Summary of Protecting Americans from Tax Hikes just passed by Congress.

Just a week before Christmas Congress passed a tax gift to many Americans.  Surprisingly many temporary tax breaks, the so called extenders, were made permanent.  Made permanent include, educator expenses, deductions for sales tax, and most interestingly not only was the American Opportunity tax credit was made permanent, the Hope education credit was increased and indexed for inflation. 

Very good news for small business owners. Section 179 expenses were made permanent. The provision permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014 ($500,000 and $2 million, respectively). These amounts currently are $25,000 and $200,000, respectively. The special rules that allow expensing for computer software and qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement
property) also are permanently extended.

Professional Education Services has compiled a summary of the law. We have posted a link below.


Click here to read the pdf file Summary of the Protecting Americans from Tax Hike Act.

Some Tax Extenders are now Permanent.

From Accounting Today.



"Congressional leaders unveiled a wide-ranging deal on tax extenders, making some items permanent.

The Protecting Americans from Tax Hikes Act of 2015 is a culmination of recent work done in both chambers of Congress and renews and makes permanent important tax incentives that support both individuals and job creators. Among the provisions that would be made permanent are the enhanced Child Tax Credit, the enhanced American Opportunity Tax Credit, the enhanced Earned Income Tax Credit, the above-the-line deduction for teachers who buy school supplies, the charitable deduction of contributions of real property for conservation purposes, along with the Research & Development Tax Credit and Section 179 expensing.

The permanent R&D Tax Credit provision permanently extends the research & development tax credit and, for the first time, allows for eligible small businesses to claim the credit against the alternative minimum tax liability or against the employer’s payroll tax liability. The Section 179 provision permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014; and sets a new threshold at $500,000 and $2 million, respectively, from the current amounts of $25,000 and $200,000, respectively. 


Also made permanent by the legislation are the tax break for mass transit and parking benefits, and the option to claim an itemized deduction for state and local general sales taxes in lieu of a deduction for state and local income taxes.
In addition, the legislation suspends the 2.3 percent excise tax on medical devices through 2017 and delays for two years the so-called "Cadillac tax" on high-priced health insurance plans that was supposed to begin in 2018. It also phases out bonus depreciation. Another provision permanently extends the exception from subpart F income for active financing income. The legislation also permanently extends the rule reducing to five years (rather than 10 years) the period for which an S corporation must hold its assets following conversion from a C corporation to avoid the tax on built-in gains.
Another provision permanently extends the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from Individual Retirement Accounts (IRAs) of up to $100,000 per taxpayer in any tax year."


Read more by clicking on this link.

The basics of year end tax planning. Did you know that it is estimated that Small Businesses pay up to $160 Billion in excess taxes each year?

Version 33 of the same story.

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

1.  Postpone income to next year.

2.  Pay as many expenses as possible this year.

3.  Keep inventory level low.

4.  If you are going to make a capital investment, do so before the end of the year.

5.  Double check for missing deductions.

6.  Invest in an IRA for similar type account.

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

Since Sally was operating her business on a cash basis and relied upon cash sales through her cash register, she did not have the opportunity to postpone much income.  She followed a policy based on our firm’s standard practice for clients for many years, to close her books on December 28th, which gave her opportunity to defer three days of sales to next year.

Sally then reviewed her bills.  She started to write out checks for her expenses. She wrote checks for all expenses due, even if some expenses were due in January.  She dated her checks for December 28, 2015 to be sure that the expenses were recorded for this year on December's bookkeeping.  Her checks written totaled to almost $10,000.  Her one simple strategy, accelerating expenses meant that Sally saved over $4,000.00 in income tax this year.

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

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

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

Surprisingly, Sally read a previous newsletter to and decided to take her business’ accounting online. She took our advice and subscribed to Wave app accounting.  She took advantage of downloading her bank account and discovered how easy it was to enter her data.  She really liked it and is recommending it to other small business owners she knows.

Sally also knew that she had time to make her annual IRA contribution until April 15 of next year.  She decided not to make it till next April.  She also made a note to talk to us about Roth IRA accounts and analyze the different options available to her.  One of her options was a self-employed Pension Plan commonly called a SEP. IRA's.  SEP. IRA's do not have to be opened or funded until the due date of your return.  That means that Sally doesn't have to open or make a contribution to a SEP IRA for the 2014 tax year until April 15, 2015.  She can also contribute a larger amount to her SEP IRA than she could to her regular IRA.  However, she was reluctant to open one because she also knew that she would have to contribute an amount to her full time employees.  She made a note to ask her tax guy what that contribution would be and what her resultant tax savings would equal.  She also thought her accountant might have ideas on how to "cushion" the employee's contribution issue.

Sally knew that her year end review of her tax situation saved her almost $7,000 this year.  She made a note to review her year end information before we prepared her tax return in 2015.

