21st Century Common Sense

IRS Delays Refunds Yet Again.

noreply@blogger.com (Don Fuener) — Tue, 31 Jan 2012 22:37:00 +0000

Last year IRS delayed some refunds till mid February. This year early filers expecting early refunds were disappointed according to the Chicago Tribune.

The early bird does not always get the worm: The Internal Revenue Service says that some taxpayers who filed on or before Jan. 25 may have to wait a week longer than expected for refunds.

The IRS blamed it on new antifraud safeguards being installed on IRS computer systems that required "fine-tuning."

The federal agency had originally announced that many taxpayers would get their money back as soon as 10 days after they filed online and had their check deposited directly.

That still remains true for those who filed after Jan. 26, said IRS spokesman Mike Dobzinski in Plantation, Fla.

Read more by clicking the above link.

Congressional Budget Office Predicts A Huge Tax Increase In the Next 2 Years

noreply@blogger.com (Don Fuener) — Tue, 31 Jan 2012 19:04:00 +0000

From CNS Online:

The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.

At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.
“In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”

Click the above link to read more good news.

S Corporations

noreply@blogger.com (Don Fuener) — Fri, 27 Jan 2012 23:08:00 +0000

Choosing the form of business you will be operating under is the second most important decision you can make, the first being actually going into business.

I believe that operating your business as a Sub Chapter S or Small Business Corporation makes sense. In fact five businesses I own are operated as Sub Chapter S Corporations. I am not alone in this belief. This year of the 4,000,000 corporate income tax returns that will be filed with the Internal Revenue Service, more than 2,000,000 will be Sub Chapter S Corporation returns.

Take a minute to read the discussions from a variety of experts. Then if you believe that becoming an S Corporation makes sense, call us.

We will make an appointment to visit with you to discuss your individual situation.

Pros and Cons of an S Corporation

Deciding what type of business company structure is best for your small business can be a confusing exercise. Is an S Corporation advantageous for your small business?

Learn the pros and cons of becoming an S Corporation.

What is an S Corporation?

An S Corporation (Small Business Corporation) is a business elected for S Corporation Status through the IRS. This status allows the taxation of the company to be similar to a partnership or sole proprietor as opposed to paying taxes based on a corporate tax structure.

Pros of S Corporation Status

No Corporate Tax: The biggest attraction of this business ownership is the tax advantages. The profits and losses of the business pass through to the corporation owner's personal income tax. Like a Limited Liability Company, the tax "pass through" allows you to avoid "double taxation".

Reduce Taxable Gains: Selling your business can be part of your retirement strategy.

Write off Start-up Losses: In the early years of starting a business, you will have many expenses and losses. These can be offset against your personal income. A regular corporation would have the losses locked within the company and not applied to your income.

Liability Protection: S corporations offer protection against liabilities. However, liability protection is not complete protection. You can be personal liable for your actions. As well as, many lenders are now requiring personal guarantees.

Cons of S Corporation Status

One Class of Stock: Choosing an S Corporation status will limit your organization to issuing one class of stock. Not having the ability to issue different classes of stock affords a business less control over the company and limitations on the stock value.

Less Attraction for Outside Investors: Growing your company requires money. If you will need venture capital, the regular corporation structure will be a better choice. Venture capitalists will not want to see the pass through tax setup or a limit of 75 shareholders.

Tax Filing: Unlike a non-corporate business structure, you avoid corporate taxes but will still have to file a tax return every year.

Corporate Meetings: Your status is still a corporation with the requirements of having regular meetings and maintaining company minutes. Consider the added time in operating an S Corporation.

How to Form an S Corporation

To change your corporation status requires the filing of Form 2553 with the IRS. To become a small business corporation, the IRS has several special requirements including:

The corporation can have no more than 75 shareholders with a husband and wife counting as one shareholder. (Before 1997 it was 35 shareholders)

Shareholders can be individuals, estates, and certain trusts.

Shareholders cannot be non-American residents.

You must be a domestic company in any state.

All shareholders must agree to the S Corporation structure formation.

Making the decision on the best business structure for your situation is never easy. This article should provide you with the basics of S Corporation status and help guide your decision of company business formation. Each state's laws differ as well as each company's situation. It's advisable to seek tax and legal counsel to determine the best choice for your individual circumstance.

Darrell Zahorsky

Self-Employment Tax Savings

Corporate profits are not subject to Social Security, Medicare, Workers Compensation and other taxes - a combined 15.3% in taxes. An individual proprietor would need to pay all of the foregoing taxes (commonly referred to as “self-employment taxes”) on all income earned by the business. With a corporation, only salaries are subject to these taxes.

For example, if a sole proprietor earned $60,000 from the business, a 15.3% tax would have to be paid on $60,000. Let's assume that the owner of a corporation pays himself or herself $40,000 a year in salary, and $20,000 is left over as corporate profits. In this case, the 15.3% tax would only be paid on the salary ($40,000). This saves the owner of the corporation over $3,000 per year!

Please note that a stockholder-employee must pay himself or herself a reasonable salary, or else the IRS could re-characterize some or all of the corporate profits as salary. Brian Liu, Esq.

S Corporation Basics

This type of corporation can be great for small businesses because it eliminates the double taxation of standard corporations. June 01, 2005

The S corporation is often more attractive to small-business owners than a standard (or C) corporation. That's because an S corporation has some appealing tax benefits and still provides business owners with the liability protection of a corporation. With an S Corporation, income and losses are passed through to shareholders and included on their individual tax returns. As a result, there's just one level of federal tax to pay.

A corporation must meet certain conditions to be eligible for a subchapter S election. First, the corporation must have no more than 75 shareholders. In calculating the 75-shareholder limit, a husband and wife count as one shareholder. Also, only the following entities may be shareholders: individuals, estates, certain trusts, certain partnerships, tax-exempt charitable organizations, and other S corporations (but only if the other S corporation is the sole shareholder).

In addition, owners of S corporations who don't have inventory can use the cash method of accounting, which is simpler than the accrual method. Under this method, income is taxable when received and expenses are deductible when paid.

S corporations do come with some downsides. For example, S corporations are subject to make of the same requirements corporations must follow, and that means higher legal and tax service costs. They also must file articles of incorporation, hold directors and shareholders meetings, keep corporate minutes, and allow shareholders to vote on major corporate decisions. The legal and accounting costs of setting up an S corporation is also similar to those for a standard corporation. And S corporations can only issue common stock, which can hamper capital-raising efforts.

Gaining--and Revoking--S Status

A corporation must make the subchapter S election no later than two months and 15 days after the first day of the taxable year to elect. Subchapter S election requires the consent of all shareholders.

The states treat S corporations differently. Some states disregard subchapter S status entirely, offering no tax break at all. Other states honor the federal election automatically. Finally, some states require the filing of a state-specific form to complete subchapter S election. Consult an attorney in your state to determine the rules that apply to your business.

An S corporation may revoke its subchapter S status by either failing to meet the conditions of eligibility for S corporations, or by filing with the IRS no later than two months and 15 days after the first day of the taxable year. Once the revocation becomes effective, the business will be taxed as a corporation.

S Corporations vs. LLCs

S corporations and LLCs possess similarities: They offer their owners limited liability protection and are both pass-through tax entities. Pass-through taxation allows the income or loss generated by the business to be reflected on the personal income tax return of the owners. This special tax status eliminates any possibility of double taxation for S corporations and LLCs.

That's where the similarities end. The ownership of an S corporation is restricted to no more than 75 shareholders, whereas an LLC can have an unlimited number of members (owners). And while an S corporation can't have non-U.S. citizens as shareholders, an LLC can. In addition, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs or partnerships. LLCs are not subject to these restrictions.

LLCs are also more flexible in distributing profits than S corporations, wherein the corporation can only have one class of stock and your percentage of ownership determines the percentage of pass-through income. On the other hand, an LLC can have many different classes of interest, and the percentage of pass-through income is not tied to ownership percentage. The pass-through percentage can be set by agreement of the members in the LLC's operating agreement.

S corporations aren't without their advantages, however. One person can form an S corporation, while in a few states at least two people are required to form an LLC. Existence is perpetual for S corporations. Conversely, LLCs typically have limited life spans.

The stock of S corporations is freely transferable, while the interest (ownership) of LLCs is not. This free transferability of interest means the shareholders of S corporations are able to sell their interest without obtaining the approval of the other shareholders. In contrast, member of LLCs would need the approval of the other members in order to sell their interest. Lastly, S corporations may be advantageous in terms of self-employment taxes in comparison to LLCs.

