Endurance Accounting & Tax Preparation Services Blog

Indiana State Unemployment Tax - Multi-State Employees

2013-07-23T12:28:00.001-07:00

C. Multi-State Employment
If an employee performs all duties in one state their wages are reportable to that state. If an employee performs duties in more than one state the following criteria are used to determine in which state to report wages:
• Report wages to the state from which the employee is directed or controlled if some part of the work is performed in the same state as the direction and control.
• Report wages to the state in which the employer’s corporate office is located if the employee performs some part of their work in that state.
• If neither of the above applies the employer reports wages to the state in which the employee lives if some part of the employee’s services are performed in the state of residence.

Indiana Employer Guide (page 8)

Indiana - State and County Tax withholdings

2013-07-15T07:36:00.001-07:00

Question: I have a question about withholding county tax. We have an employeethat lives in grant county and works for us in Madison county. Do I withhold county tax at the Madison county non-resident rate or did Iwithhold at the Grant county rate?

Answer: You will withhold for the county that the employee lives in at the resident rate. You will only use the non-resident rate when you have an employee that lives in another state and you will use the county that your business is located in at the non-resident rate.

Indiana State and County tax table can be found here; http://www.in.gov/dor/files/dn01.pdf

After I file my taxes, I generally worry about getting audited. When does the IRS notify you if you are going to be audited?

2013-05-19T20:28:00.000-07:00

Generally speaking you will be notified of an audit between 12 and 18 months after you have filed your tax return. The statute of limitation is 36 months from the time you have filed your return. Keep in mind, there are no statute of limitation of you did not file a return.

Note: If you have understated your income by 25% or filed a fraudulent return then the 36 months is extended. In the case of the understated income the extension is to 6 years. In the case of a fraudulent return there is no limit, but generally the IRS won’t audit anyone after 6 years. (NOLO Tax Savvy for Small Business, p 279)

Who must I send 1099s too?

2013-05-11T15:06:00.002-07:00

I was challenged this week to answer this question. I thought it was pretty straight forward at first but my answer started a controversy in the office. My answer was directly from the IRS Publication called “2013 Instructions for Form 1099-MISC.”
Which says, “Specific Instructions File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year: At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8); At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate; Any fishing boat proceeds; or Gross proceeds of $600 or more paid to an attorney. See Payments to attorneys, later. In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment. You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment. Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.
Exceptions. Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following. Generally, payments to a corporation. But see Reportable payments to corporations, later. Payments for merchandise, telegrams, telephone, freight, storage, and similar items. Payments of rent to real estate agents. But the realestate agent must use Form 1099-MISC to report the rent paid over to the property owner. See Regulations section 1.6041-1(e)(5), Example 5, and the instructions for box 1.Wages paid to employees (report on Form W-2, Wage and Tax Statement). Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2). Business travel allowances paid to employees (may be reportable on Form W-2).” At issue was the question of do we need to send 1099 to companies like Office Depot or Walmart. We spend over 600 per year with them so some in the office thought we did. Professor Karl sent me some information confirming my belief that we do not need to send them 1099.
Additionally, I came across a blog (http://www.indianabusinesslawblog.com/2010/11/how-will-the-upcoming-changes.html) that mentioned a new law that would require such action. However, the article linked to an update that shows that the law was repealed and that the requirement does not exist. (http://www.indianabusinesslawblog.com/2011/04/form-1099-reporting-changes-re.html).

When does the IRS notify you if you are going to be audited?

