Yes. Size Does Matter

The Big Box Stores do it. FedEx, UPS and even the stodgiest, lumpiest institution of all, the U.S. Post Office all do it. It’s 21st century agility, it comes in all flavors, shapes and sizes and it goes by the common name of “scalability.” Is your business scalable? What does scalability even mean?

The key to understanding scalability lies in its purpose and applicability to your enterprise. Seasonality is a major driver of the concept and the savvy retailers – from the big box chains to the small box movers – understand the crucial need to augment staffing to meet the surge demands of the Christmas selling season. Even the Christmas tree business owner ramps up for this limited selling season, only to go dormant for the remaining 11 months of the year. Economic conditions, current events and even emerging trends also have a say in the how and why of  scalability.

One might argue that farmers invented scalability in response to harvest time. In its purest form, scalability represents the instantaneous capability to increase or decrease capacity, volume or throughput to meet prevailing market conditions, while optimizing overhead expense. Scalability takes on many shapes, sizes and forms because it’s difficult, if not financially impossible, for a capital-intensive industry such as an automaker to add additional production lines and idle them as car sales fluctuate. Yet that same automaker can staff three shifts or scale their lines down to one shift to meet demand.

As a small or medium size business owner, it’s likely you understand and already implement scalable to your business model. Inventory, staffing, locations, business hours, virtually every attribute of your business is scalable in one way or another.

The question you should ask is whether or not you are fully considering all the opportunities to apply scalability and leverage economies of scale. While staffing, hours and inventory remain the most visible candidates for scalability, others aren’t so obvious.

For instance, do two part time employees give you enhanced scalability over one full time equivalent? The full time employee perhaps depends upon full time employment to make ends meet. Reducing that employee’s hours during slow periods may create undo hardship. Two part time employees may give you the flexibility to save on payroll by discharging staff early during slack periods. Conversely, part time employees may accept additional hours during peaks, sparing you the expense of an additional full time equivalent. Part time employees also aren’t typically entitled to a full time employee’s benefits package.

Whether your business is retail, service, business-to-business, manufacturing or industrial, opportunities for scalability exist. Have you found them all?

Think Fast

One of our most frequently asked questions is, “What can they take?” Most of the time, the call comes from a panicked business owner in the midst of a collection action. To answer, let’s consider an all-too-familiar scenario where a small business owner ignores past due invoices and repeated phone calls from a creditor attempting to collect a past due balance.

In a final act of futility, the creditor turns the matter over to a collection agency or in this case, the Sheriff’s Office. The collection effort has just escalated. In the mean time, the debtor experiences a false sense of relief as the collection attempts cease while the legal wheels turn.  Then, at the creditor’s discretion, the Sheriff pays a visit.

In one variation of this scenario, the business owner not only ignored repeated collection attempts by the creditor, but also disregarded registered and regular mailings from the Sheriff serving notice of intent to collect. This also included a missed opportunity to declare “Exempt Property” from the collections action. Sadly, that omission just gave the creditor the opportunity to seize any assets necessary to retire the debt. Up to and including tools, fixtures and equipment essential to business operations.

By ignoring these important notices, the business owner waived the opportunity to identify and declare all assets that are legally exempt from a collections action. If ever faced with collections, it’s crucial to know exactly what property is exempt from seizure. It is important to note that laws vary from state to state. For this discussion, we’ll consider a few basic examples that must be verified for each state.

A form of transportation and a home would be considered examples of Exempt Property. Also, tools of the trade are protected under the general premise that a tradesman or professional can no longer generate income without certain assets.

The best course of action, if you feel you’re facing a collection action, is to literally take stock in what you own, determining what tools, assets, fixtures and equipment are essential to conduct normal business. With that list in hand, search online or contact an Emerge180 Commercial Debt Restructuring (CDR) Specialist about Exempt Property laws in your state. Then – if the time ever comes – disclose all assets, even if they’re exempt. The discovery of undisclosed property undermines any remaining good faith and compromises your ability to negotiate a more favorable settlement.

Knowing what property is exempt goes a long way to peace of mind.

Resolving IRS Penalties and Interest

Emerge180 Helps Handle Financial Debts

“We help alleviate the financial stress and anxiety business owners face,” says Jonathan Field, CEO of Emerge180. “We often see companies that are behind with their creditors, are also behind with their taxes.  That is why we have a full service tax division dedicated to helping businesses.”

