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What is IRS Publication 334, Tax Guide for Small Business?
IRS Link to Publication — Found Here The Tax Guide for Small Businesses is a 50-page booklet designed to help small businesses navigate the forms and publications needed to file their taxes. There are many nuances to filing small business taxes, and many kinds of small businesses, so this form comes into use quite often. The Tax Guide for Small Businesses includes instructions and a list of documents and forms which will help small businesses file their taxes. Continue reading...
What is Chapter 10?
Chapter 10 is a bankruptcy filing available to smaller corporations where they agree to have their management replaced to oversee a restructuring, and they also agree to have their debts repaid within three years. If a company does not have more than $2.5 million in debt, they may be able to file Chapter 10 bankruptcy. The company and its attorney will put together a plan for reorganization and explain how the plan will ensure that the company meet its obligations in the future. Continue reading...
What are Small Cap Mutual Funds?
Mutual funds that invest heavily in companies that are small, but not micro-size, can be described as small cap funds. A small capitalization mutual fund primarily invests in small companies. Small companies are usually defined as companies with market capitalization of under $2 billion. The companies in this category are larger than those in the “micro” and “nano” cap categories. A mutual fund investing in small cap companies will generally experience higher price volatility than both mid cap and large cap mutual funds. Over time, small cap companies as a group have tended to outperform the broader market, so the higher risk is associated with higher return. Continue reading...
What is a Home Office Expense?
IRS Link to Form — Found Here The home office expense deduction allows people who work from home to take a tax deduction reflecting the loss of square footage in their home for the purpose of doing business there. The space must be used exclusively for doing business on a regular basis and it must be the principal place of business, not just a place to work outside of the actual office. Many people fail to file for the home office expense deduction because they believe it will be more trouble than its worth or that it may even trigger an IRS audit of their reporting. Continue reading...
Where do I find a good CPA?
A good CPA can be a valuable ally. You should find one who works with clients similar to you and who is easy to talk to. Taxes and accounting are a part of nearly every financial instrument and consideration that people will be confronted with in their life. It can be very beneficial to work with a CPA who can advise you properly on the issues that affect you. It can also be detrimental to place too much trust in a CPA who isn’t really an expert in the areas he claims to be. Continue reading...
What are All-Cap Mutual Funds?
All-cap mutual funds invest in companies of all sizes. All-capitalization mutual funds invest in companies without a bias towards the capitalization of the company. In every mutual fund’s prospectus, the stated objective of the fund will be outlined, as well as the agreed-upon asset allocation guidelines. Deviation from these parameters can put fund managers in hot water with regulatory groups like the SEC. Continue reading...
What is Mutual Fund Classification According to Market Capitalization?
One way of classifying mutual funds is by the market capitalizations of the companies they invest in. Mutual funds can invest in stocks and bonds of foreign corporations, or corporations in the biotechnology industry, or with any other objective they may have. But one way to manage it is by size—to capture market exposure for companies of different sizes. The size of a company is defined by the amount of market capitalization it has, which is the number of shares outstanding multiplied by the share price. Some indexes and funds will adjust market cap rankings to give weight to “free float,” which is the amount of market capitalization that is freely trading, and is not held by other companies, governments, or founding families. Continue reading...
What is the Russell 2000 Index?
The Russell 2000 index is comprised of the 2,000 smallest companies in the U.S. If you’re looking for a small cap domestic benchmark, this is a good one. Companies included in this index are reevaluated annually to make sure they can still be considered small cap companies. Since the Russell 1000 index represents 90% of the market, the Russell 2000 index represents about 10% of the market (if you are wondering whether or not there is a Russell 3000 index, the answer is yes — it is a combination of the Russell 1000 and Russell 2000 indices). Continue reading...
What Does Market Capitalization Mean?
Market Capitalization refers to the total ‘market-size’ of a company, calculated by the number of shares outstanding multiplied by the stock price. Investors should take care not to consider a company’s market capitalization as an accurate reflection of the company’s actual size by assets. Companies with very large market capitalizations can still operate with net losses, Twitter being an example. Continue reading...
How large are market fluctuations?
Fluctuations are represented in terms of volatility, and different types of investments experience different levels of volatility. The answer here depends on which market you’re talking about. Generally speaking, the capital markets in fixed instruments, such as government bonds, are the least volatile. Market fluctuations of the price of commodities, small-cap stocks, and emerging markets are the largest, and can be as high as 30-40% per year. Continue reading...
Is my portfolio diversified enough?
Diversification is intended to reduce the volatility of price movements in individual securities, but many people are not sure what proper diversification looks like. It depends. You should definitely have exposure to at least two asset classes: equities and bonds. Within each asset class, diversification is also important. In your equity portfolio, you should have exposure to stocks with various capitalizations (such as Large Cap, Mid Cap, and Small Cap), various geographical areas (such as the Europe), Developing Markets, and Emerging Markets. Continue reading...
