Thought for Today – Before you buy a business it’s important to look under the hood and make sure all the working parts are as advertised. The process of doing this is call the due diligence process. During this process actual operating information for revenue, expenses and gross profits are compared to those that were represented by the seller or broker during the sales process. The outstanding liabilities are also reviewed along with possible undisclosed liabilities that could become the responsibility of the new owners. In over thirty years of doing due diligence work the one thing we know for certain is that buyers always do their best to paint a pretty picture but often don’t disclose what’s just below the surface.
Thought for Today – I know that we tell clients we can help them solve any tax problems and provide answers to any question, but no matter how good we are and how much we know, we don’t read minds and can’t tell you what an IRS notice means if you don’t provide us with a copy of the notice.
Thought for Today – A hurricane may blow away your tax records but that does not mean you will be defenseless should the IRS decide to audit you. Thanks to the Cohan rule, a taxpayer who’s records have been destroyed through no fault of their own can often use reconstructions and estimates to prove their deductions in the event of an audit. But be warned if you don’t have the records you must first be able to show that you made every effort to get duplicated from third parties such as suppliers and vendors. You must also show that you have made an effort to reconstruct your records.
Thought for Today – You know it’s time for a mid-year tax review if; your income has increased substantially or you expect your income to increase substantially, your income has decreased, you have sold a home or other real estate, have or are thinking about taking money out of a pension or IRA, are getting close to or thinking about collecting social security and or want to do everything possible to reduce your 2015 taxes.
Thought for Today – We know many people feel that their pets are members of the family, but that does not make vet bills deductible medical expenses.
Thought for Today – From the list of questions no one will believe people ask their tax professional we have; “Can I deduct the costs of my dog, as I get all my exercise by walking him and my doctor said that I should exercise?” Answer NO. While expenses for exercise programs, equipment (including dogs) and gyms are not deductible even when recommended by a doctor for general health or other non-specific treatment they may be deductible if prescribed for a specific medical condition like obesity, rheumatoid arthritis or other specific medical condition.
Thought for Today – Is your business sending the right message? Last night we decided to have dinner on Las Olas Blvd. As it’s no longer season, we dropped in to eat at Johnny V at 7:40, and were told that it would be at least 20 minutes before we could get a table, by a hostess who could have cared less. What we did not have were reservations and what they did have were 8 empty tables that I could easily see from the hostess stand. We found dinner at another local restaurant, there are plenty of choices on Las Olas. But what Johnny V may never know, is that they lost a customer that is a local and eats out at least 5 nights a week.
Thought for Today – One of the benefits of working with the right accountant is the ability to get a second opinion and review business strategies. Sometimes a view from the outside by someone that understands your business and deals with lots of other businesses, some like yours, some very different, can add a perspective that is very useful.
Thought for Today – Are you leaving money on the table with your current customers? Sometimes you can insure additional income by helping your customers and yourself. I recently had the water changed in my hot tub by my pool service, now I admit it had been way to long since I had done this and the cost was just $100.00. So why did it take so long? I just never got around to it and all it would have taken to generate an extra $200.00 per year from me by my pool company was to ask the simple question, would like us to schedule this for every six months. They would have been insured the revenue and I would have had the peace of mind to know that I no longer had to worry about taking care of getting this done.
Thought for Today – Important reminder: Your company data needs to be protected. There has been a lot in the news about protecting data from outside hackers. For most small business Chinese hackers and foreign intelligence are not the big problem. They need to be more concerned about unauthorized access and use of their data by an employee or insider. The best protection is to see that employees only have access to the information they need to do their job, and to make sure than all computers are locked or logged off when employees and supervisors are not at their desks. Remember a password and or access restrictions don’t do any good if computers are left logged on and unprotected allowing those without authorization to access them.
Thought for Today – Tax Myth, you only have to report income that you receive a 1099, W-2 or other tax reporting form on. If did not get a tax reporting document, got paid in cash or by bartering it’s not taxable. Fact — You are taxable on all income and the fact that you did not receive a tax reporting document is no excuse for failure to report income, even payments are received in cash or in the form of a barter transaction are taxable and must be included in your gross income.
Thought for Today – Tax Myth that can get you in trouble! — You’re citizen of the United States living abroad and have no assets and no income in the United States. You do earn income in your country of residence and pay all taxes due there so there is no reason to file a U.S. tax return. Fact–U.S. Citizens and resident aliens (those with green cards), must file a U.S. tax return and report their worldwide income if that worldwide income exceeds the U.S. filing threshold for the year. Certain foreign earned income can be excluded from taxation if certain conditions are met, but to get this exclusion you must file a return.
Thought for Today – Am I the only one that thinks it’s bad manners to send someone an email and not include your full name and a contact phone number? It’s hard to answer someone’s email when they don’t tell you who they are, or only include their first name, so you have no idea who they are.
Thought for Today – I had a prospective client ask me as part of the initial consultation, if I would lie to the IRS and or their suppliers for them. When I said No and told them if they were looking for an accountant that would lie for them they should leave now. Well they let me know that they would never do business with accountant that would not do “whatever was necessary to protect them and their business”. I just said I was sure you will get what you deserve as anyone that will lie for you will also lie to you and that’s not the kind of relationships we are looking for.
Thought for Today – While borrowing for the right reasons can help you grow your business, borrowing for the wrong reason can just as surely kill your business. Before you borrow make sure it’s for the right reasons and that it will add to your business cash flow not reduce it making things more difficult.
