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2/9/11: Women in Insurance & financial services (WIFS) has announced that ten industry giants are partnering with the organization to support the careers of women in 2011. WIFS is honored to announce that MetLife joins WIFS for the first time in 2011 as a Diamond Level Partner. MetLife has partnered at the highest sponsorship level, demonstrating their dedication to supporting women in financial services careers. WIFS is pleased to work with MetLife, a longtime industry leader. Also coming on board as brand new Gold Level WIFS Corporate Partners in 2011 are Lincoln Financial Group and the John Hancock Financial Network. Transamerica Agency Group has joined with Transamerica Financial Advisors this year as a Gold Partner. By supporting WIFS, these industry partners have made a statement about their commitment to supporting women in the financial services industry and their understanding of the importance of diversity in the field. WIFS also announced that all 2010 Corporate Partners will continue their sponsorship in 2011. The partnerships between WIFS and these organizations are strong and are important to the future of the financial services industry.
2/9/11: The financial services industry, until recently, was a highly protected industry with little competition. This historical lack of competition was associated with minimal levels of marketing within the industry. Banks, for example, could rely on customers coming to them and, thus, did not need to expend resources attracting, persuading, educating customers or presumably or even attempting to fully understand the customer's decision process for purchasing financial services. Recent changes in laws governing financial services have, however, resulted in greater competition among various types of financial firms. Given this increased competition, financial services firms need to focus on understanding the consumer's decision processes for purchasing financial services in order to better meet the needs of potential customers as well as maintain a competitive position within the industry. Understanding the consumer's decision processes for purchasing financial services and understanding the growing importance of women in this market will help firms create more effective and accurate communication messages for reaching potential customers.
2/8/11: At a recent lecture at the local Community College a partner at a Jupiter accounting firm was asked by a student Isnt your field accounting? The company representative responded, While I am into accounting, which is the methodology and measuring aspect of my work, the profession as a whole is better labeled as accountancy. Accountancy is the profession and accounting is the methods by which accountants measure, track and report on financial information so that resource allocation decisions can be made by decision makers. Generally speaking, there are two main types of accounting. There is financial accounting and there is auditing. Financial accounting typically involves processing of financial information about a business operation where information is recorded, organized, summarized, interpreted and finally communicated. Auditing, on the other hand, is there process that an independent auditor examines accounting records and financial statements so that he can express a professional opinion about the financial records and answer questions about projections.
At the heart of accountancy lies the need to take stock of the day to day state of various sales and expenses. In the modern world, when many contracts are partially fulfilled at varying times, bookkeeping is the only way to know where you and your business stand in the greater scheme of things.
If you operate your own small business you may be able to do just fine with some accounting software. Take a look around for some flowchart templates. These can make monthly financial recording and reporting easier. Simply enter the various types of income and expenses then each subsection updates the appropriate fields. Before you know it, youve got proof that all bills have been allotted for and youve got your bottom line.
If you find you can manage your business finances on your own, then stick with the system that you know works for you. If, however, you start running into complications that make it hard for you to see where discrepancies are coming from, it may be time to enlist the services of a professional accountant.
Talk with colleagues and friends. You may know someone that knows a tax accountant or other type of financial consultant who may be willing to look over your taxes for a friendlier rate than if you were to cold call them.
2/8/11: In todays economy, small business owners sometimes look to the oldest form of commerce, the exchange of goods and services; or bartering. A Jupiter accounting firm, whose clients are predominantly small business owners, advices them that the fair market value of property or services received through barter is taxable income. Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market value of the goods and services exchanged must be reported as income by both parties. The firm discusses the four facts about bartering that the IRS wants small business owners to be aware of:
Barter Exchange: A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.
Barter Income: Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter barter for anothers products or services you will have to report the fair market value of the products or services you received on your tax return.
Taxes: Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax or excise tax. Your barter activities may result in ordinary business income, capital gains/losses or you may have a nondeductible personal loss.
Reporting: The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business or other business returns such as Form 1065 for partnerships, Form 1120 for corporations, or Form 1120-S for S corporations.
2/7/11: To start a restaurant, one needs to come up with a business plan to outline an efficient and cost effective way to manage the restaurantwhich in turn is necessary to impress a loan officer at the lending bank. The business plan template for a restaurant consists of several key headings which include; executive summary, marketing, historic analysis, organizational structure, restaurant operations, risk management and a financial plan. The template begins from the executive summary, which consists of business goals, description and formation, along with the owners philosophy. It also consists of the character, location, main objectives, directors and the management team involved with the restaurant. The key positions of the restaurant and strategic alliances and sales summary are also included in the executive summary. The marketing section consists of sales estimates, analysis current product mix, market analysis and marketing goals and strategies. Pricing policies and competitive research are also included in the marketing section. Advertising and promotion schemes are required to be detailed in the plan. The organizational structure should outline the management and personnel structure along with the administrative organization plus a contingency plan. The restaurant operations should also be mentioned quite clearly to include its identity, location, premises and layout. The plan must include a risk management section which lays out the exit strategy and risk reduction plans which could take effect should rough times occur.
2/7/11: There are several occasions when a business owner would have to use a business plan template. A business plan is designed to develop a presentation of the business model of a specific company. There are several situations when such an overview is appropriate. Particularly for new employees, banks, lenders, creditors and - in general -people who hold a certain interest in the company and have to examine the business plan prior to dealing with the company. On the whole, a business plan plays a highly instrumental role in giving an accurate insight to the company's structure and operations. An annual report, however, must not be mistaken for a business plan. The annual report principally consists of statutory disclosures of the company and is concentrated around the performance of the company. A business plan is not necessarily prepared to scope that entire organization. In some cases, a business plan is also prepared in order to depict the graph of one single product or initiative. The business plan is basically a brief outline of the organization and the designer of the business plan may add additional information of a specific matter.
2/4/11: Gov. Rick Scott's budget said his spending plan includes $4.1 billion in tax and fee relief over two years. The proposed tax relief Florida for 2011-13 will result in a $540 savings per household. Scott's budget proposal includes a variety of reductions to include:
Reducing the corporate income tax from 5.5 percent to 3 percent in 2011-12 and from 3 percent to 2.5 percent in 2012-13
Reduce the required local effort, a property tax for schools, saving taxpayers around $500 million in 2011-12
Reduce the property tax collected by state water management districts by 25 percent
Reduce unemployment compensation taxes by shortening how long Floridians can collect benefits and making it more difficult for them to be eligible
Roll back 2009 Legislature-approved fee increases for driver's licenses, vehicle registrations and other motor vehicle fees
Repeal or alter other small taxes on ammonia, pesticides, fertilizer, solvents, dry cleaning, tires and lead acid batteries, etc.
Taken together, Scott says the savings for taxpayers is $4.1 billion over two years.
2/4/11: Florida initiated a program to aide taxpayers unable to pay their tax bills associated with the Gulf oil spill. Based on certain criteria, taxpayers may be eligible to qualify for tax relief Florida programs. The relief options that may be available for taxpayers who owe back taxes in Florida and were directly affected by the Gulf oil spill include installment plans and waivers of late filing penalties. Eligibility for these relief options are to be decided by the Florida Department of Revenue on a case by case basis. Anyone who has been impacted by the oil spill in the Gulf of Mexico should visit or call a Florida Department of Revenue service center to discuss available options. Taxpayers affected by the oil spill and owed back taxes were also advised to participate in Floridas Tax Amnesty Program and possibly have all of their penalties and up to 50% of their interest waived
2/3/11: As many small businesses struggle with sales and financing in the current economy, San Diego-based landscape retailer Backyard X-Scapes decided to take advantage of San Diego SCOREs (formally known as Service Corps of Retired Executives now referred to as Counselors to Americas Small Business) free mentoring and low-cost workshops to remain financially sound and profitable. While setting up a national distribution of faux waterscape products, Jamie Kocher and Steve Raketich became convinced they could streamline the process by purchasing direct from the factories. As a result they started Backyard X-Scapes, a landscape retailer and wholesaler specializing in fountains, pottery, bamboo fencing, bamboo products, thatch palapas, thatch products, artificial turf, artificial rocks and rock waterfalls. They also sell accessories including fountain pumps, lights, pond supplies, etc. Utilizing over 70,000 square feet, Backyard X-Scapes is now the largest supplier of outdoor products in San Diego County. In need of financial planning and marketing guidance, Kocher and Raketich contacted San Diego SCORE and attended several business counseling workshops including internet marketing, small business marketing, and business plan I: How to Develop Your Competitive Advantage. The internet marketing workshops proved especially beneficial as Backyard X-Scapes and their bamboo and tikis websites currently account for more than 25 percent of total sales. To further expand their horizons, Backyard X-Scapes hired an online marketing team to increase sales and awareness of Backyard X-Scapes. Kocher and Raketich also received financial planning guidance from San Diego SCORE Counselor Paul Hollenbach.
2/3/11: Many factors can lead a business owner to end up in debt; among those are taxes, excessive payroll, credit lines, credit card expenses, etc. Once a company has fallen into the strong binds of debt, is not an easy task to free the business from financial difficulties. Utilizing a business counseling professional is the most advantageous way to proceed. By receiving counseling, the business owner/manager will then begin to understand the true nature of the debt problem. Many times owners/managers do not seek business debt help feeling that they may no longer have control of the company. This is the main reason why businesses remain trapped in debt for extended periods of time. A professional business counselor, expert on bringing business debt help, proceeds by first analyzing each facet of the business. By hiring a business counselor for advice, a business owner/manager then can begin to apply proven methods of allocating money to the various departments of the business. Today, thanks to the availability of professional business counselors, it is an easy task to find a good service which can provide helpful information on business debt help, credit repair, bank levy, foreclosure avoidance, debt negotiation and several mechanisms that can help free a business from debt; or at least can help the business owner/manager understand the depth of the businesss current situation.
2/2/11: Any officer of a corporation is an employee of that corporation for IRS tax purposes. This requirement does not change when the officer is also a shareholder. S corporations should not attempt to avoid paying employment taxes by having their officers claim their compensation as anything other than wages. Distributions and other payments by an S corporation to an officer must be treated as wages to the extent that the amounts are reasonable compensation for services performed by the officer for the corporation. The IRS fails to specifically outline what might be considered reasonable compensation, but there are a few factors that should be considered in determining what might constitute reasonable compensation. One determining factor would be the officers degree of experience and training pertaining to the duties he or she performs for the corporation. Another would be the time and effort the officers must expend to perform their duties. Comparisons in compensation can be made to non-shareholder employees and the wages paid by comparable businesses for the same services. The corporation also needs to examine any compensation agreements it might have for the services performed by the officer and the use of an industry standard formula to determine compensation for specific services. Health and accident insurance premiums paid by the S corporation on behalf of shareholder-employees with 2% or greater holdings in the company are deductible as fringe benefits. These payments should be reported on the shareholder-employees W-2 forms as wages for income tax withholding. This compensation is not subject to Social Security or Medicare tax and is reported in Box 1, wages, of the W-2 form. While discussing reasonable compensation for shareholder employees in an S corporation, the company position and motives in the case of a C corporation may be exactly the opposite. While the IRS strictly scrutinizes underpayment of compensation to shareholder-employees in an S corporation, it strictly scrutinizes overpayment of compensation to shareholder-employees in a C corporation.
2/2/11: IRS tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax. The AMT is a separately figured tax that eliminates many deductions and credits, thus increasing tax liability for an individual who would otherwise pay less tax. The tentative minimum tax rates on ordinary income are percentages set by law. For capital gains and certain dividends, the rates in effect for the regular tax are used. You may have to pay the AMT if your taxable income for regular tax purposes - plus any adjustments and preference items that apply to you - are more than the AMT exemption amount. The exemption amounts are set by law for each filing status and are listed in the Form 6251 Instructions. To find out if you may be subject to the AMT, refer to the Form 1040 Instructions. You may use the AMT Assistant for Individuals, which is an electronic version of the AMT worksheet available on the IRS webpage at www.irs.gov. The AMT worksheet may tell you that you do not owe the AMT or it may direct you to Form 6251, Alternative Minimum Tax - Individuals. If you are directed to Form 6251, you will have to complete that form to determine whether you owe the AMT. Form 6251, Alternative Minimum Tax - Individuals, is available in .pdf format on the IRS website. If you were not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, complete and attach Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts.
2/1/11: The Carnival Corporation wouldnt have much of a business without help from various branches of the government. The United States Coast Guard keeps the seas safe for Carnivals cruise ships. Customs officers make it possible for Carnival cruises to travel to other countries. State and local governments have built roads and bridges leading up to the ports where Carnivals ships dock. A Stuart CPA who is an expert in corporation taxation said, Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes. and Where should Obama start if he is serious about making all companies pay their fair share? But Carnivals biggest government benefit of all may be the price it pays for many of those services. Over the last five years, the company has paid total corporate taxes (federal, state, local and foreign) equal to only 1.1 percent of its cumulative $11.3 billion in profits. Because of this obscure loophole in the tax code, Carnival can legally avoid most taxes. It is an extreme case, but its hardly the only company that pays far less than the much-quoted federal corporate tax rate of 35 percent. Of the 500 big companies in the well-known Standard & Poors stock index, 115 - less than 20 percent of the companies - paid the total corporate tax rate. According to an analysis of company reports done for The New York Times by Capital IQ, a research firm, thirty-nine of the 500 companies paid a rate less than 10 percent.
2/1/11: In his State of the Union speech, President Barack Obama opened the door to lowering U.S. corporate tax rates, launching a politically fraught and complex effort that holds promise for some U.S. firms and pain for others. President Obama was applauded by Vice President Joe Biden and House Speaker John Boehner prior to delivering his State of the Union address. Mr. Obama said he wanted to lower the corporate tax rate, now at 35%, without adding to the deficit. That means offsetting any cut in the overall rate by ending scores of broad tax deductions, the impact of which would be distributed unevenly across corporate America. A Stuart CPA listening to the speech stated that the president didn't offer specifics. In November 2010 a White House-appointed commission on reducing the deficit recommended lowering the corporate tax rate by seven percentage points to 28%. To achieve that, it recommended repealing research tax credits, tax breaks for domestic manufacturers and a tax provision that allows faster write-offs for equipment purchases. Companies that don't make big use of the deductions and pay a high effective tax rate, such as Wal-Mart Stores Inc. and CVS Caremark Corp., would welcome such a move. Rachelle Bernstein, tax counsel for the National Retail Federation - an industry trade group, called the president's outline very positive.
1/31/11: Structured settlements are structured cash payments made through an annuity system established to compensate injury victims for their losses. A West Palm Beach CPA who deals with recipients of these funds calculates the most advantageous methods for his clients. The primary objective is to determine whether or not a structured settlement is the correct way to deal with the settlement. If a client is receiving payments from a structured settlement, periodic payments may not be enough. Especially should the need for large sum of money suddenly arise. One option is to sell the structured settlement which can solve an unforeseen financial problem. What the CPA advises a client to ask himself is Why do I need the money now? Advisable reasons for selling a structured settlement are to buy a house, for college tuition, for considering an entrepurenial opportunity or to keep from filing bankruptcy.
1/31/11: A West Palm Beach CPA was asked, What are the pros and cons of different types of investments? he responded by stating When deciding where to invest money, you need to take into account your investment goals and objectives since different types of investments carry varying degrees of risks and potential return. A CD is a conservative investment. The CD is FDIC insured and is, therefore, a minimal risk. A possible downside is that money cannot be withdrawn until a specific time. If money is withdrawn prior to that specific time, a penalty will be assessed. A bond is essentially a loan you make to a company or a government. Bonds have varying degrees of risk from essentially risk-free treasuries to high-risk junk bonds. The higher the risk, the higher the return. Stocks are investments in companies. Depending upon the company, the risk of the investment can be high or low. Obviously, buying stock in Johnson and Johnson is a lot less risky than a new internet startup company. In general, the stock market returns - on average - about 10% a year, though the actual return of any given stock will vary significantly. A mutual fund typically invests in over 100 stocks, so it's an instant way to diversify a portfolio. However, mutual funds charge a fee. Mutual funds never outperform the stock market. Real estate is a popular investment. The most obvious real estate investment is home ownership. A home can go up or down in value which depends on the housing market located.
1/28/11: Payroll can be a time consuming and specialized process for anyone who owns a business. It also requires knowledge of payroll processes and legislation both of which take time to master. Due to these factors it is usually difficult for someone who owns a small or medium sized business to complete his payroll while running his business at the same time. Payroll must be done or the business owner could eventually be in trouble with the IRS which could lead to fines and possibly court appearances. If a business owner needs help with payroll, he/she could benefit from using a company that provides payroll services. These are companies designed to gather all of a businesss payroll information and to complete the payroll on its behalf. Using a payroll services company is a legal and excellent way to have a companys payroll completed without employing additional staff. Contracting out payroll ensures that the work is completed by experts, is on time and that all processing is done following government guidelines.