This article was excerpted from the books Start Your Own Business and Entrepreneur Magazine's Ultimate Book on Forming Corporations, LLC's, Sole Proprietorships and Partnerships, and the article "S Corporations Vs. LLCs" by Rick Oster

Ten stupid things smart people do to mess up their taxes

noreply@blogger.com (Don Fuener) — Fri, 27 Jan 2012 02:31:00 +0000

After every April 15th we kind of shake are heads and wonder why. How can really smart people, our clients, do such stupid things to their taxes. Each year we compile of list of mistakes our clients made with one purpose in mind. Don’t make the same mistake. Learn from their lessons.

Here is our current list of things to avoid this year.

1.   Take money out of their IRA or pension plan and don’t have any money withheld for taxes. If you have to take money out of your tax sheltered plan don’t forget that there is a 10 percent penalty in addition to Federal tax owed on the distribution if you are under age 59 1/2. Don’t ever take money out of these plans without having the most Federal tax withheld from the distribution. Call our office if we can help.

2.   Take money out of their IRA or pension plan or 401 K and not roll it over to another tax deferred plan. Back on this subject again. Leaving your job usually means cashing in a pension plan or 401 K. We understand that sometimes the money is needed to pay for day to day activities until you can find a new job. But if you don’t need the money don’t spend it roll it over. We can help you if you don’t know what to do. We can refer you to very competent people that can help with the rollover. Taking the money if you don’t need it means additional tax liability.

3.   Sell stocks or mutual funds and not know what they paid for it. If you are dabbling in the market, you need to keep track of what you paid for the security and when you bought each security. We suggest keeping a permanent stock purchase file, and filing the confirmation each time you buy a security. That way, when you sell it you can easily locate the purchase price and purchase date. Remember that you only pay tax on the gain and you can deduct the loss of each security you sell.

4.   Don’t keep any records. Records are very important in our imaginary tax world. Especially for business tax deductions like car expenses. Jotting down on a daily basis in a daily planner or pocket calendar is all you need. Keep a file nearby for tax deductible receipts. Better yet get a credit card that you use only business tax deductions. That way you all the receipts organized for you. Your credit card along with your milage calendar is all you need to make April 15th very less taxing.

5.   Give charitable deductions, especially non cash and don’t make an attempt to value the donation. A note about the date and time of your deduction and a short list of the description of the deduction in your tax deduction file is all you need.

6.   Not filing your taxes because you don’t have the money to pay. Always file, even if you do not have the money to pay the taxes you owe. The IRS considers not paying on time and not filing as two separate issues, and a penalty is involved for each. When you file your tax return, you have several options. You can apply for an "offer in compromise," make monthly payments through an IRS installment agreement, or temporarily delay paying. Whichever is best for you, we will help you contact the IRS right away to let them know you cannot pay. You should pay as much as you can when you file because the IRS assesses penalties and interest on the amount not paid.

7.   Ignore those letters from the IRS. Do not ignore mail from the IRS. If you owe taxes, the IRS will collect. Persons who do not communicate with the IRS about inability to pay can expect a "Notice of Federal Tax Lien" to be filed against their property. In lien terms, this is a lien about the size of Alaska. Few carry more weight. The lien attaches all your property, including your house, car and any future property you might obtain. A levy, which is a legal seizure of property to satisfy a tax debt, is another legal means the IRS can use to collect taxes. This means the IRS can seize your car, boat or home and sell it to satisfy your tax debt or it can place a levy on your wages. More good news is that these liens often stay on your records long after the issue has been resolved or until the IRS gets around to removing it. So it's also the gift that keeps on giving!

8.   Signing. It's not the toughest part of the tax return, but we have found that one of the most common mistakes occurs on the bottom of the tax form: the place where you're supposed to sign your name. A lot of taxpayers simply forget to do it. And, a return without a signature is like no return at all. Although the IRS won't send back your forms (it doesn't want them to get lost in the mail), everything is put on hold while you're sent a special form to sign certifying that your return is accurate. Only after you sign and send in that form, and the tax agency matches it up with your other forms, can your return be processed -- and any refund check issued.

9.   Big refunds. Isn’t that the point of filing? Big refunds. In fact some clients rate the expertise of their tax preparer with the size of their refund. The bigger the refund the better the tax preparer. Nothing can be farther from the truth. Refunds are nothing more than interest free loans of your money, even earned income credit which can be advanced to you from your employer throughout the year, to the government. Then you have to go through the expense and the wait of getting your refund when you file your taxes. Extra withholding doesn’t benefit you, only the government. Don’t stand for big refunds. Stand for bigger paychecks. Your goal should be break even on April 15th.

10.   Assuming the wrong filing status. Single taxpayers should be singled out for assuming that they should file as single tax payers when in fact they qualify for the much-more-favorable head-of-household (HOH) filing status. Say you're single and your non-adult child lives with you and pays for less than half of his or her own support. If you pay more than half the household's costs, you qualify. You may also qualify if you are still married and lived with your child but apart from your spouse for at least the last half of 2006. Finally, if you are single and can claim your parent as a dependent, you can probably file as HOH. This is true even if your parent has his or her own place. You are the HOH if you pay more than half the cost of your dependent parent's home.

Ten stupid things business owners do to mess up their business.

noreply@blogger.com (Don Fuener) — Fri, 27 Jan 2012 02:27:00 +0000

Ten no 12 stupid things business owners do to mess up their business.

1.    No mailing list to their existing customers.
2.    Relying on quickbooks for their accounting.
3.    Getting complacent.
4.    No relationship with their bankers.
5.    Stop learning.
6.    Not being honest and dependable.
7.    Not having a goal in mind about what your business will look like when it is done.
8.    Not picking the right
9.    Not leaning from their mistakes.
10. Not taking action. Any action
11. Depending on marketing sales people to focus on your advertising and marketing.
12. Not realizing that sales are the most important thing. That sales are the answers to all your problems.

Wow federal workers failed to pay billions in taxes in 2010

noreply@blogger.com (Don Fuener) — Thu, 26 Jan 2012 19:06:00 +0000

According to Investors Business Daily federal workers have failed to pay more than $3.4 billion dollars in taxes last year.

How embarrassing this must be for President Obama, whose major speech theme so far this campaign season has been that every single American, no matter how rich, should pay their "fair share" of taxes.
Because how unfair -- indeed, un-American -- it is for an office worker like, say, Warren Buffet's secretary to dutifully pay her taxes, while some well-to-do people with better educations and higher incomes end up paying a much smaller tax rate.
Or, worse, skipping their taxes altogether.
A new report just out from the Internal Revenue Service reveals that 36 of President Obama's executive office staff owe the country $833,970 in back taxes. These people working for Mr. Fair Share apparently haven't paid any share, let alone their fair share.

January 1, 2012 Client Newsletter

noreply@blogger.com (Don Fuener) — Mon, 23 Jan 2012 01:48:00 +0000

It is New Year’s Day as I write this newsletter. Somehow the lack of any New Years Day college football bowl games has motivated me to write to you. Lesson one; never underestimate the power of the National Football League and the BCS.

I am a little gun shy of making predictions. In 2008 we predicted a stock market rally that of course never happened. Last year we predicted $5.00 a gallon gas at the end of the year, (It didn’t come close to that price but apparently is headed that way this year) a Chicago Cubs World Series, the increased value of the Internet in just about everything we do including marketing your business, and more doom and gloom in the Public Sector. Two out of four I guess is not bad.

With some certainty I predict the tough economic times will continue. The new year will bring continued misery to millions of Americans, including the jobless, those facing housing trouble and many who had hoped to retire but must work on — if they're lucky enough to have a job. After the recession and the lost decade of the 00s, the typical American household’s real income is back at 1997 levels.

Very slow growth makes it almost impossible to rescue this situation for years. Indeed, the danger of long-term contraction — and how does a society based on fairly high growth manage it — is real.

As you have probably already heard the temporary reduction in the amount of Social Security Tax you withhold from your employees remains in effect until February 29, 2012. That means the amount of Social Security tax you withhold continues to be 4.2% of wages paid through the end of February. Your matching portion of Social Security taxes remains unchanged at 6.2%.

January is always our busiest month. We generate hundreds of your employee’s W-2 forms and quarterly taxes. In addition, at the end of the month we prepare any 1099 forms you may need to furnish your independent contractors. Technically the W-2 and 1099 forms have to be sent to the recipients until the end of January. However, the IRS continues to maintain a policy that will allow employers an additional two weeks to furnish these forms. Sometimes we take advantage of it.