SAVE TAXES...REMEMBER BEFORE JANUARY 1, 2016

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

Do you know someone who having tax issues?  We can help.  According to IRS one in six taxpayers will have some sort of tax liability problem at some point.  Along with my colleague, former Illinois Department of Revenue attorney Jim Chipman, we have helped dozens of clients solve their tax problems, and this is very important, honestly and affordably.  If you know someone who is having problems, please ask them to call us.

Do you know someone who would like a copy of this email newsletter?  If so pass it on or ask them to send us their email at taxpartnerfreereports@gmail.com.

IRS is a Scrooge when it comes to Christmas business gifts.

Uncle Sam is a Scrooge when it comes to Christmas presents and bonuses to your employees.  

No matter what the cost of the gift, whether it is $100.00 or $1,000.00, you can only deduct $25.00 on your tax return.

You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.  

If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use.  

If you and your spouse both give gifts, both of you are treated as one taxpayer. It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. If a partnership gives gifts, the partnership and the partners are treated as one taxpayer.

IRS gives us this example:

Bob Jones sells products to Local Company. He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. They paid $80 for each gift basket, or $240 total. Three of Local Company's executives took the gift baskets home for their families' use. Bob and Jan have no independent business relationship with any of the executives' other family members. They can deduct a total of $75 ($25 limit × 3) for the gift baskets.

Incidental costs.   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.   A cost is incidental only if it does not add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit.

Exceptions.   The following items are not considered gifts for purposes of the $25 limit.

1. An item that costs $4 or less and:
1. Has your name clearly and permanently imprinted on the gift, and
2. Is one of a number of identical items you widely distribute. Examples include pens, desk sets, and plastic bags and cases.
2. Signs, display racks, or other promotional material to be used on the business premises of the recipient.

Are you giving cash in lieu of a gift for Christmas?  If  the amount of the bonus is more than $25.00 then you are required to withhold taxes just like any other paycheck. .

2015 Year End Tax Planning Newsletter

It pays to do a little tax planning this time of year. Wolters Kluwer CCH just emailed me their year end tax planning newsletter.  It is worth a look. 




Click on this link to read the newsletter as pdf file.

Is Obamacare Substainable?

As we enter another enrollment period Richard Epstein writing on the Hoover.org questions the future of the Affordable Care Act.


"But if the legal battle over Obamacare is over, the economic battle over Obamacare has just begun. The issue here is simple enough. Can the plan, which has weathered the legal challenges, survive in today’s highly dynamic economic market? The prospects are uncertain to say the least. Some clear signposts indicate the answer is no. The ACA cannot succeed simply by securing first-time enrollments in its exchanges. Insurance policies are subject to annual renewals. The first year of operations will give information about how the second year will go.


Here are some instructive results. As of early June, some 1.5 million people dropped out of the exchanges by failing to pay premiums, reducing the number covered from a February 2014 high of 11.7 million enrollees to 10.2 million four months later. That figure was still a substantial increase over the 6.3 million people insured at the end of 2014. But in the next three months, the downward trend continued so that by September 2015, the number of enrollees tumbled to 9.9 million, which was still above the administration’s goal of having 9 million on the rolls by the end of this year. But the current negative trend line is all the more striking given that some 8.3 million subscribers receive a subsidy of about $270 per month, which works out to a program wide subsidy of about $224 billion per year.

At this point, most of the gain in coverage, about 71 percent of the total, has come through the expansion of Medicaid, which in general offers inferior care to that provided by private insurance carriers. The decline in enrollees on the exchanges represents a displacement of ordinary people from insurance plans that they chose for those which come with a government stamp of approval.

The second straw in the wind is the looming failure of the private co-op plans that were intended in 2010 to offer some stiff competition to the commercial healthcare plans that were otherwise expected to dominate the overall system. The most recent casualty—the ninth to date out of a total of 23—has been Tennessee’s Community Health Care Alliance, with some 27,000 subscribers now forced once again to find coverage in order to stave off payment under the Obamacare individual mandate. Most, if not all, of the remaining 14 plans are also likely to go belly up.

The recent pattern of events raises two questions. First, how did we get here? Second, where do we go next?"


Read more by clicking on this link.



Listen to John Batchelor interview Epstein by clicking on this link.

IRS Urges Public to Stay Alert for Scam Phone Calls

The IRS has sent a "special edition" email concerning the persistent IRS impersonators scam:


The IRS continues to warn consumers to guard against scam phone calls from thieves intent on stealing their money or their identity. Criminals pose as the IRS to trick victims out of their money or personal information. Here are several tips to help you avoid being a victim of these scams:

• Scammers make unsolicited calls.  Thieves call taxpayers claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via phishing email.
• Callers try to scare their victims.  Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.
• Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.
• Cons try new tricks all the time.  Some schemes provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. Others use emails that contain a fake IRS document with a phone number or an email address for a reply. These scams often use official IRS letterhead in emails or regular mail that they send to their victims. They try these ploys to make the ruse look official.
• Scams cost victims over $23 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 736,000 scam contacts since October 2013. Nearly 4,550 victims have collectively paid over $23 million as a result of the scam.

