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Know the Tax Rules for Business and Employee Gifts
Giving business gifts is a time-honored way of doing business, but there's a right way and a wrong way to go about it. While many believe there is no limit on the amount claimed as a tax deduction for gifts to business associates, in fact, the U.S. tax code only allows a deduction of $25 per nonemployee recipient annually.

Tickets to events, such as concerts and ball games, are treated as entertainment expenses. Restaurant gift certificates are considered meal expenses; only half of entertainment and meal expenses are tax-deductible.


Special tax rules apply to employee gifts. Giving employees cash or equivalents, like gift cards, of any amount is considered taxable compensation. The gift amount is added to wages and is subject to payroll taxes.

Businesses can give nominal cost noncash gifts to employees, but the important word here is nominal. While the application is often vague, and it's always wise to check, a gift such as a voucher for a free hotel stay typically is not subject to taxes.

Award programs

Employees also don't incur taxable wages if a gift is received tax-free under a documented achievement awards program. An awards program must be open to all and cannot discriminate in favor of higher-compensated workers. The value of each award also cannot exceed a maximum of $400, and typically, the award is presented in a meaningful way through a company presentation.

Many of the tax rules are nebulous and therefore subject to broad interpretation. The important takeaway: if you don't know, ask.

Be a Responsible Computer User: Back Up Your Data
It's happened to all of us: perhaps you've been working on a project for weeks and suddenly it's evaporated. Or you've returned from a trip with a thousand photos, and they've all disappeared.

Whether you've lost data when your hard drive quit, a virus invaded, a file became corrupt, or a thief stole your computer, you need that data, and now it's gone. Worst of all, its loss could have been avoided...if only you'd backed up!

In its article "How to Back Up Data,"  warns: "Unfortunately, computers fail, and often. Having a backup plan set before anything goes wrong is one of the most important tasks you will undertake as a responsible computer user."

It's not that difficult these days. According to Michael Darmanin's article "Never Lose Data Again: Easily Back Up Your Files with These Simple Tips" in, "Saving your data or backing up to the cloud is a great way to prevent data loss and much easier and cheaper than most people realize. In fact, if you're currently using a Gmail or Microsoft email account you already have access to free online storage."

Microsoft offers OneDrive for data backup, and Google provides Google Drive. lists five alternative ways of backing up. There's software you can buy, and storage services that cost a little and save a lot. External hard drives still work well for many of us.

Perhaps  says it best: "The bottom line is that if you value what's kept on your computer, it's wise to take steps to protect your information from sudden loss." So stop typing and back up!

'Your Earnings Will Always Be in Line with Your Mindset'
Think Big
Still small? Start thinking big.

The idea's not original, Google it and you get more than 7 million results, but that doesn't mean it can't change your business...and your life.

As Anne Bachrach noted in a recent LinkedIn post, "Whether or not you realize it, your earnings will always be in line with your mindset."

It makes sense; when you can't look beyond your role as a "small-business owner," you'll miss opportunities to grow. And you'll be so busy with daily operations you won't have time for "blue-sky thinking" about the important things, such as your brand and your customers.

In an article in Urbanicity, Hamilton, Ontario-based retailer Lauren Ricottone explained her "aha" moment: "I functioned in a 'small' business mindset for a long time, and it crippled my capacity and my ability to experience real growth."

She felt like many entrepreneurs do: "I don't need to bother with that - we're still too small."

Ricottone, however, was familiar with the systems and practices of big business. She knew they had value in the corporate environment, but didn't see them applying to her own small business.

But she took a risk: "Running a business is a massive load of work. Either we carry it around, or our systems carry it on our behalf."

Ricottone implemented systems for inventory control, tracking sales, accounting, and more. "My new growth strategy? Functioning as if my small business was already a big business." It worked; Ricottone's small business is flourishing. Comments Bachrach, "You will certainly not get what you deserve when you think small....Thinking big is about realizing your potential and getting what you deserve instead of limiting yourself."

Accounting for the Merger of Two Businesses
Frequently, two similar business enterprises merge into one as a way of making more money by reaching more customers at a lower cost. By creating one from two, total overhead costs are reduced and more efficient distribution channels are created. It's called a merger.