What is a Form 2106: Employee Business Expense?
IRS Link to Form — Found Here Form 2106 is the long-form way to request deductions for unreimbursed business expenses incurred by an employee in the course of work. This can include professional affiliation dues, continuing education, insurances, vehicle mileage and depreciation, and other possible deductions. Often, employees are not reimbursed for every out-of-pocket expense they incur in the course of their work. This might include wear and tear on a vehicle, professional dues, travel expenses, business meals, and many more items. For any amount to go towards a tax deduction, the itemized unreimbursed expenses must be over 2% of adjusted gross income. Continue reading...
What are Accounting Methods?
Accounting Methods are the overarching style of accounting and bookkeeping which determine the practices, procedures, systems, and controls which should be put in place. There are two main methods of accounting that businesses and individuals can use to approach their accounting, and these are known as cash basis and accrual basis. The IRS expects businesses to choose early one which method they will use, and it can be difficult to change accounting styles later on. Continue reading...
What is IRS Publication 544 on Sales and Other Dispositions of Assets?
IRS Link to Publication — Found Here This guide is a reference for the tax implications of sales, transfers, barters, exchanges, forfeits, repossession, condemnation and abandonment of property. Where gains or losses are manifested, the guide helps to differentiate between capital gains and ordinary gains, as well as how to figure and report the gains or losses. Often when people sell or dispose of property in various manners there is a question of what the tax implications are, how much of the transaction is taxable, and whether any amount of it can be applied toward tax deductions. This guide, Publication 544, will outline all of the necessary filing forms and reporting practices for almost any kind of sale or disposition of property. Continue reading...
What is the Federal Unemployment Tax Act (FUTA)?
The Federal Unemployment Tax Act was passed in 1939, and it set up trust funds for the purpose of providing unemployment insurance. Businesses, not individuals, are taxed to provide funds for the program. There are 53 state funds (including D.C., Puerto Rico, and the Virgin Islands), 4 federal accounts, and 2 associated with railroad retirement. The Federal Unemployment Tax helps states fund their own unemployment programs. Continue reading...
What is IRS Publication 463 on Travel, Entertainment, Gift, and Car Expenses?
IRS Link to Publication — Found Here Publication 463 discusses common business-related deductions such as travel, entertainment, gift, and vehicle expenses. The guide is meant to explain which expenses are deductible, how to report them, how to prove them, and what to do if you get reimbursed. Business expenses are commonly paid for out-of-pocket by employees and business owners, and many of them are unsure exactly which expenses are tax-deductible. Continue reading...
What is a Basis Point?
When percentages being used to describe a security are very small, basis points are often used to describe the numbers. A Basis Point (bp) is 1/100th of a percent, so 1% = 100 bps. This metric is used when discussing financial instruments for which very small changes in percentages can make a difference. For example, rates on single premium immediate annuities change weekly, and generally only by a few basis points. These small changes can make a difference competitively week-to-week, because a few basis points can translate to thousands of dollars of income over time. Other places where basis points are used include: advisory and management fees, moves in indexes and securities, bonds, and so on. Continue reading...
Can I Leave My 401(k) With My Former Employer?
Generally a plan will allow you to leave your assets in there indefinitely, but this is probably not ideal for you. Most custodians will be happy to hold onto your account dollars as long as you’re willing to leave them there. They don’t have to spend any time servicing your account since you can’t make contributions and probably aren’t even able to reallocate your assets, and they will continue to make money on your account with the built-in fees. You may be charged inactive account fees or small account fees as well. Continue reading...
What is a foreign institutional investor?
Institutional investors are corporations, banks, pension funds, mutual funds, and other forms of pooled capital which act as one entity to engage in securities transactions in the best interest of the constituents or company that they represent. Foreign Institutional Investors are those whose company is based in another country. Investments made on behalf of foreign companies, foreign financial institutions, and foreign funds (such as the foreign equivalent of hedge funds, mutual funds, and pension funds) are foreign institutional investments. There are usually reporting requirements for both the foreign government for the county in which the interests are held and for the domestic government of the institutional investor. Continue reading...
What is Terminal Value?
The "end" value at a specified date in the future of an investment or cash flow. Terminal value is a term used in value calculations looking forward toward the future value of an asset or cash flow, and also in calculations which start with the Terminal Value and depreciate the asset over the intervening years until one arrives at the Present Value. Can be used in calculations regarding a business, an index, a cash flow, or an asset. Horizon Value is a synonym, and is perhaps better suited to describe the way the calculation chooses a time horizon of a specific number of years, but otherwise uses the same numbers in an equation that will estimate the value if the business or index went on growing at the same rate into perpetuity. Continue reading...