We have already started in December processing your quarterly forms for this month. Some clients will be paying their federal tax liability electronically, while others will not. New IRS mandates to pay all taxes electronically are now in place. Unless your liability is very small, IRS now requires employers to pay and file electronically. We are on top of the new mandate and will notify you of any changes that may apply specifically to you. As usual 1099 forms will be processed last. Don’t expect any 1099 forms mailed to you until very late in January.

We are rushing to complete our mega redesign of our two tax internet sites 1taxes.com and the smallbizwiz.com. Both sites are scheduled to be up and running by the end of the month. We are trying to make more resources available to our existing clients while still making them a key in our marketing message to new clients.

Lastly, I wanted to say thanks for everything in 2011. It was a tough year for a lot of reasons and I won't miss it, I appreciate all of the support from our fabulous clients, the goodwill from you fine people is always heartening. Thank you and Happy New Year.

"Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual. Yesterday, everybody smoked his last cigar, took his last drink, and swore his last oath. Today, we are a pious and exemplary community. Thirty days from now, we shall have cast our reformation to the winds and gone to cutting our ancient shortcomings considerably shorter than ever. We shall also reflect pleasantly upon how we did the same old thing last year about this time. However, go in, community. New Year's is a harmless annual institution, of no particular use to anybody save as a scapegoat for promiscuous drunks, and friendly calls, and humbug resolutions, and we wish you to enjoy it with a looseness suited to the greatness of the occasion." - Mark Twain

November 27, 2011 Client Newsletter

noreply@blogger.com (Don Fuener) — Mon, 23 Jan 2012 01:47:00 +0000

While I was cleaning my locker at the Y last week I found a gem of a book I completely forgot that I was reading for some reason. Buried way deep under a pile of old books I read when spending time working out on the cross trainer was “No B.S. Time Management for Entrepreneurs” written by one of my favorite small business gurus Dan Kennedy. Although my copy was written in 1999, a new update edition is now available.

It’s clear why he brands his books “No B.S.” — he pulls no punches! There is quite a bit of no-nonsense practical advice in this book (along with the occasional rant), but I have to admit that I’m still scratching my head at how Kennedy has practically eliminated the use of cell phones and emails from his business life as methods of communication (he opts for faxes because he says people put more thought into the content of them).

Inside this book are several great nuggets of wisdom about time management and success….words worth typing up and posting on your wall or somewhere else where you can see them and remind yourself regularly. Not burying it in your locker at the Y.

Some of my favorites:

- Self-discipline is the magic power that makes you virtually unstoppable.
– Delegate or stagnate.
– No one who is good at making excuses is also good at making money. The skills are mutually exclusive.
– The more decisions you make and the faster you make them, the more productive you are.
– Good enough is good enough.

Kennedy talked about a technique he uses to focus and avoid majoring in minor matters: Identify and write down the three most important, most significant, most productive, most valuable things you can do to foster success in your particular enterprise. Then translate them into three actions you can take on each day. He noted that even though some people may find writing down lists to be confining, he’s never known or met a successful entrepreneur who wasn’t a list maker.

To illustrate the importance and benefits of taking massive action, he shared a story about how a dentist with a struggling practice made a list of 300 things he needed to implement to turn things around. He simply did 10 items from the list each and every week for 30 weeks and without increasing marketing or advertising expenses he managed to QUADRUPLE his business!

We all know that sometimes we fail to hit our goals. When we do fail, some people will reset the same goal with a new deadline and others may create fewer aggressive goals. However, Kennedy handles these situations a bit differently by creating a similar but bigger and more exciting goal with a new deadline. This way he’s able to stay motivated and focused rather than lower the bar or waste time with disappointment.

I would like to share Kennedy’s excellent definition of productivity and four of the many time management techniques discussed in the book. I suspect you’ve heard some or all of these before but it never hurts to remind yourself because we can all do better with our time management!

Definition of productivity: Productivity is the deliberate, strategic investment of your time, talent, intelligence, energy, resources, and opportunities in a manner calculated to move you measurably closer to meaningful goals.

Four Time Management Techniques Really Worth Using

Tame the phone: Take few if any incoming calls. Return calls at your convenience. This is the number one source of interruption and distraction for most people.
Block your time: Make inviolate appointments with yourself. Block out time to handle specific recurring aspects of your business. If you block time for important, high-value functions you perform, you prevent demands of others from moving these activities from number one to number ten on your list over and over again. This one technique has enabled Kennedy to write at least one book per year publish two monthly newsletters for eight consecutive years.
Practice absolute punctuality: Being punctual gives you the right — the positioning — to expect and demand that others treat your time with respect. Kennedy feels so strongly about this one that as a general rule of thumb, he will use a person’s punctuality (or lack thereof) to decide whether he wants to do business with them.
Profit from “Odd-Lot” time: Turn driving time and waiting time into educational times to learn a foreign language, improve your memory, or essentially learn about any and every topic from experts. Take advantage of audio books and pod casts.

The number one IRS audit risk for S Corporations is salary and wages paid to officers of the corporation.

noreply@blogger.com (Don Fuener) — Mon, 23 Jan 2012 01:44:00 +0000

This is probably the most important letter I will write to you this year. There is no doubt that you, as an S Corporation owner have made very good tax move. The popularity of S Corporations is growing each year. More than six million S Corporation returns will be filed this year. They offer more advantages than any other choice of business entity today. You have chosen wisely.

However, there is one rather large S Corporation pitfall that I am required by IRS Circular 230 to warn you about.

The number one IRS audit risk for S Corporations is salary and wages paid to officers of the corporation.

Here is what the IRS says about wages and salary paid to officers of Subchapter S Corporations:

Corporate officers are specifically included within the definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code. When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes. S corporations should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions, payments of personal expenses, and/or loans rather than as wages.

Although this IRS interpretation of reasonable salary just recently updated in October 2011, is somewhat arbitrary, it is extremely important not to overlook paying yourself a salary before the end of the year.

What should you do? Don’t panic.Call us. We can help. There is still time to fix any oversights.

Remember what Ben Franklin said an ounce of prevention is worth a pound of cure. He also said that there are only two certain things in life: death and taxes.

Our 30th version of the same story.

noreply@blogger.com (Don Fuener) — Mon, 23 Jan 2012 01:43:00 +0000

Sally Smith, was a smart businessperson, she knew the basics of year-end tax planning.

1. Postpone income to next year.
2. Pay as many expenses as possible this year.
3. Keep inventory level low.
4. If you are going to make a capital investment, do so before the end of the year.
5. Double check for missing deductions.
6. Invest in an IRA for similar type account.

Sally owns a retail store and faced the year end with her eyes wide open. Sally knew that a few strategies would pay big dividends on April 15. Here is what she did to reduce her tax liability:

Since Sally was operating her business on a cash basis and relied upon cash sales through her cash register, she did not have the opportunity to postpone much income. She has established a policy for many years to close her books on December 28, which gave her opportunity to defer three days of sales to next year.

Sally then reviewed her bills. She started to write out checks for her expenses. She wrote checks for all expenses due, even if some expenses were due in January. She dated her checks for December 28, 2011 to be sure that the expenses were recorded for this year on December's bookkeeping. Her checks written totaled to almost $10,000. Her one simple strategy, accelerating expenses meant that Sally saved over $4,000.00 in income tax this year.

Since you pay tax on your inventory at the end of the year, Sally knew that reducing her inventory to the lowest amount possible was important for her. First, she decided to review her inventory to see if she had things that have been gathering dust. She found items that in fact had been sitting around for more than three years. She decided to mark those items down and immediately started an inventory reduction sale for those items. She knew that the value of her inventory was based upon her costs of the items, not the selling price. She also knew that items that were partially used or supplies not for resale did not count as part of her inventory.

Sally had been debating whether to purchase a new computer for her business. The local computer store was offering a "six-months same as cash" financing offer for the purchase of new computers. Sally decided to purchase the computer now, electing to take advantage of the special financing offer. She knew that she could deduct the full purchase price of the computer on her tax return, even though she did not pay for it right away. When you purchase something using a credit card or borrow the money, as Sally did, you get to deduct the amount when you purchase the item. The $3,000 computer saved Sally $1,200 in income tax.

As part of her year-end review Sally took a minute to see if perhaps she has recorded all her business expenses as part of her monthly record keeping. She knew that the credit card that she had been using exclusively for business had some interest payments that were not included. She made a note to record her year-end statement from her credit card company to make sure that it was included as interest paid on her year-end documents to her accountant. In addition, she decided to review her automobile mileage and other receipts for expenses that she might not have had for her business and had a chance to record in her monthly record keeping.