Thought for Today – Here are some things that clients say and what they mean. Client says, “I don’t have my information together yet but I should not owe any tax right?” Client means, “I need you to tell me that I won’t own any taxes so that I have someone other than myself to be mad if I do owe.” Client says “my return is simple.” Client means, “go easy on the fees.” Client says “my brother wanted me to ask you….” Client means, “My brother is too cheap to pay for help.”
Thought for Today – On the list of reasons never to get professional advice from a web site, is that anyone can publish anything and not only is the information often unchecked, but those who rely on it have no recourse when they are harmed by it. Take the case of the client that found information recommending adding her sons name to her bank accounts so that if something happened to her, he would be able to pay her bills. Surprise, her son had a judgment for failure to pay a debt and the account was levied leaving her with $20,000.00 less to pay her bills. The same thing could have easily been accomplished without the risk, by giving him a Durable Power of Attorney or setting up a Revocable Living Trust.
Thought for Today – It’s a funny thing that throwing money at a problem often won’t solve it. Paying attention to the problem makes it go away.
Thought for Today – There is no statute of limitations for the filing of tax return. If you were required to file a return, but did not file, it does not matter how long ago the return was due. The statute of limitations for tax returns does not even begin to run until return is filed. So if you are one of those who has failed to file past returns, the sooner you get them filed the better. Remember while you can’t go to prison for failure to pay taxes owed, failure to file a return can be a criminal matter and jail time is a possibility.
Thought for Today – The first step to being the best you can be, is knowing what you are! In business this is not about your product or service it’s about knowing how you impact the market place and how you are perceived by customers and prospective customers.
Thought for Today – Did you know that if you buy a business and Florida Sales Tax is unpaid or underpaid by the seller for any period up to 36 months before you purchase, the state of Florida can hold you liable for the amounts unpaid or underpaid? This responsibility for sales taxes of the seller of a business by the buyer of the business is called successor liability and it just one important reason why you should include your accountant in the purchase of a business, before you agree to purchase the business not after the contracts have been signed and the agreement has been finalized.
Thought for Today – Under the heading of the funny things people say to their accountant. “I don’t know why you keep asking me for information. You are my tax guy and I hire you so I won’t have to deal with this stuff.” “If I knew making all this money would mean I would have to pay taxes, I would not have bothered.” “So explain to me again why I can’t deduct all my food and clothing, as work expenses. I have to eat to have the strength to go to work and my company won’t let me work nude so that are both work related expenses.”
Thought for Today – Business is about people and service. No matter how complex or simple the product, no matter how innovative or simple the idea, in the end a business is about serving the needs of people. Do this well and you will be rewarded. Do it poorly and you will struggle or disappear.
Thought for Today – Do you have procedures in place to protect your data? In today’s age the life blood of every business is data. Every business relies on: accounting data, customer data, product data, supplier data and other unique information that is stored on computers somewhere. It’s important that this data be backed-up regularly and that the back-ups be stored offsite and protected from loss. When is the last time you reviewed your back up procedures and made sure they were really working to protect your data?
Thought for Today – I have gotten a lot of calls lately from people that set-up LLC and Corporations and what to know. “Now what?” The best time to have asked this question would have been before they set up their new entity, not after. In some cases LLC have been sent up where Corporation and a Subchapter S election would have been a better choice and in others a Corporation was set up when a LLC would have been a better choice. The best time to speak to an accountant is before you take action not after.
Thought for Today – The U.S. Department of Labor takes the position that if an unpaid Intern does work that makes any kind of contribution to the employer, that wage and hour law applies and they must be paid minimum wage. While I am sure that the intent was to protect Interns from becoming slave labor, the result is less internships and hence less opportunities for those that need real world exposure and fewer opportunities for young people.
Thought for Today – Funny things heard around the accounting office; Client, “how come no one told me that if I made more money I would have to pay more taxes.” Accountant, “when I asked for his business records he said that he did not have records he kept all his music on his IPad.” Prospective client, “I don’t want to tell you what I need until after you tell me how much it is going to cost.”
Thought for Today – If you did not like last year’s tax bill now is the time to get to work on this year’s tax bill. Wait until the year is done, and all we can do is offer a tissue to help wipe away the tears!
Thought for Today – Every business has two kinds of customers. They are inside and outside customers. Inside customers are your employees, suppliers and others that your business depends on to be able to achieve its mission. They may not produce any revenue but they do determine your ability to operate and make a profit. They are a valuable part of your business and it’s important to treat them as such as they become the face and determine the attitude that your outside customers see. While your outside customers provide the cash flow and income to your business, it’s your inside customers that keep them coming back.
Thought for Today – In the movie “Field of Dreams”, they told us “if you build it, they will come”. However, this is not necessarily true. In business you have to tell them about it and keep telling them about it, if you want them to come. Advertising and promotion need to be an important part of your business plan.
Thought for Today – It might be time to get the kids on the payroll if you are a business owner. Putting your kids on the payroll can move income from your tax bracket to theirs and teach them the value of a dollar. In addition, as soon as the kids have earned income they can fund an IRA or better yet a ROTH IRA. Now you need to be able to show that the kids actually do some kind of work for your business and that what you pay them is reasonable for the work they do, but this should be easy–who’s kids today don’t know more about computers, the internet and social web sites than you do, so why not put them to work helping you with data entry or social marketing for your business. If your business is unincorporated and your children are under 18 you pay no FICA taxes on their wages and the first $6,200 they earn is tax free.
Thought for Today – Reading the fine print is important. Remember that there is a reason someone took the time to put it in that contract or agreement and that reason was probably not to benefit you. When in doubt cross it out.