Several different penalties may be levied against companies. Others apply to individuals as well.

Failure to File Penalty (Applies to corporations and individuals):

The failure-to-file penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually filed it.

Based on the amount due, a 5% penalty accrues each month the return is late up to 25%. If you pass five months, simply multiply your balance due by 25% to calculate your failure to file penalty.

When the overdue amount is more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $100 or 100% of the unpaid tax.

Failure to Pay Penalty (corporations only):

These Deposit Penalties refer to payroll tax deposits.

The IRS may charge penalties if you fail to make required deposits on time, make deposits for less than the required amount or if you do not use EFTPS when required.  For amounts not properly or timely deposited, the penalty rates are:

2%deposits made 1 to 5 days late

5%deposits made 6 to 15 days late

10%deposits made 16 days or more late, but on or before the 10th day after the date of the first notice sent asking for the money owed.

10%deposits made to an unauthorized financial institution, or payments made directly to the IRS, or paid with your tax return.

10%Amounts subject to electronic deposit requirements but not deposited using EFTPS.

15%Amounts still unpaid more than 10 days after the date of the first notice or the day on which you receive notice and demand for immediate payment, whichever is earlier.

*These penalties can reach 65% of the amount owed.

Failure to Pay Penalty (individuals only):

This is determined based on the amount of tax you owe; with penalties of 0.5% each month they are left unpaid. With this, there is no maximum limit. Penalties accumulate from the original payment deadline, April 15, until paid in full.  Also, business owners may be liable for a portion of any unpaid payroll taxes.

As General H. Norman Schwarzkopf said, “Leadership is a combination of strategy and character. If you must be without one, be without the strategy.” Emerge180 offers both qualities.

Understanding Tax and Debt Terms

Emerge180 Helps Negotiate with Creditors

“When company debts add up, it’s important to understand the terms used by creditors,” says Jonathan Field, CEO of Emerge180. His company provides expert help to businesses in financial crisis. A quick list of some of the common terms enables business owners to discuss the challenges that come with overdue and unpaid liabilities.

Lien: This provides a legal claim on property to secure the payment of a debt or obligation. It allows use of the property to continue.

Levy: Instead of a claim, property is seized.

Notice of Tax Lien: The IRS must notify the taxpayer in writing within 5 business days after the filing of a lien under these conditions:

  • The tax liability has been assessed
  • A Notice and Demand for Payment has been sent
  • The taxpayer has neglected or refused to pay or resolve the debt within 10 days of receipt of the notice.

Tax Levy: The IRS legally seizes assets to satisfy a tax debt including property, real estate and automobiles.  It is most frequently applied to bank accounts, securities, wages, and accounts receivable.  It bars further access to the seized items by the owner.

If there is no response after the IRS issues a “Notice and Demand for Payment”, the IRS may file a Tax Lien and then issue a Notice of Intent to Levy.  The IRS can empty a taxpayer’s bank account. The severity and complexities of a levy generally points to the need for Professional Representation.

Notice of Levy:  Before the levy, the tax liability must be assessed and the taxpayer must neglect or refuse to pay the debt. The Final Notice of Intent to Levy leaves at least 30 days before it levies your vehicle, house, or land as well as property held by a third party such as wages, bank accounts, and retirement accounts.

Bank Levy: The IRS can levy your bank account and take whatever money is there, no matter whose money it is.

Wage Levy (Garnishment): This orders an employer to withhold part of a person’s earnings to pay off a tax debt, including salaries, wages, bonuses, commissions, and retirement/pension earnings. They often seize up to 85% of a taxpayer’s take-home pay.

IRS Form 2848:  Power of Attorney and Declaration of Representative form is used to authorize a third party to discuss the tax issues with the IRS.

Statute of Limitations:  Ten years is the time in which the IRS or State Agency can collect on the tax.    For example, if the return from 2000 is not filed until 2004 and the tax is assessed in 2005, the 10-year period begins in 2005 and expires in 2015.Statute of Limitations for States varies considerably.

Reasonable Collection Potential (RCP):  A formula the IRS uses to determine the amount of owed taxes they expect to receive.

Trust Fund Tax Portion:  The money that the employer withholds from the employee’s paycheck for federal income tax withholding and the employee’s share of FICA and Medicare tax payment.

Emerge180 Helps Negotiate with Creditors – Contact Us Today