Mergers come about in two ways: either through two owners combining their organizations or through one business acquiring the other. The latter happens frequently when a young operation grows by purchasing a mature business whose owner is retiring or moving. A tragic flaw in these promising arrangements is that the accounting for the merger is more often than not considered an afterthought.

Tangible assets and goodwill

Accountants refer to the bookkeeping system for assets as the "purchase method." It's best understood as allocating the purchase price to acquired assets, both tangible and intangible. Customer lists, business reputation, and seasoned staff are intangibles. This "goodwill" may have considerable value for the acquirer, but that comes at a cost.

The purchase price of an acquired business typically exceeds the fair market value of tangible assets, such as equipment, computers, and desks. This excess cost is recorded as goodwill, a special type of "other asset."

Goodwill is almost always present in an acquisition because a purchased business is usually worth more than the sum of its tangible assets, which are recorded at only their fair market values. Goodwill is therefore a catchall category of everything else.

Purchase adjustments

Accounting for an acquisition becomes especially challenging when the target company is transferring accounts receivable, customer deposits, work in process, and liability for sales tax or payroll taxes. The amount paid when the purchase closes is adjusted for these items.

As an example, assume you are purchasing a business for $10,000. The equipment you're buying is worth only $6,000, leaving $4,000 to the catchall category of goodwill. On the acquisition date, however, this business has accounts receivable of $500 and work in process (which will eventually become invoiced receivables) of $400. You have to pay for these items as additions to the $10,000 purchase price.

But the acquisition target has already conducted business that incurred $400 of payroll taxes and $100 of sales tax. You will remit those amounts in the future, along with such taxes incurred after the purchase.

So the seller must leave $500 of cash for you to pay these obligations created during operations from which the seller profited. In addition, you might assume $300 of debt that the seller owes on the equipment, and the seller also has to give you credit for those funds.

Amounts allocated to equipment and goodwill are still $6,000 and $4,000. But the purchaser has to pay $10,100.

The additional $100 arises from the circuitous route of credits. The purchase price is adjusted with $900 of credits to the seller ($500 + $400) but $800 of credits to the buyer ($400 + $100 + $300).

It's clearly an accounting obstacle, but not an insurmountable one, providing you have professional accounting advice.
Michele Ball
Perfect Additions
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Worth Reading
How to Make Quantum Leaps Personally and Professionally
By Benjamin P. Hardy
Research has shown that the roles we play in life shape our identity and behavior. Your personality is not set in stone, but it is informed by circumstances, how you see yourself, and how you act. You have the power to choose the role(s) you play and to move forward mindfully to achieve your goals. Sometimes this takes a huge leap of faith, but over time you grow into the role(s) you set for yourself!

Not All Practice Makes Perfect
By Anders Ericsson and Robert Pool


In virtually any field (music, sports, chess, business) deliberate practice is the most effective and powerful way to achieve breakthrough performance. While naive practice relies mainly on repetition, purposeful practice is thoughtful and focused, and it has specific, well-defined goals. Purposeful practice requires getting out of one's comfort zone. Don't just try harder; try a different approach.

Seneca on Letting the Eminent Dead Guide You
By Shane Parrish

Farnam Street Blog

The Stoic philosopher Seneca instructed his students, "Bathe in the wisdom of great people who lived before you." Role models, dead or alive, teach through their life experiences. You don't need to reinvent the wheel to access the wisdom of the ages; make good use of what others have already figured out.

This Month: How to Be a Strong Role Model
What strengths do you bring to your business? Where are your weak spots? We all have them, and a strong role model can help in areas that need improvement. Or, on the flip side, we can be role models ourselves, using our strong suits to be an example to others:

What does a role model look like? Discover the best role model traits.
The Seven Traits of a Role Model

Every business can benefit from effective communication. Here's how a communication role model can help.
Why You Need a Communication Role Model

Are you hoping to be a better role model in your company? Learn how to shift from "boss" to "leader" with these techniques.
Learn how to shift from "Boss" to "Leader"

Here are 12 famous entrepreneurs whose stories can provide inspiration.
12 Famous Entrepreneurs and Business Role Models
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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