Thought for Today – Why is that so many more people want us to tell them how to fix problems that could have been easy avoided if only they had called to discuss what they planned to do before actually doing it?
Thought for Today – This year we have seen more correspondence from the IRS and refund delays than ever before. Much of this correspondence is about IRS verifying credits and withholding that was properly claimed on tax returns. The requests are due to the amount of fraud that has taken place the last few years. In most cases, large refunds are being claimed. Don’t let one of these notices shake you. Simply forward it to your tax professional. The good news is that eventually you will receive your refund. The bad news is that it is just going to take a while for the IRS to get the additional information processed and your refund sent to you.
Thought for Today – Leadership is not about telling others what to do, it’s about showing them how it’s done and encouraging them to take risks and learn new things.
Thought for Today – Three very different business stages call for three different management emphasis. The three stages are the Start-Up, Growth and Transition. During Start-Up you are scrambling to figure out what your business is all about. Your plans need to be flexible as what you thought would happen is not always the case. This stage calls for being light on your feet and making sure that you keep a close eye on your capital to make sure you don’t run out of money before you become profitable. In the Growth stage, your business is established and you know the formula works; you need to just add more business while keeping expenses in line. This is the stage where you need to evaluate if you would be better off passing on some of your less productive responsibilities to others, so that you can spend more time on growing the business. It’s important to make sure that growth is controlled so that is does not out pace cash flow available. Protecting your brand and putting the systems in place to maintain quality and consistency are also important at this point. In the transition phase, you start planning how you will convert the equity you have built into dollars you can bank when you retire or move on to your next venture. There are many exit strategies to choose from. You could bring in a CEO to run the business for you and continue to collect dividends from profits generated. This could be a family member, trusted employee or someone from outside the company. You could sell the business and take a lump sum or installment payout, or you could close the business and sell of the assets. But whatever do, the only way to maximize what you will be is to start planning early. Most transitions require five years of more of planning to create the best results.
Thought for Today – Do you still experience the joy you got from your business when you were starting out? If you had to start over today, what would you change and what would you keep exactly the same?
Thought for Today – Do you track where your new business comes from? The best way to determine if your marketing dollars are doing the job you intended is to track where your new business comes from. It can be as simple as asking ever new customer “which one of our friends suggested you use us.” Recording this information can help you provide a proper thank you to those that refer you business, and to track which of your marketing efforts is working and which are not.
Thought for Today – Reasons people give for missing their tax appointment: “The dog ate my W-2.” “My husband left the information in the car at the airport.” “I did not want my husband / wife to be able to see how much I made.” “My mom handled my stuff.” “I knew that if I brought it in you would tell me that I owe taxes.” “I did not remember it was that time of year.” “I can’t get the computer to give me my information.” “I need to get the last three years together before I start working on this year.”
Thought for Today –Silly things people believe about taxes. “Getting a refund means I don’t pay taxes”. We in the tax profession call this blissful ignorance. Getting a refund means you are probably having too much withheld and giving the government an interest free loan all year. “When you get to be over 70 you won’t have to pay taxes anymore”. Truth is that there is no magic age where you no longer have to pay taxes, income taxes are based on income not age.
Thought for Today – On the lighter side here are some excuses we heard this year as to why client’s did not have their tax information: My paper work was stolen from my car. I did not know I needed to bring my information with me. I never go to the mail box, all I ever find is bills. I mistakenly used my tax information to get a fire started so I don’t have it. To avoid all these problems and more we are introducing a new app for your smart phone that lets you take pictures of your important tax documents and other information then store them in the cloud where you can access them any time. To download your free copy of our record saver app go to http://autokept.herokuapp.com/users/sign_up?share_token=lgKoTR_yBpe-
Thought for Today – Do you ask your customers for referrals? One of the best sources of business is happy customers. But getting the true benefit from this sleeping marketing machine means you have to let those happy customers know that you not only want their referral but that you need them to help you grow your business. When a customer has completed a transaction with you and is happy with the results of that transaction, it’s important to remind them that you need their help and would appreciate them referring their friends and relatives to you. It’s also important to let them know that know that they can be sure you will take the same good care of those they refer as you have taken of them.
Thought for Today – Be careful of the company’s that advertise how they can make your taxes go away for pennies on the dollars. While many true tax professionals may be able to help you work out a payment plan with the IRS, giving you some breathing room, no one can make what you own magically disappear allowing you to keep all your assets and your income intact. Worse yet, many of these firms will string you along taking your money, money you could have used to reduce what you owe. There are solutions to back taxes but none are easy or painless.
Thought for Today – It’s funny that how unreceptive we are to advice when we really need it and how receptive we become when we don’t.
Thought for Today –Yesterday I attended the sale at my wife’s parent’s home in Martinsburg MO. This was my first experience with something like this, where the possessions of a lifetime, their treasures are sold off. Events like this bring out many emotions and many types of people. Harold and Mildred, I am sure we’re looking down proudly as their children worked together to prepare for the sale and supported each other through the tears and small joys of the day. While the bargain hunters were out, so we’re the friends and family that came from far and near to offer support and share a story or memory. If there is a lesson to be learned here, it’s that a life well lived is not about the things you acquire, it’s about the people you touch, the memories you leave for others and the children, grandchildren and great-grandchildren that are all better people for the life lessons you taught them and which the will pass on to their children and their children’s children.
Thought for Today – A business without profits will never hire additional employees, contribute to charity or the community and will soon disappear from existence and memory. Profit is not evil it is the engine that drives our economy and makes life better for all.
