Things to consider heading into the new year.

This information was forwarded to me from a fellow Franchise owner, Thank you Mr. Henry Swint.

TO My CLIENTS, FRIENDS, AND BUSINESS ASSOCIATES:

As 2011 comes to a close, economic uncertainty continues to be a hot topic in Washington, D.C. and around the world. The Joint Select Committee on Deficit Reduction (i.e. the Super Committee) created by the Budget Control Act of 2011 failed to reach a bipartisan agreement to address the financial challenges facing the United States. This failure to reach an agreement has left huge tax questions unanswered. The following are selected key issues of interest:

Tax Provisions Expiring at the End of 2011

·            Alternative-minimum tax patch;

·            Social Security tax reduction of 2%;

·            Special accelerated depreciation;

·            Higher education deduction;

·            Home energy tax credit; and

·            Charitable contribution of IRA assets.

Tax Provisions Expiring at the End of 2012

·            Top 35% income tax rate;

·            Top 15% long-term capital gain and qualified dividend rates and

·            Estate and gift tax rates and exemption.

Tax Provisions Taking Effect in 2013

·            3.8% tax on net investment income for joint filers with adjusted gross income more than $250,000

·            ($200,000 for single filers). This additional tax applies to taxable interest, dividends, capital gains,

·            rents, royalties and some annuities;

·            Personal exemption phase-out;

·            Itemized deduction limitations; and

·            Reduction in flexible spending account limits.

WITH UNCERTAINTY COMES OPPORTUNITY. The best way to take advantage of the changing legislation landscape is to understand your options and be ready to act. I SUGGEST that you investigate all planning opportunities before year-end.YEAR-END TAX PLANNING is not complete without a review of your RETIREMENT AND ESTATE PLANS. Early planning is key to making the most of your opportunities. I am available to help with your planning. Please contact me if you would like my assistance in developing a strategy for you before the year is out or in the future.  Remember life constantly changes and so do our plans.  Properly planning for taxes and life events helps ease the burden.  Tax evasion is against the law.  Tax avoidance is your civic duty.

         

Here are 10 things you can do before the year is over for increased tax savings:

1.       Donate to Charity (Fall into Spring cleaning, remember to get a receipt for donations)

2.       Sell off bad investments (up to $3,000 loss)

3.       Pay your December mortgage Payment in December

4.       Hold off on bonuses and extra income until the New Year.

5.       Max out your 401(k) ($16,500 tax free maximum)

6.       Pore over out of pocket medical costs

7.       Get Married (get it legally activated now, have the ceremony later

8.       State Sales Taxes for large purchases (for buying cars, boats, planes etc.)

9.       Energy efficient  home improvements (not all qualify)

10.    Military reservists travel expenses

And many more…If you or someone you know need tax planning advice please don’t hesitate to call.

Enjoy a HAPPY NEW YEAR by starting your tax planning now.

THE IRS HAS BEEN BUSY……..HAVE YOU?

  The IRS have hired an additional 15, 000 agents for the upcoming tax season. In the state of Virginia alone  in 2 years 7,000 agents were hired. The government needs money and they have elicited the help of the IRS to help collect. They are serious and focused on targeting small businesses. Some items the IRS are requesting when they audit small businesses are:

•          Invoice and receipts
•          Logs to track miles
•          Income and expense ledger
•          Proof travel was taken for business.
•          Daily business calendar or Tax Diary
•          Proof of home office deductions
•          Many others

It is very important that the information above answers the following questions:

•          Who
•          What
•          When
•          Where
•          Why/How

I have always believed that too much information is better than not enough information.

When a small business is audited by the IRS, the questions that need answers are: 

•          Who were you with / whom did you visit (if any one)?
•         What was the purchase or the event for?
•          Where did this event or purchase take place?
•          When did the purchase or event take place?
•          Why or how does it pertain to the business?

I think it is better to have the answer to a question not asked then not have an answer to an asked question. 

To put it simple, if a business owner keeps thorough records in anticipation of an annual IRS audit then the business will not have anything to worry about.