1/28/11: The payroll software utilized by payroll services companies is important in understanding the services a business will receive. Since the payroll software provided to the owner/manager offers a wide and varied range of features, it is to the owner/managers benefit to determine which of the payroll services companies being considered has the payroll software that suits the requirements of the firm. Most payroll software has similar features, including an employee record with gross pay, deductions, net pay, employee details and employers associated costs. However, there are certain subtle differences in the payroll software provided by the different payroll services which can negatively affect payroll servicing operations. One such difference which exists in payroll software is how the reports are generated. Some payroll servicing reports provided by payroll services companies may not be compatible with existing accounting software and may prove to be a problem for the person assigned to re-encode the data to the present system. This may cause delays in the payroll servicing of employees paychecks, which would cause some tension within the company. An additional problem which a business may encounter could be in the tax computation. Some payroll software does not have the complete tax tables for all states, which could create a problem especially if the company operates with branches throughout the country. It is important to choose from the payroll services companies who have a proven track record for providing servicing on a national level.
1/27/11: A major reason that many auto repair shops close their doors in the United States is the failure to file and pay payroll taxes. This mistake is more common than most would suspect. You have a weekly payroll and weekly payroll tax deposits. You have a month where your collections go down or you lose a couple of your largest customers. The time comes for you to make the deposit and you don't make it figuring that a month from now you'll just make the deposit when the payroll tax returns are due to be filed. A month later you still don't have the money. What do you do? You can't make the payment so maybe you don't file the 941. Now youre into a new quarter and the cash shortage continues. As a result, the cycle continues. So now youre behind several quarters. What do you do? Most accountants who have performed an accounting audit have seen this occurrence more times than they care to remember. New clients do not understand the severity of this problem. They assume that the Internal Revenue Service or State Departments of Revenue will be patient and wait for the money. Nothing could be further from the truth.
1/27/11: A federal and state accounting audit of professionals involved in the auto repair Industry in Illinois has been conducted and more are on the way. Numbers published by the Internal Revenue Service show the results of its enforcement activities prove that the number of audits performed nationally and the amount of money received by the IRS as a result of the audits has increased substantially during the past five years. Government officials are confident that this trend will continue to increase in the coming years due to the record deficits being generated by federal and state governments. Always keep in mind; the main functions of the Internal Revenue Service and the Illinois Department of Revenue are to collect taxes. They do this through enforcing the laws passed by Congress and the State of Illinois. If a business is currently involved in an audit, the best thing that can be done is to get adequate representation. The job of the IRS and the IDOR is to enforce the law and to collect as much tax as is legally allowable by law. They are very good at this job. A business owner representing himself in an income tax audit simply makes it much easier for the feds and state to collect.
1/26/11: The recession may be over, but the country is looking at a long period of stagnation or slow growth. Should CPA firms change their attitude toward growth? Ed Hess, a professor at the University of Virginia, says there is no empirical evidence to support the idea that businesses must grow or die. So if CPA firms do not show growth, how will it be able to add new partners to eventually buy out the old partners? This leads to some sobering thoughts. Firms either have to slow their growth and bring in fewer new partners or ask the partners to cut their income hoping that by bringing in new partners the share of the pie will be larger. But, it is rare to find the firm whose partners are willing to take significant cuts in compensation for years for the betterment of the business. Partners need to be honest with each other and decide whether theyre willing to take a cut in pay and commit to building the firm together. If not, then the next step may be to let some of the partners go. CPA partnerships should have a realistic discussion about their individual situations and act accordingly.
1/26/11: There are CPA firms who, because of the lagging economy, feel guilty about offering new services to their clients. Instead they work toward keeping the client's fees as low as possible. That might result in losing a client. If the client has unmet needs or pains that could be alleviated, but are not, the accountant has not served that client well. Firms must stop thinking about selling to the client or cross-selling. They should be thinking about serving or cross-serving. Business development veteran Russ Molinar defines cross-serving as, The process of identifying unmet client issues and needs and offering specific products, services and solutions from the firm to fulfill a companys individual and organizational needs.
1/25/11: Despite the slumped economy, four leading accounting firms have donated a total of $4 million to the National September 11 Memorial & Museum. Deloitte, Ernst & Young, KPMG and Price Waterhouse Coopers each pledged $1 million to help build and sustain the 9/11 Memorial. These four accounting industry leaders join more than 170,000 individual contributors from all 50 states and 35 countries. The memorial will open in 2011 on the 10th anniversary of the 9/11 attacks. The museum is scheduled to open in 2012. Both are under construction at the World Trade Center site formerly known as ground zero. Mayor Michael Bloomberg, who serves as 9/11 Memorial chairman, said These gifts are helping to generate the momentum we need to ensure that the memorial opens next year. The firms have set a tremendous example of corporate citizenship even during a trying economic climate. With the tenth anniversary of the attacks coming up next year now is the time when everyone should get involved in ensuring the memory of 9/11 is not forgotten. The 9/11 Memorial will honor and remember the nearly 3,000 innocent victims of the September 11, 2001 and February 26, 1993 attacks. When we open the memorial on the 10th anniversary of the 9/11 attacks, we hope as many individuals, corporations and industries as possible will be able to say they were a part of building the nations memorial to that terrible tragedy, 9/11 Memorial President Joe Daniels said. We are enormously grateful to our Board Member Sam DiPiazza, Global CEO of Price Waterhouse Coopers International, for working with his industry colleagues to make these gifts possible. Continued fundraising is needed for programming in the 9/11 Memorial Museum and providing a financial base for long-term operational needs.
1/25/11: The Wall Street Journal reported that there could be a case filed by the Attorney General of New York State, Andrew M. Cuomo, against one of largest accounting firms in the world; Ernst & Young LLP (E&Y).The suit charges that E&Y helped Lehman Brothers Holding, Inc. (Lehman) engage in accounting fraud for hiding tens of billions of dollars of fixed income securities from Lehmans balance sheet in an attempt to conceal its true liquidity condition from the public and investors. Further, the suit alleges that from 2001 to Lehmans bankruptcy filing on September 15, 2008, Lehman extensively used Repo 105 transactions which were explicitly approved by E&Y. Repo 105 was misused to temporarily park highly liquid, fixed-income securities with European banks with the intent to decrease financial statement leverage. This was allegedly done with E&Ys explicit approval. By characterizing these financing transactions as sales - which clearly they were not - the only intent was to reduce Lehmans leverage thereby deceiving the investing public. Cuomo indicates E&Y was fully aware of Lehmans fraudulent Repo 105 transactions, approved their use and provided Lehman an unqualified audit opinion every year from 2001 to 2007 despite knowing that they concealed the Repo 105 transactions. Additionally, in 2007 and early 2008, Lehman was using Repo 105 to the tune of $50 billion. The suit also alleges that E&Y failed to object when Lehman misled analysts on its quarterly earnings calls regarding its leverage ratios. Also E&Y did not inform Lehmans Audit Committee about a highly-placed whistleblowers concerns about Lehmans use of Repo 105 transactions. Cuomo wants $150+ million plus investor damages and equitable relief for all of the fees E&Y collected for work performed for Lehman between 2001 and 2008.
1/24/11: After watching the Channel IX Queensland Flood Appeal Telethon, citizens of Australia are wondering about the generosity of corporate donors. Are they simply marketing ploysa method of quick and cheap advertising giving everybody a warm, fuzzy feeling? The CEO of a large department store gleefully donated dollar for dollar on 50% of the profit they made in one day equaling $125,000. Perhaps their bookkeeper was gone that day or perhaps they just had a bad day of business since they normally report a daily net profit of $470,000. Also there are other companies from the big end of town that agreed to donate 10 cents to one dollar on every sale made on one day. Are they really giving generously or is it an advertising spin? So how effective is cause related marketing? Is the Australian public really so dumb as to think how generous the large retailers are when supporting school programs etc. while undercutting small business owners who are struggling to make an honest buck? The citizens of Australia are beginning to question the business ethics of corporations, to encourage the media to continue its investigation into their practices and to provide the public with honest answers and suggestions for reform.
1/24/11: London Bookkeeping Services ltd is providing the most efficient and excellent bookkeeping services to businesses located in United Kingdom. They know how to get the best out of every deal for their business clients whether it is a small or large scale business. London Bookkeepers enables businesses to retain complete control over all financial and accounting aspects even though it is outsourced. They also aid management in reaping the benefits of concentrating more on the core areas of business; including aspects of marketing and production. In the present economic scenario where cost cutting is the significant need of businesses, bookkeepers offer their services at affordable rates. The staffs of London Bookkeeping Services are highly trained and experienced professionals who are familiar with all financial and accounting services of various diversified industrial sectors. If there is a need for services in the area of tax planning, a bookkeeper is able to advise clients by formulating correct taxation policies and procedures to prevent excess payment of tax. This service keeps all of their books updated and able to customize with any modifications and offers a full service monthly, quarterly, annually or limited to handle only payroll and taxes.
1/21/11: Finding a good tax preparer is not an easy task and the growing complexity of the tax code has made it even trickier, says columnist Tom Herman in Tax Report. More than 60% of all taxpayers used paid preparers last year, up from 46% in the mid-1980s. Many more are likely to need professional help this year unless Congress does something to permanently curb the rapid growth of the alternative minimum tax, a highly complex parallel tax system that ensnared about 3.5 million people last year. No one knows for sure how many paid preparers exist. Cono Namorato, a former IRS official who is a partner at Caplin & Drysdale in Washington, estimates there are 1.2 million to 1.6 million. Among them are highly trained tax lawyers, certified public accountants and enrolled agents. The list also includes seasonal workers at national tax-preparation companies and small storefront and shopping-mall operations.
1/21/11: The IRS's requirement requiring registration, testing and continuing education of the nation's paid tax preparers has proven to be a step in the right direction for the taxpaying public. Should it continue as planned, the effort will help the IRS weed out incompetent, unethical and fraudulent preparers as well as saving taxpayers and the Treasury several millions of dollars. This change is particularly relevant to the earned income tax credit; a tax benefit that actually puts money into the pockets of millions of low-income workers. The IRS says errors related to claiming this credit tops the list of taxpayer mistakes and many people lose out or get the credit late by not applying for it properly. Of course, monitoring paid tax preparers also will help snare those who fraudulently help ineligible taxpayers obtain the credit.
1/20/11: A West Palm Beach accounting firm reported that the basic business standard mileage rate has increased from $.50 in 2010 to $.51 in 2011. The IRS issued the directive stating the new 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes was made effective on Jan. 1, 2011. The standard mileage rates for the use of a car (including vans, pickups or panel trucks) are:
51 cents per mile for business miles driven
19 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
1/20/11: The West Palm Beach accounting firm also discussed how taxpayers who updated their homes by "weatherizing" would receive a tax credit for their efforts. Homeowners who made energy-saving improvements in 2010 could cut their winter heating bills and lower their 2010 tax bill as well. Last years Recovery Act expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit. This credit equals 30 percent of what a homeowner spent on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count. Those who spent as little as $5,000 before the end of 2010 on eligible energy-saving improvements can save as much as $1,500 on their 2010 federal income tax returns.
1/19/11: The new, Spending Reduction Act of 2011, bill will be introduced to the House of Representatives in the next month. It is a plan, to reduce federal spending by $2.5 trillion through fiscal year 2021. The results of the proposed cuts will certainly be regressive. But tax cuts are popular now so that does not seem to matter to the supporters of the bill. They clearly think lower taxes will stimulate economic activity and offset any harm government cuts may do to damage GDP expansion. A Stuart accountant who has been studying the bill said the proposal has a number of novel ideas. One is that federal government spending will no longer rise with inflation. Another is that there will be discretionary spending limits for non-defense items. The bill also aims to kill any stimulus programs put into place two years ago if they require additional funding in the future. The complicated legislation also has proposals to consolidate agencies and cap certain federal employment levels. Among the programs in the bill is to sell off federal property which does not have any immediate use.
1/19/11: The Stuart accountant also feels the bills logic is poorly argued. Some of its aims, which include an end to Fannie Mae and Freddie Mac, are nearly impossible. The housing market cannot do without their functions in place. There are very few economists who would argue otherwise. The goal of the legislation is to bring back the $100 billion budget cut which was criticized as unrealistic when it was proposed. The bill does not allow for any substantial military cuts or a decrease in Social Security or Medicare. It has been pointed out often that the federal budget cannot really be cut by much unless these programs are considered. The most remarkable assumption behind the bill is that the cuts, whether realistic or not, will have no effect on the economy. That means receipts to the Treasury can remain in the plans set out in the budget. It is assumed that any federal employee who loses a job is not a consumer and that all the stimulus money to be spent in the future is a waste. Most Americans think the economy is still in recession. Unemployment and housing would support that. But there is no way to look back and say for sure what federal expenditures were useless and which helped drive GDP higher. What is certain is that a drastic and rapid cut in spending now will take some bone with the fat and that is something the economy cannot afford.
1/18/11: Any company with employees has to account for payroll, fringe benefits, payroll taxes and any garnishments associated with specific employees. The payroll accounting department is tasked with tracking all payroll and benefits. Some of the components are salaries, wages, bonuses, commissions and overtime. Also included are FICA, federal and state withholding, unemployment and disability insurances. Many employer benefits include holiday and sick pay, health and other insurance, retirement and profit sharing plans. Many of these items are subject to state and federal laws; some involve labor contracts or company policies.
1/18/11: Payroll is a liability. Every business incurs a number of accrued liabilities relating to its payroll. The largest of these liabilities is the obligation to pay employees for services rendered during a period certain. A payroll expense often is among the largest expenses of the business organization. Accrued payroll liabilities, however, seldom accumulate to large amounts since they are paid in full at frequent intervals. Payroll accounting involves more than merely recording the liability for accrued wages and salaries payable. Employers must compute numerous taxes which the government levies either upon employees or upon the employer. In fact one might say that the total wages and salaries expense (or gross pay) represents only the starting point of payroll computations.
1/17/11: The Alabama Education Association (AEA) is seeking dismissal of a lawsuit it filed over an attempt by Gov. Bob Riley's administration to end the payroll deductions for the political action committees of the Alabama State Employees Association (ASEA) and the Alabama State Troopers Association (ASTA). In a filing to the Alabama Supreme Court, AEA attorneys said the lawsuit should be dismissed because the Alabama Legislature passed a bill earlier that stopped the payroll deductions and, thus, rendered the suit moot. AEA and ASEA earlier got Montgomery Circuit Judge Truman Hobbs Jr. to issue a preliminary injunction allowing the deductions to resume after the Riley administration had challenged them. The Riley administration had appealed that order. The AEA asked the Supreme Court Thursday to return the case to Hobbs with instructions to dismiss it.
1/17/11: New York employers face stricter limits on deductions from employee paychecks under new regulations issued by the New York Department of Labor. The new regulations clarify severe restrictions under Labor Law Section 193 that limits payroll deductions; even with the employees written permission. Specifically, the new regulations prohibit deductions in two areas that have been common in the past:
Employers are not allowed to make deductions for overpayments or salary advances. This also means that the New York employer cannot dock an employees final paycheck if the employee has a negative vacation balance.
Employers in New York cannot make deductions for repayment of a loan, advance or debt.
New York employers need to be aware of several recent changes in the wage and hour regulations; including rules regarding maintenance of uniforms, meals and lodging.
This comes on the heels of news that the New York Department of Labor reached a settlement with a Queens supermarket for not paying grocery baggers at all. Apparently, the food store required baggers to work for tips only. When one employee complained that this was illegal, he was terminated. The supermarket paid more than $300,000 in back wages to three baggers and reinstated the employee under the terms of the settlement.
It continues to frustrate me how employers can continue to flaunt the law and simply not pay their workers. We are glad that the employer agreed to pay workers the wages they owe them and to reinstate
1/14/11: In an apparent move to stave off defections to competitors, Google announced in November it was giving all employees a $1,000 cash bonus and a raise of 10 percent. The raises, which took effect January 1, 2011, applied to all 25,000 employees at the internet giant according to an e-mail penned by Google CEO Eric Schmidt and first revealed by a business insider. We want to make sure that everyone feels rewarded for their hard work, Schmidt wrote. We want to continue to attract the best people to Google. In addition to the raise and bonus, Google moved a portion of employees' bonuses into their base salaries. The move comes as Google grapples with a wave of high-profile defections to Facebook. The payroll department was directed to use a payroll calculator in order to accurately determine payroll deductions.
1/14/10: When inputting information into a payroll calculator there is specific data needed in order to obtain accurate calculations:
Pay period: This is how often an employee is paid; either weekly, every other week, twice a month, monthly or annually
Gross pay: Pay, before deductions
Filing status: Choices are "Single" and "Married." Choose "Married" if married or filed as "head of household." Choose "Single" if taxes are filed as a single person or if married but filed separately
Number of allowances: When federal income tax withholdings are calculated, the taxpayer is allowed to claim allowances to reduce the amount of the federal income tax withholding. This is based on the number of dependents a person reports.
401(k)/403(b) plan withholding: This is the percent of gross income put into a taxable deferred retirement account, such as a 401(k) or 403(b).
State and Local Taxes: This is the percentage that will be deducted for state and local taxes. Note, the calculator can only estimate state and local withholdings.
Post-tax deductions: Any payroll deductions made by an employer with after tax income.
Post-tax reimbursements: Any reimbursements made by the employer that are after tax.
FICA OASDI: FICA Old Age Survivors and Disability Insurance. FICA OASDI is calculated as gross earnings times 6.2% (for 2010).