Sally also knew that she had time to make her annual IRA contribution until April 15 of next year. She decided not to make it till next April. She also made a note to talk to us about Roth IRA accounts and analyze the different options available to her. One of her options was a self-employed Pension Plan commonly called a SEP. IRA's. SEP. IRA's do not have to be opened or funded until the due date of your return. That means that Sally doesn't have to open or make a contribution to a SEP. IRA for the 2011 tax year until April 15, 2012. She can also contribute a larger amount to her SEP. IRA than she could to her regular IRA. However, she was reluctant to open one because she also knew that she would have to contribute an amount to her full time employees. She made a note to ask her accountant what that contribution would be and what her resultant tax savings would equal. She also thought her accountant might have ideas on how to "cushion" the employee's contribution issue.

Sally knew that her year end review of her tax situation saved her almost $7,000 this year. She made a note to review her year end information before we prepared her tax return in 2011.

SAVE TAXES...REMEMBER BEFORE JANUARY 1, 2012

1) Postpone income to next year.
2) Pay as many expenses as possible this year, even if you do not send the checks off till January, be sure to write the checks for the expenses.
3) Keep inventory at a low level.
4) If you are going to make a capital investment, do so before the end of the year.
5) Double check for missing deductions.
6) Invest in an IRA or similar type account.

57,000 page tax return

noreply@blogger.com (Don Fuener) — Thu, 17 Nov 2011 20:55:00 +0000

GE filed a 57,000 page tax return and reported $14 billion in profit and paid no taxes in 2010 has been widely reported. However, according to the Weekly Standard Online the size of the tax return was just recently revealed.

The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. "GE was able to utilize all of these various loopholes, all of these various deductions--it's legal," Ryan said. Nine billion dollars of GE's profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn't taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.

Read more by clicking on the above link.

The 5 Biggest Mistakes Most Taxpayers Make When Choosing A Tax Professional!

noreply@blogger.com (Don Fuener) — Tue, 08 Nov 2011 02:34:00 +0000

Choosing a tax professional to help you file your taxes is a BIG thing. We are not just talking about choosing a plumber to come unstop your toilet or picking the right mechanic to fix your car. Filing a tax return requires dealing with the #1 government agency that can cause more harm to your family than any other… the Internal Revenue Service (or the IRS!) Now don’t get me wrong. Getting a good plumber is important. And of course, getting your car fixed up properly is definitely something you want done right as well. But, taking the “filing of your federal (and state) tax return” lightly can be a huge mistake!

When you choose the wrong plumber, what happens? You either don’t get your problem fixed the first time and the guy has to come back – which is a pain. Or, the plumber tracks dirt on your carpet walking in your home and you’ve got to clean up after his mess. Again, a hassle and an inconvenience. In the case of picking a bad mechanic, the wrong guy can screw up your car big time! I actually hate it when this happens. (My guess is we’ve all had some person do something to our car one time in life that turned out to be a royal pain in the tail.) Either we had to spend more money to fix something else with our car or we never got the problem actually resolved or it took SO many trips to the garage to fix our automobile that once the ordeal was over, you’d just as soon walk to work now! Again, these kind of poor choices on our part cost us extra money, time and a lot of aggravation.

But, Choosing The WRONG Tax Professional To Help You File Your Taxes Could Put You In Some Serious Hot WaterWith The IRS!

Let me ask you a question. Would you rather have to call another plumber to come fix your leaky pipes or get a nasty letter from the IRS threatening to freeze your bank account if you don’t pay a large sum of back taxes, including penalties and interest? Yeah, me too. I’d rather call another plumber or make another trip back to the auto mechanic’s garage to fix my car right. But having to deal with the IRS by myself? No thanks! Even if I didn’t owe a ton of back taxes, I still don’t want MY RECORD to show some IRS agent that there has been some discrepancy in the past so RED FLAGS start to fly and more bureaucratic people begin looking through all my past tax filings and current income holdings and basically, taking my social security number and poking around in my private life! (If you think they won’t do this, the wool might have already been pulled over your eyes ...) Just look at the nightly news one night. They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you related to filing your taxes correctly), the opportunities for them to mess with your personal stuff will be limited.

I THINK YOU’LL AGREE WITH ME …. CHOOSING THE RIGHT TAX PROFESSIONAL IS A VERY IMPORTANT DECISION!

With that said, I’d like to share with you The Top 5 Biggest Mistakes Most Taxpayers Make When Choosing A Tax Professional!

Big Mistake #1:

Not Choosing An Expert In The Type Of Tax Service YOU Want!
Most people know what they want when they are looking for someone to help them. However, in the case of filing a tax return, most folks just assume all accountants, CPA’s or tax preparers are about the same. But just like most other professional services, nothing could be further from the truth. Each tax professional has certain qualifications. And again, people who help taxpayers file taxes for a living have their own strengths and weaknesses. But here is the rub: Too many people don’t match up what they want with the strengths of a paid tax professional. And if you fall into this category, listen closely. First, let’s be clear. What do you want from a tax preparer? From my experience, here are the most common “wants” of regular middle income taxpayers. You want an accurately filed tax return. You want the tax filing process broken down into layman’s terms. You don’t want to hear about someone else’s tax filing scenario. No, you are just interested in your own tax situation -- explained so you can understand. And once you’ve “got it” … you want the tax preparer to give you a heads up about some possibilities in the future to save even more money or qualify for other deductions that would legally add more money to your pocket at tax time. You want assurances everything your tax preparer is doing for you is valid and correct, so a guarantee(s) is essential to the process. And of course, you want to “close the book” on this year’s tax filing in a reasonable amount of time. No dragging this process out for many days or weeks. You want to know what’s going on with your taxes in a day or two, gather more info (if needed) which might reduce your tax burden and/or increase the amount of refund money Uncle Sam owes you – and then file your taxes so you can be done with it!
Oh, and if you ARE getting a refund, you want a tax firm who can get you the most money back the fastest … with the most electronic filing options available.
Bottom line: You want accuracy … you want clarity … you want to be aware of beneficial tax options … you want a Worry Free Guarantee … you want an efficient use of your time …. you want your refund money back in your hands fast …. And at the end of the day, you want to KNOW you got the most money back from Uncle Sam AND you know the IRS will stay off your back so you can sleep like a baby at night!
If the tax professional you are talking to (or the tax practitioner you currently use) can’t do what you want, don’t give him/her your business. Go to someone who will be on your side, looking out for your interests and not treating you like a number.

Big Mistake #2:

Letting A Tax Preparer Help You File Your Taxes Without A Guarantee!
We already touched on this topic of guarantees earlier, but since having one or more guarantees is so important – especially when it comes to filing your taxes with the IRS – I thought I better go into a little bit more detail just to make sure you are clear on what should be expected of a tax professional in this area. In my view, the more guarantees, the better. And I’m talking about IN WRITING guarantees, NOT some tax professional verbally telling you, “Oh, yeah – you’ll never have a problem if I prepare your taxes … but if you do, I guarantee I’ll fix it. No problem.” That my friend, is not the kind of ‘guarantee’ I’m talking about. I’ve heard too many horror stories about taxpayers getting a letter from the IRS, then they take it to their accountant, and then the letter sits on a desk gathering dust. Or stories about the CPA who makes some calls on your behalf, but you get charged an arm and a leg in the process. Or sadly, a taxpayer doesn’t get any help from the person who prepared their taxes for them so they go it alone and call the IRS themselves and figure out what to do and not to do during this normally ugly IRS correspondence … THIS can be a nightmare! Don’t go down this road! In your case, just make sure the paid tax practitioner you are working with has guarantees, in writing, for you to hold on to if ever needed. And make sure the guarantees include stuff you want guaranteed! Let me give you an example. I’ve seen some accountants guarantee they will file your taxes for you by April 15th or they will file an extension for you. Well, whoopdy do! That sure makes you feel good in the morning, doesn’t it? Other weak guarantees I’ve seen in the tax industry are, “We guarantee we will begin preparing your tax return the same day we meet with you.” That means nothing to me. I don’t care when you start preparing my taxes. I want to know how long it is going to take you to finish it and do so without leaving out silly errors you know you should have caught.
But truth be told….
(if you got to sneak a peak behind what REALLY goes on in most tax professionals’ offices, you’d be SHOCKED!) So let’s pretend you knew what was really going on once you left your accountant’s office – I GUARANTEE you’d be saying (or thinking) the following:
…. you barely looked at my return because you were too overloaded with other tax work and you didn’t hire enough competent employees to help you during tax season …
.
…. you don’t trust other tax preparers doing your returns, but since you get so tired doing everything yourself, stupid mistakes become common place and you hope no one notices (kind of like an ostrich with his head in the sand) ....
…. if I decided to take my taxes and go somewhere else, you won’t care for very long because you’ve got too much going on, getting so many different files mixed up, you don’t have time to even notice ….
The moral of this story is: Protect yourself and file your taxes with a tax business that’s been around for a long time and can back up everything they do with multiple guarantees. And remember: the guarantees should be in areas you care about, like:
Tax Return Accuracy …Speed of Service…Most Money
Legally Yours …Ongoing IRS Protection For Years After Filing …
These are the things YOU care about! Make sure the tax professional you choose stands behind these critical areas of tax filing so you get the most out of your tax filing experience!