Having thorough and organized records makes it more affordable for the tax lawyers, tax professionals or accountants to counsel a business during an IRS audit.

Why are the Middle Class Bullied by the IRS?

 My honest but humble opinion of the basic ideology of the thee classes that exist (poor, middle class and wealthy) gives insight to that very question. The mind sets of the 3 classes are:

• The poor are trying to survive. 
• The middle class are maintaining. 
• The wealthy are looking to surpass. 

An old cliche' that has been repeated often (especially by me) is if you are not moving forward you are automatically moving backwards. The government and the IRS in particular understand this cliche' and keep track of  who are maintaining and and moving forward by conducting audits on every tax return every year. Most people are not aware of that fact. 

  The economy, politics and budget cuts have given the government another reason to search for more revenue. Unfortunately the middle class are the the target of such "financial bullying". I think one of the biggest reasons for such an assault is the middle class are an easy target. 

Like previously stated the middle class are considered "maintainers". Once the nature of a person or a group to maintain  is understood then it is easy to see why the middle class are the target of choice. On a whole they will do what ever it takes not to loose what they have.

 The fear of loss will encourage compliance with what ever is presented even if it the presented information is wrong. 

Example: The IRS sends a letter stating that there's an error on the tax return. The letter basically states that IRS records don't match the tax payers tax return so the refund is smaller than what was reported on the tax return. The "maintainer mentality" is.... , "ok I dodged a bullet so I will let them have what they want, I still get a refund check ".  There may appear to be nothing wrong with the above response. Lets look at it from a different perspective. How would the middle class respond to:

• The cashier gives $5.00 dollars change but should have given $10.00 dollars in change
• The ATM disperses $80.00 dollars instead of $100.00 and debits the account $100 dollars.
• The bank financing the car loan auto withdraws $350.00 from the account instead of  $300.00.

I think it is safe for me to assume that most people would not let any of those things happen without doing something to correct the issue. So why do middle class allow the IRS to bully them?

• Little to no knowledge of tax payers rights
• Public misinformation /perpetuated by the media,family members and friends.
• Fear of the IRS.

If  the the middle class does nothing to stop the bulling it will only get worse. I am just saying....

Deadline is coming DUE for those that filed for an extension

.

It seems like yesterday I filed extensions for my clients urging them to get back to me soon as possible and not wait until October 15^th to give me the information to file their 2010 tax return. Well, guess what? We are less that 3 weeks away from the deadline and it is approaching fast. Before you know it your tax professional will be sending you a reminder notice to get ready for the 2011 tax season.

For those that filed an extension form 4868. You have until October 15 2011 to file your 2010 taxes. If you fail to file your taxes by the deadline the following could happen.

1)    late filing penalty

2)    possible penalty of 5% per month of the unpaid tax

3)    possibility of being audited

If you have not filed your taxes for 2010 please get with your certified tax professional, accountant or tax lawyer and file your taxes as soon as possible.

This is not something you want to play around with.  In case you are not aware the government is in need of money and one the quickest ways to get an audit notice is to file your taxes after the deadline or not file for a particular year. Look at this as a public service announcement. Should you have any questions at all please feel free to post them below.  

Reasons to form a corporation

There are many reasons to form a corporation.

• $         Limits Personal Liability
• $         Tax benefits
• $         Shows that you are seriously committed to your business
• $         Offers a more professional appeal
• $         Corporations don’t need a passport
• $         When formed correctly offers asset protection

Another reason to form a corporation is to raise capital and additional lines of credit. I not only think this is one of the best reasons but, the most underrated and misunderstood reason.

This advantage applies to all corporation entities:

• $         Corporation – C Corp
• $         Small Corporation - S Corp
• $         Limited Liability Corporation – LLC
• $         Limited Liability Partnership - LLP

*Strategies and State laws may vary.

Corporations are called entities for a reason. They are treated separate from the individuals that form them. The Ein or Tin is how they are identified by the state government and the IRS.