2013-05-11T13:30:00.001-07:00

Quickbooks and PrePaid Expenses

2013-04-28T20:04:00.000-07:00

This post is to cover how to handle prepaid expenses in Quickbooks. This can cover big items like insurance all the way to smaller items like IPASS tolls. We will use tolls as our example but the process applies to any prepaid expense. We will accomplish this in two steps:

Step One - is to record the prepayment. In our toll example, we set up with IPASS the ability for them to charge to our debit card when a minimum amount is reached, when our account is down to $50.00 they replenish the account by charging our debit card $100.00. This will insure that our drivers never get ticketed for not paying a toll. To record this "auto-replenishment" we will use the "write check" feature of Quickbooks. The check will be written to the toll company from the checking account used with our debit card. The account we will use is the "Prepaid Tolls" account.
Step Two -This step is to record the transactions when the drivers are charged for tolls. Monthly we receive a statement from IPASS showing all the charges for tolls. When you receive this statement you will record each line item on the statement as a toll expense in the following manner. Unfortunately we have to use a general journal entry so please watch making this transaction very carefully. Make sure you enter the current date. For the Entry number please use “IPASS” followed by the month of the entry, you should have one per month. Then you will Credit “Prepaid Tolls” account by the total amount of the invoice and then create one Debit line entry for each item (expense) on the IPASS invoice.

To see the effects of these entries let's look at the Balance Sheet and the Profit & Loss Statement

Profit & Loss Statement - Here you can see the toll expenses that were incurred in the period.

Balance Sheet - Here you can see the prepaid amount that is remaining.

I hope you found this helpful! If you have any questions or comments please leave them below or send me an email at dwalker@endurancemcs.com

What is an Enrolled Agent?

2012-11-25T20:37:00.002-08:00

According to the Internal Revenue Service (IRS) website, at "An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.

Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before." (www.irs.gov).

With this in mind, and with the goal I have set to begin my tax preparation business in conjunction with accounting services, I thought it would be a step in the right direction to become an Enrolled Agent. Saturday, November 24th, 2012, I took my first step in that direction by passing one of the three required exams. I began with the third exam that focused on Representation, Practices, and Procedures. The next exam that I will target is the Individual exam followed by the Business exam. I will keep you updated as I progress along this path!

How to choose a Tax Preparer!

2012-10-28T19:36:00.003-07:00

I was watching an old episode of Magnum PI on Netflix the other day with my wife. The show started out with Magnum trying to do his own taxes and everyone (meaning T C, Rick, and Higgins) sarcastically commenting on his great record keeping system because he had pieces of paper all over the table. In a country where the tax codes and the tax forms seem to be getting increasingly complex more people are needing help. While many are turning to tax software others seek out professionals. In this post I will identify the important capabilities that you should look for when you want to find a professional to help you with your taxes.

Everyone that chooses a professional tax preparer should understand that not all tax preparers are equal. Here is a story from an article by Chuck Sloan from Back Stage East (1/12/2006) about “Ed: The Tax Preparer, who was creating wonderful returns with huge refunds for all his friends, and decided to try him out. Within months the clients was already getting audited for that same year. One look at his return and I could see why: It turns out Ed was making up all sorts of numbers on the returns he prepared, and most of the clients had no idea. All they saw were the huge refunds.” Earlier in the article Mr. Sloan had pointed out that “Trying to save (or make) a couple hundred dollars a year by picking the wrong preparer – or no preparer at all – too frequently comes back to bite you. Always remember that only you will be paying the interest and penalties if deductions are disallowed.”

This story and reminder of the consequences demonstrates why it is so important to find a tax professional that you can trust. Now let’s take a look at the top 5 criteria that should be high on your priority list when you interview your current or tax professional.

1. A Professional that listens and understands your needs. The first thing that I would recommend to anyone looking for a tax professional is that it has to be someone that you know listens to your needs, goals, and requirements. My first rule is the old saying from Theodore Roosevelt “nobody cares how much you know until they know how much you care.” If you ask questions and feel put off or not fully understood then you should find a new tax professional. You have to have someone that helps you reach your financial goals and can do it without you losing sleep because you worry about an audit.

2. Experience is an important aspect of finding the right tax professional; however, you have to be careful. I have met many people tell me “I have 20 years in the business” like it is some badge of honor and then proceed to give some of the worse advice I had ever heard. It was like they had 1 year of experience that they have repeated 20 times. While others with less experience who could focus on your situation with knowledge of the tax rules and regulations and that have applied those in situations similar to yours can respond with far better results. So do not discount experience, just make sure it is the right kind of knowledge that can really benefit you.