The IRS will not:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand that you pay taxes and not allow you to question or appeal the amount you owe.
• Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
• Ask for your credit or debit card numbers over the phone.
• Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes, or have no reason to think that you do:

• Do not give out any information. Hang up immediately.
• Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
• Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.

If you know you owe, or think you may owe tax:

• Call the IRS at 800-829-1040. IRS workers can help you.

Phone scams first tried to sting older people, new immigrants to the U.S. and those who speak English as a second language. Now the crooks try to swindle just about anyone. And they’ve ripped-off people in every state in the nation.
Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
IRS YouTube Videos:

• Tax Scams – English | Spanish | ASL 

IRS Podcasts:

• Tax Scams – English | Spanish

S corporation owners, the IRS, and the importance of paying yourself a salary subject to social security tax.

Being licensed by the IRS does come with some important responsibilities.  Accordingly I am fulfilling my Circular 230 responsibility by writing to all clients who operate their business as S Corporations reminding you of the importance of paying social security tax

As an S Corporation owner you are not alone. S Corporations are the single most popular form of corporate entity in the United States.  This year more than 70% of the 4.1 million tax returns filed in the United States will be S Corporation returns.  68% of those 4.1 million tax returns had problems.  

As a quick refresher, an S Corporation is not subject to corporate tax rates. "Generally, an S Corporation is exempt from federal income tax other than tax on certain capital gains and passive income," according to the Internal Revenue Service.  Instead, an S Corporation passes-through profit (or net losses) to shareholders. The business profits are taxed at individual tax rates on each shareholder's Form 1040. The pass-through (sometimes called flow-through) nature of the income means that the corporation's profits are only taxed once– at the shareholder level. The IRS explains it this way: "On their tax returns, the S Corporation's shareholders include their share of the corporation's separately stated items of income.

S Corporations therefore avoid the so-called "double taxation" of dividends.  S Corporations, like regular C Corporations, can decide to retain their net profits as operating capital. However, all profits are considered as-if they were distributed to shareholders. Thus an S Corporation shareholder might be taxed on income they never received. (Whereas a shareholder of C-corporation is taxed on dividends only when those dividends are actually paid out.)

The big benefit--and the one that people usually talk about--is the payroll tax savings.

To understand how this works, let me compare two alternatives: A sole proprietor making $90,000 a year and an S Corporation making $90,000 a year.

Of course, the taxes that a sole proprietor pays depends on his or her filing status, itemized deductions and family size, but typically such a person might pay about $12,000 in federal income taxes. The person might also pay another chunk in state income taxes.

In addition to these income taxes, the proprietor also pays a 15.3% self-employment tax on the $90,000 of business profits. Roughly, this self-employment tax (which is equivalent to Social security and Medicare tax) equals $13,000.

Things usually work differently for the S corporation, however. To make calculations easy, assume the S corporation is owned by a single shareholder. In this case, the S corporation must break the $90,000 of profit into two buckets: wages and the leftover (which is called a distributive share). If the wages equal $40,000 and the leftover distributive share equals $50,000, the business pays Social Security and Medicare taxes (equivalent to self-employment tax) equal to roughly $6,000.

In this case, even though the two businesses make the exact same amount of money, the S corporation pays roughly $7,000 less in tax each year.

So what is the problem that the majority of S Corporations filed this year?

For the first time the IRS has concluded its National Research Program (NRP) specifically looking at employers. The goal of National Research Program is to design and implement a successful strategy to collect data that will be used to measure payment, filing and reporting compliance.  Results are based on examinations of 50,000 employers (also known as the audit from hell) in order to statistically do a better job determining which returns would produce the greater compliance.  The results are in. Issues IRS will focus on for determining which taxpayers to audit include the 1120 S, Small Business Corporation salaries paid to stockholder/officers .

The advantage of paying yourself a salary.

• Social security tax is refundable.  It adds to your benefits.  The more you receive the more you will receive in benefits when you retire.
• Paying yourself increases tax deductions. Many times it will more than exceed the initial cost of paying the tax.  IRA, SEP, and self employed health insurance deductions are all dependent on the salary of the S Corporation

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

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

What's a Reasonable Salary?

The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation."

The amount of the compensation will never exceed the amount received by the shareholder either directly or indirectly.  However, if cash or property or the right to receive cash and property did go the shareholder, a salary amount must be determined and the level of salary must be reasonable and appropriate.

There are no specific guidelines for reasonable compensation in the Code or the Regulations. The various courts that have ruled on this issue have based their determinations on the facts and circumstances of each case.