What does this mean to the average person? You know the advantage of having two people in a house hold with exceptional credit (increases lending power and leverage). A person or persons may increase their lending power forming a corporation.  Of course it is not that simple. There are many things that must take place before a Corporation is credit worthy.  Proper business practices and credit structuring must take place before an investor or a bank will begin to look at a corporation as viable credit risk. The principle to obtaining good credit in a corporation is the same as obtaining good credit in one’s personal life. The laws and the strategies slightly differ but, with the right information and circumstances an individual can go from being a borrower to a lender.

Always consult your tax attorney, accountant or tax professional before venturing out to form a corporation because different corporations fit different business types.

Why do so many small businesses fail?

There are many reasons small businesses fail.

• Lack of business plan
  
• Lack of documentation
  
• Poor tax planning
  
• Not understanding the laws
  
• Only focusing on the work part of the business
  
• Many, many others.
  

I was informed by my mentor who has run a successful business in Real-Estate and Accounting for over 40 years that there are many reasons that a small business fails but, their are two in particular that handicaps a business litereally before it gets started and they are:


Federal Unemployment Tax Act (Futa)

State unemployment Tax Act (Suta)


Not to be confused with Federal Insurance Contributions (fica). Suta and Futa are a tax in addition to fica. What does this mean to a small business owner with employees? It means in addition to employee wages 10% to 15 % of the employee income must be paid to the State and Federal Government. If an employee earns $2000.00 dollars a month, at least $200 dollars goes to pay fica, Suta and futa. The unfortunate fact is many small businesses don't pay the payroll tax (fica, suta and futa). Some of the reasons for not paying the payroll tax are…..

• Unaware of the taxes exist
  
• Can't afford to pay the employees and the taxes
  
• Just flat out don't want to pay the taxes
  
• Convinced business will increase so they can catch-up on payroll tax
  
• Accepting bad advice from non tax professionals (friends, family members and co-workers)
  

Whatever the reason for not paying the payroll tax the outcome is the same. The employee/s  of the small file their tax return and a couple of months later the IRS sends the employee a bill for unpaid taxes. A phone call is made; the IRS shuts the business down for unpaid payroll taxes. The time frame for this to take place is from a year to six months of starting the business.

A word to the wise, if you are going to start a business consult a tax professional, law attorney or accountant before doing so. The information they provide will be well worth the time and money invested.


 

Assets vs. Liabilities in business

        Depending on the persons involved in the discussion. There are different definitions of assets and liabilities. The dictionary and accounting defines as follows:

Asset, Dictionary -  A valuable item that is owned

Accounting definition- The entries on a balance sheet showing all properties, both tangible and intangible, and claims against others that may be applied to cover the liabilities of a person or business. Assets can include cash, stock, inventories, property rights, and goodwill.

b. The entire property owned by a person, especially a bankrupt, that can be used to settle debts.

Liability, Dictionary - Something that holds one back; a handicap. Accounting definition - The financial obligations entered in the balance sheet of a business enterprise.
My mentor explained it to me this way,Assets -  something that makes you money. Liability - something that cost or looses you money.
  There can be grey areas. Should my children be considered an asset? If my son and daughter would have become a detriment to society, (in and out of juvenile detention and thus graduating to state penitentiary) would they still be considered an asset or a good return on investment (ROI))? The answer is obvious.
What I am talking about is strait forward. I am talking about a more immediate ROI. (Or a close to immediate ROI). I want to discuss this from a business perspective.
There are things that can be done in business that bring quick ROI's. 

Examples of assets and liabilities in business are as follows:
      Asset;
mentors - mentors are a great assets because a good mentor has fruit on their tree. They can help you avoid costly mistakes. A mentor is like a tour guide along your journey to success.
       Liability:
Negative friends and family and associates. Love them or hate them we all know of the nay Sayers. Individuals for whatever reason have nothing positive to say. These individuals are a drain on your mentality and offer nothing in the way of putting money in your pocket. The more time spent with them the less time available for making a business work. Negative people can’t be converted. If there is doubt, consult a mentor.
        Asset:

Business seminars, books and other business related training. This should be self explanatory but for the sake of argument.....  Business related training is an asset because it offers information, when used properly can have an immediate impact on a business. Training properly recorded offers a residual effect. Can always be referenced.