Big Mistake #3:

Picking A CPA With Too Much “Accounting” Experience That Doesn’t Relate To You!
Most people don’t realize this, but many CPA’s usually spend most of their time doing accounting and auditing work – NOT taxes! (CPA = Certified Public Accountant) They get paid to sign off on accounting, payroll and complicated bookkeeping for larger businesses. So when it comes to preparing taxes for the regular middle income family, it’s just not something they’ve been spending their time thinking about or doing much of most of the year. CPA’s have a ton of experience in many very complicated accounting practices, doing very complex audit work and usually doing a really great job helping some large business or very high net worth rich guy with his investments and taxes. But, for most tax returns that are filed each year … nah. Look, does this sound like your tax return? I thought so. You are not alone. The majority of people will never need the experience coming from a CPA’s background because the accounting and auditing work does not relate to their normal family income status. Am I saying all CPA’s are wrong for you to choose to file your taxes? Absolutely not! There are some Certified Public Accountants who take the time to keep up with the latest tax laws. (Heck, my best friend is a CPA. He prepares taxes and knows what’s going on in the tax world each year.) But, in most cases you are better off finding a tax preparer who is good at doing what you need done. And in this case, if the tax preparer preparers a lot of middle income tax returns already, that’s even better. Think of it this way: Would you use a sledge hammer to hang a picture frame? (I didn’t think so.)
Remember: Go with a tax professional with TAX preparing experience, not auditing or accounting or something else that doesn’t relate to you!

Big Mistake #4:

Going With A National “Brand Name” Tax Firm With Image Advertising!
I’m not going to name names here. But, just about everyone has heard of these brand name tax firms right down the block in most cities and small towns. They spend millions of dollars every tax season on “brand building awareness” ad campaigns just so you will think of them when it comes time to file your taxes. The problem is, a “brand name” never prepared anyone’s taxes – people do! So you can have all the famous names, fancy Super Bowl ads and catchy slogans, but when push comes to shove, it is a real person helping you. And behind that one tax preparer, there should be other people who do “return reviews” – and, a manager who is held accountable for quality work -- and a support staff to proactively trouble shoot any issue that might arise – and on and on. Getting a quality tax service from a reputable tax business has very little to do with the award winning promotion, and everything to do with the quality of the tax preparer and the organization to back him or her up. Outstanding personal service just because some smiling face says it on the TV… not a chance! Better listen to what OTHER taxpayers like you are saying. Have they already experienced that particular tax firm’s services in the past and can testify to this effect? If so, that has more credibility than some high paid ad agency putting together some commercial on Madison Avenue. (Hearing it from the “horse’s mouth” so-to-speak is even better. If you can listen to what other real people are saying about their tax filing experiences, and you like what they are saying -- then by all means, go to that particular tax business and give’em a shot at filing your taxes this year.) So for the record, don’t be “blind” to the fact that fancy ad jingles translate into the high quality tax services. They don’t. To be blunt, usually the more IMAGY the promotion (nice looking models smiling in the commercial, pretending nothing would ever go wrong with your taxes -- none of which ever happens in the real world) ... the WORSE OFF your tax service will be. Now, what I just said is not scientifically provable, but if you’ve been around the block enough like I have, you know what I mean.

Big Mistake #5:

Paying Too Little OR Too Much When Filing A Regular Tax Return!
Some of what I just said might sound odd to you? Why would I not want to pay too little to have my taxes filed with a tax professional? Well, let me explain. What’s too little or too much? It depends. Let’s start with the “paying too little” for filing a tax return. Who do you think are the tax professionals charging the least amount or advertise the lowest fees for tax preparation? Some of these folks are the “fly-by-night” tax preparers. Yeah, they know a thing or two about filing some tax forms. What they don’t know, they try and figure out as they go along. These are nice people for the most part, but getting them to be your tax representative with the IRS might not be the wisest decision. Other tax professionals who “low ball” on price work out of their house or they have very limited resources related to keeping up with the tax codes and ever changing tax laws. Many times they are “one man/woman” operations so they do your taxes, charge you a low price, but have zero accountability for their work. No in-house quality control, no double-check audit process, no compliance reviews. Do you need all of this? Yes, in most cases. But, if you are a middle income taxpayer with a couple of schedules, extra forms and deductions you are not sure about … well, it’s your neck (and your money) that’s on the line … so I’d definitely say yes then! What about paying too much when filing a tax return? Did you know to some people, paying the MOST money to file their taxes is like a badge of honor… (or if you want to know the secret truth -- it makes the person feel important [like a “somebody”] because they paid $500.00 or $700.00 or $1,200.00 to have their taxes filed!) I’m a rich important guy, “I paid my accountant $600 bucks to file my taxes this year!” as he sips his mint julep at the country club. No thank you! Yes, you’d be surprised, but in a lot of cases, when someone in the middle income tax bracket wants to be sure they’ve filed correctly with the IRS and they (very foolishly) go pay too much at some CPA’s office… with the leather couch and fancy plants and wall hangings … and after they write the check to the accountant for $500 bucks or whatever, they feel pretty good, but their gut tells them something is wrong. Well, there usually IS something wrong. It’s called overpaying when you don’t have to! Regular retail tax offices with nice, clean working environments are just fine. Getting a quality preparer with multiple guarantees backing up their work, ongoing support and year round access to a manager or person in charge is all you need. Do you need to pay $500.00 or $1,000.00 for that? Actually, on most middle income returns, you can pay in the $175 to $275 range and be just fine. Some high-priced tax professionals will charge you $500 or $600 for the same forms and schedules. Or you can find a “Fast Eddie” to help you file your taxes and probably only pay $100 or less. My advice is to find a tax professional who charges by the form so he/she is not pulling fees out of thin air. Like I said, you can over pay or actually under pay – either way, both will come back to bite you in the end. Getting the best value for your money is always the right way to go!

CONCLUSION

“Taxing” Lessons Learned….

I hope this Free Report has opened your eyes to lessons about filing your taxes with a paid tax practitioner. Some people reading this Report will conclude -- oh well, “I’ll just file my taxes to Uncle Sam myself. It doesn’t seem like that big of a deal anyway” With all due respect, this kind of attitude can get you is some hot water if you don’t watch out! Choosing the RIGHT tax professional is an investment of time and money… and I will add, a WISE INVESTMENT indeed. I say “wise” because the consequences of a misfiled tax return, an incorrect tax return or a late/penalized tax return are aweful in the short and long term. Do not put yourself through the ongoing pain and agony of dealing with angry IRS agents and uncompromising auditors who’ll take you to the cleaners if you’re even the least bit sloppy. Oh, you say you didn’t mean to make that mistake? Oh, you say you didn’t know you had to do this or that? Tough beans. Tax auditors eat these kinds of excuses up and spit out big red marks with lots of zeros on a line which says: YOU OWE. Unless you are Bill Gates, these are not dollar figures you like to see in the red column. No one wants to pay unexpected bills … especially back taxes!

But I’ll tell you a bigger problem.

Unclaimed refund money taxpayers never receive because they had no idea they were entitled to a certain deduction or they never filled out a particular form that automatically got them more money or ……… (the list is endless!) The worst part is YOU don’t have extra money in your bank account or even in your pocket right now because you didn’t get a tax preparer who knew what they were doing to help you file in recent years. Statistically speaking, you could be out as much as $1,300.00 in back refund money because you choose to file by yourself. (Ouch!) I wouldn’t take that chance. I’d choose a quality tax professional this year and ask to let them review your previous 3 years of tax returns at the same time. You might have some “buried treasure” lying around in your files and never know it. Wouldn’t that be a scream! (Caribbean Vacation, here we come….)

Take Action Now …Before It’s To Late!

The clock is ticking. Most taxpayers procrastinate. I hope you are not one of them…Best Wishes and Happy Filing!

The Time is Now To Lower Your Tax Bill

noreply@blogger.com (Don Fuener) — Thu, 29 Sep 2011 01:29:00 +0000

From moneycnn.com:

Next April may feel light-years away, but December will be here before you know it -- and many of the benefits you can reap on tax day require you to act well before the end of the year.
"The further ahead you start your tax planning, the more strategies you will have to save money," says Indianapolis accountant Kevin Aaron. The early-bird tactics that follow can together keep thousands of bucks in your pocket.

