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.
Thursday, November 17, 2011
Monday, November 7, 2011
The 5 Biggest Mistakes Most Taxpayers Make When Choosing A Tax Professional!
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.
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.
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!
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!
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.
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!
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!Wednesday, September 28, 2011
The Time is Now To Lower Your Tax Bill
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
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
Sunday, September 25, 2011
You can't make this stuff up
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.
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.
Thursday, August 4, 2011
IRS Hits Homers, Too!
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:
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:
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.
Sunday, July 31, 2011
July 31, 2011 Client Newsletter
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.
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.
Tuesday, July 26, 2011
The dirty dozen. IRS Red Flags that lead to greater scrutiny
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.
Wednesday, July 20, 2011
Tomorrow Is Often the Busiest Day of the Week
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.
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.
Sunday, July 3, 2011
July 3, 2011 Client Newsletter
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.
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.
Monday, June 6, 2011
Crazy Cat Lady Takes On IRS
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!
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!
Wednesday, June 1, 2011
June 1, 2011 Client Newsletter
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 .
2. Keep Stock Low.
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.
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.
Thursday, March 10, 2011
Charlie Sheen's taxes
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:
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!"
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.
"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.
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!"
Tuesday, February 15, 2011
More healthcare reform law news. IRS says it needs....
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.
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.
Wednesday, February 2, 2011
February 2, 2011 Client Newsletter
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!
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!
Saturday, January 29, 2011
Real Audit Support?
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 withillustrations 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
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.
Monday, January 24, 2011
IRS wins low pay case against Iowa S Corporation shareholder
From the Wall Street Journal online:
There's a saying: Pigs get fed and hogs get slaughtered. The Internal Revenue Service surely hopes that includes tax hogs.
That is the message of a recent U.S. district court case won by the IRS against David Watson, a CPA in West Des Moines, Iowa. At issue: a common tax-cutting maneuver available to the owners of millions of closely held businesses.
The case, David E. Watson P.C. v. U.S., revolved around Mr. Watson's low pay as the sole owner and shareholder of a so-called S Corporation. Such companies, often called "Sub-Ss" after the subchapter of the tax code governing them, is a popular choice of entity for private firms. Unlike C corporations, Sub-Ss have no more than 100 shareholders, and they pass profits to owners without an extra layer of tax. There are nearly 4 million Sub-Ss in the U.S. today.
Mr. Watson's Sub-S was, in turn, one of four principals in LWBJ, an accounting firm. According to the decision, the firm made profit distributions of $203,651 and $175,470 to Mr. Watson through his Sub-S for 2002 and 2003, respectively, the years in question.
Mr. Watson, who had a graduate degree in tax and 20 years' experience, received only $24,000 of salary for each of those years, far less than the $40,000 a year earned by recent graduates in accounting with no experience, according to one expert for the IRS.
The agency cried foul, saying his pay was far too low. Why object? Unlike profit distributions, all salary is subject to a 2.9% Medicare tax and some is subject to a 12.4% Social Security, or FICA, tax. (The FICA income cap, $84,900 in 2002, is now $106,800.) By reporting low pay Mr. Watson didn't save any income taxes, but he did save nearly $20,000 in payroll taxes for the two years, the IRS said, pegging Mr. Watson's true pay at $91,044 for each year.
Read more by clicking the above link.
There's a saying: Pigs get fed and hogs get slaughtered. The Internal Revenue Service surely hopes that includes tax hogs.
That is the message of a recent U.S. district court case won by the IRS against David Watson, a CPA in West Des Moines, Iowa. At issue: a common tax-cutting maneuver available to the owners of millions of closely held businesses.
The case, David E. Watson P.C. v. U.S., revolved around Mr. Watson's low pay as the sole owner and shareholder of a so-called S Corporation. Such companies, often called "Sub-Ss" after the subchapter of the tax code governing them, is a popular choice of entity for private firms. Unlike C corporations, Sub-Ss have no more than 100 shareholders, and they pass profits to owners without an extra layer of tax. There are nearly 4 million Sub-Ss in the U.S. today.
Mr. Watson's Sub-S was, in turn, one of four principals in LWBJ, an accounting firm. According to the decision, the firm made profit distributions of $203,651 and $175,470 to Mr. Watson through his Sub-S for 2002 and 2003, respectively, the years in question.
Mr. Watson, who had a graduate degree in tax and 20 years' experience, received only $24,000 of salary for each of those years, far less than the $40,000 a year earned by recent graduates in accounting with no experience, according to one expert for the IRS.
The agency cried foul, saying his pay was far too low. Why object? Unlike profit distributions, all salary is subject to a 2.9% Medicare tax and some is subject to a 12.4% Social Security, or FICA, tax. (The FICA income cap, $84,900 in 2002, is now $106,800.) By reporting low pay Mr. Watson didn't save any income taxes, but he did save nearly $20,000 in payroll taxes for the two years, the IRS said, pegging Mr. Watson's true pay at $91,044 for each year.
Read more by clicking the above link.
8 tips for picking the right tax preparer
8 Tips For Picking The Right Tax Preparer
Thank heaven the IRS has the following tips for when it comes time to pick a tax preparer:
1. Check the person's qualifications. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns in 2011.
2. Check on the preparer's history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility for enrolled agents. (You can e-mail opr@irs.gov — be sure to include the preparer's name and address.)
3. Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.
4. Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
5. Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
6. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
7. Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
8. Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.The preparer must also give you a copy of the return.
Remember: You're still legally responsible for the content of your tax return, whether you prepare it yourself or hire a paid preparer. So if you think the results of your return seem too good to be true, it behooves you to double and triple check everything before signing off on it.
Wednesday, January 19, 2011
What is new on the 1040 for 2010
Smart Money online lists the major changes on your 1040 this year:
Over the last few years, Congress has made tax-law changes that place increasing pressure on professional return preparers to electronically file more and more returns. As a result, your preparer might be forced to e-file your 2010 Form 1040 even if your returns for earlier years have always been done on paper. Get used to it.
Over the last few years, Congress has made tax-law changes that place increasing pressure on professional return preparers to electronically file more and more returns. As a result, your preparer might be forced to e-file your 2010 Form 1040 even if your returns for earlier years have always been done on paper. Get used to it.
Subscribe to:
Posts (Atom)