There are some important things to understand about tax Form 1040 before preparing your 2011 return. As always, there are many changes and variables that will affect your return. We have discussed some key changes previously, but neither that commentary nor this article is intended to replace the advice of a professional tax consultant. Here are some of those changes:

Social Security Tax Component of the Self-Employment Tax

The Bush tax cut extensions included a reduction in the Social Security tax component of the self-employment tax from the usual 12.4 percent of net self-employment income to 10.4 percent. This reduction applies to 2011 only. Medicare tax remains at the usual 2.9 percent. For 2011 Social Security tax purposes, the ceiling for net SE income is $106,800.

Self-Employment Tax Deduction (Page 1)

Because of the above-mentioned Social Security tax component tax break, there is a new formula in place for your self-employment tax deduction. Instead of deducting half of your self-employment tax bill on page 1 of your Form 1040, you tax deduction will be 57.51 percent of the self-employment tax amount as long as that tax amount does not exceed $14,204. If your self-employment tax bill does exceed this number, you will multiply the self-employment tax amount by 50 percent and then add $1,067. These revisions are designed to allow you to end up with the same self-employment tax deduction that you would have without the new Social Security tax cut.

Roth Conversions

Many people converted their IRA accounts into Roth accounts in 2010. If you did so, for tax purposes the conversion was treated as a taxable liquidation of a traditional IRA followed by a contribution to a Roth account. For 2010 conversions only, savers were given the option of reporting half the taxable income on their 2011 Form 1040 and the remaining half on their 2012 Form 1040. The same provisions were available to allow people with other qualified retirement plans (e.g. profit-sharing plans) to distribute their savings into a Roth IRA.

Energy-Efficient Home Improvement Credits

A federal income tax credit of up to $500 is available for 2011 for expenditures on qualified energy-efficient home improvements including, but not limited to, new windows, roofs and central air-conditioning systems. If you have already claimed credits in previous years, these claims will be subtracted from the 2011 limit. Note: in past years, the maximum tax credit for energy-efficient home improvements was much more generous.

The IRS Goes Digital

With the aid of lawmakers, the IRS is putting increasing pressure on tax professionals to file returns electronically. It might not be your preference, but this could be the year your Form 1040 is electronically filed.

It might be cliché, but beginning the year with renewed enthusiasm and new goals can be a major boost to business success and an excellent way to get back to business basics. Instead of making unrealistic resolutions, aim to make some simple changes to improve your chances of business success. Here are some suggested starting points.

If something isn’t working in your business, let it go now and try something different. Whether it’s a relationship, a product or business method, if it hasn’t worked in 2011, recognize reality and move on. Both professionally and personally, many of us waste time and money trying to force a square peg into a round hole. Resolve to act when something is not working and make a change immediately. Be willing to listen to others who might have the experience and insight to steer you in a more productive direction.

Make business planning a weekly activity. Don’t wait for the next month or quarter to review your company’s progress. Business moves at lightning speed, and in order to correct mistakes or identify new opportunities, it makes sense to evaluate your progress and goals each week. This way you can make corrections when the changes needed are still minor and relatively easy to implement. In a tough business environment, weekly strategy sessions will give you more control over your own destiny.

Promote your business consistently – in good times and bad. When you’re busy, it is easy to ease off on new business activities. Unfortunately, that is when you most need to keep your efforts going to keep your business healthy. In today’s economy, problems with your clients’ business affairs can come out of nowhere and hit your bottom line fast. Keeping existing customers happy is important, but it’s equally important that you identify new prospects and constantly market your business to new clients.

Give something back to your community. Don’t try to spread yourself too thin, but do find a local cause or charitable organization to support. Find something that is close to your heart or a logical fit with your area of expertise. Whether your contribution is in cash or in pro bono work, this type of giving cannot fail to energize you and help you appreciate your own good fortune. Although this work should never appear to be self-serving, good deeds generate recognition and enhance business reputations. Although the payback might come in unexpected ways, it rarely fails to materialize.

Differentiate between being busy and being productive. Running your own business presents you with many varied tasks – but they are not all of equal importance. Resolve to manage your own time better. Start by delegating minor tasks to others so that you can expend your energy on things that are critical to your business success. Prioritize your daily activities and begin with the most important first. Show others that you expect them to respect the value of your time as you value theirs. Insist that all company meetings have a short written agenda, that they start and end on time and that a participant documents all decisions, tasks, assignments and deadlines.