Thought for Today – There is no better time to start a business than today and while the products or services you offer are important as is customer need, nothing is more important that a belief in yourself and the ability to see beyond what others see and tell you. Many a great company has been built from ideas others laughed at by a person with vision who was will to take great risks to see that vision through. Federal Express, Southwest Airlines, Office Depot, FaceBook, Google, GoPro ….
Thought for Today – It’s never too early to teach your children about money. At every age there are important lessons you can teach them. These lessons include: Money has to be earned and that what you earn limits or expands the choices you can make. Savings is an important discipline. Investing gives your money the chance to work for you and earning something adds to its value. Living on a budget means learning to spend less than what you make or have, as needing or wanting more has little to do with getting more.
Thought for Today – Often times we pay so much attention to how we want things done, that we fail to see the possibilities for improvement. In many cases, the how is much less important than the results. Allowing the people around you the freedom to determine how might just improve the process and the results.
Thought for Today – The reason we do not use hourly fees for bookkeeping and a number of other services is because in fairness to our clients they should not pay more because we work slower. A fixed fee means we get paid for the work required and completing it in a timely basis, not for the amount of time we spend. The incentive is on getting the work done and done right as we don’t get paid extra for redo’s or working too slow. Want to know more about how you can get more bang for your buck when it comes to bookkeeping give us a call.
Thought for Today – Your business is only as good as the people that work for you. Treat them like your greatest asset and provide them with the training and support necessary to help them grow and your business will grow along with them.
Thought for Today – Today I vow not to use the T word for at least a week.
Thought for Today – If you have not filed your tax return, an extension is available BUT YOU HAVE TO FILE FORM 4868 with the IRS. The form can be found on the IRS website at http://www.irs.gov/pub/irs-pdf/f4868.pdf and must be post marked today. Filing this form if you have not yet competed and filed your return filing. An extension will help you avoid the late filing penalty.
Thought for Today – In the back stretch now. If only all the clients pick up their returns and get the e-file forms back to us.
Thought for Today – Tax return still not out? Do not worry! Do not shout! Simply get an extension sent out!
Thought for Today – Identity theft victims are waiting a long time for their tax refunds. According to a new report from the Treasury Inspector it takes an average of 278 days during which time the taxpayers refund is delayed. With this in mind you may want to adjust your withholding and or estimated tax payments to reduce or eliminate a refund when you file your tax return. The best strategy may be to owe some tax and not get a refund when it comes time to file your return.
Thought for Today – So today a client asked “how much of my income do I have to report on my tax return?” When I said “all of it”, he asked “what is the worst that can happen if I only tell you about part of it?” My response “It all depends on how you feel about jail”. Remember that failure to pay your taxes means the IRS can levy your bank accounts and or seize your assets but lying about how much you make on your tax return could be considered criminal fraud, and get you 3 hots and a cot in the federal slammer.
Thought for Today – The best intentions sometime create the worst results. I don’t know how many times every year I have to explain to a client, that a parent or loved one adding their name to the deed on their home or deeding the home to them before death means that they will be paying a lot more tax on the sale of that home than if it had passed through an estate at death or been part of a trust. Property passed due to death gets a stepped up tax basis reducing the gain on sale while property transferred through a gift retains the tax basis of the person who gifted it.
Thought for Today – Tired of having to go through lots of receipts that look like your dog ate your homework every year at tax time? We have a new App that can help you scan your receipts and save them to a private folder for access over the internet. Simply shoot a picture of the receipt at the time of purchase and dictate a short description. Our App will save it for you, allow you to classify, then download it at tax time. The App is free–simply email us at info@RMSAccounting.com and put Tax App in the subject line.
Thought for Today – Don’t forget the identity thieves are out there looking to make what you have, theirs. The IRS does not email or call tax payers looking for information about you or any of your family members. Don’t click on links in an email asking you to verify something the IRS should know. Before you respond to those emails that say they are from your bank or credit card company, make a phone call to the bank or credit card company using a phone number you know and verify that they are not just a trap to get information.
Thought for Today – While we know just about everything there is to know about taxes and tax returns, we don’t know when you bought those stocks you have been holding onto forever and what you paid for them. When you sell a stock, the broker reports the sale to the IRS but it’s often up to you to come up with what you paid to purchase it along with when you purchased it. Without this important information you could end up paying more tax that you owe on the sale.
Thought for Today – Maybe it’s just me but this time of year as my email fills up with advertisement for accounting and tax conferences of every kind and in every place, all I can think about is that the last thing I want to plan right now is a week of conferences surrounded by accountants and tax professionals!
Thought for Today – Former client called yesterday asking for help. It seems that he decided that he did not need our help last year and filed his tax return using Turbo Tax. He recently received a notice from the IRS showing he owed a great deal of additional tax and wanted to know what to do? I asked if he had called Turbo Tax about his problem and he said that he had but they had not been any help. Then he asked me to see if I could help, as he just did not understand the notice and I have always dealt with any IRS correspondence in the past and taken care of it for him. When I told him I would be happy to help, but that I would need $500.00 retainer and that the fee was $250.00 an hour, he said in the past you did not charge me for handling this kind of thing. I had to remind him that in the past we had done his returns and that when he paid us to do his return we handled any problems, questions or audits for no additional charge.
Thought for Today – The only thing more expensive to undo than a bad partnership is a bad marriage. Both can end up with financial collapse and a transfer of assets to attorneys and accountants. Don’t rush into either with the idea that you can change someone or that if things don’t work out it will be easy to get out. If things do go bad, try to remember that those advising you may make more from conflict than from common sense and doing what is fair.