Some factors considered by the courts in determining reasonable compensation:

• Training and experience
• Duties and responsibilities
• Time and effort devoted to the business
• Dividend history
• Payments to non-shareholder employees
• Timing and manner of paying bonuses to key people
• What comparable businesses pay for similar services
• Compensation agreements
• The use of a formula to determine compensation

Although this IRS interpretation of reasonable salary was updated in October 2012,  it is somewhat arbitrary, it is extremely important not to overlook paying yourself a salary before the end of the year.  Determing salary is more art than science.  There is no set formula.  

The IRS can collect payroll taxes on officer compensation, and the penalty for failing to pay payroll taxes is 100% of the taxes owed. S-Corporations will avoid this payroll tax penalty by paying shareholder-employees a reasonable compensation.

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

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

The general information in this publication is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purpose of avoiding tax penalties.

Done is better than good.

Listening to an interview with author Elizabeth Gilbert on NPR's Ted Radio Hour, she said that the best advice she ever received from her Mom was, "Done is better than good."

From her blog:


"DONE IS BETTER THAN GOOD.

Dear Ones –

Those of you who regularly follow this page know that I say this all the time. The best lesson my pragmatic mother ever taught me, and the opposite of perfectionism: Done is better than good.
What she meant was: Just get it done. It doesn't have to be immaculate; it just has to get done.

I like the way George Patton said it, too.

I cannot even tell you how many plans I have "violently executed" by the seat of my pants, rather than waiting for things to be perfect. In fact, I have written every single one of my books that way — in stolen moments, as efficiently as I can, and constantly letting things slide that are not ideal.
Ben Franklin said that laws and sausages are two things you never want to watch being made. I would add to that: Books.

If we wanted to have a really boring afternoon together, I could sit down with you and point out every single mistake, shortcoming, shortcut, and problem in each one of my books. I could show you underdeveloped characters, points where I skipped over 20 years in the narrative because I couldn't figure out how else to do it, areas where I didn't do the research I probably should have done, or where I rushed an emotional epiphany. I could show you characters that I killed off simply because I didn't know what else to do with them. But you know what? Those books are DONE. All six of them:

Done. And they are FINE. And for that, I am proud.

Because at some point, you really have to put the kid on the school bus and send him out into the world, ready or not.

And I think this goes for everything."



 Read more by clicking on this link.

Marketing to make your customers feel good about buying from your business part two.

Marketing to make your customers feel good about buying from your business part one.

July 1, 2015 Client Newsletter

“Never argue with a stupid person, they’ll drag you down to their level and beat you with experience.” Mark Twain

Lots to talk about this month, let’s get started.

Your tax guy is off to the IRS Nationwide Tax Forum this month.  The Tax Forum allows me to mingle with fellow tax geeks, find out the latest tax software changes, and most importantly learn from mother IRS what her focus will be for the upcoming year.  Looking at the schedule I couldn’t help but notice that several key seminars were canceled for some unknown reason or maybe not.  For example, the tax transcript session was canceled.  This cancellation was more than likely the result of the recent revelations of the IRS data security breach hack of the transcript system that caused identities of 200,000 taxpayers to be stolen.   I can only speculate of course, but there has not been an implementation of additional security systems in place in the transcript system to tell us. Therefore no seminar to attend. Next month I will pass on what I have learned.  

Surprisingly the failure to have any type of record keeping system for their business is the number one mistake that our smart clients do to mess us their taxes.  I have to tell you how amazed I was to find people just starting to organize the previous years’ figures, some that were incurred more than 19 months ago, when they file their corporate tax returns in September.   I don’t think I can remember what I spent last week let alone more than a whole year and and half ago.  In the old days we built our business on bookkeeping....an era before desktop computers and the internet.  Nowadays the computer has revolutionized your small business recordkeeping.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.  We are still compiling our list so stay tuned.

Speaking of record keeping systems we are still looking at new cloud based base accounting systems that integrate with your existing accounting system and eliminate the need for additional data entry.  Our reaction so far is that it is not worth the hassle.  

As we endure yet another state budget crisis, I couldn’t help but notice these comments from Chief Executive.net’s ranking of the best and worst states to do business in.  Illinois is ranked 48th.  No change from 2014.  Only California and New York rank worst than Illinois.

“The Democratic politicians have been bullsh****ing the voters in Chicago for close to 40 years. The state fiscal situation is a mess and Bruce Rauner may be the last, best chance to save the state.”

“Illinois politicians are elected and controlled by the public service unions. All focus is on keeping them happy and funded. All else takes a second or third seat. Business is only viewed as a source for taxation revenue.”

“Illinois would be better if our state-elected officials knew how to work together and for the people instead of only working for their own best interests.”