Extending this list wouldn’t be hard, but these five simple suggestions can provide a practical framework for success in 2012. Use them to improve your personal productivity and to also provide your staff with a great example of business leadership.

According to a recent survey taken by the Hong Kong Shanghai Banking Corp., 40 percent of small businesses worldwide want to be trading internationally by 2013. Firms both large and small are daunted by the linguistic and logistical challenges involved in international trade, so the prospect of going global has remained a pipe dream for many. The United States lags behind other developed countries in exports – estimates suggest that less than 1 percent of all 30 million U.S. companies export goods overseas. Small businesses make up more than 70 percent of U.S. exporters, and their goods represent approximately 14 percent of the value of all goods exported. In the international arena, small businesses have some advantages that the big guys don’t have – including the flexibility and willingness to embrace new technology to reach and service customers.

Is global business right for you? The decision to launch a global marketing effort needs careful thought. It must be compatible with your overall business plan and your growth strategy. Here are some basic issues and questions to consider.

1. Define your major objectives for tackling overseas marketing, which might include:
   • Improving profitability
   • Capitalizing upon the pending launch of a unique new product or service
   • Leveraging a special window of opportunity, such as a major international event
   • Maintaining or improving growth rates
2. Do you have the staff skills and other resources required to support international marketing efforts?
3. Are you able to research the new international market(s) thoroughly, identifying key markets and possible customers, determining budget needs and assessing overall risks?
4. What special skills (languages, previous experience, existing business/family contacts etc.) do you have?
5. Are senior executives (and travel budgets) available to make trips to the overseas markets? And how much face time will be needed at startup – and then later on to maintain relationships when the business is more established?
6. Are you prepared to customize your products and/or adapt marketing efforts?
7. Adopt the Harmonized Commodity Description and Codingsystem if you plan to use a foreign distributor. It will help you easily read trade data to see which countries are exporting or importing certain products.
8. Attend industry trade shows to identify and meet foreign importers.
9. Can your product(s) be modified to suit local customers (e.g. packaging size and style; meet metric standards)?
10. In many countries (especially Asia and the Middle East), relationships are critical to success – and there are no shortcuts. It takes time. Get to know local protocol and business etiquette – it is important to know how to greet potential business partners and learn the rules of business dining. Some cultures like Japan’s are much more formal than the United States, and it’s import ant to observe the correct protocols and chain-of-command.

Resources

Retail businesses might want to take a look at Export Now, a new e-commerce venture designed specifically to help U.S. businesses access consumer markets in China. Founded by a former U.S. ambassador and under secretary of Commerce for International Trade, this e-commerce solution for small businesses distributes subscribers’ goods via its online store and Taobao.com, China’s largest business-to-consumer platform.

Closer to home, the administration is supporting export efforts. Thanks to President Obama’s National Export Initiative, the International Trade Administration at the Commerce Department has more funding for export programs. The president also has called on the Export-Import Bank of the United States to increase available financing for small businesses by 50 percent. In addition to helping business owners find capital, the Small Business Administration provides training and expert counseling to small firms. Public sector agencies have also ramped up efforts to simplify the requirements business owners must meet and will help businesses identify overseas markets and customers.

Studying the headlines every day for clues to the economy can be a frustrating process, and trying to figure out what works best in today’s economy can be exhausting. Relax. Surviving and thriving in today’s economy often doesn’t require abandoning your old systems in favor of something new. In an atmosphere of uncertainty, it is easy to lose sight of business basics in a fruitless search for some fail-safe solution. Successful business owners must adapt to conditions – good or bad – in order to reap the rewards. Here are some of the tried-and-true philosophies that characterize successful entrepreneurs.