Thought for Today – The internet makes it much easier today to get information on business ideas, taxes and many other subjects. This ease of access to information comes with one big problems. The problem is the reliability of the information. Anyone, even those with bad intentions or misinformation can publish on the internet and with a little work what they publish can look like it comes from a reliable professional source. Before taking action based on something you find on line make sure to double and triple check it’s accuracy and remember internet research is never a substitute for reviewing a decision with a professional in the field.
Thought for Today – Client asked me how old do I have to be to stop filing taxes? She was not happy when I told her that she either had to have a lot less income or stop breathing to stop filing taxes, and that even if she stopped breathing someone else would still need to file her final return. The only way out of the tax system is poverty or death.
Thought for Today – Something you should know about those of us who spend our days doing taxes, we live in the past. When we ask you if there were any changes this year or how old your children are now, we really mean last year, as that what we are working in. Just call it the tax pro time warp.
Thought for Today – Same sex marriage is good news for many couples when it comes to inheriting a large estate, but may not be such good news when it comes to filing tax returns. Couples that are legally married must file income taxes using the filing status married filing joint or married filing separately and this often results in a higher tax bill than when each filed a return using the single filing status. If marriage is in your future, it does not matter if you are a same sex couple or a traditional couple, it’s a good idea to speak to your tax advisor before tying the knot.
Thought for Today – Buying or selling a business? A little planning can help insure a successful transaction. If you’re a seller, the planning should start at least a year before you are ready to sell. If you are a buyer, the planning should start before you start looking at businesses for sale. Spending a little time with your accountant to do some planning can mean the difference between success and failure.
Thought for Today – Having the right accountant on your side can make all the difference not only at tax filing time, but also throughout the year. The right accountant can help guide you when it comes to tax, business and investments, making sure that your actions have the results you intend.
Thought for Today – Under the heading of “I Told You So”, is the client who fired an employee for stealing, only to have the employee threaten to turn him over to the IRS because he was paying her in cash for sales that he was not reporting on his tax return. I have often told client two things; 1) Don’t underreport your income as it could be considered criminal fraud. 2) Anytime more than one person knows something, it is not a secret and may come back and bite you when you can least afford it.
Thought for Today – Over the years we have honed our skill set. While there is not a tax or accounting question we can’t answer, one of the skills we have been unable to develop is reading paperwork or tax notices you receive in the mail over the phone. If you get something you want to ask us about in the mail, please fax, email or mail us a copy before you call us about it.
Thought for Today – The good news about tax season is that we get to visit with so many clients that have become more like friends over the years and learn about all that has been happening in their life over the last year. The bad news about tax season is that all those good friends leave behind piles of work that we need to get done.
Thought for Today – Add to the list of bad negotiating tactics, showing up late for your appointment with your accountant with a box full of paper that looks like it came straight out of a land fill then asking for a discount on the tax preparation fee.
Thought for Today – Sometimes it pays to keep it simple. Before setting up multiple corporations or LLCs to help protect you from legal liability, it’s important to determine just how much additional liability they will protect you from and what the cost of this protection will be. Before setting up a new corporation or LLC, check with your accountant to make sure you understand all the costs involved.
Thought for Today – Corporate returns are due on the 15th of this month so if you have not filed your corporate return yet remember to file an extension on or before the 15th to avoid penalties.
Thought for Today – You may think that all of those that fail to file their tax returns owe taxes but you would be wrong. The IRS estimates that it has a billion dollars in refunds that are due to tax payers for 2011. To claim these refunds the tax payers simply have to file their 2011 tax return. But time is running out. Like Cinderella’s glass slipper, at midnight on April 15, 2015 the ability to claim a refund for 2011 disappears forever.
Thought for Today – Millions of people that are over 112 have social security numbers that show they are still actively working and earning wages! These senior employees seem to be the result of the Social Security Administration not matching up the death notices they receive with the active files. So who are all these working octogenarians? Seems they are often people that are present in the United States illegally and needed a Social Security number to get a job. So if you’re worried about making ends meet in your old age, don’t worry, as it seem the government see no problem in allowing you to just keep working even long after you are dead.
Thought for Today – What are you teaching your children about money? Do they know what it costs to live in the style they have become accustomed to? Do they understand the value of saving? Do they know that money is the result of hard work?
Thought for Today – All too often we find that clients let the tax tail wag the dog. While pay less taxes might be a good idea a better idea is getting and keeping more money.
Thought for Today – Lose your Social Security Earnings statement? Replacement Forms SSA-1099 and SSA-1042S are available online: A recent enhancement to the Social Security Administration’s (SSA’s) website allows individuals to obtain replacement Form SSA-1099 or Form SSA-1042S this tax season through an account created at www.ssa.gov/myaccount/. In addition, an online mySocial Security account may be used to track earnings, estimate future benefits, change an address, start or change direct deposit, or for those currently receiving benefits, request a letter with proof of benefits. Medicare enrollees may obtain a benefit verification letter, check benefit and payment information, verify earnings records, change an address and phone number, start or update benefit payment direct deposit. A mySocial Security account may be only created and used for an individual’s personal information. An account cannot be created or used on behalf of another person, even with written permission.
Thought for Today – When someone tells you that an investment or business idea is so good that you need to sign now without discussing it with your accountant or other advisors, it’s a sure sign that there is something that won’t stand up to further investigation.
Thought for Today – When you tell us, your accountant, what you have done after you have done it, there is little that we can do if your actions are going to cost you more or was a bad choice other than try not to let you see what we are thinking. It’s always best to remember to Ask before Acting.