         Liability:

Television, video games - I can here the booing and hissing as I write this. These two mediums offer very little in the way of productive learning and education. Cable cost on average $159.00 dollars per month that is more than $1800.00 dollars a year. Video games cost on average $39 dollars per game not to mention the gaming system with all of its accessories. If $2000 dollars annually are spent on TV and video games, in 5 years the cost is 10,000.00 dollars (that could pay off a credit card). Enough said

Asset :

A master mind team - A master mind is a team of like minded  successful individuals. They meet on a regular basis (at least once a quarter) . They normally have expertise in valuable areas. (Law, Taxes, Marketing and Finance). Strategic plans are laid out and performed for the betterment of the team. The return on the investment is priceless.

        Liability:

Apathy/waiting on the government to improve the countries situation. This country had the greatest economic boom in its history during the 90’s through 2000. If the average person was not able to become independently wealthy during that time then there time has passed. That was the best the government could do (if you believe the government was responsible,forgive the sarcasm).

Basically there are a couple of choices, surround oneself with assets and increase net worth or surround oneself with liabilities and decrease ones net worth.

Tax preparation is an annual endeavor, happy tax season.

While doing a good work in and for your business..... dont get caught up

    I want to congratulate all those business owners that did more in their business in 2010. You set a goal to increase your clientele, get more referrals and  attend more training seminars. You even took a business trip in a vacation location. All these things were done but, (wait for it) you did not properly document those events. If you don't have proper documentation then all the work you did to increase your productivity in your business will increase your bottom line, however it will also unnecessarily increase your tax liability. Proper documentation answers the questions who, what, when, and where. Who were you with? (client , potential client , prospect, a referral). What was the purpose for the meeting? (to gain a client, to gain a referral, to show appreciation for a referral, to introduce a new product or service). When did this take place? (date and time) where did it take place? (location).
     I have receipts,  isn't that enough? Having receipts is a good start but,  it only proves that you purchased something (the what). Receipts do not show intent. Remember the IRS needs proof that you intended to make a profit. Without proof of intent you only have a hobby. Trust me hobby's are expensive and a liability. In any economy liabilities are not good.
 How do I keep good records to keep the IRS off my back?
     A good old fashion day planner is the least expensive way to keep track of you daily progress in your business. If you have a smart phone, i pad or samsung galaxy, there are many free apps that allow you to accomplish the same thing as a day planner. Do not go out and buy an expensive device for the purpose of  keeping track of your daily business
Keeping track of your business in this manner will allow you to see how close you are to reaching your goals for the week. You will be able to look back at your week and determine if you needed to keep doing what you were doing or if adjustments needed to be made. This is critical to your business. If you do not know how far you have gone in your business You will not be able to determine how far you have to go to reach your goals
     Proper record keeping on a daily basis keeps the IRS from deciding your business is a hobby. Once the IRS determines your business conducts it self as a hobby all business deductions are denied and  penalties and fines follow. The IRS will also look back through all your tax records.(this is allowed because they have determined that you have defrauded the government by under stating / under reporting income).
     I can not emphasize this point enough. Proper documentation is key to keeping the IRS from penalizing you with fees and bringing down the audit hammer.

Remember, tax preparation is a daily endeavor so happy tax season. 

Not All Business owners have until April to file their Taxes...........

For all the business owners that operate under the entity of LLC, LLP, SCorp or C Corp, you have leass than a month  to file your corporate taxes.(15 march 2011), or file an extension (Form 4868).
The filing date is not to be confused with the personal tax filing dead line of 18 April 2011. To the veteran business owner this may seem like a no brainer, or you may not even know that two different tax deadlines exist. One of my  new clients were unaware that there had ever been 2 separate tax deadlines, and they had been in business for 8 years. I suspect their previous tax professional just filed an extension for the business taxes and then filed everything ( personal and business taxes) by The April dead line. Now some business owners may be confused because you only receive a copy from your tax professional of a 1040 with a schedule c attached. The only reason that should happen is you are a sole proprietor or the sole owner in a LLC. If either are the case you would not be required to file form 1065 (limited liability tax form). If the corporate tax forms are not filed on time (15 march 2011), you will face penalties from both the federal and state government. Businesses that file taxes quarterly continue to do what you do.
Should you feel that you would not be able have your information in time to file your 2010 corporate taxes by 15 March 2011 I suggest you file an automatic extension (form 4868). Form  4868 must be filed on or before 15 March 2011 or you will face penalties and fines.
Tax management is a year round occurrence, so happy  Tax Season!

