More people are heading to their retirement plans at work for a bail out in today’s economic times. An individual will have financial options if he or she should be so lucky as to a have a retirement plan at work.

An employee may request a hardship distribution or a loan from their retirement plan at work, if available. There are strict rules that must be followed or unwanted tax consequences may occur due to non-compliance.

A retirement plan may, but is not required to, provide hardship distributions. The plan, if it provides for hardship distributions, must specify the criteria used to determine hardship. Hardship withdrawals are subject to income tax and the 10% early withdrawal penalty if the employee is under 59 ½ years of age.

Borrowing from your retirement plan is another option available if offered. The maximum amount a participant may borrow from his or her plan is 50% of his or her vested account balance or $50,000, whichever is less. A plan could include an exception to the 50% of the vested account balance limit if the balance is less than $10,000. A participant may borrow up to $10,000 if the exception is included in the plan.

Federal law mandates that participant loans must be repaid within five years and payments must be made at least quarterly. An exception to the 5-year rule is if the loan is used to purchase a primary residence. The rules for repayment for a primary home loan can vary by the individual plan.

Any outstanding participant loan balance in the event of termination of employment is treated as a fully taxable distribution at the time of separation from employment. The “distribution” may also be subject to the 10% early withdrawal penalty if the employee is under the age of 59 ½.

Depending on the personal situation, one option may be better than the other from a tax standpoint.

No repayment is required on a hardship distribution. Taxes must be paid on the distribution and may incur the 10% early withdrawal penalty as well.

Participant loans must be repaid but are not taxed as income unless employment terminates.

They just don’t make them like they used to. Have you ever said or thought these words?

Products were not designed to last. Purchase of replacement products contribute to the profits of the manufacturers. Software programs, for instance, are constantly changing and must be replaced if you want support. The software still works but is no longer supported because the manufacturers want you to buy the new one.

We are replacing perfectly good usable electronics such as the cell phone for the latest and greatest. You’re considered out of style if you don’t. Fairly new furniture is replaced because it no longer matches our decor. Cars get replaced because the newer models have more bells and whistles. All kinds of stuff gets thrown away including kitchen equipment, dishwashers, stoves, hot water heaters and refrigerators. One of the reasons we buy new kitchen equipment, dishwashers, stoves, etc. is because they have stopped working and it’s cheaper to replace them rather than repairing them. This “out with the old, in with the new” thinking is good for the manufacturers but not so good for the environment. Is this how we spend our hard earned “disposable income”?

Plastic bottles, plastic bags or anything plastic take a long time to decompose, which is why we should recycle them. We should use less plastic products in addition to recycling them. Think of the plastic stirrers and the coffee cup lids thrown away every day at your favorite coffee shop. And don’t forget the plastic containers used for your treat to go with your coffee or tea. We should bring our own reusable shopping bags when we go to the store. At least 45 cities and counties in California have bag reduction ordinances. A minimum 10 cent charge for each bag is required in the city and county of San Francisco. In San Francisco, disposable bags used have been reduced by 70-90 percent since the checkout bag charge became effective on October 1, 2012.

Think before you dispose.

The first known use of a blog was in 1999.  Blog is short for Weblog.  The Merriam-Webster defines a blog as “a Web site that contains an online personal journal with reflections, comments, and often hyperlinks provided by the writer; also: the contents of such a site”.

Internet users have jumped from 360 million in 2000 to over 2 billion in 2012 according to the Internet World Stats.    Over 1 billion of the 2 billion internet users were in Asia and 270 million in North America.

So is the reason for blogging to potentially reach 2 billion internet users?

Blogs can take a personal or professional approach.  Topics can include almost anything including politics, pets, comics, etc. or it can offer informative information.  Businesses can use blogs as a communication platform to interact with their clients and prospective or potential clients.

Many times we have been contacted by clients and potential clients inquiring about our firm performing an audit for them, and more importantly, what will it cost? Some of the first questions we ask are “who is asking for it” and “do you think you really need an audit”?

The answer depends on who will be using the financial statements and the needs of the creditors, investors or agencies. The major difference in the three types of financial statements is the assurance level. In all three levels, the reporting entity is primarily responsible for the financial statements.

The most basic level of service with respect to financial statements is the compiled financial statements. The CPA makes certain that the data received from the client are in the correct format and free of clerical errors. A report on the compiled financial statements is issued that states no assurance is expressed as to whether changes are necessary to be in conformity with generally accepted accounting principles.

The next level is the reviewed financial statements. In addition to evaluation of the format presentation of the data, the CPA is required to make inquiries of management, apply analytical procedures and obtain representations from management. The additional requirements allow the CPA to express limited assurance that he is not aware of any material modifications that should be made to the financial statements to be in conformity with generally accepted accounting principles.

The highest level of assurance is expressed on audited financial statements. Procedures in an audit include confirmation with outside parties, observation of inventories, and testing of selected transactions by examining supporting documents. Even though an audit is the CPA’s highest level of assurance that financial statements are free from material errors and fraud, it does not provide a guarantee of absolute assurance.

The costs involved for preparation of financial statement increases as the expression of assurance level on them increases. Governmental agencies may require from a small entity, say under $100,000 net worth, reviewed financial statements to apply for certain licenses. The cost for such a financial statement seems disproportionate as to the value of the entity. Make sure you know which one of the financial statements you really need because the cost difference can be astounding.

“A negative economy has little effect on a given business’ survival. Businesses started in expanding economies in 1995 and 2005, those started just before the downturn in 2000, and those started just after the downturn had almost identical survival paths”…(Source: BLS, Business Employment Dynamics.)

Many new small businesses go under within their first two years but usually the failures can be explained. Knowing the pitfalls associated with a new business and having a professional team, including a Certified Public Accountant (CPA), can maximize your chances of success.

Being your own boss is exciting. It also means hard work and risk taking when you start a new business. You can be a successful business owner if you already have or can learn the right traits, such as being a self-starter, goal-oriented, committed and resilient, to name a few.

You have what it takes. Now what? You need to do your homework and develop a business plan. Here are some things to consider:

Should you buy an existing business or start from scratch?

• You take on more risk if you build your business from the ground up.

• Because a start-up has no previous track record, raising capital to acquire an existing business with a proven track record of success may be easier than a start-up business.

• If you decide to acquire an existing business, engaging a CPA to assist in the transaction is advisable, and will be mandatory at some step of the process for financial credibility and tax purposes.

What’s the best type of ownership for your business (sole proprietorship, corporation, partnership, LLC, S corporation)? There are advantages and disadvantages for each type of ownership. Which software and accounting method is appropriate for your specific business needs? How can you raise capital for your business? Where’s the best location for your business? Should you buy or lease? These are all questions you should consider in developing your business plan.

Before you make your first dollar, you must comply with the state and local licensing requirements.  These include state registration, state and local sales and use tax license, and local business licenses and permits. You’ll need to apply for a federal employer identification number (EIN) if you plan to have employees, or if your business will not be owned as a sole proprietorship.

Your business is now ready for operation. You must keep good accounting records for the preparation of year-end taxes as well as other compliance reporting. Examples include preparation of payroll reports and other government forms. You may also need advice on estimated tax payments that you should make during the year. Let your CPA help you with the record keeping and compliance issues, while you concentrate on running your business.

Having experienced support from the start will help your small business succeed. The right CPA can help you launch your business, assure long- term success and prevent costly mistakes through all the cycles of your business adventure.