Thought for Today – Do you manufacture a product in the U.S., do new construct, develop software, grow and harvest crops, extract gas or potable water? If so you may be eligible for the Domestic Productions Activities Deduction. The deduction is equal to a reduction in of the net income for qualifying Domestic Productions Activities Deduction activities of up to 3%.
Thought for Today – The second best answer you can get when prospecting is “no”. It definitively lets you know to move on and puts you one step closer to finding someone that will say yes. The worst answer you can get is “maybe” or “let me think about it”. It tell you nothing and leaves you to spin your wheels and waste your valuable time.
Thought for Today – Remember, if you are a U.S. citizen or a U.S. Resident you must report your worldwide income on your federal income tax return. On the bright side if you paid tax in other countries you are likely entitled for a foreign tax credit up to but not exceeding the lessor of the foreign tax paid or the amount of U.S. tax on your foreign income.
Thought for Today – Hint when someone wants to buy your business, it’s customary for them to make an offer in writing before you strip down to your underwear and show them everything you have got. While showing a little skin may be ok to get them interested, they don’t have to see everything you have until they make an offer and put up some money.
Thought for Today – Don’t take tax and business advice from those that are not qualified to give it. Way to many times I have told prospective clients that the workers they are treating as independent contractors are in fact employees and should be treated as such to avoid penalties and other liabilities only to be told that “it’s ok my friend treats his employees as independent contractors and it saves him money, he has been doing it for years.” My response is always the same, “just because he has gotten away with it so far does not mean he will continue too. Isn’t it better not to have to worry that you will be put out of business by penalties, unpaid employment taxes, overtime liability or worse injuries to a worker.” Most of the time this means that we have no chance of getting the business as they just don’t want to know what they should do or why. But at least once a year a few of these people show up at my office with letters from the IRS, Department of Labor or some other government organization looking for records and threating penalties for failure to comply, wanting my help.
Thought for Today – The reason for doing something or not doing should not be the tax consequences. While tax consequences may sweeten the investment or business deal, the quality of the investment or the value of the business deal should always be your primary consideration. Put another way, the amount of taxes you pay are far less important than the amount of money you keep.
Thought for Today – The best advisors are those that will tell you what they think, even when it’s not what you want to hear.
Thought for Today – Hint–The cost of preparing your tax return goes up if your information is a mess. Want the cost to go sky high, bring it in looking like trash wadded up in a box containing mold mildew and dead bugs.
Thought for Today – One of the great things about all of the do it your self-tax software is all the additional billing and revenue it creates for us out side of tax season. We make lots of money helping tax payers that though they would save a few bucks by using a do it your self-program answer IRS notices, handle audits and fix mistakes that they made on their tax return. If taxes were easy the guys that write the tax laws in congress would do their own returns, they don’t.
Thought for Today – I know that is sacrilegious for an accountant to say that all business and tax decisions can’t be based on the dollar cost or savings alone, but it is often true. Yesterday a new client wanted to know what he could do to eliminate the penalty that would result from his claiming his grown son as a dependent as his son did not have health insurance. He had determined that if he did not claim his son the loss of the exemption and elimination of the penalty would result in him paying an additional $50.00. My question was, if your grown son, without health insurance goes to the hospital and runs up a big bill, what are you going to say when the hospital comes looking to you for payment, you have claimed him as a dependent? My comment was paying an extra $50.00 to avoid being held responsible for an adult child that is not disabled but simply chooses not to work, seems like a no brainer to me.
Thought for Today – The good news is that it is easier to be a millionaire today than at any other time in history. The bad news is that a million dollars just does not go as far as it did at almost any time in history. The big secret that most millionaires don’t tell you is that getting into the club is a lot less about how much you make, than it is about how much you spend.
Thought for Today – The answer to Fridays you make the call question is: None of the taxpayer’s expenses for travel or living away from home for work are deductible. The tax code considers your home to be where you make your living. If you choose to live elsewhere and have to travel back and forth, the expenses of travel, food and lodging are not deductible. If the position was a temporary assignment the deductions may be allowed.
Thought for Today – You make the call. A taxpayer’s has a home in South Florida with his family. He takes a job in Atlanta and decides to commute back and forth from his job in Atlanta every weekend to be with his family in Florida. The taxpayer wants to deduct all of his cost of commuting to and from his job and the cost of lodging and meals while he is in Atlanta for business, can he deduct these expenses?
Thought for Today – Tax season is the only time that you will ever find people that overpaid celebrating getting their own money back as if they won the lottery.
Thought for Today – Did you know that anyone can hang out a sign and claim to be a tax preparer? Not only can they, but this time of year signs go up and offices open all over and many of them are staffed by people that only months ago were taking a beginners class on income tax preparation. Worse yet some of these people may not understand the importance of keeping your private information private. There are only three classes of people that can not only prepare your return but they can also represent you before the IRS, these people are Enrolled Agents, C.P.A.s and Attorneys. Enrolled Agents are the only tax specialists to derive their authority from the U.S. Treasury. Our Enrolled Agents are year round tax professionals, so no matter the time or year or the type of tax question, they are always here to help you.
Thought for Today – Yesterday a client called to ask a question about overtime rules. Our client wanted to know if they could avoid paying their employee time and half for working over 40 hours a week by having the employee agree to just get regular time for the additional hours. Much to our client’s disappointment I had to tell them no, regardless of any agreement to the contrary, the law is the law. If you need to know more about Overtime Rules and Exempt vs Nonexempt employees email us at info@RMSAccounting.com and we will send you a free booklet that will help you understand the rules.