FICA Medicare: ICA Medicare is calculated as the gross earnings times 1.45%. Unlike FICA OASDI there is no annual limit to FICA Medicare deductions.
Federal tax withholding calculations: Federal income tax withholdings withheld.
1/13/11: It can be argued that 'profit' does not always give a useful or meaningful picture of a company's operations. Readers of a company's cash flow statement might even be misled by a reported profit figure. Shareholders might believe that if a company makes a profit after tax of $100,000, this becomes the amount which it could afford to pay as a dividend. Unless the company has sufficient cash available to stay in business and also to pay a dividend, the shareholders' expectations would be wrong. Survival of a business depends not only on profits but, perhaps, more on its ability to pay its debts when they are due. Such payments might include 'profit and loss' items such as material purchases, wages, interest and taxation etc, but also capital payments for new fixed assets and the repayment of loan capital when this falls due (e.g. on the redemption of debentures).
1/13/11: Most business owners/managers understand the basic tenet of good cash flow management (accelerating receivables, streamlining payables and managing inventory) and its benefits (greater operational efficiencies, making your money work harder for you, etc.). The essence of staying on course with these objectives is to maintain a positive cash flow. Yet, according to the Service Corps of Retired Executives (SCORE), a lack of control over cash flow is one of the leading causes of small business failure. Cash management products and services generally fall into four categories; collections, disbursements, investments and borrowing and information reporting. All of these are reflected in the cash flow statement.
1/12/11: Many various types of ratios can be calculated from financial statements pertaining to a companys activities: performance, liquidity and financing. Regarding investing, ratio analysis is an important element in the fundamental analysis process. Among the dozens of ratios available, the most relevant ratios are categorized into six major units:
Liquidity Measurement Ratios - Ratio is calculated by comparing a companys liquid assets
Profitability Indicator Ratios- Discusses the different measures of corporate profitability and financial performance
Debt Ratios-Gain a general idea of the companys overall debt load
Operating Performance Ratios-How well a company turns its assets into revenue and how efficiently a company converts its sales into cash.
Cash Flow Indicator Ratios- Give users another look at the financial health and performance of a company.
Investment Valuation Ratios-Used by investors to estimate the attractiveness of a potential or existing investment/valuation
1/12/11: Ratio Analysis is one of the basic tools of financial analysis. It is a fact that financial analysis itself plays an important role in the progress of business strategic planning. Considering this is a basic tool of the strategic analysis, ratio analysis, plays a vital role thus, it is not possible to complete the analysis of a companys strengths, weaknesses, opportunities and threats, without an analysis of its financial position. This tool is normally used to conduct a quantitative analysis of information in a companys financial statements. Ratios are calculated by comparing the current year figures to previous years, other companies, the industry, and perhaps the economy to judge the performance of any company. This is a procedure predominately used by proponents of fundamental analysis. To accurately evaluate the current and/or possible future performance of a business, the owner/manager must learn how to analyze ratios.
1/11/11: All taxpayers will have three extra days this year to file their taxes and pay the any tax due. The tax filing deadline has been extended to April 18, 2011 because of a little known Washington, D.C. holiday, Emancipation Day, which falls on the normal deadline time of April 15th. Taxpayers requesting an extension will have until October 17th to file their tax returns. The IRS kicked off the start of tax filing season this week by announcing the new deadline along with several reminders about the recent tax law changes.
1/11/11: The health care law includes a provision that requires even the smallest businesses to send a 1099 form to the IRS whenever they buy more than $600 a year in goods or services from a single company or individual. Andy Ellard, who manages Manda Machine Co.; a 20-employee manufacturing shop in Dallas, estimates that the provision will take 160 hours of his bookkeeper's time. The purpose of this ruling for this tax filing law is to increase revenue by $17 billion. It seems, however, that legislatures seldom concern themselves with the costs involved in satisfying the legislation or the burden that it creates for businessesespecially small companies. The IRS estimates that the provision would affect 40 million businesses, charities, nonprofit associations and other entities that would be required to file these additional reports.
1/10/11: EFTPS, the Electronic Federal Tax Payment System, is a tax payment system provided free by the U.S. Department of Treasury. Pay federal taxes electronically via the Internet or phone 24/7. Businesses and Individuals can pay all of their federal taxes using EFTPS. Individuals can pay their quarterly estimated taxes deposits electronically using EFTPS. Both business and individual payments can be scheduled in advance. More than 9.5 million taxpayers are currently enrolled in the system. Since EFTPS was initiated there have been 1 billion electronic payments made - totaling over $22.8 trillion. EFTPS via the Internet is a secure government web site that allows users to make federal tax payments.
1/10/11: EFTPS offers taxpayers the convenience and flexibility of making tax payments via the Internet or phone by 8:00 p.m. (ET) at least one calendar day in advance of the due date. EFTPS can be accessed directly to report tax information. The taxpayer instructs EFTPS to move the funds from the individuals account to the Treasury's account for payment of federal taxes. Funds will not move from an account until the date indicated. The bank statement will confirm that the payment was made. Payments may be initiated 24/7. As an added convenience, EFTPS allows taxpayers to schedule tax payments in advance. Businesses can schedule payments up to 120 days in advance of their tax due dates. Individuals can schedule payments up to 365 days in advance of their tax due dates. EFTPS will automatically make payments on the due date as indicated. Scheduled payments can be changed or cancelled up to 2 business days in advance of their scheduled payment date. EFTPS can be utilized to make all federal tax payments, including income, employment, estimated and excise taxes.
1/7/11: Tax preparers are able to e-file the following Arizona Department of Revenue refund or payment due return forms electronically:
140 Resident Personal Income Tax Return
140A Resident Personal Income Tax Return (Short Form)
140EZ Resident Personal Income Tax Return (EZ Form)
140PY Part-Year Resident Personal Income Tax Return
140NR Non-Resident Personal Income Tax Return
204-E Application for Electronic Filing of Extension Request
In addition supporting forms available for electronic filing consist of the following types:
Schedule A Federal Form 1040 - Itemized Deductions
Schedule A Arizona Form 140, Itemized Deduction Adjustment
Schedule A(PY) Itemized Deductions for Part Year Resident
Schedule A(PYN) Itemized Deductions for Part Year Resident with Nonresident Income
Schedule A(NR) Itemized Deductions for Nonresident
Form 221 Underpayment of Estimated Tax by Individuals
Form 131 Claim for Refund on Behalf of Deceased Taxpayer
Tax credit forms available for electronic filing consist of the following types:
All active 300 credit forms numbered 301 through 342, except 338, 339, and 342. Refundable Credits for 308-I and 342 can not be e-filed.
1/7/11: Common questions regarding e-file:
When does the IRS start accepting tax returns though e-file? The first day the IRS will accept transmissions for e-file by anyone is January 16, 2009. Therefore, filing earlier than January 16th will not get a faster refund.
How can a taxpayer e-file a prior year return? Prior year returns have to be paper filed and cannot be sent through e-file. The IRS only accepts current year returns through October 15th for e-file.
What is the procedure? A return which was sent through e-file was rejected due to an error. What is next? The IRS returns approximately 1% of submissions for corrections. Usually this is because of a typo in the data the taxpayer has entered (an incorrect EIN on a W-2, a misspelled name or a typo in a SSN). The most common error message this year relates to the Self-Select PIN Program. A person will generally have the opportunity to correct the error and resubmit the return. However; note that if the error is not corrected, the return will not be accepted.
Can a taxpayer check his IRS e-file refund status online? Yes, you can check your IRS e-file refund status online by going to the IRS website and clicking on the "Wheres My Refund" link.
1/6/11: Cash flow is an indicator of a company's financial health. Without a positive cash flow, a business will have difficulty surviving; even if it is profitable. Cash flow is an indicator of a company's financial health. The statement of cash flow provides information about cash inflows and outflows over a specified period of time. This information is useful to a business owner since it reveals how well a company can generate cash from operations, financing and investing activities. Without cash, a company will be unable to maintain or expand its operating capacity, pay its employees and vendors or pay dividends to stockholders. There are two methods for reporting cash flows from operating activities; the direct method and the indirect method. The direct method uses actual cash flow information from the company's operations instead of using accrual accounting values. The indirect method uses accrual accounting information instead of actual cash inflows and outflows.
1/6/11: A sale is not a sale until the cash is collected. To illustrate this concept there was a business owner who sold $18,000 of merchandise to two different commercial accounts. He had basically hit a home run by winning these two new commercial accounts. He was feeling quite good about the sales and also finally breaking into an untapped market. The businesss income statement reflected an exceptionally good month in sales. In fact, it was the best month in the stores history. What the business owner had not realized was that these sales were actually hurting his cash flow. Not only had he not collected the $18,000, he had already paid for the inventory he sold to them. To make matters worse, the uncollected sales revenue occurred at a time of the year when he could least afford to be without the cash. The sale looked good on the income statement, but not so good on his cash flow statement.
1/5/11: Vancouver, British Columbia, Tempe, AZ, Plutonic Power Corporation and GE Energy Financial Services have agreed to acquire a 50-megawatt portfolio of three photovoltaic solar facilities to be built in Ontario from First Solar, Inc. marking Plutonics expansion into solar power and Ontario. Plutonic Power is expected to make an equity contribution of approximately C$6 million and serve as the projects managing partner. Project debt will be arranged by First Solar on behalf of Plutonic and GE Energy Financial Services and is expected to be in place at financial close, which coincides with the start of commercial operation. Additional financial details were not disclosed.
1/5/11: Prior to counseling, financial services professionals first ask clients a provocative question: If I no longer go to work what is the amount of income I will need to pay all of my expenses?" Once the figure is established the next question is, "How do I become financially independent?" Many financial professionals begin with utilizing a process known as the Four Points of Focus which analyzes a persons present financial picture. Using the Four Points model, the client receives a snapshot of his financial situation thus, enabling a financial advisor to establish specific recommendations. The Four Points of Focus are:
- INCOME - Increase earnings and income
- DEBTS - Effectively manage debts
- EXPENSES - Reduce and control expenses
- PROTECTION - Protect your assets and yourself
1/4/11: The 2010 Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 retroactively brings back the estate tax for 2010, but with a $1.5 million exemption increase (to $5 million) and a 10 percentage point rate reduction (to 35%) compared to 2009. It extends these levels through 2011 and 2012, with an inflation adjustment on the exemption for the latter year. Then, in 2013, the exemption and top rate will return to levels prescribed by pre-2001 tax law the levels that would have gone into effect in 2011 without the 2010 Act. While what for 2010 is essentially a repeal of the estate tax repeal may sound unattractive, a Jupiter accounting firm believes it may actually prove beneficial to many families with loved ones who died this year. Why? Because the estate tax repeal was accompanied by a limit on the step-up in basis, which could have caused many heirs to face significant income tax liability on the sale of the inherited assets. Still, for some families the step-up in basis is less of an issue than the estate tax. So the Tax Relief act provides an option to elect the pre-act estate tax regime for 2010.
1/4/11: Even though the holiday spending spikes that most businesses see during December have come to an end, big profits are still made thanks to the overwhelming popularity of gift cards in recent years. Gift cards are big business, which translates into big profits. A Jupiter accounting firm published an interesting article about the challenge of accounting for gift cards. Since no merchandise changes hands, cash from gift card sales should not be recorded as revenue under normal retail accounting. But chalking it up as a deferred revenue liability only presents a partially correct picture. The author of the article analyzed the 10-K statements of retailers to determine how companies were accounting for gift cards. What he found is that it varies quite a bit something to keep in mind before investing in retail stocks.
1/3/11: In the "Definition of the Market" section of the business plan template, prospective entrepreneurs are encouraged to identify their target market and anticipated market share. Individuals are encouraged to utilize reputable agencies such as the U.S. Census Bureau- Department of Commerce or Industry Canada to find reliable industry statistics for market research. Demonstrate the competitive nature of products and services by researching similar items online. Use screenshots and pricing information to compare features and benefits in the "Description of Products and Services" section of the business plan template. After completing all research and data input to customize the business plan template, save as a Word document. Print and proofread carefully; adding any necessary attachments to support the information within the business plan. Before approaching banks or potential investors for funding, ask about any specific business planning or research requirements and ensure the document covers those issues. Save and print a final copy, updating regularly as the e-business grows.
1/3/11: The U.S. Small Business Administration offers a free business plan template for individuals seeking loans from the federal government. The SBA's free business plan template walks perspective entrepreneurs through the critical business planning steps with customizable fields for:
Business description and vision
Definition of the market
Description of products and services
Organization and management
Marketing and sales strategy financial management
Entrepreneurs can access the business plan template directly through the SBA website and follow prompts to input important business planning information. The service is easy to use, with clear instructions and writing tips.
1/3/11: Income tax calculator training makes the job of a tax preparer easier and faster. Calculators are designed to perform complex computations for each line of the tax form. The utilization of tax calculators allows the tax payer to receive accurate detail pertaining to deductions, credits and taxes due. All certified tax preparers use Internal Revenue Service approved calculators for accurate computations to reflect the IRS rules and requirements. Tax calculators can also be used to learn the impact of taxes on investments. The tax a person/company pays can wither away the profit of investments; therefore utilizing tax calculators is wise advice for making smarter investment choices.
1/3/11: Social Security tax rates will be reduced by two percentage points. The employee-portion of Social Security taxes will be reduced from the current 6.2% to a temporary rate of 4.2% for 2011 only. The employer-portion remains the same at 6.2% and the Social Security wage base remains the same at $106,800 for 2011. Medicare tax rates are not changed; remaining at 1.45% each for employees and employers. Freelancers, farmers and other self-employed persons will see a corresponding reduction in their self-employment tax. The total 15.3% self-employment tax rate is temporarily reduced for 2011 to 13.3%. Self-employed persons will still be able to deduct the full amount of the employer's portion as an adjustment to income. Congress has directed the Treasury to reimburse the Social Security trust fund for the full amount of the reduced Social Security taxes out of the general fund. Many employees have been accessing an income tax calculator to determine the amount their wages will increase in 2011.
12/23/10: Various factors can lead a business to end up in debt. Among those are taxes, excessive payroll, credit lines, credit card expenses, etc. Once a company has fallen in the strong binds of debt, is not an easy task to free the business from the financial difficulties that debt means - and to do it successfully. Utilizing business counseling is a positive move once a manager/owner has decided to look for business debt help. By seeking counseling, the manager/owner will begin to understand the true nature of the debt problem. Many times, managers/owners do not like receiving business debt help because they feel they will have lost the control of the company. This is the main reason why businesses remain trapped in debt for an extended length of time. A professional business counselor will begin by analyzing each part of the business and its finances. By utilizing this assistance, a business may move toward a better allocation of funds. This change almost always helps clear current business debt.
12/23/10: Bad employees are a fact of life. No matter how hard a business owner tries to screen new hires, dealing with bad employees will always be an issue. Perhaps the new employee is not happy with their work they or simply do not fit into the organization. For whatever reason, a bad employee is not producing the quantity or quality of work they must to remain a part of the organization. Many business owners have attended workshops to receive business counseling on how to deal with the situation regarding bad employees. The norm for a manager/owner is first to Identify a problem employee; next counsel the bad employee. It is essential to speak to the person in an office for a private one-on-one discussion of his recent work and the problems with that work. Try to ascertain why his work has fallen to a level which has been determined unacceptable. If the discussion does not reveal a valid reason for poor performance or reveals a problem that cannot be resolved, a documented warning should be issued and placed in the employee's human resources folder. This clearly tells the employee that if his performance does not significantly improve within 30 days, he will face termination.
12/22/10: With just weeks to go before the end of the year, Congress cleared tax relief legislation extending the Bush-era individual and capital gains/dividend tax cuts for all taxpayers for two years. CCH has issued a Special Tax Briefing on the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, providing insight and analysis on the bill. The Tax Relief Act also provides for an AMT "patch," a one-year payroll tax cut, 100% bonus depreciation through 2011, 50% bonus depreciation for 2012, a top federal estate tax rate of 35 percent with a $5 million exclusion and more. "The Act brings a welcomed level of relief to all taxpayers and certainly tax relief Florida (which has a high level of unemployment and foreclosures) for the next two years," said noted CCH Senior Federal Tax Analyst John W. Roth. While the Act is expected to help pump money back into the economy, it comes at a cost of an estimated $857 billion. Cost means that House and Senate Democrats wanted to levy an additional $857 billion in taxes on the American people.
12/22/10: Florida foreclosure listings continue to increase, unemployment is at record low and the housing market has plummeted. Unscrupulous lending practices along with an overvalued market and the changing economy caused residents to find themselves in financial distress. In time, Floridians were forced to place their homes and condos on the market only to be told there are simply not enough buyers. Florida legislators passed tax relief for property taxes in an attempt to thwart foreclosures from continuing a downward spiral. By providing tax relief Florida, it was determined that more homeowners would be able to afford to stay in their homes. Florida, the Sunshine State, has always been a hot tourist spot along with a great real estate market. The wonderful climate, plethora of high secondary education, ample opportunity to land gainful employment and low cost of living make Florida an attractive place for both the young and old to experience homeownership. It is these same homeowners who are experiencing the hardest crunch to make their mortgage payments. Predatory lending practices as well as skyrocketing consumer credit interest rates along with ARM mortgages hitting their peaks have caused the State of Florida to be among the highest in home foreclosures.