Is getting a tax refund really a good Idea?....it depends.

   If that is the only way you can save you money then a tax refund is good idea.The problem is the IRS does not pay interest for holding your money for more that a year. (14 to 16  months to be more accurate). I don't think people realize that the refund money they get back is nothing more than them getting change back from paying to much in taxes. This is a normal practice for more than 85 million people averaging more than $2,200 back from the IRS (that's a lot of change). To give you an example of how crazy this really is lets look at this from a different perspective. If you go to grocery store every month to purchase your food and other items and you always over pay for the food. Instead of the cashier giving you back your change she/he keeps it. Now lets say you do this for 15 months and then on the 16th month the cashier gives you all your change, all 16 months worth. If you were to tell and friend or family member you did that. They would probably have you committed. Yet we think it is perfectly fine to allow the IRS to give us back our money when they feel like it.

How about getting a tax refund in your pay check every paycheck? Make some adjustments to your W-4. Look at your deductions, consider your circumstances and above all consult your tax professional/accountant.

It is your money shouldn't you decide when you get it?

         I would like to thank another one of my indirect mentors, Mr. Daniel J. Pilla. Because of his book "How to lick the IRS with postage stamp", I was able to handle my very first tax issue back in 1994 with an abatement letter.

Remember tax preparation is an annual event, plan accordingly and happy tax season.

 

http://taxhelponline.com/resources-and-publications/research-reports/reevaluate-tax-withholding.html

Did you accomplish your goals this week?

        For many of us that is an easy question to answer. Either yes or no. But the real question is did you set any goals for your business this week? If the goals you set are in your head and not recorded then you did not really set them. Why do I say that? Simple, there is no proof that you set them. I am sure you are a trust worthy individual. but, without the recorded proof their is always a shadow of doubt. Unnecessary doubts in business in not good business. Goals need to be set so you know what to expect to make sure you don't forget and minimize regret.
Did you ever wonder why basketball, Soccer,Hockey and football have goals? So the teams can have something to aim towards. I know that was weak but, you get the picture. Once you know what you are aiming towards,then you can adjust accordingly. Tracking your goals are just as important. Having the ability at the end of the week to see if you exceeded or  fell short of your goal gives you something to work on and prepare for.
                 Is all your tax information ready to be file or  turned over to your tax professional/accountant?
If so great.! If not you can set a goal to work on a system that will allow you to keep track of all your needed tax information. If you are not sure what you need to know. Just click on this blog link  http://knowtaxlawknowmoney.blogspot.com/2011/01/how-to-prepare-for-your-tax.html  it explains what you need to have and also leads to a link to down load the client organizer (its 8 pages in PDF format).
The better and more consistant you are at setting goals the smoother you business and your life will run.
Tax preparation is a year around endeavor, so happy tax season.

Mentoring ,...... Why it is equally important for business.