Thought for Today – As we fight through the details of the Affordable Care Act “Obama Care” which includes additional work on every tax return this year along with possible penalties for those that do not have insurance, we want to know what you think. Should the federal government force everyone to purchase insurance coverage? Should what kind of insurance you purchase be dictated by the government? Is health insurance a right that everyone is entitled to or is it a choice that we are entitled to make on our own?
Thought for Today – There is nothing wrong with mixing a little pleasure with your business travel. For example choose that Vegas trade show instead of the one in Detroit. Then add a couple days on the end and get in a little time at the tables. Deduct the entire cost of the airline ticket, the hotel and meals for all business days. While you don’t get a deduction for the non-business days (unless staying over the weekend including hotel is less expensive then returning home Friday night) you get to deduct the plane ticket and hotel transfers. Want to deduct it all just work the trade show during the day and gamble at night. A little planning can save you some money and make the trip a lot more fun.
Thought for Today – The most important competition you will ever have is yourself. If you are better every day that you were the day before, you will be better than any competitor ever could be.
Thought for Today – There is a deadline for filing a claim for refund. Generally, the period for filing a refund claim, on an original return form 1040 or an amended return on form 1040X is the later of three years from the time the return was filed or two years from the time the tax was paid. However, if the claim is due to a death that occurred in a combat zone or from wounds, disease or injury incurred in a combat zone, the deadline for filing a claim is extended using the special rules for Combat Zones and Contingency Operation Extensions.
Thought for Today – When buying or selling a business, what you buy can make a big difference in the tax treatment for both buyer and seller. For example, If the business changing hands is a corporation, you could buy the assets of the business and place them in a new business entity such as an LLC or S-Corporation and depreciate them based on the purchase cost or you could simply buy all of the corporate stock in the existing corporation and continue to do business as the new owner / shareholder. In this case you would not be able to depreciate the assets based on what you paid for the business and would just continue with any depreciation remaining for the assets while capitalizing your investment as basis in the stock. For the seller, a sale of stock would avoid any recapture of depreciation and allow the entire sale to be treated as a long term capital gain. So what is good for seller may not be as good for the buyer. These deals are complicated and should not be attempted without consulting a qualified accountant.
Thought for Today – Thinking about buying or selling a business? Your first stop should be an accountant. Your accountant can tell you what to look for if you are buying, including information to gather before making an offer so that you will be able to evaluate not only the seller’s profitability but also the honesty of what you are being given. If you are selling, your accountant should show you how to get your business ready so that you put your best foot forward and you know what kind of information to share with a prospective buyer. Before you call your lawyer or broker call your accountant.
Do you spend your time during the business day on things that are urgent instead of things that are important? Important things add to your bottom line and increase the value of your business. Urgent things most often are nothing more than firefighting, they don’t add value they just prevent what you have from going up in smoke.
If you have a Florida Corporation, LLC or Partnership be sure to remember to file your annual report with the state of Florida. The state no longer mails out reminders or forms for filing your report. Filing is now done on line at www.Sunbiz.org. Reports must be filed before May 1 and reports filed after that date are assessed a late penalty of $400.
Safe Harbor for Buildings Owned by Small Taxpayers (those with annual gross receipts of less than $10 million) can deduct eligible building improvements provided that the total paid for repairs, maintenance and improvements the property during the year does not exceed the lessor of $10,000 or 2% of the properties unadjusted basis. To use the safe harbor you must file an election to do so for each property on which it will be used.
New rules for when costs associated with tangible property (stuff you can touch other than real estate) can be expensed as repairs rather than capitalized and depreciated over the life of the asset were put in place by the IRS for 2014 and beyond. In general these rules allow taxpayers to deduct amounts paid for repairs and maintenance to tangible property if the amounts paid are not otherwise required to be capitalized under Internal Revenue Service Code Section 263(a) or any other provision of the Code or regulations. In a nut shell this means if what you do does not add to the value and or the useful life you can expense it. There is also a new “Safe Harbor” provision that defines and allows routine maintenance to be deducted currently. Reg §1.263(a)-3(g)(1)
Every business reflects the owner or chief executive. If that person values doing the right thing the business will make doing the right thing for its customers and employees and important part of its core philosophy. If the owner or chief executive has respect for others the business will respect its employees, customers and vendors. A business becomes a mirror of its leader, so a good look at the leader tells you all you will ever need to know about a business.
Client told me yesterday that he did not know why I wanted to know about his business income. I had his 1099s and a friend told him that he only had to report income he received a 1099 for. I asked him what his friend does and he told me he was a plumber. It’s easy to get tax advice but it’s important to consider the source. Income received in a trade or business is income and it does not matter whether you get a 1099 or not.
I am often asked how I feel about online tax programs that advertise on TV and the big tax in the box companies that use part time people, often with little training, to offer cheap tax returns. The question always makes me smile, for if it was not for these anyone can do it options I would not have been able to put three kids through college. I make a lot more money fixing these messed up return then I could ever make doing them.
Yesterday’s phone call from a prospective bookkeeping client. Prospect “hi this is ______________ I need some bookkeeping help.” “My bookkeeper just walked out on me and left me with quite a mess. I need someone that can figure out what she did.” Me “How long was she with you?” Prospect “about six months and she gave me no notice, this is not the first time this has happened to me.” Me “well we would be happy to assist you. All our bookkeepers are supervised by and accountant and since we use a team approach you never have to worry about the person handling your account quitting, being sick or just not being available.” “All work is done in our office based on a monthly fee that takes into account the amount of work you need done, not the time we spend doing it, so you know in advance just what the cost will be.” “So you will never pay overtime, or have to pay extra because someone is not working fast enough to get the job done.” Prospect “but that’s not how I have done it in the past. I have always had a bookkeeper in my office that handles everything.” Me “how many bookkeepers have you had in this position in the last 2 years.” Prospect “I have had 4 in the last two years.” Me “and what happens when they quit?” Well I have to drop everything else. I have to do because when our bills don’t get out we run out of money real fast.” Me “it sounds like what you have been doing is not working very well. 4 bookkeepers in 2 years.” What if you never had to hire a bookkeeper again and someone else trained them, supervised them and made sure you got what you needed on time, every time?” Prospect “that would be great but I really don’t want to change the way I do things.” Me “without a change in the way you do things it’s foolish to expect a change in the results of what you are doing.” Change is hard, but without it everything stays the same.