Illinois does not rate as poorly in the just published CNBC 2015 top states to do business in listing.  Illinois ranks overall 19th, but ranks 45th in business friendliness.  Anyone who endures the wait at the Illinois Liquor Control Commission office to obtain or renew a state liquor license like I did today would concur.  By my count I watched in astonishment as 12 small business owners saw their liquor applications rejected by possibly the most rude, deleterious, employees I have encountered in state government for the most petty reasons.  They were not alone. My poor client had their license rejected because of the fact that the assumed name listed on their local liquor license ended with the number 2 and not the roman numeral II.  I kid you not.

I want to share with your the attached email from I receieved from the new entreprenurial support site tapp.com:  “Attract Local Customers Online in Under 60 Seconds.

Want to attract local customers without tapping into your marketing budget?

Make sure you’ve got the No. 1 online base covered:

Enter your business into local online directories.

It may sound obvious, but this step is often overlooked. Making sure your business is listed locally lends credibility and helps nearby customers find you. Start with directories like Yahoo Local, Superpages, Google Places, and Citysearch. First, check to see if you’re already listed. If not, add your business and load up your entry with all relevant info, including address, phone number, hours of operation, and photos. It’s worth checking out each site’s paid options in order to up your listing views.

If an online directory allows users to review businesses, make sure you reach out to your customers and encourage them to comment on your service or product. Earning great reviews should help your listing earn a more prominent spot and look more credible to potential customers. If a directory allows for the addition of a unique ad, go for it. Stay short and sweet, and highlight what makes your business unique. Make sure the link that you add to the directory takes the potential customer to a page where they’ll get all the info they need.”  

The great thing about these local directories is the listing is free.  I wrote in September 2014 “you absolutely need an Internet web presence.  No exceptions. Your customers are searching for you on the Internet.  BE THERE for them to find you. Your business needs to be listed in the new yellow pages....Google local is now incorporated in something called Google+. The best part is that Google+ is free.  The Internet is the new yellow pages. You're under 40 customers are not picking up the yellow pages to find you, they are searching Google.”

IRS PHONE SCAM PRINCIPAL GET 14 YEARS

Of concern is the source of the lead sheets for these criminals.  Is your tax guy outsourcing to India?


From Accounting today.



"A scammer who organized a scheme in which taxpayers were threatened with calls purporting to come from the Internal Revenue Service and the FBI demanding payment has been sentenced to 14 years in prison.
Sahil Patel was sentenced to 175 months in prison and $1 million in forfeiture for his role in organizing the U.S. side of a massive fraud and extortion ring run through various “call centers” located in India, through which Patel and his co-conspirators impersonated American law enforcement officials and threatened victims with arrest and financial penalties unless those victims made payments to avoid purported charges.

In addition to the prison sentence, Patel, 36, of Tatamy, Pa., was sentenced to three years of supervised release.

Patel pleaded guilty in January 2015 before U.S. District Judge Alvin Hellerstein, who imposed the sentence Wednesday. “The nature of this crime robbed people of their identities and their money in a way that causes people to feel they have been almost destroyed,” said Hellerstein.

According to prosecutors, from Dec. 2011 through the day of his arrest on Dec. 18, 2013, Patel participated as a leader in a sophisticated scheme to intimidate and defraud hundreds of innocent victims of hundreds of dollars apiece. Throughout the course of the fraud, telephone call centers located in India hired English-speaking employees to place telephone calls to individuals living in the U.S.
Armed with long lists of potential victims, referred to by Patel and his co-conspirators as “lead sheets,” those India-based callers systematically placed thousands of calls to individuals in the U.S. in the hopes of intimidating the call recipients into providing a payment to the co-conspirators. To extort these victims, the India-based callers impersonated law enforcement officials of the FBI and IRS and threatened their victims with financial penalties and arrest in connection with fabricated financial crimes.
“Sahil Patel’s elaborate scheme involved impersonating law enforcement officers and using intimidation and fear to bilk over a million dollars from hundreds of unsuspecting victims,” said Manhattan U.S. Attorney Preet Bharara in a statement.

In order to receive funds in a manner that would mask the identity of Patel and his co-conspirators, the ring undertook several measures to anonymize itself, including by using anonymized voice-over-internet technology, which was subscribed under fraudulent names in order to give the appearance of being related to U.S. law enforcement agencies.

Patel and his co-conspirators also used several layers of wire transactions in order to conceal the destination and nature of the extorted payments, which totaled at least $1.2 million."

New Tax Penalty Starts Today on Small Business Health Insurance

From taxpro today:


"Small business groups are sounding a warning about an obscure Internal Revenue Service rule that takes effect Wednesday imposing heavy fines on small businesses for helping defray the cost of their workers’ insurance or medical expenses.


The National Federation of Independent Business said small businesses that get caught helping their workers buy insurance or pay medical bills can be fined 18 times more than larger employers that don’t provide coverage at all.

“It’s the biggest penalty that no one is talking about,” said NFIB policy director Kevin Kuhlman in a statement. “The penalty for compensating employees for healthcare-related expenses is enough to destroy most small businesses.”


