Tips to slash shipping costs for your business

Scrutinize your operating budget and you may discover that shipping expenses — ever present and necessary for obtaining inventory and delivering products to customers — are squeezing your bottom line and cutting into profit margins. Taking some time to trim those costs may offer significant opportunities for savings.

Comparison shop and negotiate

The biggest names in the shipping industry — UPS, FedEx, DHL, and the U.S. Postal Service — aren’t the only games in town. And because they all compete with each other, it’s wise to shop around for the best price. If you ship large volumes of merchandise, you may find that some shippers are willing to lower your costs. Generally speaking, pricing schedules are based on volume. The more you ship, the lower your rate.

Shipping account number

Ask suppliers to use your shipping account number. This approach has two major advantages. First, it tends to increase the shipping volume on your account, which can lower your overall rate. Secondly, it can also keep vendors honest. For example, if you ship via FedEx, request that the supplier use your FedEx account number, so you can check online to verify actual shipping expenses. Include this requirement with each purchase order and your suppliers may not be tempted to pad their delivery invoices.

Other costs

Shipping is expensive. Fuel surcharges, recipient signature fees, and extra charges for Saturday deliveries are common. Your pricing should reflect those costs. If you’re selling online and can’t afford to offer free shipping, consider increasing the price of your products to cover delivery expenses. Buyers may balk at paying $8 to ship a $15 item, but may be willing to spend $3 for shipping to obtain a $20 product. Your company garners the same sales revenue either way.

Slash packaging expenses

Your customers will gladly inform you that shipped items were damaged in transit, as they should. But ensuring that your products arrive in pristine condition requires well-designed and costly packaging. How can you reduce packaging costs? Consider using packages provided by your carrier. You won’t run afoul of their size regulations or end up paying “dimensional fees.” Order several boxes of each size to determine the optimal packaging for your needs. Other options that may work for you include recycling previously used containers or shopping online auction sites for inexpensive packaging materials.

Shipping costs will likely always be a part of your company’s expenses, but implementing a few of these ideas may reduce your bottom line.

Hitting the jackpot on gambling losses

Gambling may not be for everyone but many people occasionally place wagers at the track or indulge in games of chance. You may be one of them. If you’re lucky enough to hit a jackpot, or even if you have relatively modest winnings, the IRS expects you to report those amounts as taxable income. On the other hand, you can reduce the tax on those winnings with deductible losses from your other gambling activities. Perhaps one of the best benefits of this tax deduction is that it can be claimed without meeting the usual tax law requirements for similar miscellaneous expenses.

The winning thresholds that require reporting vary by gambling activity, but generally, if you receive $600 or more from gambling activities during the year, you must report the income on your annual tax return. This includes winnings from trips to the casino and racetrack and even the bingo games at your local house of worship. It doesn’t matter if the money goes to a private business or a charity.

Fortunately, you can offset the tax by claiming gambling losses, up to the amount of your winnings. But you can’t claim any loss for the excess. You are strictly limited by this rule.

Now here’s the kicker: Normally, you can deduct only miscellaneous expenses above 2 percent of your adjusted gross income (AGI). But this doesn’t apply to gambling losses. Therefore, your losses are fully deductible down to the penny!

It’s important to keep track of your losses through detailed records. For instance, if you bet at the track, log your wagers for each race and supplement it with documentation like losing ticket stubs. Similarly, if you’re playing blackjack at a casino, list the amounts won and lost at each table. Bingo players should record the number of games played, the cost of cards, and amounts collected on winning cards. If your activities rise to the level of being a “professional” gambler, you can deduct all of your losses, even if they exceed your winnings. Contact our office if you have questions about your situation.

Donating art to charity — it can be a beautiful thing

Do you own a prized piece of art that you’d like to donate to charity?

If you meet the requirements for gifts of property, you may qualify for an enhanced tax deduction. But be aware of potential pitfalls along the way.
Normally, your deduction for donated appreciated property is based on the cost when you acquired it. For example, if you paid $7,500 for a sculpture and it’s now worth $10,000, your deduction is limited to $7,500. However, if the property would have produced a long-term capital gain had you sold instead of donating it (i.e., you’ve owned it for more than a year), you can deduct the full fair market value (FMV). In other words, you’re then entitled to deduct a higher amount, even though you never paid tax on the appreciation in value. In our example, after one year you could deduct $10,000, the sculpture’s FMV on the donation date.
The tax law generally limits your annual deduction for charitable gifts of property to 30 percent of adjusted gross income (AGI). If you can’t squeeze under the AGI threshold in a given year, the excess is carried forward for up to five years.

Yet there’s still another tax hurdle to overcome. If you donate property like artwork, the gift must be used to further the charity’s tax-exempt function. Otherwise, the deduction is limited to the property’s cost. For example, if you donate a family heirloom to a museum, you can claim the higher deduction based on FMV if it is prominently displayed. However, if it’s relegated to a dusty storeroom, your deduction is limited to the lower amount. In the event that the value of artwork has declined since you acquired it, your deduction is limited to the FMV, regardless of how long you’ve owned it.

Finally, the tax law imposes strict recordkeeping requirements on such charitable gifts, including independent appraisals for donations exceeding $5,000. If you have questions about your donation, contact Dye & Whitcomb today.

Is it worth filing an amended tax return?

Suppose you just glanced at the 2016 tax return you filed in April and noticed an error or omission. Or maybe you remembered a deduction you neglected to include on your return from the prior year. Is it too late to fix things?

Not at all. As long as you meet the statutory deadline, you can file an amended return for the appropriate tax year, even if the original return was filed only a short time ago. But the question remains: Should you do it? The answer: It depends. There are several factors to consider in this decision, including the amount of tax at stake, whether the IRS owes you money, or you owe the IRS.

If the IRS owes you money, it may not be worth the extra cost and inconvenience of filing an amended return when the differential is insignificant. On the other hand, if you have a legitimate gripe and the refund would be substantial, go ahead and file an amended return. Many people suspect that filing an amended return increases your likelihood of being subject to an audit, but the IRS denies this.

If you owe the IRS money, the amount of the discrepancy is not as important. Typically you should file an amended return and pay the difference you owe as soon as you can. Otherwise, you run the risk of being assessed extra interest and penalties on top of the regular income tax that is rightfully due.

The deadline for filing an amended return is three years from the original due date and the IRS generally has the same three years to review your return. The audit period is extended to six years if you’ve underreported income by 25% or more. There is no time limit if fraud is involved.

Still not sure if filing an amended return is the right move in your case? Contact Dye and Whitcomb, your Northern Colorado accounting firm so we can go over the details.