12/21/10: Congress recently passed the "Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010," a 74-page bill that contains details about the income tax and estate tax compromise reached by President Obama and Senate Republican leaders. A Stuart CPA has a summarized the contents of the bill with regard to estate taxes, gift taxes and generation-skipping transfer taxes.
Sets estate tax, gift tax and generation-skipping transfer tax exemptions and rates for two years: a $5 million exemption and 35% rate for both gift taxes and generation-skipping transfer taxes, and a 0% generation-skipping transfer tax rate for 2010.
Retroactive application of the estate tax back to January 1, 2010: the estate tax was completely repealed for the 2010 tax year and replaced with what is referred to as the "modified carryover basis rules."
Portability of the estate tax exemption between married couples: the bill eliminates the need for AB Trust planning by allowing married couples to add any unused portion of the estate tax exemption of the first spouse to die to the surviving spouse's estate tax exemption.
Nine month extension for filing estate and gift/generation-skipping transfer tax returns and paying taxes: The heirs of decedents who die after December 31, 2009 and before enactment of the new law will be given a nine month extension of time from the date of enactment to file and pay estate and gift taxes.
What is left out of the bill is reinstatement of the state death tax credit, which would have reinstated the "pick up tax" for many states. Instead, the estates of decedents that have to pay state death taxes will continue to receive a deduction.
12/21/10: A Stuart CPA was asked the question, Can the IRS garnish my wages without giving prior notice? The CPA responded with a strong, Yes, the IRS only needs to send a Final Notice letter once. After that time the IRS can move forward with enforced action including a wage garnishment or bank levy. They do not need to send the notice every time they want to garnish your wages or take other collection action. Because of this rule years can go by after the Final Notice is sent. Many taxpayers are taken by surprise when they are suddenly garnished after months or years of not hearing from the IRS. Also, a portion of taxpayers never receive the Final Notice because the IRS sent it to an old address. Unfortunately, this is completely legal.
12/17/10: The Internal Revenue Service today warned taxpayers to beware of several current e-mail and telephone IRS Tax scams that use the IRS name as a lure. The IRS expects such scams to continue through the end of tax return filing season and beyond. The IRS cautioned taxpayers to be on the lookout for scams involving proposed advance payment checks. Although the government has not yet enacted an economic stimulus package in which the IRS would provide advance payments, known informally as rebates to many Americans, a scam which uses the proposed rebates as bait has already cropped up. The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft. Typically, identity thieves use a victims personal and financial data to empty the victims financial accounts, run up charges on the victims existing credit cards, apply for new loans, credit cards, services or benefits in the victims name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scamsters to act quickly and cover their tracks before the victim becomes aware of the theft. People whose identities have been stolen can spend months or years and their hard-earned money cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities, may be refused loans, education, housing or cars, or even get arrested for crimes they didn't commit.
12/17/10: The most recent IRS tax scams brought to IRSs attention are described below:
Rebate Phone Call
At least one scheme using the word rebate as part of the lure has been identified. In that scam, consumers receive a phone call from someone identifying himself as an IRS employee. The caller tells the targeted victim that he is eligible for a sizable rebate for filing his taxes early. The caller then states that he needs the targets bank account information for the direct deposit of the rebate. If the target refuses, he is told that he cannot receive the rebate. This phone call is a scam. No legislation has yet been enacted that would allow the IRS to provide advance payments to taxpayers or that determines the details of those payments. Moreover, the IRS does not force taxpayers to use direct deposit. Those who opt for direct deposit do so by completing the appropriate section of their tax return, with bank routing and account information, when they file; the IRS does not gather the information by telephone.
The IRS has seen several variations of a refund-related bogus e-mail which falsely claims to come from the IRS, tells the recipient that he or she is eligible for a tax refund for a specific amount, and instructs the recipient to click on a link in the e-mail to access a refund claim form. The form asks the recipient to enter personal information that the scamsters can then use to access the e-mail recipients bank or credit card account. In a new wrinkle, the current version of the refund scam includes two paragraphs that appear to be directed toward tax-exempt organizations that distribute funds to other organizations or individuals. The e-mail contains the name and supposed signature of the Director of the IRSs Exempt Organizations business division. This e-mail is a phony. The IRS does not send unsolicited e-mail about tax account matters to individual, business, tax-exempt or other taxpayers. Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the Wheres My Refund? interactive application on this Web site, IRS.gov. The only official IRS Web site is located here at www.irs.gov.
Another new scam brought to IRS attention contains features not seen before by the IRS. Using a technique calculated to get almost anyones attention, the e-mail notifies the recipient that his or her tax return will be audited. This is the first scam of which the IRS is aware that uses this to get the victim to respond. Unusual for a scam e-mail, it may contain a salutation in the body addressed to the specific recipient by name. Most scam e-mails seen by the IRS are sent using the same technique used by spammers, in which hundreds of thousands of messages are sent to potential victims based on Internet address. Because of the volume, the typical scam e-mail is not personalized. This e-mail instructs the recipient to click on links to complete forms with personal and account information, which the scammers will use to commit identity theft. This e-mail is a phony. The IRS does not send unsolicited, tax-account related e-mails to taxpayers.
Changes to Tax Law e-Mail
This bogus e-mail is addressed to businesses, accountants and Treasury managers. It instructs them to download information on tax law changes by clicking on a series of links to publications on businesses, estate taxes, excise taxes, exempt organizations and IRAs and other retirement plans. The IRS believes that clicking on a link downloads malware onto the recipients computer. Malware is malicious code that can take over the victims computer hard drive, giving someone remote access to the computer, or it could look for passwords and other information and send them to the scamster. There are other types of malware, as well. The URLs contained in the link are not legitimate IRS Web addresses. All IRS.gov Web page addresses begin with http://www.irs.gov/.
Paper Check Phone Call
In a current telephone scam, a caller claims to be an IRS employee who is calling because the IRS sent a check to the individual being called. The caller states that because the check has not been cashed, the IRS wants to verify the individuals bank account number. The caller may have a foreign accent. In reality, the IRS leaves it entirely up to the individual to choose to cash or not cash a paper check. The IRS has no business need to know, and does not ask for, bank account or similar information, except when taxpayers indicate on their tax return that they are opting for the direct electronic deposit of their refund. In that case, however, it is the individuals responsibility to provide the IRS with the correct bank routing and account numbers on the tax return; the IRS does not contact taxpayers to verify the information.
What to Do
Anyone wishing to access the IRS Web site should initiate contact by typing the IRS.gov address into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment. Those who have received a questionable e-mail claiming to come from the IRS may forward it to a mailbox the IRS has established to receive such e-mails, email@example.com, using instructions contained in an article titled How to Protect Yourself from Suspicious E-Mails or Phishing Schemes. Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by visiting IRS.gov and entering the words suspicious e-mails into the search box in the upper right corner of the front page. Those who have received a questionable telephone call that claims to come from the IRS may also use the firstname.lastname@example.org mailbox to notify the IRS of the scam.
The IRS has issued previous warnings on scams that use the IRS to lure victims into believing the scam is legitimate. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available on this Web site. Enter the terms phishing, identity theft or e-mail scams into the search box in the upper right corner of the front page.
12/16/10:Tax deductions for donations is a trending search topic today as the IRS rewards taxpayers who donate to charity with tax advantages and deductions. Taxpayers can deduct donations only if they give them to a qualified tax exempt organization. IRS Publication 78, a list of the organizations that are eligible to receive tax deductible contributions, can be searched at or downloaded from the IRS Web site.
12/16/10: Every year, the IRS dutifully reports the most common blunders that taxpayers make on their returns. And every year, at or near the top of the oops list is forgetting to enter their Social Security number at the top of the tax form -- or making a mistake when entering those nine digits. No doubt about it: The opportunity to make mistakes is almost unlimited, and missed tax deductions can be the most costly. About 46 million of us itemize on our 1040s -- claiming nearly $1 trillion worth of deductions. Thats right: $1,000,000,000,000, a number rarely spoken out loud until Congress started debating economic-stimulus plans to combat the Great Recession
12/14/10: A West Palm Beach CPA firm has been fielding calls from unemployed people all over Florida who have been informed by the state that they no longer qualify for unemployment benefits because they were hired by the firm, even though they werent. C.R. Cooper, CPA, has received at least 11 calls from people who received such a letter from the state, according to the New Times Broward-Palm Beach. But the firm has not hired any employees in a year and believes there may be a payroll scam going on. They were never employed by us, administrative assistant Lynn York told WebCPA. People called with the names, and we dont know who they are. The Florida Department of Children and Families contacted the firm at one point to verify the identity of one of the phantom employees, but the firm had never heard of them. We dont know where they got our name, said York.
12/14/10: Recovering from swine flu and trapped in a rickety hospital in the Chinese countryside, John Yeend has to be creative about passing the time. On his first day in quarantine, the West Palm Beach CPA grabbed a mop and scrubbed the hallway. He watched women hang laundry in the courtyard outside his glass-walled room. He helped an earnest nurse in a moon suit practice her English. He watched staffers offer him up pounds of raw fruit at mealtime. He made faces to masked workers in the adjacent hospital wing. Mostly though, he waited. He waited to be released. To be able to come back and care for his wife in West Palm Beach, also recovering from the flu.
12/13/10: There are several advantages to hiring a payroll services firm. Many services will produce regular payroll management reports that are used in annual fiscal budget reports. In addition, payroll services may offer consulting on ways to pare down business taxes related to payroll and the employer's contributions to various federal and state funds such as disability, unemployment and Medicare. The job of researching the best methods for this is left to the payroll service consultants with expertise in the area of payroll taxation. A comprehensive report is also provided by the services on the cumulative costs of these taxes. Some payroll services offer special services for small business similar to regular CPA auditing and reviews of overall business operations.
12/13/10: When a company begins to analyze its financial position, a question often asked is; should we hire a payroll services firm? Payroll can be one of the most complicated accounting procedures in any business even when the number of employees is small. The reason is most businesses simply do not have the time to stay current with ever-changing employment compliance laws and taxation tables. This is one of the best reasons to choose a payroll service. The best services offer a range of features that make payroll simple, fast and manageable and can be implemented directly from office computers linked to the payroll service.
12/10/10: Recently there has been an increase in the number of sales tax audits occurring in the State of Illinois and, in particular, Chicago. It appears that whenever the state runs out of money, it simply orders an accounting audit of businesses; which in turn increases state revenues. The term sales tax audit is actually a misnomer. All taxes collected by the Illinois Department of Revenue will generally be examined. They are not just looking to enforce existing sales tax law, but also income, use, and payroll tax laws. Managers should take an audit seriously. If the companys accountant has not handled taxes properly, then the audit will result in a nightmare. If a business has not reported all of its income, the business could be guilty of income tax evasion.
12/10/10: Accounting auditors are responsible for ensuring that a company is operating ethically. They do this by analyzing data for accuracy and compliance to policy. Their work is important because there are significant penalties associated with a lack of organizational control; including fines, loss of business and even prosecution. As with any professional responsible for integrity, there are incentives to turn a blind eye to infractions for personal and professional gain. An accountant conducting an accounting audit is expected to maintain independence from the entity that is being audited. That is, he should not have any allegiance that makes his objectivity come under suspicion. Therefore, the accountant should never receive gifts or any other perks. If he should become employed with the entity that he is auditing, his prior work should be held to the highest scrutiny to ensure favoritism was not granted in the auditing process.
12/9/10: CPA firms who hold shareholder/partner retreats must conserve resources by exploring cost-effective meeting options. In todays economy, finding ways to save money isnt up for discussion its mandatory given the constraints of most CPA firms. This is not contingent on where the firm is located or the kinds of services offered to clients. Yet, there are certain expenditures vital to the continued success of any firm. One of the most discussed and debated categories is the CPA firm retreat where, not less than annually, the firms shareholders and partners (and staff, in some cases) meet to talk about the firms short and long-term outlook. The firm usually focuses on strategic planning and growth opportunities. Unless a firm is one of the Big 4 or even in the second tier where regions gather in one city, the travel costs and time associated with an offsite, out-of-town retreat isnt cost effective. Gone, too, are the days when local firms met at dude ranches or in beach houses because of the direct costs. What, then, are the options for this very necessary firm function? Even though it isnt as exciting as a golf retreat or something more glamorous, theres nothing wrong in meeting in a firms conference room. The location is convenient, close and costs nothing. With technology 24/7, asking partners to set themselves up with a virtual retreat is a very efficient way to conduct business, especially if firm members are scattered in various locations. There is virtually no cost associated with patching partners into the conversation. Fast Internet connections provide maximum resolution, while online tools - such as whiteboards - offer different ways to hold a discussion.
12/9/10: The condition of the current state budget and the national economy is no secreteven if there is some confusion as to whom and what is responsible. The bottom line, however, is that California businesses are looking for solutions today - not when the recovery occurs. Orange County CPA firms offer tax advice and are able to analyze individual business plans and financial records in order to make sure businesses are receiving all of the tax credits to which they are entitled. Orange County and the rest of California have a number of areas, identified as "Enterprise Zones," that can provide some serious tax benefits.
12/8/10: Accounting bookkeeping services are vital for every business to accurately record financial transactions including purchases, sales, income and individual or organization payments. Bookkeeping must not be confused with accounting. The accounting system is frequently done by an accountant. Accountants create information from the recorded financial transactions made by the bookkeeper. An important aspect of the business that is time consuming and somewhat difficult to handle is bookkeeping. In actuality, it is the resource through which a business owner/manager can view the exact condition of a company. Manual bookkeeping and computerized bookkeeping are two types of bookkeeping. Manual bookkeeping may suffice for running a small business. Computerized bookkeeping is superlative and virtually a necessity for medium and large businesses.
12/8/10: Accounting bookkeeping has two basic goals: first; keeping track of income and expenses, thereby improving chances of making a profit and two; collecting the necessary financial information about a business in order to file the various tax returns and licensing egistration paperwork. This sounds pretty simple and it could beespecially if a business owner/manager runs his company always keeping in mind these two goals. It must be noted that there is no requirement that records be kept in any particular way with the exception of publically owned companies and government entities. There is a requirement, however, that certain businesses use the accrual (as opposed to the cash) method of accounting. In other words, there's no official "right" way to organize books. The IRS typically finds any method acceptable as long as the records accurately reflect the business's income and expenses and the business is not specifically required to utilize a particular method.
12/7/10: The market for mergers and acquisitions of accounting firms has changed dramatically over the past 18 months. Prior to the financial crisis in 2008, M&As were viewed more as a tool for acquiring experienced talent and less a means for growing the top line. The economic shift has contributed to a more vigorous outlook for M&As. Three factors appear to be at the core of the trend: the demographics of the profession are causing a significant increase in the need for external succession in a large number of firms, economic turmoil has created a renewed interest in M&As for firms to sustain growth and the globalization of the U.S. economy continues to require that firms provide clients more breadth and depth of services and delivery points.
12/7/10: In its drive to become a one-stop shop of financial services, American Express Tax and Business Services Inc. of Towson said it has acquired Wolpoff & Co. LLP, one of Baltimore's largest accounting firms. The move follows American Express purchase of the Baltimore's Walpert, Smullian & Blumenthal and its acquisition - its largest to date - of New York's Goldstein Golub Kessler & Co. PC, the country's largest single-office accounting firm. The world is changing very quickly; you can either lead, change or be left behind," said Alfred Whiteman, a managing director at the former Walpert, now known as American Express Tax and Business Services in Baltimore.
12/6/10: In Connecticut the rollicking race for state comptroller was the highlight in this year's Democratic primary for the state's top bookkeeper; comptroller. The election received national drawing power. Where else in the nation have candidates squared off behind feminist icon Gloria Steinem and rock 'n' roller Chubby Checker? Waterbury Mayor Michael Jarjura challenged convention-endorsed state healthcare advocate Kevin Lembo. These candidates had the state's political class humming when Jarjua skewered Lembo in an internet advertisement that parodied Checker singing a 1962 lyric to the Kal Mann tune Limbo Rock. After all the politicking, hand shaking and baby kissing, Limbo survived the primary and won the national election by 53%.
12/6/10: The Baltimore Sun reported that a 59-year-old Pasadena woman who spent a portion of the $86,000 she stole from her employer on Italian greyhounds she bred and trained was sentenced to 15 years in prison. Joan Krempa of the 8400 block of Miramar Road in Pasadena pleaded guilty in March to one count of theft from Parade Produce in Jessup. Howard County prosecutors say Krempa committed "102 acts of theft" over a nine-month period while working as a bookkeeper for the business. Senior Assistant State's Attorney Colleen McGuinn said Krempa forged her name on company checks, depositing 17 of them totaling about $60,500. McGuinn said Krempa then illegally obtained a company check card and used it for transactions amounting to another $25,000, including paying for the services of a bail bondsman in Anne Arundel County. McGuinn said Krempa used about a quarter of the money to help fund her expensive hobby. Krempa was at a dog show in New York when the owner of Parade Produce discovered the theft. The sentence was nearly double the state's guideline maximum of eight years and triple what defense attorneys Jonathan and Ronald Kurland had sought. Howard County Circuit Judge Lenore Gelfman said Krempa had "exploited a position of trust."
