March 2021 Client Newsletter

Stephen Merritt Newsletter

Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462

Kiss the Chef Louis!

What’s Inside:

What is the Difference Between Your Marginal Tax Rate and Your Effective Tax Rate?
Happy Birthday Louis!
Managing Customer Service with Technology
Covid-19

What is the Difference Between Your Marginal Tax Rate and Your Effective Tax Rate?

Have you heard the phrases “marginal tax rate” (or tax bracket) and “effective tax rate” and wondered what the distinction is between them? In order to explain the difference, it is first important to note that in the United States, we do not pay a flat tax – we are on a graduated system and therefore pay taxes in tiers.

Let’s say that you are a Single filer, and you have taxable income of $60,000 for the 2020 tax year. According to the IRS tax tables, that puts you in the 22 percent tax bracket – in other words, that is your marginal tax rate. Twenty-two percent of $60,000 is $13,200, but luckily, you don’t have to pay that much. If you calculate the tax based on the 2020 IRS Tax Tables, the amount of tax is $8,990, which is less than the $13,200 based on the 22 percent marginal rate.

This scenario illustrates the difference between your marginal tax rate (tax bracket) and your actual effective tax rate. Even though you would be in the 22% bracket based on $60,000 of income, you do not pay 22 percent flat tax. You would pay less than that since there is one bracket below your tax bracket: the 12 percent bracket. (There are really two for you math geeks: 12 percent and 0 percent.)

The rate that you actually pay in taxes is your effective tax rate. This rate is unique to you individually and is simple to calculate. Just take your total tax liability and divide it by your taxable income. In our example, that would be $8,990 / $60,000 = just about 15 percent. Compare that to the 22 percent marginal rate and it sounds pretty good!

The effective rate is often more useful because it gives you an average rate you pay on all the money you make during the year. It is much more accurate in terms of gauging what you might owe based on your projected taxable income. In most cases, the effective tax rate is less than the marginal rate.

The marginal tax rate is still helpful to know for tax planning. For example, you can get a feel for how much potential benefit you could receive from an additional deduction. For example, how much would you benefit from making a $6,000 IRA contribution? Your taxes would be reduced by $1,320, or 22 percent of $6,000. Looking it up in the tax tables is another way to double-check the math and yields the same savings.

Birthday Boy Louis had a fantastic day filled with tons of cookies and treats!

Managing Customer Service with Technology

Do you have a lot of customer service inquiries in your business? If so, it can be a challenge to manage them all. Being responsive with customer service can make all the difference in your company’s success, so it makes sense to take a look at some tools that can streamline the process.

The most common solution to automating customer service inquiries is to implement a ticket management system, which is also called help desk software. Some of the things that are important to consider include:

How fast you can respond to a customer
How well you solve the customer’s problem
How to track a customer’s issue if it has to be open for a while before it can be solved
How to do all of this in a cost-effective and efficient, yet friendly, manner

These days, an inquiry can come from a multitude of places:

Phone calls and voice mails
Emails
Text messages
Social media accounts, for all the platforms you have a business presence
Posts, replies, and comments
Messaging
Any other methods you have set up in your social accounts
Chat feature on website
Snail mail

That’s a lot of inputs to organize. When they can all be fed into the same system, you have just unified your messaging input and taken a giant step toward organizing all of these moving parts. A good ticketing system will accomplish this, and the feature you want to ask for is multi-channel accessibility.

Keeping your customer service costs low is another factor, and one way to accomplish that is to help users self-serve and solve their own issues when they can. This requires a robust knowledge base feature. A knowledge base is a set of how-to articles and videos of the most frequently asked customer service questions.

Here are a few very basic topics to consider including in your knowledge base:

What forms of payment do you accept?
What is your shipping policy?
How can I get help if I need it?
What is your return/refund policy?
What is your privacy policy?
What is your guarantee?
Is my data secure with you?
How do I update my credit card/address/phone/email?
When will my items arrive?
What licenses do you have?
What are your hours?
Do you have hours for seniors?
How do I login?
How do I access my digital items?
What are your covid-19 policies for your employees? For customers?
Are you hiring? How do I apply? What are your employment policies?

A good ticket system will also have the ability to customize the ticket, the customer service agents, the customer records, and the other important parts of the system. For example, you may want to set up your own status items for each ticket. Open, assigned, active, hold, and complete are typical status types, but you may need another one.

The workflow must also be considered in a ticket system. How does a typical ticket flow through your business, and can the system replicate that flow.

Other important features of a ticket system include:

Support for multiple languages
Customer response to tickets, as well as customers can view status of their tickets
Uptime of system – service-level agreements
Tracking, such as number of open tickets, tickets on hold, and the like
Reporting metrics, such as wait time, ticket servicing time, and number of tickets handled by each agent
Ticket tagging and categorizing
Feedback loop for customer suggestions of product improvements
Ease of use for customers and agents
Notifications

A few of the most popular ticket management systems include:

o Zendesk

o Freshdesk or Freshservice by Freshworks

o Zoho Desk

o HubSpot Service Hub

o Salesforce Service Cloud

o LiveAgent

There are literally hundreds of technology options for any size business.

If you want to take your customer service to the next level or just want to get more organized, consider looking into these ticket systems.

Coronavirus Disease (COVID-19)

Stephen Merritt, CPA, P.C. understands the challenge the impact COVID-19 has on our community.

Our office will continue with regular business hours. We are doing client meetings, all the while following CDC guidelines.

We have a handy system of passing the box thru the door, as well as following sanitary procedures.

Hours of Operation: Monday- Friday 8:00 am till 5:00 pm

Tax documents may be mailed, FAXed or emailed.

Final Returns will be mailed out.

As always, please call, we are happy to assist.

Stay safe and healthy.

Certified Public Accountants

Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778 233 Business Park Drive, Suite 104, Virginia Beach, VA 23462

What is the Difference Between Your Marginal Tax Rate and Your Effective Tax Rate?

Coronavirus Disease (COVID-19)

Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462