       This past Monday (MLK Day) I briefly mentioned one section on mentoring. Why is mentoring in Business important? Before I started seeking out mentoring I held the belief that "if it was to be it was up to me". I WAS VERY MISTAKEN. Anyone currently in business or aspiring to go into business must understand going solo limits you to your actions alone. The mindset of doing it on your own is like attempting to design something already perfected, like the wheel.
      Having a mentor is like having the smartest student in your class give you answers to all the test you will take in that class. Again over simplification on my part, however I can say from a personal experience my mentors have saved me years of aggravation, hundreds of thousands of dollars and have contributed to a much more pleasurable journey to success as an entrepreneur. Having a mentor in business is like having a guardian angel. Anyone associated with a thriving private franchise or Multi-Level Marketing Company (MLM) understands the importance of what I am talking about.
      One thing most successful business owners have in common is a mentor. My mentors have mentors. I stress seeking out a mentor because once the search begins, many doors open and opportunities come from some of the most unexpected places. My opportunity to own a tax franchise came from my financial mentor and accountant, MR. Daniels. He has opened many doors that would not have been available to me. Thank-you Mr. Daniels.
       Mentors can be direct or indirect. direct mentors are individuals you can reach out to in person or via phone conversation. Indirect mentors are those individuals that are in life where you want to be. They are typically your more famous or well established individuals that are not so easily accessible in person but,  conduct seminars, write books, post blogs or send out news letters. Those forms of communication can be considered a mentoring source. Two indirect mentors I have followed for a while are Robert Kyosaki (Author of Rich Dad Poor Dad) and Sandy Botkin (CPA and CEO of Tax Reduction Institute). Mr. Botkin also offers tax information and has a face book page that I have linked to this blog. Feel free to check him out.
        One last thing I would like to mention about mentors, is the process is more powerful when you decide to become a mentor. It also gives you a greater appreciation for your mentor. So seek mentoring and become a mentor. It will change your life for the better.


Happy Tax Season..
http://www.facebook.com/#!/loweryourtaxes

Business owners while you have time... Re-evaluate your deductions.

     While driving into the office this morning the news reminded me that the IRS will not be allowing itemizing tax payers and business owners to file their taxes until Mid February at the earliest. It appears the IRS will not be really ready until 1 March 2011 based on my IRS updates. This gives us procrastinators a little more breathing room. For those that have been ready since January this is the perfect opportunity to go back and take a look at any deductions that were left on the table. Take a look At your receipts. Did you discuss business while you were eating out with your friends And associates? Did you know that if your local ( key word being local). dining out with prospects and potential clients can be written off with out a receipt if the total (not including tip) was under $75.00 dollars. Yes you read correctly. But it has to be documented properly. How? You must answer who, what, when, and where.
Who were you with ( you can only include your spouse if your potential clients were accompanied by a guest.) what was the intended purpose of meeting? (To get a client referrals, lead etc). when did the event take place and Where did you go?
Go back over your office deductions. Did you have any repairs to the home? A percent of the repairs can be written off in addition to the credit you are already receiving. What about your home interest. Just some things to think about that you may have either forgotten or not considered. As always please consult with your accountant or tax Professional for details and information.
Remember Tax Preparation is at least a once a month endeavor, so have a happy tax season.

Why is having a financial team good for business?

       If following in the footsteps of successful people is a determining factor of future success. Then it can’t be ignored of having mentors in the same field you wish to be successful in. What do I mean by that? If a you want to be a huge success in sports then you would find a person that you best relate with in that sport. Do the things the successful athelte did so you can have what that athlete has.
     Mentors are very important (but that’s a blog for a later date). How does this relate to having a good financial team? If you do the research on some of the most successful business owners you will see that they have a financial team. Financial team is the term I use because it encompasses the lawyer, accountant/tax professional and financial planner to name a few. If you want to have a successful business you need a financial planner to help you plan how to allocate your money, an accountant/tax professional to show you how to keep your tax liability legally low and a lawyer to help you keep your money. This all sounds great but what can you do provided there are no funds allocated for such a financial team? The first thing to do is start interviewing firms or other small businesses in Law, Accounting/Tax Professional and Financial Planning. Interviewing, what do you mean? Ask business owners you know whom they use. Look the businesses up on the Internet. Do some research to find out prices for initial visits and consultations?  If you find the team you like but can only afford one or none what do you do then?

Read books they have written. find out if they have newsletter you can subscribe. See if they post a blog. If they don’t ask them would they consider posting a blog. (That’s how I got started). There are a number of ways to have your financial team before you physically have a financial team. It is only limited to the amount of work and imagination you are willing to invest. The only question you really need to ask yourself is, what is it worth to me?

Remember Tax Season is at least a once a month endeavor, so have a happy tax season. 

What can a business legitimately write off?.......It Depends.