Under the rule, which the NFIB noted appears nowhere in the Affordable Care Act, employers who do not offer a group health plan, but give their workers additional pay to compensate for the purchase of health insurance or direct medical expenses, can be fined $100 per day, per employee. Over the course of a year that can add up to $36,500 per employee, up to $500,000 in total. In contrast, the penalty on businesses for failing to comply with the employer mandate is only $2,000 per year.
The National Association for the Self-Employed,  an advocacy group for the self-employed and micro-business community, is calling on the Treasury Department to immediately delay the policy until the end of the year in order for bipartisan legislation to passed through Congress to remedy the situation.

“Currently in Congress bipartisan legislation has been introduced that would fix this unintended consequence of the Affordable Care Act,” said NASE vice president for government relations and public affairs Katie Vlietstra. “The Treasury Department should immediately announce a delay in this rule until the end of the year in order for the legislative process to work and for small businesses to be spared the devastating effects this IRS rule could have across America’s Main Street.”

In February, the U.S. Department of the Treasury’s announced a delay in the enforcement of the technical guidance issued in September 2013 for health reimbursement arrangements. The February delay expires July 1 and fines could begin to be imposed on businesses not meeting the requirement for group coverage plans that provide health care assistance for their employees through the use of traditional HRA accounts.

“It’s hard to believe Congress or the President intended to punish employers much more severely for actually helping their workers,” said Kuhlman. “Nevertheless, that’s the consequence and most small businesses don’t know it.”


Read more by clicking on this link. 

Attract Local Customers Online in Under 60 Seconds

We recently wrote about this email in our client newsletter from the web site tapp.com.  

"Want to attract local customers without tapping into your hilarious billboard budget? Make sure you’ve got the No. 1 online base covered:

Enter your business into local online directories.

It may sound obvious, but this step is often overlooked. Making sure your business is listed locally lends credibility and helps nearby customers find you.

Start with directories like Yahoo Local, Super Pages, Google Places, and Citysearch.

First, check to see if you’re already listed. If not, add your business and load up your entry with all relevant info, including address, phone number, hours of operation, and photos. It’s worth checking out each site’s paid options in order to up your listing views.

If an online directory allows users to review businesses, make sure you reach out to your customers and encourage them to comment on your service or product.

Earning great reviews should help your listing earn a more prominent spot and look more credible to potential customers.

If a directory allows for the addition of a unique ad, go for it. Stay short and sweet, and highlight what makes your business unique.

Make sure the link that you add to the directory takes the potential customer to a page where they’ll get all the info they need."

Tired of high taxes? Maybe it's time to move. CNBC data analysis shows outbound flow from high-tax states.

From CNBC.com


"In states with the highest taxes—per person—the number of moving out of the state are greater than the number of people moving in.

Connecticut taxpayers, for example, paid an average of $4,431, according to data from the Federation of Tax Administrators, a group that represent state tax officials. Last year, United Van Lines and Atlas Van Lines, the two largest movers in the U.S., moved 3,212 households out of state and 2,368 moves inbound. That means 55 percent of all moves left the state, for a net outbound flow of 58 percent. Over the last decade, the two companies reported 36,837 moves outbound to 30,426 inbound, for a net outbound flow of 55 percent.


Any guess were are home state Illinois rates?  Click this link to read more. 

June 15, 2015 S Corporation Newsletter

Are you banking at the right bank?  

Your primary aim as a small business owner is doing the thing that your business does?

Right?  Wrong.  

More about that later.  

First let’s talk about your bank and why I began thinking about the subject of where my client’s are banking.  And why you should be choosing a smaller local bank and not that big bank that you are doing business with.   

It is all about an IRS examination I am representing.  My client banks at PNC Bank.  Apparently the appeal is that the bank doesn’t have a monthly service fee. However, it doesn’t provide copies of canceled checks or deposit slips with its bank statements either.  And that can be a real issue, especially when the IRS is looking for copies of canceled checks and deposit slips.  

In May I wrote in our client newsletter. “How do you explain to an IRS auditor that the $2000.00 cash deposit you put in your personal checking account two years ago is not unreported income?”

Especially if your bank doesn’t provide you with a copy of deposit slips.  My client was forced to pay PNC Bank money (hundreds of dollars)  to retrieve copies of checks and deposit slips.  They seem to have a fee for everything but monthly checking account service fees.   

If my client only banked at the local Bank of Springfield or Security Bank down the street.  They provide their customers copies of canceled checks and deposit slips.  My client’s failure to provide copies of source documents may eventually lead to an undeserved, unwarranted tax liability.

Not having your item images returned to you can be an issue beyond the IRS.  Documentation is the key to lower tax savings.  Documentation is the key to proving you paid that bill.  I can think of many things I would rather do than visit the bank to obtain a copy of a canceled check, instead of finding it in cabinet.  Even online access has limits.  Many bank limit the look back period of when and what you can print.  