12/3/10: You can report an abusive tax preparer and suspected tax fraud to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888. Download Form 3949-A from IRS.gov or order by mail or call 800-829-3676.
12/3/10: The IRS urges people to use care and caution when choosing a tax preparer. Remember, as the tax payer is legally responsible for whats on his tax return even if it was prepared by another individual or firm. Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. The following tips will help a person choose a tax preparer who will offer the best service for your tax preparation needs.
Check the persons qualifications: Ask if the preparer is affiliated with a professional organization
Check on the preparers history: Determine if the preparer has any questionable history with the Better Business Bureau
Find out about their service fees: Avoid preparers that base their fee on a percentage of the amount of the refund
Make sure the tax preparer is accessible: Make sure the tax preparer will be available after the return has been filed
Provide all records and receipts needed to prepare your return: Most reputable preparers will request to see records and receipts
Never sign a blank return: Never sign a blank tax form
Review the entire return before signing it: Before signing a tax return, review it and ask questions
Make sure the preparer signs the form: A paid preparer must sign the returns as required by law
12/2/10: Many reading this blog might recall the cover of MAD magazine, What Me Worry. Alfred's only worry was about his front tooth. Today everyone has different problems of concern, such as having enough income to support a comfortable life style. Someone approaching retirement or who is retired will need adequate cash or income from investments or pension plans to make this happen. Living only on Social Security will not suffice. A Stuart accountant advises his clients to begin saving early and to make sound and safe investments. He recommends stocks, mutual funds and bonds in addition to owning your home free and clear by retirement. Unlike Alfred, you can't sit back and not worry. It doesn't make any difference what you buy. Buying does not take too much brain power. The hard part is selling. The financial mavens don't tell you that the key to success in the stock market is selling. If you own a stock or fund that is not going up or is trending down it MUST be sold or you will lose your cash. Every professional trader will advise their clients that they must cut their losses short and let profits run. An average investor doesnt have to be smarter than Alfred E. to get out of a loser. The simplest protection for a persons funds is a stop-loss order of about 10%. When the stock or mutual fund drops 10% or more from its highest price sell it and find a better more profitable place for money.
12/2/10: Identity theft encompasses a wide range of deception; from a stolen credit card used to charge purchases to an existing account, to stolen information used to impersonate the victim, open new accounts (even ones for utilities) and rack up thousands of dollars in debt. An expert in the field is a Stuart accountant who recently said there are in excess of 500,000 new cases reported each year (and some say upwards of 900,000). Identity theft is one of the most rapidly growing crimes in America. In many states it isn't illegal or its hardly punishable if deemed so. Often the perpetrator goes uncaught and unpunished. Worse still is that it takes an average of 12 months for the victim to realize he is a victim and by then it may be nearly impossible to climb back out of the black hole of damaged credit; costing hundreds of hours and thousands of dollars in an attempt to have it restored. Sadly, since much of this goes unpunished, companies often write off the bad debt and then charge customers higher interest rates and fees to cover their losses. Indirectly everyone is a victim of identity theft. The more vigilant we become, the better off we will all be. What can people do to protect themselves from becoming a victim of identity theft? There is no absolute guarantee, but the more precautions put in place, the harder it will be for someone to steal information and use it illegally. A major first step to protecting oneself is to check ones credit report annually. This is the first and foremost line of defense.
12/1/10: The holidays are upon us and its time for the annual ritual in high-net-worth households; getting out the checkbook and sending donations to favored not-for-profit institutions and causes. According a West Palm Beach accounting firm, 55% to 60% of charitable giving occurs in the fourth quarterwith 44% in December alone. This year could be different though. It may be the last year of the tax cuts enacted under former President Bush meaning higher marginal rates could go into effect on Jan. 1st. As a result, some affluent investors are wondering whether to skip writing the check this year and defer the donation until 2011 when they might realize a greater benefit. Some advisors and tax experts generally agree its better to write the check this year. Its unclear whether or when Congress will revisit an extension of the Bush cuts or what form such an extension might take. Tax rules that reduced the value of all itemized deductions for certain large bracket taxpayers (rules that were phased out recently) are scheduled to be reinstated in 2011 and many accountants say its unwise to make financial decisions based on guesses of what may or may not happen with tax rules. The WPB firm - who serves many affluent clients - likens it to playing roulette. You cant let the tax tail wag the dog. You cant make every decision based on what the tax implications of the decision are, the firm said in a public statement. Sometimes you have to step back and say, Whats my intent? How do I best serve my intent? We certainly consider taxes as a factor in the decision, but we dont think of taxes as the be-all and end-all when it comes to making sizable contributions to worthy organizations/foundations.
12/1/10: A West Palm Beach accounting firm sent out a client memo entitled Timing is Everything. The memo addresses the handling procedures for clients who ask; "when is the best time to exercise stock options? An accountant should start the conversation by discussing that the era of historically low income tax rates may be coming to a close. After the ball drops on 2011, federal tax rates may revert to higher levels with more increases expected in 2013 and afterward. This new world of taxation could prompt executives with stock options to ask accountants when they should exercise those options. The firm advises that holding the options allows executives to benefit from stock appreciation without a current expenditure. Yet doing so for too long can diminish the value of the options. Also, exercising options before they expire might mean giving up one of the financial instruments principal economic benefits. Thus, the task facing accountants is to measure the tax burden of an options exercise.
11/24/10: If an employer does not withhold state taxes from an employees paycheck, the employee will get a nasty shock when filing his tax return. Each state (with a state income tax) assesses an income tax based on its own needs and these methods can vary widely from state to state. However, most states fall into one of two categories: the progressive tax or the flat tax. A progressive tax is assessed based on income levels, while a flat tax requires everyone to pay a particular percentage of their income. To determine state tax first access the states tax rate. Next calculate what is owed by utilizing an income tax calculator. An individual can go through the process on his own, but figuring out taxes can be very complicated. Therefore, to gain peace of mind, individuals should seek professionals to complete their complete tax returns.
11/24/10: An income tax calculator is used to calculate a tax payer's income tax liability and refund (or amount due). It is a simple method of calculating tax. To calculate ones 2010 tax liability, begin by entering income, marital status, dependent information and deductions and the income tax calculator will estimate the total taxes for the year. Based on the projected withholding's for the year, the tax calculator can also estimate the tax refund, state taxes, federal taxes or any amount that may owed to the IRS by April 15, 2011. This calculator uses the 2010 income tax tables and regulations, subject to modifications by the IRS and changes in the tax code. By using an income tax calculator for the successive year, a taxpayer can begin planning and organizing in an attempt to lower his tax liability and/or increase his withholdings or quarterly estimated tax deposits. If someone is going to owe, there will be time to investigate other deductions for which that person might be eligible prior to filing the return. Although there are several income tax calculators on line it is always advisable to solicit a professional tax preparer or accountant. These professionals are trained to properly utilize all IRS tools to ensure that an individual receives every legal deduction to which he is entitled.
11/19/10: FloridaWageLaw.com deals with wage law in the State of Florida; concentrating on helping employees who may have been illegally denied overtime wages or possibly those who have not been paid at all. Their goal is to inform employees of their rights and determine if they can offer help. Countless employers have denied their employees wages at some time or another. There are many employers who misclassify employees as being exempt under the Fair Labor Standards Act (FLSA), a Federal law requiring employers to pay overtime pay to its employees for any hours worked in excess of 40 hours per week. This department concentrates on overtime and unpaid wages cases in the state of Florida. If someone has worked overtime without getting paid time and a half and is not exempt under the FLSA, then they likely have a valid claim. Successful litigants are entitled to the overtime wages that you should have been paid, interest and attorneys fees. The Court may award you an additional amount of "liquidated damages" equal to the amount of overtime that you should have received. One can go back 2 years to recover unpaid overtime wages. In some instances unpaid overtime can be recovered up to 3 years back. Unpaid overtime can add up over a 2 year period. If an hourly wage is $10.00 and an employer owes an employee for just 3 hours per week overtime, then they could be owed $45.00 for each week. Over two years, this would amount to $4,680.00 plus interest. The court may award another $4,680.00 as liquidated damages putting the total recovery at $9,360.00 - not including attorneys fees - which would be recoverable from the employer. Everyone employed in payroll accounting should be aware of all laws when classifying an employee.
11/19/10: Criminals target payroll accounting professionals for payroll fraud, says Mike Magness, Intuit's manager for small business payroll risk. He sets out the nine questions you can ask to protect yourself from becoming the next victim. Part of his job is tracking trends in a certain kind of payroll fraud that targets accounting professionals. Unfortunately, the criminals are busier than ever. Over the last year we've seen a 200 percent increase in this payroll fraud. In this kind of one-time fraud, criminals pose as legitimate companies, pull out payroll checks and then disappear. There is some good news. First, we are able to stop over 98 percent of the fraud attempted. Second, there is a lot you can do to protect yourself from becoming embroiled in such fraud simply by taking a few precautions.
Protect against Fraud with Nine Key Questions:
Did the client send over a temporary or bank counter check? Does the check look like it has been altered?
Did the client provide a personal check instead of a business check to set up his account?
Does the payroll being run match the type of business that the client has?
Is the client overly persistent in getting his account set up?
Has the client just started the account and wants a "special" payroll run?
Is the client using a generic email address from a free service provider?
Does the person setting up payroll only want to do business over the phone?
Is the client a brand new business or currently applying for an EIN (Employer Identification Number)?
Does the new client use pay cards or pre-paid debit cards to pay a large number of employees?
Awareness is the best protection from thieves. Accountants who assist in such scams are potentially liable. That's why using your common sense; keeping in mind the nine questions above - can save an accountant lot of headaches. No practitioner benefits from bogus clients.
11/18/10: A garnishment is a court action initiated by a creditor in an effort to obtain a part of an employee's earnings before the earnings are turned over to the employee. In a garnishment, an employer is required to withhold from an employee's pay that portion of earnings that is being garnished and pay it directly to the creditor. The federal garnishment law applies to all employers and employees. The amount of payroll deductions which may be garnished from an employees wage is limited to 25% of his disposable earnings or the amount by which his disposable earnings exceed thirty times the current minimum hourly wage; whichever is less. Three exceptions are court orders for the support of any person, Chapter XIII bankruptcy orders and debts due for federal or state taxes. Disposable earnings are those earnings remaining after any amounts legally required to be deducted have been subtracted from an employee's compensation. Discharge of an employee because of a garnishment is not allowed. In the case of multiple simultaneous orders of garnishment, child or spousal support typically has priority. If a state has a garnishment law that is more protective to the employee than the federal restrictions, the stronger state law will govern garnishments in that state.
11/18/10: Ohio State Universitys Department of Transportation has recently announced a plan known as the Payroll Deduction Activation. Faculty and staff are eligible to purchase a parking permit through monthly payroll deductions if the following criteria are met: the individual must hold a regular (on-going) appointment, have paid continuously over 12 months and have a standing schedule of more than 5 hours per week. Enrollment will be given to those who meet eligibility requirements and agree to the Terms of Agreement and Program Policies at the time of permit purchase. The cost of the annual permit will be divided over 12 months and automatically deducted from the purchasers paycheck.
PAYROLL DEDUCTION CANCELLATION
If an individual separates from the university, he must return his permit to Transportation and Parking Services. Until the permit is returned, it is considered active and fees for the permit will continue to accrue. If the permit fees become overdue by more than a month, the permit and all parking privileges associated with that permit will be revoked. The cancellation date of a permit is effective when the permit is returned to Transportation and Parking Services, not the official date of termination. No refund is given for any unused portion of the current month. Deductions will stop in the next calendar month.
11/17/10: A payroll clerk is an employee within the payroll department responsible for a number of accounting functions concerning the payroll process. According to Bureau of Labor Statistics (BLS), the median yearly salary for a payroll clerk was $34,810
The educational requirements can vary from company to company. A payroll clerk should have knowledge of accounting principles and practices, as well as some college coursework.
Paychecks are prepared by the payroll clerk. To successfully prepare paychecks, payroll clerks have to keep a record of commission and bonus pay. They have to make sure there are no errors with the paychecks. Clerks must be knowledgeable in using payroll calculators.
A payroll clerk is also responsible for keeping a record of attendance. They have to track and register accrued vacation time, sick days and personal days.
Tax withholding has to be accurately computed by the payroll clerk. To perform all payroll functions, a payroll clerk should be familiar with several software programs. These programs are useful for figuring out wages, as well as the appropriate deductions.
The job prospects for payroll clerks are on the decline. Presently there are 208,700 payroll clerk jobs and projections show a total of 197,700 by 2018; a 5 percent decline.
11/17/10: There are 8 useful payroll calculator tools to help business owners and their employees estimate the most critical computations of all personal salary, retirement and investment calculations.
Salary Paycheck Calculator
How much are an employees wages after taxes? This powerful tool does all the gross-to-net calculations to estimate take-home (net) pay in any part of the United States.
Hourly Paycheck Calculator
Enter up to six different hourly rates to estimate after-tax wages for hourly employees.
Gross Pay Calculator
Plug in the amount of money an employee would like to take home each pay period and this calculator will tell you what your before-tax earnings need to be.
Not sure how many personal exemptions to include on Form W-4? This tool will help. An employee can even print out an official copy for use by the payroll department.
Estimate the future value of retirement savings based on the interest rate, contribution amount and current balance. Adjust the variables to see how the changes would affect an employees savings goal.
An employee of a non-profit organization can calculate how much income he/she should defer through the organization's 403(b) plan to prepare for retirement.
Employee Stock Option Calculator
Estimate the after-tax value of non-qualified stock options before cashing them in. Locate current stock prices by entering the ticker symbol.
Employers can calculate the savings they would receive by offering their employees Flexible Savings Accounts.
11/16/10: Accounts have participated in countless accounting classes in which they picked up a thing or two about the real life importance of the field. Despite the fact that debits, credits, balance sheets, P&Ls and statements of cash flows didnt seem to have much significance as they lie on countless stacks of papers or glowed dimly upon their computer monitor screens looking like a jumble of numbers and columns. In time they became increasingly more valuable in this ever shaky market and economy to those looking to invest on their own. If one learned the basics of a cash flow statement, he gained that ever elusive edge upon investments and personal gains. When a company reports positive earnings, most would assume that this is all cash which would translate into positive earnings for shareholders. This is not always the case as the reported earnings take into account noncash items used in the accrual method. Take, for example, that a company reported an annual earnings of around $500 million. There is a chance that only a portion of it - say $100 million - is actually cash; the rest being assets of the company. One should not allow this to create an intimidating situation as there is a way to help figure out the health of a company despite the fact that an accountant does not know exactly how much cash there actually is. A good means by which to do this is the cash flow statement. This report is submitted by companies along with their financial statements, which includes the balance sheet and income statement.
11/16/10: A cash flow projection is an integral part of the financial section of all business plans; literally describing how cash is projected to flow in and out of a business. Creating a cash flow projection isn't as easy or as cut and dried as the other financial statements that business owners and managers require because instead of merely reporting financial figures, the cash flow statement demonstrates how various things may affect a business in the future. A key component of creating a cash flow projection is knowing how to forecast sales. Note: A cash flow projection is not the same thing as a cash flow statement. Where cash flow projections are used to anticipate future cash flow, cash flow statements are used to explain previous actual cash flow. Cash flow projections are crucial to both new and experienced owners/managers alike because they clearly show what costs, profits and losses are coming down the pipe so that they may better assess how to plan. This assists the entrepreneur in determining whether or not he/she has enough capital in place to run the business for the period of the projection (usually monthly for a full year). Cash flow projections are also used by loan companies to determine whether or not a business is a good credit risk.
11/15/10: Used externally, financial ratio analysis can spot better investment options for investors and, internally, business managers can spot business areas requiring attention. Financial analysis using ratios between key values help investors cope with the massive amount of numbers in company financial statements. For example they can compute the percentage of net profit a company is generating on the funds it has deployed. All other things remaining the same, a company that earns a higher percentage of profit compared to other companies is a better investment option. Financial ratios can measure different things. The Net Profit to Capital Employed ratio mentioned above measures the success of a company in using funds available to it. There are ratios to measure the companys financial health, operating performance and cash flows and liquidity. Under each category there are multiple ratios that measure different aspects or can fine tune the measurements. For example, different profitability ratios measure profit margins at different stages return on owners funds and effective tax burden.
11/15/10: Ratio analysis can be used to tell how well a company is managing its accounts receivable. The two most common ratios for accounts receivable are Turnover and Number of Days in Receivables. These ratios are calculated as follows:
Accounts Receivable Turnover = Credit Sales / Average Receivable Balance.
Example: Annual credit sales were $400,000, beginning balance for accounts
receivable was $55,000 and the year end balance was $45,000. The turnover rate is
8 - calculated as follows: average receivable balance is $50,000 ($55,000 + $45,000) / 2. The turnover ratio is $400,000 / $50,000. This indicates that receivables were converted over into cash 8 times during the year. Number of Days in Receivables = 365 / turnover ratio. Using the same information from the previous example gives 46 days on average to collect accounts receivable for the year. Two other ratios that can be used are Receivables to Sales and Receivables to Assets. Referring back to the first example, we would have a Receivable to Sales Ratio of 12.5% ($ 50,000 / $ 400,000). Remember ratios are only effective when used in comparison to other benchmarks, trends or industry standards. A turnover ratio well below the industry average would indicate much slower conversion of receivables than other companies. A much lower Receivables to Sales Ratio than the industry average might indicate much better policies in getting sales converted into cash.