     Please for give me for not acknowledging the day of one of the Greatest leaders of the 20th Century, Dr. Marting Luther King JR. Giving his life for his dream allows me to enjoy the freedom I as a Business owner enjoy.Thank-you.

   It can be argued whether or not we live in the greatest country, (traveling to a few foreign counties while serving in the United States Army I would say so).  What cannot be argued is the benefit of owning a business. What a business can write off (deductions and credits) is different depending on the type business. With large amounts of write offs afforded to a business, it is a wonder why more people don’t own a business. I would chalk it up to lack of knowledge. Well let’s see if we can fix that. It would take me less time to tell you what a business couldn't write off, but that wouldn’t be any fun. Below is a very small list of what can be legally deducted for business expenses.
         Any educational investment directly associated with the business can be deducted. Travel (with limitations of course) directly or indirectly associated with business can be written off. Entertainment (golf outings ,eating out, football ,futbol,(for soccer fans) baseball ,tennis ….you get the picture. Home Office expenses, car expenses just to name a few.   As always there is a catch. You must have proper documentation and the deductions have to be supported by the IRS guidelines. Your tax attorney, tax professional or accountant should be able to assist you with the who, what when where and why of the business deductions. I encourage you business owners to aggressively go after the business deductions that are legally yours.

In many cases it could be the difference between paying a large sum in taxes or getting a significant refund.

How to prepare for your tax preparer....even if the preparer is you

     One of the first questions a potential client ask me (After they inquire about the price) is what do I need to bring with me? So I send them a client organizer. A what? A client organizer is a form (between 4 to 49 pages thick) listing items or information needed to help the preparer prepare your taxes. Most clients fill out the list and the interview is brief and their taxes are processed quicker. A select few either don't fill it out or leave it at home.   The client organizer to your tax prepare is like the medical and insurance information to your doctor or the car maintenance history for your mechanic. With that information readily available the process goes faster and that is a win win situation for everyone. Believe it or not your tax preparer may charge you more for having to organize your paper work.(example a box full if receipts in no particular order).
If you prepare your own taxes, the client organizer can help you start gathering the information as soon as you get it and keep track of it. This keeps you from scrambling for your documentation.
             A simple list of things to bring to your tax preparer are but, are not limited to: dates of birth and SSN for spouse and dependence.W2 and 1099 paperwork for income reporting. Dividends received and interest paid to the banks. Receipts (more preferable copies of receipts) of your expenses for the job and or business.....better yet I will send you to my page with a link so you can download  a copy of the client organizer I send my clients( don't worry it's only 8 pages.)  Hopefully you will look it over and send responses and questions. One thing I want you to remember is that tax preparation is an annual and not a season endeavor. Enjoy and happy tax season. http://www.mytmhglobal.com/Tmhglobal_Accountable_prepairs_taxes_for_everyone.html

What to look for in a tax preparer…..or what not to look for.

     On 10 January 2011 the IRS sent out an email (of course you had to be on the list). The IRS suggested 8 things that people need to be aware of when choosing a tax preparer. I thought it was a good idea. The laws have changed. I know when I started with my franchise my wife and I had to send in finger prints and register with the IRS. We also had to file for a tax preparer filing number (PTIN).

Every year we have to re-file for our PTIN. This is done to prevent fraud. People were getting into trouble letting others who were not certified file their taxes and it got them (the tax payer) into trouble. Why? Because it does not matter if you prepared your taxes or have someone else prepare them. Once you sign the return , you are stating that you have reviewed the document and you agree with it. Yes you read correctly. Once you sign your tax return it legally binds you to what is on that tax return, even if you did not prepare it. So make sure you read over your tax paperwork before you sign them.

With that said the IRS listed things you should look for in a  tax preparer and I will add one more important one for business owners.

1)      Make sure they are affiliated with an organization and provides continuing education.

2)      Check the preparers history

3)      Find out their service fees (if they charge a percent based off of refund head in the other direction)>

4)      Make sure tax prepare is accessible ( you should be able to get a hold of them after April 15).

5)      Never sign a blank return

6)      Provide ALL records and receipts to prepare your taxes.

7)      Review the entire return before signing.