• Make your own luck. We all face the same basic issues – product demand, credit availability, customers’ spending habits, economic slow-down etc. The winners are those who stop focusing on the problems and switch to being part of the solution. A positive attitude and outlook are vital in a tough economy. Don’t indulge in the idea of being a victim of today’s tough economic times. We are all affected by the same problems; but every situation brings opportunities for those who are willing to look for them. Open your mind to searching for new possibilities.
• Change your mindset. Stop referring to how things were and focus on what’s happening now. How can your business or your firm be a solution for customers in today’s market conditions?
• Recognize your advantages. Small businesses have the ability to respond to changing conditions faster than large organizations. They are unburdened by the unwieldy systems, layers of management and inflexible policies and procedures that make it hard for bigger companies to adapt and respond in a timely manner.
• Be a positive leader for your employees. People who work for and with you take their cues from you. A despondent leader unwittingly encourages defeatism and pessimism among those who are crucial to the business’s success. Be realistic and honest about problem areas, but make it a point to focus on remedies and positive action. With customers, by all means lend a sympathetic ear if your client needs one, but don’t join in the pity party. Use the feedback to develop new products or services that might help them. Instead of sympathy, offer solutions.
• Avoid major change; instead, embrace improvement. It is tempting to think a big change in your business systems is the key to adapting to outside economic issues. Perhaps it isn’t. If your business systems are informal – like many small businesses – then perhaps it’s time to review them. Don’t engender chaos by tossing out what might only need fine-tuning for something that is more complicated.
• Review and improve your basic business systems. Make sure that all the processes in your business – receiving customer orders, making sales reports, accounts receivable, etc. – are documented as simply and straightforwardly as possible. There’s no need to create fancy training materials or online tools. A simple checklist of tasks that outlines responsibilities, approval procedures and timelines is all that is usually needed. These checklists should be provided to every employee and made readily available online and/or as hard copies.
• Make new business everyone’s business. Build referral partnerships. Bring not only your employees, but also family members, business partners and others together to discuss what additional services or products might be of interest to your clients. If you are able to assist the company that services your fleet of trucks, perhaps they might refer a contact that needs your professional services.
• Be smart with social media. Set aside specific times to handle social media. Find sites like LinkedIn that will allow you to participate as an expert in your industry by answering questions from fellow group members.

Bottom line: tough times don’t necessarily require a radically different approach to business. What is essential is a willingness to adapt to market conditions and to accept responsibility for generating your own success.

One of life’s many ironies is that you need a solid marketing budget when economic times require you (and everyone else) to tighten the purse strings. To be effective, marketing requires the right mix of reach and frequency – or to put it in layman’s terms, a series of ads in the right mix of media (print, radio, TV, web-based, social media, etc.) supported by direct marketing (mailers, brochures, email campaigns) and public relations. Traditional marketing/promotional campaigns can be expensive. However, challenging times can be a great catalyst for innovative thinking. Here are a few tactics to reach potential clients without spending a lot, though most do require some investment of your time.

• Think highly targeted. It makes no sense to conduct campaigns with a wide sweep – finding qualified leads this way just costs too much. Determine who might be your most likely customers and think of the most direct way to reach them when they might be in a buying mood. For example, if you run an agency providing temporary staff to businesses, review local papers, professional organizations’ news and e-letters and trade journals to find out if neighboring companies have hired or promoted senior HR/personnel executives. Your tactics here might include a card of congratulations followed up with information on your services and a brief phone call to introduce yourself and your firm. If you offer catering services, review the local announcements of engagements and pending marriages, send congratulations along with a tempting list of menu options and an invitation to a tasting party you host for brides and grooms.
• Look for community events or expos where you can showcase your products and meet prospective clients without spending a lot of money. For example, an upcoming health fair might present a chiropractor or physical therapist with the chance to provide complimentary treatment demos to inform potential new clients about innovative treatments for sports injuries or repetitive stress injuries. The event offers the chance to compile a targeted mailing list (email and mail) and the means to send offers to interested parties.
• Community relations can be an effective way to get your name out to potential customers. If you provide personal services – whether it be hair styling or debt counseling – consider celebrating your firm’s anniversary by donating services to certain respected institutions (like a halfway house or a shelter for victims of domestic violence) to support their clients’ new beginnings. In return, your firm gets appropriate recognition in the institutions’ newsletters, web-based communications and annual reports that reach neighborhood leaders. If the institution seeks press coverage, it’s even better. However, to keep the tone of philanthropy apart from commercialism, it is best if the beneficiary (or another third party) contacts the media. Have a concise fact sheet about your business prepared and in the hands of the institution’s director for inclusion with their press materials.
• Of course, no list of ideas would be complete without reference to Twitter or other social media. Don’t be afraid to encourage followers on Twitter or Facebook so that you can send out updates, money-saving offers or tantalizing tips to current and potential fans. Use your web presence and your business cards to encourage them to follow you.