10/26/10: Along with the Timothy Geithner defense to tax filing mistakes (Gee, TurboTax made me do it!), perhaps we should add the robo-signer defense: I didnt read my tax return, I just signed it. After all, if officials at big financial institutions can execute foreclosure documents willy-nilly without reading them, why cant we? For most people these days, tax return preparation is done by someone else. The IRS statistics bear this out. According to the most recent IRS data, 57.7% of U.S. taxpayers used paid preparers during tax year 2008. With over half our returns being prepared by someone else, it is no wonder that most taxpayers assume their returns are written in some unintelligible runic script. Even lawmakers cant figure out how to do their own! True, we're supposed to read and understand the return and we must sign under penalties of perjury. We should review it before signing and alert the return preparer to any mistakes we discover. But how often does this happen? With electronic wizardry, there are many preparers who seem to have almost no interaction with clients.
10/21/10: According to a report by The Gazette, a Colorado Springs based newspaper, expressed its extreme disappointment in Douglas Bruce last week, after an e-mail he wrote to supporters of Amendments 60, 61 and Proposition 101 outed him as the initiator and major proponent of the measures a role Bruce has actively denied for much of a year. The disappointment grew by leaps and bounds as Bruce told Gazette reporter Tom Roeder that his tax-exempt charity, Active Citizens Together, spent money urging voters to vote against Referendum O and Amendment 59 in 2008. The problem with that is that he told the Internal Revenue Service something entirely different. Roeder obtained, from the IRS, the Active Citizens Together tax filing by Bruce on which the 990-EZ form asks: Did the organization engage in lobbying activities? Bruce placed an X in the No box thereby putting in writing fraudulent information about his financial involvement in a political campaign.
10/18/10: The first step to improving cash flow is to understand the history of the target business cash flow. This requires scheduling cash inflows and outflows. Once this is understood, the steps can be taken to cut cash outflows and increase collections. One of the largest cash outflows is payroll. Payroll should be managed with flexibility in mind. Look at scheduling: a workforce that works when needed as opposed to 5 days a week, 8 hours a day. Consider diversifying the work force into a mix of temporary workers, part-time workers and outsourcing of non-value added activities. Also, don't forget payroll flow time can be extended by distributing payroll checks after 2:00 o'clock on Fridays. Purchasing practices should also be considered in a mixed approach. For example, why buy everything new? Purchasing used items or renting can reduce cash outflow by a considerable amount. Perhaps the purchasing agent may want to purchase in minimum quantities, especially if cash is tight. Rule of thumb; do not hold inventory that isn't moving - get rid of it! Other cash traps include insurance. Do not use insurance to cover all risks. Make sure the company retains some risks, especially if the risk is not materially significant and not likely to occur very often. One of the fastest rising insurance outflows is health care. Make sure to have in place a preventive program for all employees. This could include annual cholesterol screenings, reimbursement for quit smoking programs and company participation in outdoor activities. Finally, aggressively monitor all outstanding receivables and begin to take action at the first sign of trouble. If there are any doubts about a customer's ability to pay, require an advance deposit.
10/18/10: Although not widely used, cash flow ratios can be useful in determining the adequacy of cash and cash equivalents. Cash flow ratios are used depending upon the critical needs of cash. For example, if cash is critical to servicing long-term debt, than Cash Flow to Long-Term Debt would be a good ratio. If liquid assets are critical to meeting current liabilities, than Cash + Marketable Securities to Current Liabilities would be useful. Some of the variations for cash flow ratios include: Cash Flow / Total Debt, Cash Flow / Long-Term Debt, Cash + Marketable Securities/Working Capital and Cash + Marketable Securities / Current Liabilities. Another good cash flow ratio is Operating Cash Flow to Net Income. This ratio shows the extent to which net Income is supported by operating cash flows. Cash flow from operations is calculated by adjusting net income for non-cash items such as depreciation. Cash flow is reported on the Statement of Cash Flows and cash flow ratios can be calculated from a complete set of financial statements.
10/15/10: Tax professionals who are accepted into the electronic filing program are called "Authorized IRS e-file Providers." They are the Electronic Return Originator (ERO) who transmits tax return information to the IRS. The IRS e-file program works by having a professional prepare a tax return. The tax professional is also the Electronic Return Originator (ERO) who is authorized to file a return electronically to the IRS. The tax preparer signs the electronic tax return via PIN or Form 8453. Afterward, the ERO transmits the return to the IRS or to a third-party transmitter who then forwards the entire electronic record to the IRS for processing. Once received at the IRS, the return is automatically checked by computers for errors and/or missing information. If the return cannot be processed, it is returned to the originating transmitter (usually the ERO) to clarify any necessary information. After correction, the transmitter resends the return. Within 48 hours of electronically sending a return, the IRS sends an acknowledgment to the transmitter stating that the return has been accepted for processing. This is proof of filing and assurance that the IRS has your return information. The Authorized IRS e-file Provider then sends Form 8453 (if applicable) to the IRS. If due a refund, it can be expected to be received in approximately two to three weeks from the acknowledgment date - even faster with Direct Deposit (half the time as when filed on paper.)
10/15/10: When filing a tax return electronically using the e-file filing method, the taxpayer enjoys a streamlined filing process with minimal effort. After filing a return with e-file, always check the status to ensure the return is proceeding through the electronic system without problems. If problems occur, they can be quickly remedied and, thus, keep the return progressing through the process. An e-file can be checked either through the computer or by telephone. Check the IRS website for a contact page that provides all local telephone numbers which will enable a person to speak directly to a representative about the status of an e-file return. This contact method may not provide the fastest information because local IRS offices are often understaffed. If expecting a refund visit the IRS website, enter the social security number, filing status and refund amounts into the appropriate fields and submit the query. Anyone using this method will receive an update on their refund and a status of the return in a timelier manner.
10/14/10: Its time to throw out those 8109 coupons! Beginning in 2011, most small businesses in Massachusetts and throughout the country will be required to pay by EFT (Electronic Funds Transfer) when making their tax deposits. Some taxpayers still insist on going to their banks to pay their payroll taxes. Not anymore! The U.S. Department of the Treasury has announced that businesses currently permitted to use paper Federal Tax Deposit (FTD) coupons will have to make those deposits electronically beginning in 2011 with few exceptions. The major exception to the above rule will be for businesses with $2,500 or less in quarterly tax liabilities that pay their tax liability when they file their return. Most taxpayers are already using the Treasurys free Electronic Federal Tax Payment System (EFTPS) and IRS research has shown that businesses using EFTPS are 31 times less likely to make an error. The new initiative is one of several in the Treasurys plan to go green, a move that is expected to save more than $400 million and 12 million pounds of paper in the first five years alone.
10/14/10: Beginning September 30th, Bank of America has announced it will no longer accept an employees payroll tax deposit check and Form 8109-B. Bank of America offers free online payroll tax filing if a company and their employees have direct deposit through the bank. BOA will also begin switching all of their business clients to EFTPS for payroll tax deposit purposes. EFTPS is a simple, hassle free way to make payroll tax deposits online. Any business that is a Bank of America customer should begin planning for the switch over. It can take up to fifteen days from completing an application, receiving a PIN and securing an online password for EFTPS.
10/12/10: A Jupiter accounting firm published a list of indicators that a homeowner should look for in order to determine if a loan modification discussion is a scam. They first noted that scams aren't always easy to spot but it helps a persons alertness to know the warning signs. There are four red flags to look for when trying to spot a loan modification scammer:
A company/person asks for a fee in advance to work with a lender to modify, refinance or reinstate a mortgage. They may pocket the money and do little or nothing to help someone save their home from foreclosure.
A company/person guarantees they can stop a foreclosure or get the loan modified. No one can make this guarantee to stop foreclosure or modify a home loan. Legitimate, trustworthy, HUD-approved counseling agencies will only promise they will try their very best to help the homeowner.
A company/person advises a person to stop paying the mortgage company and pay them instead. Despite what a scammer will say, never send a mortgage payment to anyone other than the mortgage lender.
A company/person pressures the homeowner to sign over the deed to the home or sign any paperwork that the homeowner hasnt had a chance to read and does not fully understand. A legitimate housing counselor would never pressure someone to sign a document before they have had a chance to read, understand and fully explain any questions.
10/12/10: From one-person entities to major corporations, bookkeeping is a significant part of any business; it is at the heart of a company's success, and errors can cost a company significantly. A Jupiter Accounting consortium reviewed a significant number of businesses and determined those who were in trouble displayed several common errors and should be avoided:
Not saving receipts of less than $75
Doing it yourself: Having a competent bookkeeper coming in to handle the books can be extremely beneficial
Forgetting to track reimbursable expenses
Not properly classifying employee: The proliferation of independent contractors, consultants, and freelancers has made it difficult to determine who is on staff and who is not.
Lack of communication
Not reconciling the books with the bank statement each month
No backup: As long as audits exist, the paperless office does not truly exist.
Not deducting sales tax
Petty cash nonchalance: A system should be set up whereby a set amount of money is in petty cash
Miscategorization or overcategorization: There are fairly standard categories for expenses. Often times expenses are entered into the wrong categories or too many categories are created.
10/8/10: A basic system in accounting bookkeeping is "double-entry. As information is recorded in a companys books there will always be two entries made, which exactly balance one another. Each entry has a left side -- these are called debits, and a right side -- these are called credits. For each entry at least one debit and one credit has to be posted, and the total of the amounts on the right must equal the total on the left. Another "rule" is that debits are positive and credits are negative and if you add them all together, the total is "zero." If a person goes to the store and makes a purchase, he or she is decreasing cash in the bank thereby increasing expenses by the same amount - and now there are two entries. Cash gets the negative entry, or credit, and the applicable expense account gets the positive entry, or debit. What puts a spin on the debit/credit concept is that many people think of a credit as a minus and a debit as a plus, but various account types are affected differently because accounts can have debit or credit balances. All asset accounts have debit balances, which mean that they are positive numbers. An asset is a positive number in the system. Liability accounts have credit balances and are negative numbers. Generally speaking, credits are not represented on financial statements with minus signs. To the computer, however, liabilities are actually negative numbers - because they need to be subtracted from the assets in order to calculate the net worth of the company.
10/8/10: There are a number of benefits to accounting bookkeeping:
- It allows businesses to evaluate the efficiency of a company
- It facilitates the preparation of financial reports which provides information regarding the company to mangers, creditors and other outside parties
- It permits analysis for financial transactions records
Today, outsourcing is advantageous to almost every business due to the time saving benefits. There are many benefits to consider when thinking of outsourcing accounting functions. In fact, many business owners have stated that outsourcing was the most important business decision they have made because the results contributed to the establishment of a successful operation.
Whether you run a small, mid or large corporation, you will likely find that outsourcing accounting services will free up resources and help increase business success.
10/7/10: Taxpayers are legally responsible for what's on their own tax returns even if prepared by someone else. So, it is important to choose carefully when soliciting an individual or firm to prepare personal returns. Most tax preparers are professional, honest and provide excellent service to their clients. Here are a few points to keep in mind when someone else prepares your return:
A paid preparer is required by law to sign the return and fill in the preparer areas of the form. The preparer should also include their appropriate identifying number on the return. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. In addition, the preparer must give you a copy of the return.
Review the completed return to ensure all tax information, your name, address and Social Security number(s) are correct. Make sure that none of these spaces are left blank.
Review and ensure you understand the entries and are comfortable with the accuracy of the return before you sign.
Never sign a blank return, and never sign in pencil.
If you have provided specific authorization in a power of attorney filed with the IRS, you may have copies of notices or refund checks mailed to your preparer or representative; but only you can sign and cash your refund check.
A Third Party Authorization check box on Form 1040 allows you to designate your preparer to speak to the IRS concerning how your return was prepared.
10/6/10: When asked about Low Income Taxpayer Clinics (LITC), a West Palm Beach CPA answered first by explaining that the LITC program serves individuals who have a problem with the Internal Revenue Service and whose income is below a certain level. LITCs are independent from the IRS. Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes and other issues for free or for a small fee. If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. LITCs receive partial funding from the IRS via the LITC grant program. Examples of LITCs are nonprofit organizations exempt from tax under IRC § 501(a) that represent taxpayers or refer them to qualified representatives, and clinical programs at accredited law, business or accounting schools in which students represent low income taxpayers experiencing difficulties with the IRS. Each clinic determines if prospective clients meet the income poverty guidelines and other criteria before it agrees to represent a client.
10/6/10: The same West Palm Beach CPA was also asked to speak about the Taxpayer Advocacy Panel (TAP). This is a group which listens to taxpayers, identifies taxpayers' issues and makes suggestions for improving IRS service and customer satisfaction. TAP is the new name for the expanded advocacy panel within the IRS. TAP is an outgrowth of the pilot Citizen Advocacy Panels established in 1998, which were located in Brooklyn, the Midwest, the Pacific Northwest and South Florida. With the expansion of TAP, citizen volunteers from all fifty states now have the opportunity to participate in the federal tax administration system. TAP acts as a two-way conduit; serving as a focus group for the IRS by providing input on strategic initiatives, as well as providing a venue for raising issues identified by citizens. Structurally, there are seven geographically based Area Boards aligned with the current Taxpayer Advocate Service areas. These Area Boards address local issues and schedule outreach activities. Issue Committees (with nationwide membership), identify and work with service-wide issues and are closely linked to the Wage and Investment and Small Business/Self-Employed program owners. The goal is to have panel members demographically diverse with at least one member from each state, for a total of 95 members. The Taxpayer Advocate Service provides funding for staff and research support to the panels. Annual reports are submitted to the Secretary of the Treasury and the IRS Commissioner. Copies of all reports, events, meeting agenda, minutes and success stories can be found on the TAP website at www.improveirs.org .
10/5/10: At a recent club meeting the invited guest, a Stuart CPA, talked about another sign of the times. The Internal Revenue Service plans to cease mailing instructions and paper forms for annual income tax returns as more Americans are filing online, saving the agency about $10 million annually. IRS claims approximately 11.5 million people who filed paper tax returns in 2009 received the tax packages in the mail. The agency normally mails the information at the beginning of the calendar year which includes Form 1040 and instructions which total 44 pages. More than 96 million individuals have filed their tax returns in 2010 via IRS e-file (up about 6 million from 2008) and estimated 20 million paper returns were filed through paid tax preparers, according to the agency.
IRS plans to mail information about the decision in the coming weeks to individuals who filed paper forms last year. Taxpayers who want to file paper returns may still obtain the forms at www.irs.gov, a local IRS office or a participating library or post office.
The $10 million in annual savings for IRS accounts for printing and postage costs, the agency said. IRS uses the Government Printing Office to print the materials, which in turn hires private printing firms to do some of the work. The federal government continues to curtail its use of traditional "snail mail" to save on paper, postage and printing costs. The Treasury Department announced plans in June to start making most government benefits payments by direct deposit by 2013 as part of the Obama administration's government efficiency reforms.
10/5/10: When the IRS sends out a levy notice to a taxpayer there is only have a short period of time to comply! The IRS or other State Taxing Authority can make a persons life miserable by filing a federal tax lien against him. The IRS and state taxing agencies have the power to collect back taxes by levying taxpayers' property. This is a result of a tax lien. The tax lien attaches to all rights, title and interest of the taxpayer. Additionally, all IRS and state tax liens become public records. Tax liens make it very difficult to obtain credit or to sell real estate. A tax lien is filed by the government to protect its interests and is recorded with one or several county recorders. A tax lien tells the world that the individual has a delinquent tax liability, which is generally devastating to the taxpayer's credit. Once the IRS or state tax agency has filed a tax lien on all of a taxpayer's assets, they may enforce that tax lien by administratively levying his or her assets. Although the taxing agencies are extremely reluctant to release or modify tax liens, recently a Stuart CPA was able negotiate with the government to subordinate its tax lien to a lender, thus allowing the client to borrow money against his assets to satisfy all or part of the tax lien.
10/4/10: Both the IRS and state departments of taxation frequently use wage garnishments to collect taxes owed. Once a garnishment is filed, the employer is then required to collect a percentage of the employees paycheck. A wage garnishment requires a large percentage of a taxpayer's wages be turned over directly to the IRS or the state. The wage garnishment stays in effect until the tax is fully paid or until the IRS or the state agrees to release the garnishment. The amount that the IRS can keep from any wage garnishment is based on the employees marital status and number of dependents. Basically, the IRS keeps most of the money from a wage garnishment. The amount of income that is exempt from an IRS tax wage garnishment is figured by adding the standard deduction claimed on the employees taxes and the amount claimed for exemptions. In addition to an IRS wage garnishment, the individuals wages can also be subject to a state Wage garnishment for as much as an additional 25% of the taxpayer's disposable wages.