Read more by clicking on the above link

You can't make this stuff up

noreply@blogger.com (Don Fuener) — Mon, 26 Sep 2011 02:21:00 +0000

H & R Block won't honor their guarantee.

From the consumerist web site:

Bambi has been getting her taxes done by H&R Block for decades with no problem. But when a recent audit turned up a small error that required Bambi pay $725 in additional taxes, folks at the tax-preparation service seemed to go out of its way, including telling her complete falsehoods about why her claim was being denied, to not make good on its guarantee to reimburse her for the $725.

Read more by clicking the above link.

IRS Hits Homers, Too!

noreply@blogger.com (Don Fuener) — Fri, 05 Aug 2011 02:34:00 +0000

New York Yankees shortstop Derek Jeter became the 28th major leaguer — and only the first Yankee — to achieve 3,000 career hits. Jeter's third inning solo home run to left field wound up in the hands of a 23-year-old fan named Christian Lopez. Souvenier baseballs are big business, so team officials immediately whisked Lopez out of the stands, escorted him into the president's office, and asked him what he planned to do with his windfall. (The fan who caught Barry Bonds's 715th home run ball sold it on Ebay for $220,100. And Mark McGwire's record-breaking 70th home run ball sold for $3 million in 2006. Nice timing, too — in 2010, McGwire admitted using steroids while he played, and that ball's estimated value dropped faster than a pop fly!)
Lopez showed a bit of class that some would say is surprising from a Yankees fan. He passed on the chance to auction the ball, which some experts estimate would have fetched as much as $250,000. Then he told reporters he thought the ball belonged to Jeter and gave it back to the legendary slugger. But he still walked off with some lovely parting gifts, including three Jeter-autographed balls (worth about $600 each), three autographed bats ($900 each), and two autographed jerseys (another $1,000 each). The Bronx Bombers also gave him four tickets to every remaining home game this season. In fact, for the game after Lopez's lucky grab, they gave him four front-row 'Legends' seats, which sell for up to a whopping $1,358.90 each. Quite a haul!
Oh, and you know what else he's likely to catch? That's right . . . a tax bill from the IRS! And those opponents won't be happy with jerseys or tickets, even if the Yanks make the Series. They just want cash, thank you very much.
Catching collectible baseballs presents all sorts of tricky tax questions that most fans won't think of when they suit up for a big game:

When does the lucky fan who catches the ball fan 'recognize' the income? Now, when he catches it? Or someday down the road, when he sells it?

If tax is due immediately, before the fan sells, how does he determine what it's worth?

If the proceeds qualify as capital gain, taxed at the special 28% rate for collectibles, what will the fan's 'cost basis' be? Zero? The price of the ticket to the game? The price of his season-ticket package?

And what if the lucky fan gives the ball back to the hitter, like Lopez did with Jeter? Back in 1998, just before Mark McGwire beat Babe Ruth's single-season record, a reporter asked an IRS spokesman what would happen if the fan who caught that ball handed it back to McGwire. The spokesman replied that the fan might actually owe gift tax — and sparked howls of protest! Then-Commissioner Charles Rossoti quickly changed course, confessing that the Tax Code could be as hard to understand as the Infield Fly Rule.
Tax experts predict Lopez won't owe tax on the value of the ball he caught, but will owe it on the value of his memorabilia and tickets. What do you think? Is that fair? Or should the IRS 'intentionally walk' the fans who catch souvenir balls and let them enjoy a little tax-free history?

Top of the head response, which these instances induce, would be to discuss the earned image of the IRS!
How could you possibly get a worse image than this scenario ? The average person (like me) finds the IRS to more than deserve their reputation. To make matters worse, the IRS has some government bean counter contacting individuals or the Yankees and reading them these types of rules.
This gives sportswriters something to do. For example, the late Bill Murray (I forget his first name) would do a column like options for foul balls, home runs, etc. in tricky situations. The options would be something like:

Dodge the ball and let someone else pay the IRS. The fan would avoid trauma from being mauled for the ball and go home safely and without IRS worry.
Let the ball hit them and slump to the ground. This would delay all parties, since the fan has medical options.
Catch the ball and quickly put a ski mask on and exit as soon as possible. This leads to all sorts of options like involving the New Your Mafia Family, etc.
Do what any Americal would do . . . catch the ball and go kick ass with the IRS pinhead.

Have a nice day,

July 31, 2011 Client Newsletter

noreply@blogger.com (Don Fuener) — Mon, 01 Aug 2011 01:05:00 +0000

Ahhhh the dog days of summer are upon us. It is Sunday evening when I am writing this and apparently there is some sort of deal on the expansion of the federal debt ceiling. Although I understand it is only a short term bill it will change the way the debt is managed and is aimed at avoiding problems this December. Remember the Bush tax cut debate last year?

According to Political, the proposal goes back to the Gramm-Rudman sequester model of the 1980s, which calls for severe across-the-board cuts as an action-forcing device. The cuts would affect Democratic domestic priorities, including Medicare, but also about 50 percent would come from defense spending, which is a major priority for many Republicans.

The goal is to give both parties an incentive to avoid a deadlock in the committee, and the administration will also have a major stake since success will make it easier to manage its borrowing. But the severity of the threatened defense cuts is such that it risks a backlash from House Republicans, accounting for some of the continued uncertainty Sunday.

What I found absolutely farcical about this whole mess has been the reaction of the various credit reporting agencies like Standard and Poors and Moodys threatening to down grade the federal debt. These agencies facilitated the real estate boom and bust by giving their seal of approval to debt instruments pieced together from no-doc and sub prime mortgage loans. They now characterize these instruments as “toxic.”

Ironically the U.S. Government always pays its creditors and it does so by borrowing heavily. Actions that they, the credit reporting agencies, have known for years. Despite this, dare we say, Ponzi type cycle, these credit reporting agencies have always awarded U.S. Government debt their highest ratings.

So maybe it is done and maybe it isn’t. Maybe the markets will crash this week. And maybe not. Armageddon around the corner? Maybe not. Interest rates going up? Maybe not. Better still lets focus on something that we can actually control and get on with our business.

Another comment about the economy. The recent GDP report of a very sluggish 1.3 % growth for the second quarter 2011 reinforces what we have been saying for months. Our purely anecdotal survey of small business clients leads to only one conclusion. Making a living right now really is tough.
The IRS continues to feast on S Corporations that pay very low salaries to owners. Typically, S Corporation owners take very low salaries, so they can receive the bulk of the corporation profits as distributions, which are not subject to payroll taxes. IRS and the courts balk at this practice. In a recent case, Watson, D.C., Iowa, a CPA.....who should know better...took a $24,000 in a year in which the S Corporation’s profits were around $200,000. A district court agreed that his pay was unreasonably low and ruled that the distributions are properly reclassified as salary and are subject to payroll taxes.

This constant struggle between S Corporation owners and reasonable salaries is something that we have had extensive experience in. The IRS reasonable salary classification and definition are a moving target. Something that we love to talk to you directly about.

IRS has joined with states in its fight over mis-classified workers. It is part of the Obama budget proposal directing the IRS and the Federal Labor Department to work together to increase enforcement. Illinois has recently passed a law that provides penalties for mis-classifying employees. Pennsylvania recent enacted legislation aimed at curing mis-classification of construction workers that include criminal penalties.

Remember that IRS relies upon leads from states to audit firms on this issue. Typically this referral comes from an Illinois Department of Employment Security (IDES) audit of a business generated by an independent contractor filing a claim for unemployment benefits. Our experience is that you are almost guaranteed to be audited by IDES if your independent contractor files a claim for unemployment. Especially if you are not currently an active employer in the system. If you have any type of direction and control of an independent contractor, i.e., you tell them what they are going to do, when they are going to do it and set the price, they are employees.

Another year another IRS Nationwide Tax Forum. I will be out of the office August 13-19 attending the forum learning what issues’ IRS will be focusing on this year. Please help me help you by getting us your sales tax information to us before I leave. Thanks in advance.

The dirty dozen. IRS Red Flags that lead to greater scrutiny

noreply@blogger.com (Don Fuener) — Wed, 27 Jul 2011 01:09:00 +0000

If you are filing Schedule C you tax return is in the cross hairs of the IRS. Audits of individuals by the IRS are up. The highest in more than 13 years. The Kiplinger Tax Letter has compiled a list of common audit triggers. We have linked to that web site. Just click the above link.