Setting aside the lack of available documentation, there is even a bigger, more important reason to consider moving your business to a smaller bank.

Big banks do not loan to small businesses.  Small banks loan to small businesses.

Charles Wendel writes in his blog  Why Banks Still Don’t Like Small Businesses

“In this hyper-regulated and politically correct world, many banks will not admit that, at their core, they dislike banking small businesses. With actions speaking louder than words, it seems apparent that despite all the hype and “We love small business” signs in the branch windows, many banks either ignore small businesses or are clueless about what it really means to work with them.

Why? First, small businesses are, well, small. You need a lot of them and much of their wallet share to make any significant dollars, to “move the needle,” as bankers like to say. Obviously, consumers are small too, but they are a core franchise for most banks and are both better understood and appreciated by senior bank management, even though they pale in attractiveness to the potential small business offers.

Small businesses also suffer from a perception that they are inherently riskier than other bank customers. During the last downturn many banks proved this to themselves by poorly managing their small business credit scoring and risk management processes. However, instead of blaming their inadequate procedures for their losses, many blamed the small businesses as if the businesses themselves were responsible for the bank’s bad judgment.

Further, bank leadership usually emerges from areas other than small business. The small business segment lacks a champion or, to use a New York phrase, a “rabbi” at the top of the house. At many banks, the segment perennially seems to be treated like Rodney Dangerfield, always fighting to get respect, even though small businesses can provide strong returns and significant non-credit income as well as the depth of a household relationship many banks want and need for growth.

“Smaller banks are generally much better at making small-business loans than big banks. This is because the loan officers and the credit officers typically work in the same building and are able to work on a loan together and find the best way to get it done. Small-business loans typically require careful thought and creativity. There is almost always a twist. The smaller banks are much better able to handle this.” What’s more, larger banks often don’t want to be bothered with handling small loans when they can focus on loans for billions of dollars, instead.”

At the risk of being accused of picking on one bank, here is one more PNC Bank story.  Another client was looking to get into the trucking business.  He went to his local PNC Bank requesting a loan for a tractor trailer.  Excellent collateral. He was partnering with another already existing, already profitable trucking business.  Excellent capacity.   My client has an 800+ FICO score.  Excellent character.

After requests for tax returns, financial statements, projections and other numerous requests, PNC Bank said no.  Big surprise. But they did tell my client to come back with his next deal  They would finance that one.  Go figure.

Dan Kennedy is my favorite marketing guru.  He preaches that you should be focusing on one and only one aspect of your business.  Marketing.  It is where all the money is he says.  In fact he is even more radical.  You should be the one that is selling for your business, not your employees.   You should be selling to all prospective customers.  However, if you really want to make it.  Earn what Dan Kennedy calls that 7 figure income.  You have to become more than the marketer/salesman of your business.

From Dan Kennedy’s October 31, 2014 blog:

‘Personally, I’ve never liked it.

But I realized early on, it was irrelevant whether I liked it or not.

The question wasn’t, “Did I like it?”

The real question was “How much money did I want to make and how much freedom did I want?”

Kind of like dieting and exercise, the question isn’t “do you like to exercise and eat right?” No the real question is do you like the alternative if you don’t exercise and make the right food choices?

So it’s important, although again, not something I particularly like.

What I’m about to tell you is a transcendental factor in income.

And if you listen to what I say, you could find yourself making a lot more money across every communication channel.

You see, for at least the past 30 years or so, I’ve been teaching that the one thing that usually gets people who are earning below six-figures or a low six-figures in any business up into a high six-figures is the quantum leap of shifting from being the “doer” of your thing to the “marketer” of your thing.

That is still true.

Shifting from being a fitness instructor to a marketer of fitness training. Changing from being a veterinarian to marketing veterinarian care. Switching from a photographer to marketing photography services, and so on, will carry you a pretty good way.

I mean, most people locked into relatively low incomes, regardless of their level of expertise or excellence that they deliver, are stuck there because their primary view of their business is the doing of the thing.

The cooking of the food, the cracking of the bat, the fixing of the tooth, the waxing of the car, the styling of the hair, the – whatever. And when you shift out of that so that you’re actually now in the marketing of that thing, that’s a pretty good income leap.

But truth be told, it has its limits. It’s NOT the thing that gets you to a 7-figure income.

And it is questionable whether it will give you the exact freedom you are seeking. Because although you are making more money, you are also most likely still working a lot of hours for it.

Let me show you what making the next shift can do.

I make 7-figures from copywriting alone. That is only partially the way I make money though. I only spend 20% of my time writing.

Imagine making that leap in your business and only working at your “thing” 20% of the time. How would THAT change your life?