3. Certification is a standard that your tax professional should have and be striving to maintain. There are three main certifications to be aware of:

a. Certified Public Accountant (CPA) – A CPA is the gold standard of tax preparation and planning. They have proven through their passing a comprehensive set of exams followed by years of experience that they can deliver successful results. The main issue here is that often CPA’s do not really engage with the clients unless they have very complex tax situations, or business clients and CPA’s are the most expensive of tax professionals. So a client that has a standard tax situation is likely to overpay and get less personal service.

b. Enrolled Agent (EA) – An Enrolled Agent is someone that has also passed a set of comprehensive set of examines. The main difference is that the EA exams are focused specifically on taxes, where the CPA exams are broader and include subjects like auditing, financial accounting, and reporting. The Enrolled Agents focus on personal and business taxes and the rules and regulations to practice in front of the IRS. This is an IRS certification and allows an EA to represent you if you are selected for an audit.

c. Registered Tax Return Preparer (RTRP) – The RTRP is another IRS certification that focuses on the preparation of tax returns. Like the EA, an RTRP has a number and is registered with the IRS and have passed an exam demonstrating proficiency in preparing taxes, however, they cannot represent you if you are called before the IRS for an audit.

4. Be careful of their advertising. If the tax professional you are interviewing offers things like big returns or fast cash then it is likely they are focused too much on the level of return that you will get and may even lead you to risky, if not improper, deductions raising your exposure to an audit and possible penalties. On the other hand if they take too conservative of an approach then you may lose out on legitimate deductions that you are entitled too. Find a professional that is focused on your goals and your risk tolerance and they can maximize your return without risking your sleep.

5. Always get referrals. All tax professionals should be able to provide you with customers that are happy with the service they provide and that are willing to talk to you. Or you can look online for survey ratings or customer feedback. Make sure you know that your tax professional can and has delivered valuable services to his/her clients. This can bring confidence to your selection.

In summary, I would like to stress the first of all the criteria. While all of the criteria that I have listed is important, I do not think that any is as important as the first; finding a tax professional that will listen to your needs and understands all of the ramifications and how best to advise you for the best result. Picking the right tax professional is a hard thing to do, but if you pick someone that has the cares about your needs and goal, has the “right” experience, has earned the proper certifications, and can refer satisfied clients you will be on the right track to a long lasting and beneficial relationship.

If you have a comment or question please feel free to comment below!

The Countdown Begins

2012-10-09T07:17:00.001-07:00

The family and I are set to move back to my home. Back home again in Indiana! Here is the countdown!

Educational Goal - Achieving a Master of Science in Accountancy

2012-07-23T13:09:00.000-07:00

I set out over 7 years ago to achieve a MS degree. I was not sure if that was possible or if I was capable but I work in a shrinking industry and I knew I would need some alternatives. Considering that I had not even achieved a Bachelors degree this was more of a dream then a goal. Part of achieving any goal is setting a plan. That plan started with earning the bachelor degree in Business with a concentration in Finance, which I did in 2011. Soon after that I began to work on my Master of Science in Accountancy. Follow this link The Master Plan to check on the progress. It includes the upcoming schedule and a breakdown of cost. In January 2013 I will be taking 15 credits (full time) for the first time in my life and I am very excited. Taking classes, especially master level classes in a subject that is not included in the work you do is very difficult. I have been able to do it so far but the opportunity to focus on the subject of my future work is exciting. Of course it is scary to leave a secure position but I am very excited about the opportunity. The fact that my wonder wife Elizabeth and my awesome Mom support me is very helpful and makes it all seem possible.