Tomorrow Is Often the Busiest Day of the Week

noreply@blogger.com (Don Fuener) — Thu, 21 Jul 2011 00:56:00 +0000

From lifehacker.com:

This Spanish proverb about procrastination reminds us that it's easy to put things off until tomorrow, but that will just mean having to catch up on everything the next day—with added stress and less time to boot.

Read more by clicking the above link.

July 3, 2011 Client Newsletter

noreply@blogger.com (Don Fuener) — Mon, 04 Jul 2011 03:40:00 +0000

Today’s CBS Sunday Morning’s cover story featured a look at the evolution of customer service, call centers, and propensity of large corporations for putting customer service on hold. Customer service call centers are a very big business. Estimates of 43,000,000,000 telephone calls are made to American call centers each year. They employ more than three million American workers. Two million oversees.

Ever wonder why large corporations would ever consider farming out their customer service to foreign agents or even worse those press one for this and two for that voice response systems?

Money.

It costs $7.50 for an American agent to answer a customer service telephone call. $2.35 to out source it. Thirty-five cents for you to press number three. Everyone was happy of course because their businesses saved a lot of money. Everyone of course except the customer.

Things are changing however. The Internet has become a great leveler. Tell your customer service horror story to a web site such as Consumer Report’s Consumerist, and suddenly the offending corporation has found itself in a PR firestorm. Corporations such as FedEx have adopted a different mentality. They believe that customer service is not a necessary evil, rather an opportunity. Good customer service is part of their corporate culture. Comparisons to the bankrupt United States Postal Service are in order.

As small business owners we would never consider “farming” out our customer service calls.
More often than not we are the customer service representative. Admitting we are wrong. Fixing what we can. Implementing new strategies to avoid further problems. Small business should and do run circles around any large business when it comes to fixing customer service problems.

The other conclusion I drew is how the Internet has changed the business marketplace. Both for large and small businesses. If you haven’t yet discovered the power of the Google place’s page, yahoo local, yelp, manta....all free local Internet listings.....you need to. Your future customers have. We will write to you more about these free internet listings later this year. The Internet is the great leveler.

What’s up with this three-page questionnaire you have included this month?

As your tax guy I never want to stop expressing my appreciation for your business. I have done the very hard job of convincing you to pay me money for my tax advice. Thank you. I began wonder why more clients don’t take more advantage of our proactive tax planning service. After all I am selling free money. A chance to reduce your tax bill. Guaranteeing much less pain on April 15th. My conclusion is that I am not telling you enough or making it easy enough for you to take advantage of it.

Two years ago we licensed a tax planning tool...one that has helped us more than ever before... to identify and explore opportunities with our clients to cut their tax bill called Tax Coach.

I think Tax Coach gives my clients the most innovative proactive tax planing reports that I have come upon in 30 years of practice. Finally a simple plan for beating the IRS. Legally.

In fact, our research and testing show that clients who implement our tax coaching service can rescue thousands in wasted tax dollars, year after year.

We have documented results from clients just like you, and I think we can do the same for you.
Tax coaching is more involved than garden-variety tax preparation. Therefore, we have to limit the number of clients we accept.

Oh did I mention your cost to get this plan? Zero. Nothing. It is our way of saying thanks for being a client. In exchange of course for your honest feedback and testimonials.

Take a few minutes, fill out the questionnaire and return it to our office. I will plug in the numbers and generate a personal tax plan with an estimate summary of tax savings for you. I will call you to arrange an appointment when I am done.

I can guarantee you will be very excited with the results.

Crazy Cat Lady Takes On IRS

noreply@blogger.com (Don Fuener) — Tue, 07 Jun 2011 02:08:00 +0000

Every town has a crazy cat lady, with way too many cats littering her property. Neighborhood kids walk past the house and wonder if it's haunted. Adults drive past and imagine the interior looks like a scene from Hoarders. But — what if the crazy cat lady is a sharp-as-a-claw attorney who's not afraid to take on the IRS?

Jan Elizabeth Van Dusen is a graduate of UC Hastings College of Law and an attorney in Oakland, CA. She's also a volunteer for Fix Our Ferals, an IRS-recognized 501(c)(3) nonprofit organization dedicated to providing free spay/neuter clinics for feral cats in San Francisco's East Bay area. Van Dusen devoted essentially her entire life outside work to the organization. She trapped feral cats, had them neutered, obtained vaccinations and necessary medical treatments, housed them while they recuperated, placed some of them for adoption, and released others back into the wild.

In 2004, Van Dusen reported keeping between 70-80 cats — so many, in fact, that she couldn't recall where they all came from. Seven of the cats were her own pets; the rest were foster cats she cared for as part of her volunteer activity. Most of them roamed freely around her home (except for bathrooms); however, some of the less-domesticated cats stayed in a room called the "feral room" or lived in cages for taming or because of illness. Every day she fed, cleaned, and looked after the cats, laundered their bedding, and sanitized the floors, household surfaces, and cages. She even bought her house "with the idea of fostering in mind."
Van Dusen also spent a small fortune taking care of the cats, including pet supplies (food, medicine, litter and litter boxes, pet dishes, and other supplies), cleaning supplies (garbage bags, paper towels, laundry and dish detergent, and other similar cleaning supplies), and even higher utility bills from laundering so many loads of cat bedding and running a special ventilation system to ensure fresh air. (Let's face it, folks, with 80 cats in the house, it had to smell at least a little gamey.) Even her garbage bill went up because of all the cat waste!
For 2004, Van Dusen claimed $12,068 in noncash charitable contributions for her rescue work on behalf of Fix Our Ferals — $1,381 in supplies, $9,607 in vet bills, and $1,080 in utilities. The IRS shot her down. But tax deductions for foster cats, like Van Dusen's cats themselves, may really have nine lives — so Van Dusen appealed to the Tax Court and even chose to represent herself.

Last week, the Court issued a 42-page opinion in Van Dusen v. Commissioner. The Court found that portions of Van Dusen's veterinary expenses, pet supplies, cleaning supplies, and utilities were "directly connected with and solely attributable to" her services to Fix Our Ferals. After several pages examining the state of Van Dusen's records (including three full pages on the woodstove pellets she used as cat litter), the Court let her take 90% of her vet bills and 50% of the supplies and utilities. However, charitable contributions of $250 or more must be substantiated with a contemporaneous written record from the charity itself. Since Van Dusen had no such acknowledgment, the Court disallowed all expenses above $250.

You don't have to be a crazy cat lady to deduct your volunteer expenses. You just have to know the rules. Keep good records! Make sure you get a statement from the organization acknowledging any expenses over $250. And call us with your questions, so we can help you make the most of those often-overlooked deductions!

June 1, 2011 Client Newsletter

noreply@blogger.com (Don Fuener) — Thu, 02 Jun 2011 02:46:00 +0000

I have been suffering a severe case of writers block. It has been six weeks since the end of tax season. We have focusing on catching up first quarter bookkeeping and starting to clean up stuff that we couldn’t get to prior to April 15th. Little time or desire to write to you this month. We will give it our best shot.

Today the news was filled with really bad financial news. Especially concerning is the housing market. I just read that home equity is dropping at an alarming rate. My father, who has had his home in La Grange Illinois for sale since November 2010 told me today that he has been forced to drop the listing price by more than $30,000.00 since that time. The impact of high gasoline prices, especially here in Illinois where we have proudly won “highest gasoline prices in the nation award” is a real life “economic tax” to your customers and clients. Money spent on higher gas prices cannot be spent in your business. I am truly baffled by the 30 cents a gallon increase today while the price of oil has dropped and inventories are up. Our crystal ball is getting clearer now and the recovery if any is still some distance away.

In this down economy, many small business owners are left wondering: "What does this mean for me?"

Despite the economic slow-down, there are several things small business owners can do to survive, and even thrive according to nonprofit micro finance organizations ACCION USA .

1. Know Your Market.

If you haven't yet researched your suppliers, or competitors before, now is the time. Talk to customers about their needs in this environment, get a sense of your suppliers' financial stability, and talk to neighboring businesses about your shared market in this economic environment.

2. Keep Stock Low.

Most consumers are spending and buying less.Try to keep your supplies and stock low so that you don't get stuck with products you can't sell. Try to only buy what you need whenever possible.

3. Maximize Marketing.

Instead of putting a freeze on marketing, think about ways to get more out of it. Promotions and specials are especially useful during hard financial periods because they provide customers with an incentive to buy. A limited-time "2-for-1" special is an easy, cost-effective promotion.

4. Reduce Your Dependency on Credit Cards

Business owners who approach this financial crisis as a short-term situation might find themselves too dependent on credit. If you are using credit cards to keep up with expenses during slow periods, focus instead on ways to reduce expenses. "Maxing out" your credit cards could negatively impact your credit score, resulting in higher interest rates.

