Five Expenses to Cut During Tough Times

If revenue hasn’t come back as fast as you expected it to, it may be time to review your budget and determine if some planned expenses can be cut. Here are five places to look to do just that.

1. Travel 

Since most events have been moved online or cancelled altogether, you can likely redirect any money you’ve budgeted for travel this year to other more urgent expenses. And if you have prepaid these items, you may be able to get a refund. Hotels have flexible refunds up to the date of the stay unless you took a prepaid deal.  And airlines have begrudgingly provided refunds, although in some cases, it did take time to get them.  

Now that so many employees are familiar with Zoom and other videoconferencing tools, you may want to rethink any future travel requirements that could easily be accomplished virtually with a much lower budget. 

2. Training

 While it’s never a good idea to cut training, there may be ways to deliver it more affordably. You may be able to purchase subscriptions to online courses that include an “all-you-can-eat” component to them.  A good example is Lynda.com, now owned by LinkedIn.  

Any unnecessary training that can be delayed is another way to free up funds.  

3. Dues and Subscriptions

If money is tight, evaluating your memberships is one area where you may be able to free up money. Especially since many in-person events have been cancelled, this might be a good time cancel any renewals you are not able to fully utilize.  

Subscriptions are also something you can review.  Can any of these be cancelled to free up cash?  You can always re-subscribe when things get better. 

4. Employee Perks

If you provide your employees with benefits and times are extremely lean, cutting them is an option to keep from laying off workers.  Some of the options might be:

• Eliminating perks like movie day, free car washes, or onsite chair massages 
• Stopping coverage of paid volunteer hours
• Cutting education expenses if you are paying college tuition for some employees
• Cancelling employees’ memberships and subscriptions as described above
• Slashing training budgets as described above
• Converting event attendance and sales meetings to online versions
• Disallowing overtime work
• Holding off on employee bonuses
• Reducing vacation or holiday pay
• Cutting down on health care options such as vision and dental plans
• Reducing 401(k) matches on a temporary basis (watch out for plan requirements, though)
• Cutting regular hours

All of these are steps you can take to avoid having to reduce your workforce.

5. Layoffs

One painful place to look for more cash is your workforce. If work has slowed due to demand, you can raise cash by furloughing or laying off workers.  Unfortunately, many businesses have already had to do this. 

By looking deeply at all of your business expenses, you can find places to cut spending so that you will be in a better position for the future.  

Failure to File: COVID-19 Update

Due to COVID-19, the IRS extended the tax return filing and payment deadline to July 15, 2020.  If you are unable to file your return by this date, you may request an extension which will give you until October 15, 2020 to submit your tax return.  However, an extension only gives you extra time to file your tax return; your payment is still due no later than July 15, 2020.

When a taxpayer has not filed a tax return by the extension deadline of October 15^th, the IRS will gather all of the tax documents that have been transmitted to them and create a substitute return.  If their data shows that you are owed a refund, nothing further will be done.   If the data shows that you owe money, the IRS will begin sending out collection letters.   

Overpayment of Taxes

If you qualify for a refund and wait more than 3 years to file your return, the IRS will take that refund away because the statute of limitations will have expired.  Don’t expect them to send you a reminder letter!

Penalties Assessed If You Owe

There is interest due on taxes you owe, but that’s not the biggest penalty. For every month that your tax return remains unfiled, a five percent failure-to=file penalty applies, up to 25 percent of the tax due.  

For example, let’s say you owe $1000. It could cost you a penalty of $250 per month for not filing, but only a $5 penalty for not paying.  Don’t forget that in addition to the penalties listed above, the IRS will continue to charge interest on any unpaid balance.

Increased Audit Risk

In addition to the penalties and interest you are charged when you don’t file a timely return, you also increase your chances of being audited. When you file on time, you have a three percent chance of an audit. If you don’t file on time, your chance of being audited increases to 50 percent. 

The general rule is to file by the extension due date since the consequences are harsher for not filing than not paying the tax due. However, be proactive to pay any tax due by the deadline, not the extension deadline.  

You Can No Longer Hide from the IRS

You might think that the IRS will never find you, but you would be mistaken. Advances in technology have made it easier than ever before for the IRS to find you. 

If you have a driver’s license, passport, bank account, social media account, address, social security number, or any other database record, the IRS has access to it and will see that you have not filed.  

Take Action Now

Don’t put yourself in a position of grief. Even if you are not ready to file, file something and you can amend the return later.

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