Many Streams make a River

2012-07-14T21:13:00.000-07:00

This is a lesson that I learned from my boss. Consistant improvement should be a target of everyone. That we do not need to wait for a big action or a huge change but through our daily efforts improvement would be the goal. At different times in our lives these types of lessons can take on new meanings. As I have thought about starting my own business I considered this concept of many streams making a river to mean that many streams of income can make a river of a company.

At first I had considered a tax preparation business. But I worried that it is seasonal so the income just wouldn't be there year round. The two options were try to make enough money in the tax season to sustain our family or to find other sources of income. The second seem to be a better choice simply because the former would require the hiring and training of many employees and marketing expenses would be far greater among other things. Then I considered, and even started, my own Management Consulting Company. But with no time and less money that never even got it's first marketing program off the ground.

By bringing together the concept of many streams makes a river into the business planning process I realized that what I needed to achieve the flexibility that I want, that is a flexible schedule, I need to develop a good portfolio of services.

The portfolio is still under development and currently includes:

Accounting Services
Tax Preparation Services
Quickbooks Training & Professional Services
Investments

If each of these could develop into their own stream of income then the business could be sustained for a long time.

Another blog that discusses the topic from a different viewpoint. The Survival Mom

Tough Decision - Updated 7/22/2012

2012-07-14T20:39:00.000-07:00

"High achievers spot rich opportunities swiftly, make big decisions quickly and move into action immediately. Follow these principles and you can make your dreams come true." Robert Schuller

"It is not always what we know or analysed before we make a decision that makes it a great decision. It is what we do after we make the decision to implement and execute it that makes it a good decision." William Pollard

These are two quotes I came across while pondering a decision that I need to make. The first quote makes me wonder because it seems that the big decisions, what I call life altering ones, make me pause. I would not say that I make them quickly. I study, ponder and pray before making the decision. I completly agree with the second quote because once you make the decision, as Jack Welch would say, it is important to start to make it the right decision.

The decision that I am facing is how to leave a good job and take the risk of entrepreneurship. That entrepreneurship could take the form of starting my own business or becoming an agent with an insurance company, they help you start your own insurance agency. The other issue is a timing issue. If I am to start either an agency or a business then when to do it is an additional consideration.

The specific choices that face me now includes both aspects but before I get into that I want to discuss why there is a need to change jobs/careers at all. First and foremost the change is driven by a strong desire to relocate to Indiana. Their are several reasons that I want to move to Indiana, that is where my Mom and family is located. For me, the way of life is better for my family then it is here on Long Island, NY. As a proud member of The Church of Jesus Christ of Latter Day Saints I was happy when the churched announced a temple would be built in Indianapolis, IN. Once we move, we will be about 30 minutes from the temple. I would love a life where my wonderful wife Elizabeth and I could attend the temple weekly!

It seems to me that there are three main options. All of which have thier own risk! The first option is our original plan which is to wait to make the move until January 2013. At that time I would leave my current work, register as a full-time student in my Masters program and move. This would allow us to save more money to prepare for the move and it would allow me to accelerate my timeline for completing my Masters degree and saves money because I would be able to continue my in-state tuition. But it comes with its down-sides as well. In those first months after the move we would have no income and while our expences would be low we would have to figure out a solution for health insurance. As I have begun my research I have found that to be a much bigger challenge then I had planned. Additional considerations are that I would have to stay in my current position for seven more months and with a lot of changes coming up I feel bad making decisions that affect people's lives when I know that I won't be here to help them through the transition. I manage about 36 people and dramatic changes will happen to them and to programs around them and at the moment those changes take place I will be announcing my departure. I worry that will damage my reputation in the company. I have worked hard to earn a good relationship with many people and I do not want to lose that.

The second option, which has presented itself in the last few days is to make the move starting in early September. This comes with me starting a career as an Insurance Agent and continuing my Masters studies. The good news here is that the move could happen sooner and I could work with my employer for a quick transition and then new people would make the decisions that will carry on after my departure. Second, we would get to Indiana several months earlier than planned and I can begin to build a business, Insurance and Accounting & Tax Preparation. The concern here is that I have no sales experience and starting both of those requires me to learn how to find and keep customers.