When Congress passed the 1099 business tax reporting requirement in 2010, it drew immediate criticism. It would have required business owners to report all transactions totaling $600 or more paid to other businesses for products and services. With its repeal, business tax reporting reverts to previous guidelines, which require only disclosure of payments made to unincorporated businesses.

The repeal might have resolved business leaders’ concerns, but it left government coffers with a shortfall of $21.9 billion – the projected revenue from the repealed requirement. Accordingly, the Senate and Congress both developed strategies to address this. The Senate version proposed spending cuts. The version President Obama signed into law reflected the Republican-controlled House proposals that the Senate passed on April 5. The new law changes parts of the healthcare bill of 2010 that deal with health insurance tax credits for low- and middle-income taxpayers. Individual taxpayers’ eligibility for credits – paid directly to health insurers – is calculated based on personal income reported for the previous year. The new law will require more people whose incomes rose over the past year to return overpayments.

Democrats had opposed the changes to health insurance tax credits because they believe the revisions penalize people who receive year-end bonuses. Acknowledging this and his party’s commitment to more affordable health care, Obama noted that he looked forward “to continuing to work with Congress to improve the tax credit policy in this legislation.”

The debate over how to tackle the budget deficit has no easy answers. Former Federal Reserve Chairman Greenspan jumped back into the fray on April 17 by recommending allowing the Bush tax cuts to expire and a return to Clinton-era tax rates. He also noted that major cuts in entitlement spending were needed.

Many entrepreneurs had their share of bad bosses before setting up their own business operations. Trying not to fall into the bad habits of others – or avoiding your own versions – can be a challenge, especially for people who excel in doing rather than managing.Here’s a short checklist that might help you avoid the most common pitfalls:

1. Lead by example and be clear about your rules, guidelines and expectations
   If you want your employees to dress appropriately or work normal office hours, make sure that you aren’t breaching your own guidelines. Be sure people know what you expect from them in terms of workplace conduct and that they recognize the type of environment you offer.
2. Create and distribute written workplace guidelines
   Don’t assume everyone shares your standards and values. They don’t. In these litigious times, every business needs something in writing (reviewed by a legal professional) that states company policy and procedures. This is the document that states what is not allowed in the workplace – whether it be sending comments and photos regarding work to Facebook or using office equipment (computers, scanners, etc.) for personal business. This document can also address confidentiality issues, vacation and sick time policies, and non-compete requirements.
3. Be honest and consistent
   Being the boss means you will sometimes have to give employees unpleasant news, share information and/or address problems and issues with them. Remember, you are their boss first, not their friend. If you use little white lies to try to avoid uncomfortable conversations – telling one person one thing and another employee something different – you run the risk of appearing inconsistent or untruthful. Employees want to know where they stand, what the boss plans to do and how the boss feels about work-related issues. It is best to deliver bad news honestly, without delay, and directly to those it affects. To do otherwise can generate conflicting rumors and undermine morale and trust.
4. Praise publicly; criticize privately
   There will be times when something, or someone, makes you frustrated, angry or even fearful. You are human, after all. Whatever works – a walk outside, breathing deeply, etc. – to avoid a public outburst, do it. No matter how severely provoked, shouting, expressing anger or losing your temper won’t make the situation better. In fact, it might seriously upset those who played no part in creating the situation. When you can address the issue with the individual calmly, do so in private. Only discuss individual employees’ job performances publicly if you are delivering praise.
5. Conduct diligent reference searches
   Don’t be tempted to cut corners when checking references on new hires. Remember that you are trying to determine competency and character. An inexperienced worker or unscrupulous individual can create havoc and cost you a lot of money in a short amount of time. If you hire people with little or no relevant work experience, make sure that you train and supervise them carefully. What is obvious to you might not be obvious to them.

Being a boss brings its own rewards and challenges. Remember that most employees take their cues from what they see the boss doing. You set the tone and atmosphere of the workplace. Upholding consistent standards and expectations in a place of work where mutual respect thrives will make your management duties much easier.