal and state unemployment taxes.  If your employee is paid $1,000 or more in any calendar quarter, then you must also pay federal unemployment tax of 6 percent of their annual wages.

Decide early on how you’re going to pay.  The IRS gives you the option to withhold your employees’ share of their Medicare and Social Security taxes from their paycheck, or to elect to pay their share yourself.  Let’s say you are looking to hire a nanny to come over a couple of nights a week for three hours.  At the current federal minimum wage of $7.25 an hour, that’s $43.50.  Extend that over a year, and it’s $2,262 — triggering the requirement that you pay the nanny’s payroll taxes. Under that scenario, unless you have been withdrawing payroll taxes over the year, you’ll have to come up with $173.04 to settle the nanny’s portion of the tax, and an equal amount for your obligation as the employer.  That’s probably a manageable amount to shell out come tax time.  But if you end up needing to hire the nanny to come over more than several times a week, or maybe like so many families today, you've had to hire a caregiver on a regular basis to care for an aging parent or loved one, that tax payment could be much more.  In that case, withholding payroll taxes along the way makes more sense.  Specialists suggest that household employers begin withholding payroll taxes as soon as it seems likely that they’ll be increasing their employees’ hours, and wages, dramatically.  Even if you choose to cover the payment yourself, another option is to set the money aside in a separate bank account, so that you’re not scrambling at tax time.

Verify an employee’s legal status.  The government doesn’t look favorably upon employers who hire people who can’t legally work in the United States.  So the IRS requires that employers and their hires complete an employment eligibility verification form, dubbed I-9, before the end of the employee’s first day of work.  The form requires that non-US citizens provide information backing up their legal employment status and that the employer examine the information against a list of acceptable identification documents.  Once it’s filled out, employers must simply hang on to the form.  It can be downloaded at http://www.uscis.gov/files/form/i-9.pdf.

Keep solid records.  It's important to keep accurate records of all wages and federal and state taxes you pay or withhold on behalf of your employee.  The record-keeping will come in handy when it comes time to file several forms with the IRS.  They include Schedule H, on which employers report household employment taxes paid, and Form W-2, which outlines your employee’s annual wages, taxes paid by you and other details.

Get help.  Instead of dealing with the intricacies of the U.S. tax code, you can pay an accountant or consider hiring a professional daily money manager (DMM) to assist you in getting things set up with one of the many on-line companies who cater to handling payroll and tax concerns for domestic employers.  The DMM can also help you set up your record keeping system so that at tax time you have everything in order.  To locate a professional daily money manager (DMM) you can contact the American Association of Daily Money Managers (AADMM).  This organization will provide referrals to DMMs in your area.  You can visit their website at www.aadmm.com.

Why families don't talk about money or estate planning decisions.

I've been working with senior clients for the past 31 years, first as an insurance and financial services agent, and for the past 20 years as a financial planner and daily money manager (DMM).  The one common denominator that I have seen among families is a lack of communication about finances and estate settlement decisions between senior parents and their adult children.

As we, or our parents reach retirement age and become seniors, why is it so difficult to talk openly about finances and estate settlement wishes with the family?  Seniors think about the possibility of becoming dependent upon family members, or worse, ending up in an assisted living facility.  Adult children are keenly aware that if something happens to their senior parent(s) someone would need to step in and manage the finances or settle the estate.  Here's where it gets tricky.  My professional experience has been that Mom and/or Dad are not taking the lead and proactively communicating their personal information and wishes with the kids - they just don't want to think or talk about it.  I've also been told countless times by adult children that none of the kids want to be the first to bring the topic up for discussion for fear of being seen as "a little too interested in what their inheritance may be."  Now throw blended families into the mix, and of course a little (or a lot of) dysfunction and believe me, nobody wants to bring up the issues that everybody knows really need to be discussed. 

So how do families overcome these communication issues?  Sometimes getting outside help can make all the difference.  I've found as a professional daily money manager that my senior clients have no problem disclosing all of their confidential information to me; in fact, they like the fact that someone other than themselves has a complete record of everything.  For many clients their greatest fear is that the kids will fight over financial decisions or the estate settlement wishes.  Having someone outside the family to assist their loved ones in managing the estate and carrying out their estate settlement wishes gives them peace of mind.