The third option is much the same as option two, but just is me working with the insurance company to be patient which would allow me to give a longer period of notice, like two or three months. But really following the same plan as option two.

I am reminded of the story of David and the Giant. But I feel like I am one of the soldiers that watched him sling the stone at the giant. He had the faith in the Lord that the Lord would protect him. I have faith, strong faith, but at times like this, when I let doubt creep in, that my faith is tested. Elizabeth and I are fasting this weekend. We pray for the Spirit to be with us and help us make the decision and stand confident having the faith of David.

Tough Decision Update! 7/22/2012

The udpate is that the more things change the more they stay the same. After the prayers and fasting and talking it came down to stay with our original plan. So we are planning on moving back to Indiana (Pendleton) in January of 2013. I will then go to school full time for one semester and try to get as much of my Masters degree finished. In addition to that, I will be starting the Endurance Accounting & Tax Preparation service business with much happiness. I have no idea if I will be successful as an business owner, but I am excited to try. If you want to follow the planning for that please check out the "My Business Plan" section. The decision is done and I am again at peace!

The Start Up

2012-07-09T18:12:00.000-07:00

Courage is a trait that I have admired for a long time. Starting your own business takes courage. Over the last two years I have watched two people summon the courage and accept the challenges of starting their own businesses. While I see them working many hours and struggling with some things I have been incredibly proud of their success. The success is not measured by the simply the dollars but it also includes the pride and confidence on their faces as they talk about what they are building.

Watching them, along with having a desire to relocate, has inspired me to begin my own business. Over the next few months I will be blogging about the steps I am taking as I begin to develop my business plan and make decisions that will form the foundation of the business. The business will be Endurance Accounting & Tax Preparation Services. Endurance will provide accounting, bookkeeping, and tax preparation services to small-to-medium sizes businesses and to individuals. My goal is to help people find ways to keep more of what they earn and not sacrifice time away from their families. There are entrepreneurs out there that spend to much time on the administration and accounting for their business which takes time away from their family. In my opinion there is no greater success than watching your loved ones, wife and kid(s), smile, laugh, and love. While helping others achieve more time with their family I also hope to achieve the same with mine. I have a great family that I love and I am motivated to be successful so I can have more time with them.

Over the next few months please watch my blog grow and as I blog about topics that relate to the business plan, I will use those posts to build my business plan, which can be found on the tab "My Business Plan."

Balanced Scorecard

2012-07-09T11:38:00.002-07:00

I have been interested in and have been using a balance scorecard since 2006. I was taught about balance scorecards by a professor at the University of Chicago School of Business. I took some Executive education courses. This professor studied under Robert Kaplan (The person that developed the Balance Scorecard approach) in the late 70s and early 80s. The story he told us was that prior to the balance scorecard companies were measured mostly by their financial statements. If they were profitable they were considered good and if not they were not good. They began to wonder if there was a better way to measure a company. Good financial performance today does not ensure stable financial performance in the future. However, if the company had a set of broader measurements not only could you understand the health of the company today it would also keep you informed about the trends that would predict future performance. So hence the Balance Scorecard was developed. The balanced scorecard is used to monitor and track four areas of company performance. The four areas are financial, customer, internal processes, and learning and growth. You can imagine also by the name scorecard that its design is to track a score associated to specific measurements. In other words, we want to keep score! So the four areas provide the "balance" and the targets and measurements provide the "score."
An example is that a training team tracked student satisfaction in their in-house Instructor-led training programs. This fits under the customer category and they placed a target of 91.25 out of 100 as their goal. Each month they would report as one of the items on their balance scorecard the student satisfaction rating. This helped management know monthly if the trend was toward increased student satisfaction or decreased student satisfaction or if student satisfaction was flat.
Well, I hope you have enjoyed this brief overview of the Balance Scorecard. Please feel free to comment or ask question. test