10/4/10: Is it time to take advantage of the equity sitting in your home? This means if you have lived in your home for 2 of the past 5 years you may be eligible for a substantial IRS tax exclusion. If youre a married couple you can take $500,000 profit tax free, ($250,000 for individuals) if you meet the criteria under IRS code 121. Even if you have used this tax exemption before, under current regulations, you can take profit from the sale of personal real estate tax-free every two years. This is a huge deal and is the foundation of some individuals retirement strategy. Many people may benefit from the tax savings of caching out the equity in their personal residence and saving a huge portion of this income from going to the IRS. Real estate is still a great way to protect your money from the IRS.
9/29/10: What does Financial Services Roundtable mean? The Financial Services Roundtable represents 100 of the largest integrated financial services companies which provide banking, insurance and investment products and services to American consumers.
The state goals of the Financial Services Roundtable are to:
Be the premier executive forum for the leaders of the financial services industry
Provide powerful legislative and regulatory advocacy
Enhance the industry's public reputation
Promote best practices and a strong infrastructure in technology
The Roundtable believes that financial services companies are integral to the nation's economy and that the competitive marketplace, not government, should govern the delivery of financial products and services. It underscores the necessity of uniform national standards across state lines and the effective use of technology to efficiently deliver financial products and services.
9/29/10: eCert, Inc. recently announced a pilot program to provide e-mail protection for selected members of financial industry consortiums, the Financial Services Information Sharing and Analysis Center (FS-ISAC) and BITS, the technology policy division of the Financial Services Roundtable. As many as 25 members of FS-ISAC and BITS, which includes top U.S. banks and credit unions, will join eCert's Trusted E-mail Registry Service to help keep consumers' e-mail safe from phishing attacks and other e-mail fraud. A full rollout to all of the hundreds of members of FS-ISAC and BITS/Roundtable is anticipated in the coming months. "The pilot of eCert's Trusted E-mail Registry Service represents an important milestone in securing the e-mail channel for financial institutions," said Leigh Williams, BITS President. "We are proud that through partnering with the FS-ISAC and eCert, we are able to provide access to these critical new capabilities as part of our ongoing commitment to help our members fight online fraud and protect consumers."
9/28/10: As if we needed it, the federal government has again reminded us that the financial bailout bill enacted in 2008, though often called the bank bailout, authorized the Treasury to buy almost any asset from "any institution, including, but not limited to, any bank, savings association, credit usion, security broker or dealer or insurance company established and regulated under the laws of the United States."
This week credit usions got their bailout and several leading accounting firms are claiming this to be outrageous because the federal government already funnels three billion dollars into credit unions annually by granting them undeserved tax exemptions based on three promises:
Credit Unions will help lower-income people who don't have bank accounts,
Restrict their customer base to groups of people with a common bond; enabling the credit union to specialize intheir financial needs and
Avoid high-risk, high-return investments in favor of safe, lower-interest investments.
Have they delivered on any of their promises?: No!
They have marketed their services mostly to middle and upper-middle income people who would be profitable for taxpaying banks to serve, leaving low-income people to use check-cashing centers.
Credit Unions and their regulators have "interpreted" the common-bond requirement to mean, for example, anyone living in Los Angeles County,
Since this bailout announcement, it was discovered credit unions were investing in risky subprime junk.
9/28/10: As reported on September 27th Britains financial regulator proposed changes to the way accounting firms sign-off on client - asset reports in a bid to correct serious failings identified in a study of the industry. The measures are part of an initiative to improve financial firms segregation of client assets, the Financial Services Authority said today in a statement. Failings identified in the accounting industry show a general deficiency in applying FSA requirements on client assets, the agency said. It is ultimately a firms responsibility to ensure that they have adequate systems in place, but they - as we - rely on their auditors to provide the necessary assurance, Richard Sutcliffe, a sector leader at the FSA, said in the statement. The FSA has been under pressure to clarify rules on client assets since they were deemed to be flawed by a London judge overseeing a case involving Lehman Brothers Holdings Inc. The regulator has been examining whether investment firms properly separate client money following Lehmans 2008 bankruptcy. The proposed changes include confirming and clarifying the standards required for the auditors reports and increasing the information required, according to the statement. The FSA will consult with the auditing industry until the end of the year and publish a final policy statement during the first quarter of 2011, it said. Failings cited by the FSA today include auditors giving clean reports on clients with significant breaches of the client-asset rules. Other shortcomings include the omission of dates and signatures from reports.
9/27/10: Have you often pondered why some entrepreneurs very successful and others are do not fare as well? Many in the field are convinced that the answer lies in setting goals and receiving good business counseling. Once goals are determined and combined with solid counseling, entrepreneurs must continually monitor their progress. A question to be asked; Is someone who inherits $10 million successful? The answer is not necessarily. Is someone successful if he takes a counselors advice and, consequently, makes millions? The answer to this question is yes. Real success, both in life and in business, is the achievement of goals, being observant and continually seeking advice. It is this process, not always the outcome, which brings success. People are successful because they set goals and have achieved them. Making a goal is easy, but achieving one can be difficult. Just look at how many New Year's resolutions go unmet. However, overcoming hardship to reach a desired end is what success is really about. In addition, success comes from having a plan that a person really enjoys executing. Enthusiasm for a concept generally conquers all obstacles.
9/27/10: Blockbuster filed for bankruptcy Thursday in its latest attempt to overcome nearly $1 billion in debt. The movie rental store's U.S. businesses filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. As part of its recapitalization plan, Blockbuster said it would receive business counseling in an attempt to reduce its debt load to $100 million or less. In a release Thursday, the company said it has secured $125 million in financing from senior bondholders to keep its remaining U.S. businesses open during the bankruptcy proceedings. Its stores, DVD vending kiosks, by-mail and digital businesses will continue serving customers, but the company will have to implement major cost-cutting measures to repay its investors, said Michael Pachter, an analyst with Wedbush Morgan Securities. "Blockbuster is under the gun now to generate as much cash as possible," he said. "When they were run by shareholders, the company was making investments and trying to grow. Now that they've been seized by creditors, Blockbuster is under the gun now to generate as much cash as possible." Blockbuster has struggled for survival ever since media conglomerate Viacom spun off the company in 2004. As a part of the deal, the company had to pay Viacom shareholders a $5 per-share dividend causing the movie rental giant to rack up about $1 billion of debt in the process. The company also suffered losses from unprofitable stores and increased competition from both Netflix and Coinstar's Redbox.
9/24/10: When we see the word 'forensic' we might think of a forensic scientist such as in the TV series "CSI." While forensic accountants conduct accounting audits, they also investigate crimes. These crimes, however, are concerned with financesnot murder scenes. The word forensic means 'relating the application of scientific knowledge to a legal problem' and forensic evidence is that which can be used in a court of law. Of late, forensic accountants have a fairly high profile because they participated in the investigations into financial scandals involving large corporations; think back to 2001 and Enron. Forensic accountants can be called upon to investigate fraud and what are termed "white collar" crimes. They can be called upon as expert witnesses in court cases in which a fraud is believed to have occurred. They are important to big businesses and governments and can also take part in lower profile cases.
9/24/10: The Ohio Department of Development (ODOD) will continue to accept applications from owners of historic buildings for Ohio tax credits until September 30, 2010. The Ohio Historic Tax Credit Program provides a tax credit equal to 25% of qualified rehabilitation expenditures, which generally include construction for the building's structure and interior that meets the U.S. Secretary of the Interior's historic rehabilitation standards. The credit is maxed out at $5,000,000 per project. To be qualified as a historic property, a building must either be:
· Listed in the National Register of HistoricPlaces
· A local landmark designated by a certified local government; or
· Located in a registered historic district
Owners of the Historical sites must complete an application and submit an accounting audit. During the prior four Tax Credit application periods, 111 applicants in 27 cities obtained approval from ODOD and will be receiving $246,000,000 in tax credits
9/23/10: Payroll services offered by firms such as Rizzolo Group can be depended upon to handle the payroll of a business professionally.Outsourcing payroll tasks to professionals who devote full time to the task will provide accounting data which is accurate and reliable.Payroll service firms use payroll software for easy data entry which reduces the probability of error. Payroll accounting data must be kept secure; therefore, when hiring a payroll service a business owner must keep in mind that the level of protection should be high. They should be provided secure data transmission between the payroll service provider and the client. The financial officer of a firm should also have complete knowledge and information about security and backup systems that the firm is offering.
9/23/10: A federal bankruptcy judge found two executives of a payroll services company in contempt of court after testimony that documents and computers owned by the business are missing. According to The Tennessean, Judge Keith Lundin on Tuesday found Sommet Group managing partner Brian Whitfield and vice president Marsha Whitfield, his wife, in contempt as investigators look into claims that Sommet left clients with unpaid medical bills and other losses. Sommet Group of Franklin, Tenn. had naming rights to Nashville's arena from 2006 to 2009. FBI agents raided the company on July 6th.The company sold payroll services and health insurance to small businesses; many of which now face thousands of dollars in unpaid medical bills for their employees and never-paid unemployment taxes. No one has been arrested.
9/22/10: Each year in the United States a large number of people make the decision to become entrepreneurs and set up their own businesses. This is one of the biggest decisions a person will make in his or her lifetime. It can be as equally exciting as it can be daunting. Thankfully, like most major life decisions, there are a range of organizations and support groups available to help a person through the process. Running ones own business can provide a great deal of satisfaction and reward. Obversely, it will cause grief and put pressure on all facets of a persons life. A vital first step to take is to research the business idea thoroughly and to choose a proper business plan template to effectively create a plan to secure necessary funding, serve as guide going forward and provide measurable goals and targets. While developing a plan, always keep this in mind; An extremely important factor to the success of a business venture is the person or persons behind the idea.
9/21/10: Tax deductions for automobile expenses related to business activities are deductible. Eligible taxpayers can choose either the "actual cost" or "standard mileage" systems to account for these expenses.
1. Actual Expenses: includes parking, tolls, interest, taxes, depreciation, repair and maintenance, garage rent, insurance, registration fees and gasoline. Expenses must be pro-rated between business and personal use.
2. Standard Mileage Rate. This method allows a separate deduction for parking and tolls, but lumps all of the other expenses under a per-mile rate. For 2010, the standard mileage rate is $0.50 per mile. Only business-use miles are deductible. A properly kept mileage log is required for this deduction.
If an employee chooses to use the standard mileage rate, he/she must elect to do so the first year the vehicle is placed in service as a business asset. In subsequent years, a choice may be made to change to the actual expense method. If a vehicle is leased, an employee may elect the standard mileage option, but must continue to use it for the life of the lease. Overall depreciation and leasing deductions for cars are limited by other special rules.
9/21/10: An often asked question is what differences are in office in home tax deductions for general partners and S-corporation owners? There are two very different treatments.
1.General partners can take a home office deduction as an unreimbursed partnership expense (UPE) on page 2 of Form Schedule E. This holds true only if they are authorized to do so under the partnership agreement. Be sure to attach Form 8829; home office deduction.
2.S-corporation owners are considered to be employees of the S-corporation. For them, the home office deduction is an unreimbursed business expense, and must be taken as an itemized deduction on Schedule A using Form 2106. These expenses are considered to be miscellaneous itemized deductions and, as such, are subject to the 2% of AGI haircut, the Pease phase-out and a total AMT disallowance.
How can the situation become more palatable for the S-corporation owner? Simply have the S-corporation reimburse the owner for business use of the home under an accountable plan. If 10% of the home is business use, have the S-corporation pay for 10% of costs that would be allowable as a home office deduction. It's a straight deduction from S-corp. profits. The owner will have to then reduce the deduction he takes for mortgage interest and property taxes.
9/20/10: Basic tips for a bookkeeper: The All Business Finance & Accounting Center has surveyed many small businesses and found that the most common bookkeeping errors are also the easiest to fix. Using these six tips will help a business stay on a sound financial footing:
1.Use the right accounting system: Most businesses use either cash or accrual based accounting methods.If the cash-based method is used, income can be counted when received and expensed when paid.
2.Maintain daily records: This is one of the most basic rules; if accurate records are not kept daily then there is no accurate method to track the financial condition of a business.
3.Handle and review checks carefully: It is easy to be on autopilot when writing checks and tossing canceled ones into a filing cabinet without remembering them. Remember.these checks are as good as cash and if something goes wrong the bookkeeper - not the bank - will be on the hook.
4.Get a bank statement with a month-end cutoff: This is an additional tip that can reap big rewards. Synchronizing the bank statement with other monthly records will make it easier to reconcile the bank statement and track expenses.
5.Leave an audit trail: Record keeping will be more effective if there is a system which allows a bookkeeper to quickly and easily retrace a companys financial activities.
Use a computer: Computers are absolutely essential for all businesses
9/20/10: Federal legislation is currently underway to force employers to ensure that they have properly classified employees and to notify employees of their classifications. Legislators are proposing steep penalties for ignoring the law by fining employers as much as $5000 per misclassified employee. This blog is not intended to scare the reader, but instead to inform employers that the IRS and the federal government are beginning to pay much more attention to the record keeping systems of small businesses. Even if a business is very small and under the radar, being pro-active and getting the appropriate consultation on the proper classification of employees as well as the maintenance of payroll and other records is sage advice. Encourage your CPA, bookkeeper or small business attorney to research this legislation. It is also recommended to conduct a payroll audit if the business has a history of employee misclassification.
RULE OF THUMB: If it walks like an employee, talks like an employee and acts like an employee...it's probably an employee.
9/17/10: "Rarely has leadership-level talent been so important to the CPA profession yet, perhaps, so difficult to find. Technical knowledge used to be the only thing a firm really needed," says Rex Gatto, a Ph.D. in organizational psychology and a personnel consultant to CPA firms. "But now you have to have somebody who can communicate, mentor and coach," he says. Someone who knows how to build a team a succession plan and able to work with others to make it happen.Many accounting firms are finding that they can both afford - and need - to be more selective in hiring. As a result, job candidates, even at the partner level, are receiving more and more exquisitely calibrated scrutiny than perhaps ever before. Remember the partner for life? "Those days are gone," Gatto says. Today partners aren't guaranteed anything unless they can perform. Its very different today.
9/17/10: The seven keys for the successfulmanagement of CPA firmsis based on research conducted during the past two years. Thousands of surveys were distributed and, based on the responses and interviews with leading authorities in the field, the survey team identified the best practices and common characteristics that separate the competitively successful firms from the not-so-successful. The team labeled these firms as, The Leaders vs. The Laggards.
The seven keys for success were identified as:
Leadership and Management
Marketing and Business Development
Client Service and Satisfaction
Creating a Great Place to Work
Building the Learning Organization
9/15/10: An individuals Income tax expense is based on a percentage of gross yearly income less exemptions and deductions. These exemptions and deductions reduce the gross income to net income, which is entered on Form 1040. The federal income tax rate ranges from 10 to 35 percent depending upon income and filing status (single, married filing jointly, married filing separately or head of household). This determines the amount of allowable deductions. Take advantage of the income tax calculator provided on this site by entering this information to estimate the amount of taxes that you will owe.
9/14/10: The Financial Accounting Standards Board (FASB) is hosting two public roundtable meetings to solicit input on private company accounting and reporting issues. The roundtables are part of a series of forums planned and designed to provide interested parties with the opportunity to express their views on various FASB issues. The boards purpose in holding these public roundtables is to engage in a constructive dialogue about private company accounting and reporting issues with a wide variety of stakeholders; including private companies, their Stuart CPA and other CPA practitioners and users of private company financial statements said FASB assistant director for nonpublic entities Jeffrey Mechanick. We want to hear a variety of perspectives on how high quality financial reporting can be achieved while taking into account the specific needs of the private company sector. Issues to be discussed at the roundtables are expected to include, Consolidation (Codification Topic 810, originally issued as FASB Interpretation 46(R)) and Income Taxes Codification Topic 740, originally issued as FASB Interpretation 48).
9/14/10: Equity is the difference between assets and liabilities as shown on a balance sheet. In other words, equity represents the portion of assets that are fully owned by the owners (stockholders, partners, or proprietor) of a business. A Prominent Stuart CPA prepares financial statements by first reviewing the general ledger (GL) account numbers that clients have coded on the check register. Whenever he sees a balance sheet GL account number, it is automatically double-checked. The reason this is done is the balance sheet is the least understood part of the financial statements for most clients. This is especially true regarding the equity section. In a way, this is rather strange, since the equity section represents the owners share of the business. The CPA wants to keep a very close eye on investments and to do that effectively, he needs to know the nature of each equity account and how to interpret the changes in those accounts as they occur. When dealing with a sole proprietor, its not as crucial since everything in the equity section belongs to that individual. This is not to diminish the importance of knowing what the accounts mean, as there are other reasons to track the increases and decreases that occur within them. However, when dealing with a partner or a stockholder in a corporation, the CPA is responsible to protect all investment interest from mistakes. This can be a challenge and accounting knowledge is required.
9/13/10: A Stuart accountant recently lectured on the many environmentally friendly options an individual can initiate; options such as recycling, using less electricity and participating in carpools. Many changes can be considered more sacrificial than others, but the following is effortless. Most large companies are now giving customers the options to receive monthly statements and to pay their bills online. Once the monthly statement is ready, the customer receives an e-mail informing that the statement is ready to view. His lecture discussed how, today, many people are paying their bills online. Paper is saved by storing a copy of the receipt on the hard drive. The accountant addressed the paranoia about sharing a debit card or checking account information on the internet. The internet is secure. Research indicates the majority of identity thieves are not high-tech computer hackers. Identity thieves scour garbage dumps for other peoples important documents. Individuals who receive bills electronically will eliminate approximately 60 to 70 percent chance of becoming a victim of identity theft. Paying bills online has advantages in addition to saving the environment; no more late payments!