Most business owners know that meals and entertainment are only 50% deductible. But did you know that some meals qualify for a 100% deduction? The 100% deduction applies to meals provided on the employer ‘s premises for the employer’s convenience, if more than 50% of the employees are furnished meals for the employers convenience. It also applies to meals at promotional activities such as seminars where meals are provided to the general public, such as an investment seminar.
Starting or running a business today takes more than just having a good idea and delivering it to customers that are willing to pay for it. There are Federal, Local and State laws that you must comply with. You need to know about licensing requirements, taxes, minimum wage requirements, new hire reporting, zoning, wage & hour rules and much more. While these things may complicate your life there is help available. For more than 30 years we have been helping new and existing business owners navigate the Federal, State and Local requirements placed on their business. We are more than just accountants, we are business owners and consultants and most important of all, we are also business owners. If you have questions or need help and don’t know who to call, call us.
Protecting the tax deductions you are entitled too requires good record keeping. It’s important to remember that the deduction for business use of auto goes away for most people it they don’t have the records to prove business use. Something as simple as keeping a mileage log or appointment calendar that shows where you went for business and the miles traveled can protect your deduction. Business meals and entertainment also requires documentation. Never forget the four W’s. Who, where when and what for every business meal or entertainment items. Who = Client’s / customer’s / prospect’s name. Where = where you purchased the meal or description of the entertainment. When is the date and what business was discussed. Remember quiet business meals where business is not discussed are not deductible.
Number one rule in business: Always do the right thing for your clients, customers and employees. Do this no matter what and good things come your way. It’s only a matter of time.
Want to avoid last minute surprises on your tax return? Then it’s a good idea to start early this year. Even if you are used to getting a refund you could find yourself owing or with a smaller refund due to the ACA (Affordable Care Act) aka Obama Care. If you did not have health insurance for the full year penalties may apply and if you did have health insurance through healthcare.gov or one of the state exchanges and received a subsidy and your income was understated on the application or more than you expected, you could end up having to repay all or part of the subsidy you received. Now the news is not all bad as there are some exemptions to the penalty but these require a little effort before you can file your return, so the sooner you visit your tax professional the more time you will have to get what you need and to know what you may owe while you still have time plan for how to pay or deal with that smaller refund.
When a married couple owns an unincorporated business together, that business is a partnership by definition and required to file a partnership return unless an election is made to treat the business as a QJV (Qualified Joint Venture). To qualify for the election both must materially participate in the business, there may be no additional partners and there must not be a partnership agreement or LLC agreement in effect. The couples must also file a joint return. Hint this saves the cost and aggravation of filing a separate partnership return as all income and expenses are reported on schedule C of the joint 1040 once the election is made.
One of the most important laws in business is the law of unintended consequences. Consider it carefully before taking action and remember that often it does not rear its head until long after a decision has been made. When it does, it will often be in an area you never even considered.
In any business decision I ask myself two questions. The first is “What is the best thing that can happen if I do this? The second is what is the worst thing that can happen if I do this? If the answer to the first one does not make it worth risking the second, then I just don’t do it.
Welcome to the new year. Time to start updating your business information: collect new W-4s from employees; make sure that you have I-9s for everyone that works for you; update W-9 information for subcontractors and other vendors.
Tax season has arrived, as we diligently print and send the W-2s, 1099s and other year-end document for our clients we want to remind everyone to stay on the look out for those important forms you will be receiving in the mail. You will need them when it’s time to do your tax return. It’s a good practice to set-up a file folder or large envelope and mark it “2014 Tax Information”. As your tax documents come in you should: open the envelope, verify that the social security number and amount are correct (if they are not contact the company that sent you the document and ask that it be corrected), then place it in the folder or envelope marked “2014 Tax Information”.
If you expect help or other information from the IRS this year you better be prepared to wait. Due to budget cuts coupled with new ACA (Affordable Care Act) enforcement responsibilities and last minute retroactive extensions of expiring tax provisions the IRS has its hands full. We are already receiving reports of extra-long hold times when calling IRS. There are even some reports of messages asking callers to call back on the next business day as the call queues are full. The only good news in all of this is for those of us that are tax professionals, we are betting this means and even busier year with more new clients that are confused by all the changes and have nowhere else to turn for answers.
Taxes become more complicated this year due to the Affordable Care Act (Obama Care). The law requires reporting of required health insurance coverage by month for each member of a household; in addition if insurance was purchased through an exchange and a subsidy (credit) was granted a calculation must be done to see if all, part, or none of the subsidy must be repaid because actual income exceeded projected income for the subsidy. All of this at a time when the IRS has less funding will mean less help from the IRS and more strain on tax professionals.
Who you surround yourself with can make a huge difference in how successful you become. Surround yourself with successful, positive people and you are better than half way to being successful and positive. To make something happen you have to believe that not only can it happen but that it will happen. Let’s make 2015 an “I can” year.