5. Explore Alternative Financing Sources.

The current lack of access to loans makes it harder for small businesses to grow. Even though banks are less willing to provide loans, other organizations like nonprofit lenders or state-sponsored business grant programs can provide the capital you need.

A damaging admission. I don’t know how we did it. But we did it. Some clients did not get billed for monthly work in April. Sorry about that. So if you see a extra monthly service or your bill is for two months and not reflecting payment, the reason is simple. We did not bill you. Questions please call.

Each year after tax season we take a look at how we can improve our service for our clients. Client centered is the latest buzz word. And it makes a lot of sense. Client-centered focuses on the client's needs, concerns, priorities, and questions. We are doing our best to improve our client communication. Here is what to expect: Improved client communication. Whether it is an updated web site, better email communication from us. Expect to hear from us more often. And we expect you to communicate with us. Our open door policy has served us well for the last 30 years. Have a question? Call us first.

In the next few months we will be publishing three new reports:

What we learned from working with small businesses for the last 30 years.
The last word about small business cash flow.
What every business owner should know about their taxes.

The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which passed Congress on April 5, 2011, eliminated two recently enacted 1099 reporting requirements that were to take effect in 2012. Repealed was the onerous 1099 requirement for purchases made and rental expenses. Can you say firestorm? That is very good news.

Still on the books, however, are a couple of new 1099 reporting requirements effective for 2011. Specifically if you sell stock or mutual funds, the brokerage or mutual fund company handling the transaction will have to now identity the capital gain or loss for that transaction. In addition if you process more than $20,000 in credit card sales, the credit card processing company will now report the total of credit card sales to both the IRS and you.

I applaud the decision to report the entire capital gain transaction, including the basis and gain or loss on the 1099. We have spent countless time researching cost basis for our clients. Some clients are just baffled about the sale of their security. This requirement is very consumer friendly and certainly will stream line the tax preparation process on this end. Some good did come out of a very bad law.

Charlie Sheen's taxes

noreply@blogger.com (Don Fuener) — Thu, 10 Mar 2011 22:31:00 +0000

Sitcom star Charlie Sheen's public meltdown has grabbed more headlines than any story since pop star Michael Jackson's death. Public consensus is that Sheen is a man in desperate need of help. So naturally, we were wondering, is there any help waiting for him from the IRS?
We're not here to "pile on" like so many commentators. (That's what Saturday Night Live is for!) But if you're following the story like so many of us, consider how the tax code helps Charlie in these areas:

Drug Rehab. Charlie's rehab bills are a deductible medical expense. And unlike some deductions that are specifically limited (like mortgage interest on your primary residence and just one additional home), there's no limit to how many times you can write off rehab.

The downside here is that medical expenses are deductible only to the extent they exceed 7.5% of "adjusted gross income." Sheen reportedly makes $1.8 million for each of 22 episodes, which suggests he can only deduct medical expenses topping $3 million/year. Even for Charlie, that might be a stretch! However, he might establish a Medical Expense Reimbursement Plan through a business entity to avoid that 7.5% floor. If you own your own business, even a startup or sideline, call us to see if you can benefit from that same strategy.

"Goddesses." Sheen lives with two young blondes whom he calls "goddesses," and whom he says help take care of his twin toddler sons. If he actually pays those women for child care, payments up to $6,000 per child may qualify for the Dependent Care Credit. The rules say you can't pay a member of your own family to care for younger children — but they don't say anything about paying goddesses!

Job-Hunting Expenses. "Two and a Half Men" producers have officially canned Sheen, arguing he's violated a morals clause in his contract. Job hunting expenses to help Sheen find new and artistically challenging roles are deductible as a miscellaneous itemized deductions, subject to a 2% floor on adjusted gross income.

Legal Fees. Odds are good that anyone with a mouth like Charlie needs a lawyer who bills by the hour. Sheen can deduct legal fees relating to the $300 million lawsuit he just announced against CBS, along with any additional fees related to tax-deductible alimony paid to his three ex-wives.

Sheen has tiger blood and Adonis DNA to help him through his current troubles. But even Hollywood train wrecks can't hide from taxes without a plan. So call us if you're looking for savings without the headlines!"

More healthcare reform law news. IRS says it needs....

noreply@blogger.com (Don Fuener) — Wed, 16 Feb 2011 02:00:00 +0000

From usnews.com:

The Internal Revenue Service says it will need an battalion of 1,054 new auditors and staffers and new facilities at a cost to taxpayers of more than $359 million in fiscal 2012 just to watch over the initial implementation of President Obama's healthcare reforms. Among the new corps will be 81 workers assigned to make sure tanning salons pay a new 10 percent excise tax. Their cost: $11.5 million.

Click the above link to read more.

February 2, 2011 Client Newsletter

noreply@blogger.com (Don Fuener) — Thu, 03 Feb 2011 04:18:00 +0000

Originally I was going to write about what a strange tax season it has been. Delayed processing. Terrible weather. After spending an hour digging our vehicles out at home I was greeted with three foot drifts of snow and a still not plowed parking lot when I finally got to the office this afternoon. Flu problems that seemed to have hit every one of your tax guys some time last month.

All that negative stuff has been thrown out the door today when I learned that the Senate voted for the first time to repeal a piece of President Barack Obama’s health care overhaul, rolling back a new tax reporting requirement that’s been universally panned by business owners. The amendment to repeal the 1099 reporting requirement passed 81-17 with broad bipartisan support.

The provision would have required business owners to file 1099 tax documents on all cumulative purchases from a single vendor that total more than $600 in a year.
It was included in the health law because it would have raised about $17 billion in previously uncollected taxes. A bipartisan collection of business groups have opposed the provision, arguing that it would bury them in paperwork.

Equally as unpopular is the new five percent, retroactive to January 1, 2011, increase in the Illinois Income Tax rate. No chance for repeal I am afraid. If you haven’t already, you are required to now withhold from your employees at the new rate. We received official Illinois Department of Revenue notice last Friday. If you are using our paycycle payroll and tax service the new rate has now been changed.

We have just started processing your non employee 1099 forms this week. The due date is February 15, 2011. Call if you have questions.

When you are 70% sure of something, it is time to go for it. Figuring out the other 30% leads to diminishing returns which jeopardizes the window of opportunity. In other words, you have to know when "good" is "good enough". More often than not we spend so much time being perfectionists, we miss the fact that small business success is always achieved by action. And massive action is always been more successful because the day you quit the competition wins. There’s no question that action leads to results. The beautiful part of this formula is that results increase your belief about how much you can accomplish; which in turn helps you take more action. It’s a beautiful cycle that only leads to more success. Try it. It’s great!

Real Audit Support?

noreply@blogger.com (Don Fuener) — Sat, 29 Jan 2011 06:28:00 +0000

I call it reading the fine print. Fear of an IRS audit is real. The do it yourself tax preparation business has grown in the last few years. Obviously we are biased, but why in the world would you trust a box to assist in preparing a tax return and later rely on down loadable audit support for help.

In the case of the most popular do it yourself tax preparation software, assistance is not even available if you file a business return. I copied and pasted from their web site emphasis is ours:

Audit Support Included FREE with All TurboTax Personal Tax Products

TurboTax not only helps you reduce your chance of an audit, we also give you clear guidelines with
illustrations on what to do if you are contacted by the IRS.^{1<<<<<<<<<<<<<<<<<<<<<}

Includes Downloadable Audit Support Center

Being contacted by the IRS can be confusing and stressful, but it doesn’t have to be. That’s why we’ve created the TurboTax Audit Support Center, included for FREE with all TurboTax products.

Only about 1% of all personal tax returns were audited,² so it is unlikely, but if you are contacted by the IRS, we’ll help you to:

Find out why the IRS contacted you
Determine what it means
Prepare your next steps

With downloadable step-by-step guidance, including what different types of IRS letters may mean, you’ll know exactly where you stand and what to do next.

Remember, TurboTax guarantees 100% accurate calculations. If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we’ll pay you the penalty and interest.

¹Not included with TurboTax Business.<<<<<<<<<<<<<<

²Based on IRS results for tax year 2009

So if you file a business return. The number one target of IRS audits, you really are on your own. No audit support for business returns.

After a little hunting on their site I found that additional tax audit support is available for about $40.00. More than the cost to prepare some returns.

But it gets a little murkier. These services are outsourced to a third party Tax Resources Inc. And their help can be spotty.

Click here to read some users comments.

Better yet click this link to read user comments about TurboTax.