So here’s the thing you must do to make the next quantum leap.As I mentioned, personally it is a thing I never really liked, but I do it because the alternative is worse. So this really is pretty important.

You must shift from focusing on being the “marketer of your thing” to focusing on “the status of the individual providing the thing.”

Because even when you are the marketer of your thing, the focus is still on the thing, not on the greatest possible point of differentiation, which is the status of the individual providing the thing. Increasingly all other options for differentiation are becoming harder and harder to use and sustain. But one thing that will always make you different is who you are.

The easiest place to look for examples of this is with celebrities and professional athletes.

There are professional football players who make a good six-figure income. They are elite athletes who reach an income level that many never will. But, unless you are a diehard fan, you likely wouldn’t recognize their name even if they offer big contributions to the team.

As an example, NFL player Ryan Taylor is probably a name you aren’t familiar with. You probably don’t even know what team he plays for, but he makes a solid 6-figure income and is in his 4th year playing professional football.

In comparison, Johnny Manziel better known as Johnny Football is in his rookie season. He has less experience than Ryan Taylor, yet Manziel makes $2 million a year not including endorsement deals. You probably also recognize the name Johnny Manziel or at least have heard the name Johnny Football even if you aren’t a fan. .

The big difference is that Manziel knows how to market his personal brand. That, more than his ability or experience, has put money in his pocket.

For instance earlier this year, prior to knowing whether or not Manziel would be a boom or a bust in the NFL, Nike signed him to the largest endorsement deal from this year’s NFL rookie class. It had nothing to do with experience or even how well he plays.

So if you want to join the 7-Figure club, then you’ll have to get out of the business of marketing your thing and get into the business of marketing you, even if you dislike doing it as much as I do

“Dumb business owners get a customer in order to make a sale.

Smart business owners make a sale in order to get a customer!”

S Corporation SE Avoidance Still A Solid Strategy

Peter J. Reilly writes a tax Blog for forbes.com.  His most recent blog highlights an entry he wrote back in 2013 concerning the use of S Corporations to avoid self employment tax as one of the most popular entries he has written.  Below I included a portion of this blog.

You can read the entire story by clicking here.  

“Even though Sean P. McAlary lost in Tax Court, the decision in his case shows that S Corporations are still a valid self-employment tax avoidance strategy.  If you operate as a sole-proprietorship, all of its income will be subject to self-employment tax.  If you put the business into an S Corporation, none of the income will be subject to self-employment tax.  Entrepreneurs will be inclined to heavily discount any decrease in future social security benefits as a trade-off, so organizing as an S Corporation and avoiding self-employment tax seems like a no-brainer for a sole proprietor.

Is The Game Worth The Candle ?

If you convert a proprietorship to an S Corporation, there are some costs to weigh. If you are going to take salary below the FICA max, there may be an effect on future social security benefits.  Actually quantifying that is challenging, but you can give it a shot with some of the calculator programs.  I have never gone through that exercise and my experience is that most business owners are dismissive of it.  So you can take that factor as a “just saying” if you want.

Operating as an S Corporation will require another tax return to be filed, which might cost something.  In principle, your individual return should be somewhat easier, since a Schedule C is no longer required.  You may need to “remind” your tax preparer of that in order to realize that saving on the individual return that might offset some of the cost of the S Corporation return.  If you are a brown paper bag type of client with a masochistic CPA, the realization on doing your return might be so lousy that even without your Schedule C, standard charges might come out higher than what you paid in the previous year.  On the other hand if you are a mensch with a CPA who “knows how to bill” your fee will never go down from one year to the next if you don’t ask.

Although there is a good chance that the potential for your individual return being audited will go down, the S Corporation return will be another return that potentially could be audited.  I don’t know how that balances out and I suspect that nobody knows, although you will find plenty of people who will tell you they know.

If your business involves significant debt and has irregular income, there are a lot of tax traps in operating as an S Corporation.  It gets really complicated if you have multiple businesses and real estate ownership is somehow involved.  If you are the type of person inclined to pay the bills out of whatever account happens to have sufficient cash and let your accountant sort it out with journal entries, you may be setting yourself up for an income tax nightmare in your quest to save a few thousand dollars in SE tax.  I have known partners in professional practices who contributed their partnership interests into S Corporations and encouraged me to do the same.  I never regretted not doing it and they came to regret having done it, except the one who died.  I’m pretty sure his executor really regretted it.

Finally, don’t ignore state and local income taxes in planning this move.  There can be pluses and minuses depending on which state or states you are dealing with.  New Hampshire is a particularly nasty place to fool with S Corporations and don’t get me started on New York City.  Regardless, you need to consider state and local taxes carefully, particularly since you are not really saving a very high percentage federally from making this move.

Conclusion

Despite court  losses and the lack of any discernible policy justification, it appears that the S Corporation SE tax avoidance strategy is still solid.  Small business owners should examine the implication carefully, though, before jumping into it.