9/13/10: Kenneth Starr, a former Manhattan financial adviser to the rich and famous, pled guilty on Friday to defrauding his clients out of up to $50m. Mr. Starr, whose celebrity client list at one time included actors Sylvester Stallone, Wesley Snipes, etc, pled guilty in a federal court to one count each of wire fraud, investment adviser fraud and money laundering. Mr. Starr was charged in June, 2010 on 23 counts of fraud and money laundering relating to an alleged fraud of up to $59m. Prosecutors and lawyers for Mr. Starr agreed on a sentencing range of 121 to 151 months; although this is not binding on the judge, who will sentence the 66-year-old in December. The total loss from his fraud, agreed for sentencing purposes, was between $20m and $50m. Mr. Starr has agreed to forfeit his apartment on Manhattans Upper East Side which has reportedly been dubbed the Ponzi Palace by neighbors as part of the deal with prosecutors. An anonymous Stuart accountant has been working closely with the Federal Government to help his clients recover a portion of their investments from the distribution of Starrs assets.
9/10/10: President Obama has proposed a 100 percent bonus depreciation business tax incentive for 2011 to encourage business investment.The official announcement of his plan was made during a political speech Wednesday in Parma, Ohio. Obama will ask Congress to allow companies to deduct the full cost of new investments they make in plants, equipment and investments other than real estate. The deduction would be available retroactively to businesses from the date of his September 8 speech. Many business leaders are also looking to extend the tax cuts of 2003.The administration claims that the bonus depreciation proposal would cut business taxes by $200 billion right away - leaving businesses with money for capital purchases - but would only cost $30 billion over ten years because businesses would not be claiming normal depreciation. Paying for a larger percentage of depreciation up front is not a new idea. The Economic Stimulus Act of 2008 allowed small businesses to write off the value of investment up to $250,000 if the asset was purchased in 2008 and 2009. Larger companies were permitted to claim 50 percent of an assets basis as bonus depreciation. The regular depreciation could then be claimed on the remaining 50 percent over a period of three to 20 years. West Palm Beach accounting firms are studying the impact this proposal will actually have on small businesses.
9/10/10: West Palm Beach accounting firms have been analyzing several facets of the economy. Six-in-ten (57%) say they have been receiving negative information regarding real estate values which increased to 49% in early July from 41% in May. A third (32%) say they have been receiving mixed news stating the market essentially remained unchanged; 35% in July, down from 42% in May. The changing perceptions came amid reports about plunging home sales in July -- despite low mortgage interest rates. There are no significant differences among many on this question. Views concerning other aspects of the economy show little change since July. Amid continuing high unemployment, 65% say they are receiving negative statistics regarding the job situation. A similar percentage said there was an increase in July to 64%, representing a jump from 52% in May. Information regarding the financial markets and consumer prices have minimally changed in recent months; 40% say information concerning financial markets is mixed; 43% say information is mostly negative; while 42% say information indicates consumer prices continue to remain unchanged.
9/9/10: In todays complex business world, payroll accounting can be a complicated task. More often than ever, businesses are turning to outside payroll services, such as Rizzolo Group, to help with the intricate task of ensuring that employees are properly paid as well as overseeing employee benefits. Because of the severe penalties imposed on businesses by the IRS for infractions such as late or missed payroll tax deposits, businesses are finding it advantageous to outsource their payrolls to service bureaus that will handle all aspects of payroll administration. The business world is becoming very specialized and it takes specially trained workers that know the law, know accounting and know the importance of expedient procedures to accomplish the task of getting paychecks into employees hands on time.
9/9/10: May Bowen, former payroll supervisor, claims Next to the taxman, the company payroll department might well be the most criticized people on the planet.When an employees paycheck is accurate and on time, employees are satisfied with their employers payroll staff. When things go wrong, it is a completely different matter. Rightly or not, payroll accounting professionals come under a great amount of scrutiny if an employees pay has not been properly calculated. The payroll department is only able to work with the information given and, therefore, it is important that they are provided with accurate information. An example is handing in expense forms the day after they are due and expecting to be reimbursed in that pay period. To process a payroll accurately and in a timely manner, all claims must be submitted in accordance with the schedule provided by the department. YES, the responsibility is up to the individual to report accurately so the paycheck can be issued correctly.
9/8/10: In case you missed it . . . IRS has announced nationwide implementation of the EFTPS - FTD penalty refund offer. This offer allows business owners, who were assessed and fully paid a Form 941 payroll tax deposit penalty, the opportunity to receive a one-time penalty refund if they sign up for EFTPS, use it for one year (4 quarters) and make all required payments. The offer is also available to current non-mandatory EFTPS users. EFTPS is applicable to all taxpayers, however, with this initiative it offers a special opportunity to reach out to business owners with employees who have previously been assessed penalties and may be struggling because of it. EFTPS is an efficient, user-friendly system, costs nothing to use and will make tax payments trouble free. Now, with this initiative, IRS will look back up to four quarters prior to the four-quarter compliance period for a fully paid FTD penalty to abate. Penalties paid earlier than one year prior to the four-quarter compliance period are not eligible for the automatic offer.
9/8/10: The Electronic Federal Tax Payment System (EFTPS) is a free service from the U.S. Department of the Treasury. Since it began in 1996, millions of businesses, individuals, federal agencies, tax professionals, and payroll services have used this system. All federal taxes can be paid using this system Payments can be made via this the IRS web site, a voice response system, or special channels designed for tax professionals, payroll services, and financial institutions Quick, secure, and accurate, EFTPS is available by phone or online 24 hours a day, 7 days a week. You can schedule a business payment up to 120 days in advance or an individual payment up to 365 days in advance.
9/7/10: Is your Company running out of money? Where has all the money gone? Understanding a cash flow statement is important in order to evaluate the financial health of a company. Cash flow is the life blood of a company and revenue should be coming in at a greater rate than expenditures being made. The more revenue being generated determines the financial solvency of a company.Preparing a cash flow analysis helps track transactions; an integral part of business finance. Whether one manages a business or is a potential investor, interpreting the business cash flow is extremely important in determining the success of company operations. In accounting terms, positive cash flow is defined as the revenue remaining from the difference between monies received and monies spent.
9/7/10: To understand a cash flow statement, one must first evaluate the operations section of the statement. It shows the amount of cash coming in and going out from the core operations of the company. A strong positive cash flow from operations is a good sign of a healthy company. Next examine the investing section of the statement. This represents the cash flow from changes in purchasing and selling equipment, other assets and investments. Cash goes out when new equipment is purchased and cash comes in when an asset is sold. The last section of the cash flow statement reflects the changes in cash from financing activities such as debt payments and dividends paid out. The financing section will show how borrowing affects the company's cash flow. Check to see if there is positive cash flow as a healthy cash flow is a good indicator of a strong company
9/3/10: It is possible to make a late tax filing and still receive the refund owed you.
While taxpayers who owe the Internal Revenue Service (IRS) and file their taxes late face numerous penalties and interest, there is no penalty for those who file late but are owed a refund. However, the IRS warns taxpayers to file their taxes as soon as possible. A 3 year statue of limitations exists on all refunds owed. You have up to three years to file your taxes if a refund is owed to you and beyond this time limit you will lose your refund. Fortunately, there are many ways to file your taxes late and still receive the refund owed you.
9/3/10: Prior to tax filing, individuals and businesses should have all necessary documents pertaining to identity, expenditures for the year and, if pertinent, Forms W-2 and 1099. It is also recommended that the taxpayer have his Social Security card, driver's license, receipts from expenses earned or paid and paperwork provided from the government for benefits received. These are some of the types of documents needed for the Internal Revenue Service (IRS) to approve your filed income-tax return. Form W-2 is provided by the taxpayers employer and consists of all wages paid and all taxes withheld. It also verifies a taxpayers Social Security and Medicare benefits received for the year. One copy of your W-2 form should be sent to the Internal Revenue Service when filing taxes; the other copy should be kept for the taxpayers personal tax records along with a copy of the completed tax return.
9/2/10: Payroll deductions may include money voluntarily taken from employees checks for bill payment or investment. The deduction can cover a specified amount of time or can continue for the length of the employment with the company. Historically, payroll deductions began as a way of helping employees make payments for investments without having to write a check. To create a deduction, the employer must agree to take money out of the employee's pay check. An employer can also agree to authorize a deduction to pay a bill for an item that may have been sold to the employee by the company. The most popular reason people request to sign up for payroll deduction is to put money into an investment account. This method of investment or payment is helpful with an employee's budgeting. It ensures that the person requesting the deduction does not forget to make a payment. In the situation of merchandise purchased from the company, a payroll deduction ensures the employer being paid back for the item purchased.
9/2/10: Deductions from paychecks include federal, state and local income tax withholding, FICA taxes and amounts that employers withhold to cover employees portions of health insurance premiums, contributions to 401(k) plans or various other items. The amounts of money withheld from employees' paychecks are itemized, or listed, on their pay stubs. The law mandates that employers deduct federal taxes, but other deductions depend on company policies or may be determined by employees. These itemized payroll deductions are deducted from gross income. The amount of money left over is referred to as net income, which is the amount of an employee's paycheck. Because the government depends on tax revenue to pay its bills, it prefers to collect the taxes on income at about the same time people earn it. FICA taxes support Social Security and Medicare. The full tax amount is 15.3 percent. Half (7.65%) of the FICA tax is paid for by employees by way of payroll deductions. The other half (7.65%) is contributed by the employer.
9/1/10: Financial ratios are calculated from one or more pieces of information from a company's financial statements. This process is known as ratio analysis. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit margin for a company of 25% is meaningless by itself. If we know that this company's competitors have profit margins of 10%, we know that it is more profitable than its industry peers. A condition that is quite favorable. If we also know that the historical trend is upwards and, for example, has been increasing steadily for the last few years, this would also be a favorable sign that management is implementing effective business policies and strategies.
9/1/10: One very useful tool used by accountants to conduct a quantitative analysis of information in a company's financial statements is ratio analysis. Ratios are calculated from current year numbers and conclusions are drawn. These current year ratios are then compared to previous years, other companies, the industry or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. There are many ratios that can be calculated from the financial statements pertaining to a company's performance, activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover and working capital.
8/31/10: A Payroll calculator allows a company to collect and organize employees time data simply and accurately. Today, more than ever, it has become necessary to give thought to the methods of time and attendance management. The traditional time clock no longer makes sense and simply does not meet the needs of the modern work environment.Soliciting a company such as Rizzolo Group offers payroll services which will:
Easily and efficiently track your employee time
Manage your time and attendance data and employee profiles
Eliminate buddy punching
Make employee scheduling a breeze
Track employee time at the worksite
Reduce the headaches and time associated with payroll.
Best of all, Rizzolo Group will quickly pay for itself in time savings and eliminate payroll errors. Call to learn how Rizzolo Group can help your business.8/31/10: For tax relief Florida, consider an offer in compromise. An offer in compromise is a negotiated agreement between a taxpayer and the Internal Revenue Service that allows the taxpayer to settle his tax debt for less than the full amount owed. There are several reasons the IRS will accept such a compromise:
Doubt as to Collectability - The IRS doubts that the taxpayer would ever have the financial capability to pay the full amount owed within the time frame of the statutory period for collection (typically ten years from date of assessment).
Doubt as to Liability - There is doubt that the amount of tax liability assessed is correct. There are several reasons doubt may exist. Among them; the tax examiner may have been incorrect in interpreting the law, the tax examiner did not consider the taxpayer's evidence or there is new evidence available from the taxpayer.
Effective Tax Administration - The tax is correct but an exceptional circumstance exists to demonstrate that the collection of the unpaid tax would create an economic hardship or would be unfair or inequitable.
An individual tax payer is unable to do this on their own. They must seek out a professional such as an Enrolled Agent (EA) to assist them through the process. Contact Rizzolo Group today and speak to an EA.
8/30/10: When trying to find tax relief, it is not a good idea to negotiate with the IRS alone. If you live in Florida, have tax problems and it is creating anxiety; do not worry. If you owe back taxes you are not alone. Thousands of people every day are looking for tax relief Florida; and what you will find out isyes, it is available. Tax professionals are ready and willing to help you out of your situation. Enrolled agents are at your disposal to help in your case against the government. They are authorized to negotiate with the IRS on your behalf. Contact Rizzolo Group to schedule an appointment with an EA today!
8/30/10: Only 44 percent of workers have tried to determine how much they will need to save for a comfortable retirement. How much life insurance is enough? What type of IRA is right for you? Financial calculators are available on this and other sites and are designed as tools to help you gain answers to common financial questions. It is advisable to first use a payroll calculator to determine your net and disposable incomes. In addition, keep in mind that while preparing for the future calculators are not intended to predict returns or results; they are merely used as indicators.
8/27/10: A good business plan template should contain certain main components in order to produce a meaningful and useful business plan. The minimum components are as follows:
Executive Summary: Write this last. Its just a page or two of highlights.
Company Description: Legal establishment, history, start-up plans, etc.
Product or Service: Describe what youre selling. Focus on customer benefits.
Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
Strategy and Implementation: Be specific. Include management responsibilities with dates and budgets. Make sure you can track results.
Web Plan Summary: For e-commerce, include discussion of website, development costs, operations, sales and marketing strategies.
Management Team: Describe the organization and the key management team members.
Financial Analysis: Make sure to include at the very least your projected Profit and Loss and Cash Flow tables.
Build your plan and then organize it. I dont recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary obviously comes as the first section of a business plan, I recommend writing it after everything else is done. It will appear first, but you write it last.
8/27/10: When using a business plan template to create a business plan, the preparer should consider the following with regard to the business mission statement:
1) A mission statement should define what the business wants to do for at least three sets of people: customers, employees, and owners. It should not be just meaningless hype words.
2) A mantra is a single phrase that defines a business. Guy Kawasaki, author of Art of the Start, recommends mantra instead of mission.
3) A vision statement projects forward into time three or five years and presents a picture, like a dream, of how things should be. Usually a mission statement works best as a story about the future, with your business as the key element in the story. Where is it, what is it doing, how big is it, whats special about it. This works for some businesses, but not all.
4) Business objectives should be hard-baked, concrete, specific and, above all, measurable. Objectives are like sales growth rates, employee headcount, customers in the database, percentages of gross margin or profitability, units sold and so on.
The mission statement is both opportunity and threat at the same time. Its an opportunity to define a business at the most basic level. It should tell the company story and ideals in less than 30 seconds: who the company is, what it does, what it stands for and why the company provides its product or service. Its a threat because it can be a complete waste of time. 8/26/10: The first step to a better future is to take a good look at where you are now. Business counseling will help you identify where you are in your business development cycle. Whether you are just starting your business or have been working in your business for years, business counseling will help you to better understand your business. Counseling will assess and address your financial situation, the team you have created to run your operation and the time commitment you currently devote to running your business among many other measures. As you discover these important numbers and facts, your counselor will help you determine a clear course by which your business may follow. Are you happy with where you are now?
8/26/10: To provide effective business counseling one needs to understand what the role of a counselor is and isnt. A counselor is a person who gives advice and/or recommends a course of action. A counselor is not someone who lays down the law with a heavy hand. As a business counselor, the primary responsibility is to keep the big picture in view and guide clients toward reaching their goals. To properly counsel clients, one needs to understand what industry he or she is working with. One also needs to understand the clients goals. When an appropriate analysis has been made, the outcome should be articulated to the client in a manner that will enable the client to understand the pros and cons as well as the recommended course of remedial action.
8/24/10: The IRS should phase in - over the next three years - a requirement that tax return preparers filing more than 10 returns do so electronically; a mandate that otherwise will take effect next year, an advisory panel said Friday. The recommendation was among nine by the Electronic Tax Administration Advisory Committee in its annual report to Congress. The committee advises the IRS on its strategic plan for electronic tax administration and related issues. It monitors the IRS progress toward meeting its goal of receiving at least 80% of tax and information returns electronically. It also assesses the effects of efile mandate on small businesses and self-employed taxpayers. The 13-member committee is composed of practitioners, tax executives, state revenue officials and others.
8/24/10: Efile is a system for submitting tax documents to the Internal Revenue Service through the internet or direct connection, usually without the need to submit any paper documents. Tax preparation software with e-filing capabilities are available as stand alone programs or through websites or tax professionals from major software vendors for commercial use. Of the 139.3 million U.S. returns filed in 2007, 79.98 million or about 57.4 percent were filed electronically. The number of efiled returns has steadily increased since then and, as of the 2010 filing season, most professional tax return preparers will be required to efile all of the returns that they prepare.
8/23/10: The most important single step you can take to head off a possible cash flow surprise is to ask and answer this very simple question: What do I expect my cash balance to be six months from now? Answering this question will force you to focus forward. It will force you to look at your business in a new and revealing way. It will pull you out of the past and into the future. The key to answering this question is having a monthly cash flow projection for your business for at least the next six months. This is a schedule that shows your projected revenues and expenses in the context of your beginning and ending cash balance for each month.