8)      Make sure the preparer signs the return and includes their PTIN #

Those are the IRS’s 8 things to look for in a tax preparer. The one I want to add that is very important for small business owners is……

 Make sure the tax prepare owns at least one other business besides preparing taxes.

Why? It has been my experience that unless the tax preparer is a large corporate accounting firm, they will be conservative. Think about it. The worst thing that could happen to a tax preparation firm is to have a client get audited. That could kill a lot of their business. The more conservative the tax preparer the better it is for them. For you?  A lot of tax advantages left on the table not to be claimed. If they own another business they can at least let you know how things worked out for them being aggressive. Just a thought.

Is your Business a Hobby?

  This is an important question to ask yourself if you are in business. Why? The IRS is asking that question and if they determine that the answer is yes your business is a hobby then that lesson can be very expensive in penalties and fines. Action alone is not the determining factor. The type of action can be. What do I mean by that? Are you in business to make money? Some people may think that is a stupid question. If the IRS determines that you are not in business to make money then they may decide to investigate further to determine if your businesses is just an attempt to get write offs and deductions. That is called tax evasion and is illegal. It is very important to understand this. The government is looking for ways to get money out of it's tax payers. Raising taxes is the last option but, going after businesses disguised as hobbies is the first alternative. I am not presenting this information to you to scare you out of starting a business or continuing to be a business owner. what I am doing is arming you with information with hopes you will become an intelligent and productive business owner. There will be more to come.

Starting a Small Business?....things to consider.

There are a lot of benefits to starting a business, from tax breaks to the possible financial freedom it offers. With a strong steady surge in small business start ups, a lot of people and organizations are taking notice....even the IRS. So much so they (IRS) have hired over 2000 new employees in the State of  Va alone to inform the tax preparer franchises of its responsibility to make sure small businesses are doing "the work". Tax franchises (H&R Block, Jackson Hewitt, Liberty Tax Service to name a few) Are being accessed up to $1000.00 per incident for knowingly reporting false data on a tax return. What does this mean for new or existing small businesses? Tax preparers may start turning away businesses with large losses with little to no documentation. Why? because they don't want to be responsible for information the small business can not prove.
So if a tax preparer can not prove your business did "the work" then you may have to file your own taxes.

The Two Tax System ….which system are you in?

When it comes to tax paid on wages, income or profit the IRS has two main ways to collect.

 Is the previous statement an over simplification? Yes it is, so follow the thought and if you have questions or comments please post them consult with a Tax attorney, CPA or a tax professional Specializing in business.

One tax method allows you to keep your income, spend it, invest it, and pay taxes on what is left. The other tax system forces you to live on the remainder of your pre-tax check. The majority of us live on the remainder of our pre-taxed check while a minority pays taxes on the remainder of their income. You may be asking your selves, “Why they are so lucky and what do they know that I don’t”. The answer is they are business owners and they know that in order to control their outcome they first must have control of their income. It is very difficult to control what goes on in your life when almost 4 months of your earnings goes to the government. I don’t know about you but I don’t see how my money is spent wisely with the current economic conditions.  

What would you do if you could keep an extra 2 months of your income?

Filing your taxes early?.......Not so fast .

The Tax Relief Act made some taxpayers happy and some tax payers not so happy. Many taxpayers will be affected for a different reason. The changes in the tax laws need updating by the IRS. What changes and who will it affect? For those of you that file as soon as you get W2’s for rapid refund (Trade Marked by H&R Block) or refund anticipation loan (RAL). If you are not itemizing then you will not be affected.  For those of us that are homeowners and business owners alike that do itemize. (File a 1040, schedule A and Schedule C specifically). What? If you are writing off your interest on your home loan, have a huge amount of medical bills, uniform cost, writing off taxes paid, homeowners & have a profit or loss in your business. (Sole proprietor or single owned LLC). You will have to wait from mid February to 1 March before you will be able to file your taxes. If you prepare your own taxes on retail soft ware, you will be able to input the information you just will not be able to print until the time stated. Please pass this information to everyone you know. The link to the IRS website with a more detailed information is hyper linked below.

IRS website for more details