Hiring a collection agency? Research it first
Dear Karen: How do I choose a collection service for my unpaid invoices?
Answer: Ask agencies about their recovery percentages, their rates and whether they have experience with your industry. Balance their commissions with their success rates, said Tony Reisz, chief of Ontario Systems of Muncie, Ind., which sells collections software.
“Carefully consider and evaluate how an agency will reduce your costs while improving efficiency,” he said. Check references with other firms in your industry.
And check out collection services with the Better Business Bureau, at www.bbbonline.com. It lists complaints against the agencies.
How to respond to a tax audit
Dear Karen: You recently discussed avoiding tax audits. What do you do if your firm is being audited?
Answer: Appoint your legal counsel, human resources manager and payroll manager to respond, said Kevin Wiggins, an attorney with Thorp Reed & Armstrong in Pittsburgh.
Do a compliance review of employment practices and tax payments, correcting any deficiencies. “Focus on independent contractor classification issues, compensation for officers and owners, fringe benefits and payroll taxes,” Wiggins said.
You can ask the IRS for additional time to respond, and you “may also be able to limit the scope of the documents or information requested,” Wiggins said.
When records can be tossed
Dear Karen: How long should I keep financial records?
Answer: Keep your payroll reports and human resource files for as long as your company is in business, said Douglas R. Palmer, founder of Palmer Financial, an accounting firm based in Bethesda, Md. Keep copies of employees’ W2 and W4 forms while the individuals are employed by you and four years after they leave your firm. Keep unemployment tax forms for 10 years.
Leases, vendor invoices and hard copies of your expense reports should be kept for seven years, and your compliance certificates and customer contracts should be retained for five. Keep canceled checks for up to 10 years, Palmer said.
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