My best advice is to bring all family members together to proactively discuss the financial and estate settlement details long before any issues come up.  Decide as a family how you will proceed going forward and who will play what role.  Discuss whether or not you want professionals to be involved to provide services or if you will try to handle everything inside the family.  If family members are going to provide services, what should their compensation be for providing such services?  What checks and balance process will be used to assure finances are being managed appropriately?  More often than not providing oversight and care will fall on one person rather than being divided evenly among all of the siblings.  Get everything worked out in advance.  Maintain an open line of communication and review the game plan periodically to keep things current.
  

Three Money Management Tips For Small Business CEO’s

Running a successful business takes more than a good idea. Entrepreneurs must also have good money management skills in order to make their business a true success.

Understand your relationship with money 

I advise you to analyze your behavior and unique characteristics to understand what your strengths and weaknesses are when it comes to managing money. I once read that many rich people remain rich by behaving like the poor, while many poor people remain poor by behaving like the rich, and I think there is a lot of truth in that statement. When it comes to managing money as an entrepreneur you have to separate your personal finances from you’re business finances, and run your business as a completely separate pocketbook. Understanding how to capitalize on your own strengths and manage your weaknesses when it comes to daily money management will be critical to your business success.

Have a daily target and an action plan

You probably wouldn’t get in your car, start it up, and just start driving without a predetermined destination in mind. Golf wouldn’t be much of a game without the hole to shoot for. Even a driving range has yardage markers to provide a reference point. So why is it then that most small business owners show up at their business each day with no real measurable financial objective for the day?  Every day that you start out with no clear goals to work toward is a day that you are getting into your car and taking a trip to nowhere. The most successful entrepreneurs establish simple, clear and measurable goals, and manage company activities to those goals. Developing a financially healthy business does not happen by accident. The two most fundamental financial bench marks for a small business CEO to target and manage to is a break-even point and a pre-targeted profit goal. You might be taking in money each day, but are you really making money?

Run a financially healthy company 

I’ve read plenty of articles and books that advise people to pay themselves first as a mean of getting ahead financially. When it comes to the daily money management of a small business, that advice doesn’t hold true. The #1 reason that the failure rate of small businesses is so high is because most entrepreneurs are under capitalized and they take too much money out of their businesses too quickly. Constantly taking all the money out of the company will sooner or later take you down.  If you want to run a healthy company, know your break-even point, set daily, weekly and monthly profit goals and manage company activity toward achieving those goals. Once you start having financial success remember to keep your eye on the target and your nose to the grind stone.  Remember, rich people remain rich by behaving like the poor. Build company reserves and then gradually start rewarding yourself for the hard work you’ve done by taking more and more profits out of the company while maintaining a healthy reserve.

The Growing Need For Seniors To Protect Themselves Against Elder Fraud

America is aging. Between 2011 and 2050, the United States is projected to experience rapid growth in it’s senior population. The 78-million member baby boom generation (born between 1946 and 1964) began turning 65 in 2011.  Over the next 10 years the older American segment is projected to grow 23%. By 2020, this market segment should be nearly 119 million people and represent 35% of the total population.

The number one fear expressed by many seniors regarding their retirement years, is the fear of outliving their money. Managing financial resources wisely for this generation has become more important than ever before. A rising concern for many seniors and their family members is the issue of elder fraud.  

Seniors tend to be trusting and charitable to strangers making them more likely to fall prey to a solicitation for money. They often live alone, isolated from family and friends who could otherwise advise them.

Con artists, unethical repairman and contractors are aware of the possible effects that age has on memory, and a seniors’ potential lack of financial savvy. These individuals realize that seniors are often poor witnesses. Being victimized or taken advantage of can also make seniors so embarrassed that they are reluctant to come forward or even tell family members.

Seniors are often dependent upon family members and caregivers, making them susceptible to being taken advantage of by these very same people. Children and grandchildren often approach their loved one for a loan. Too often these loans go unpaid creating a financial hardship for the senior later in life when they need that money to provide supplemental income or to pay for long-term care expenses.

One solution that many seniors and their caregiving family members are turning to is to hire the services of a professional daily money manager (DMM) to pay bills, reconcile accounts, maintain records, prepare monthly or quarterly financial statements, and more. 

Studies have shown that DMM services can help seniors to maintain their independence and remain in their homes longer avoiding costly nursing home care. DMMs also provide adult caregivers relief from some or all daily money management tasks while at the same time providing outside financial controls which can reduce or eliminate claims of caregiver fraud.

The best way to start your search to locate a DMM is through referrals from trusted friend, family members, and community organizations. You may also wish to contact the American Association of Daily Money Managers (AADMM). This organization will provide referrals to DMMs in your area. You can visit their website at www.aadmm.com.