Wednesday, February 29, 2012
Choosing a Charity
There are hundreds of charities with noble missions. They can provide a great deal of help to people who desperately need it. However, not all non-profits are created equal. It can simply be that you don't support their mission. Or they can be poorly run and spend too much of their donations on overhead and marketing. A good accountant
can help their clients choose charities that match their clients goals with well run organizations.
Here are some tips from Betsy Brill and Susan Winer of Strategic Philanthropy
on how to choose better non-profits to support.
- Check with the IRS that they are tax-exempt and in good standing.
- Review their financials. Make sure their expenses are reasonable based on their size and their work.But low overhead does not always mean effective use of the money. Make sure they are using it wisely to advance their goals.
- Consider where they get their funding. Make sure they have a diverse source of revenue.
- Investigate their investing policies. They should have confilict-of-interest policies in place.
- Go and visit them. This might be a prudent step if it is a sizable donation.
Labels: charitable donations, charities
Monday, February 27, 2012
Taxpayers Owed $1 Billion
There are around a million people that have failed to file their 2007 federal tax return. The IRS estimates that they are owed over $1 billion in refunds. To get the refund they must file by tax day this year (April, 17 2012).
The reason that many people don't file is because they did not earn enough to require them to file. However, they are due a refund based on the taxes that were deducted from their wages. They might also be due an earned income tax credit. This applies to filers with less than $38,646 of income for families with two or more children. The thresholds decrease without children. The law allows a three year time limit to apply for the refund. If they fail to do so then the monies become the property of the US Treasury.
If you have not filed than the Accounting Aisle
can get you in touch with a good accountant in your area. They will go over your entire situation and determine if you still need to file.
Labels: tax refunds, taxes
Thursday, February 23, 2012
Some Interesting Tax Deductions
The Minnesota Society of Certified Public Accountants has released their annual survey
of bad deductions. The organization asked each member Minnesota CPA
what were some of the most interesting deductions that their clients wanted to claim. I can understand the frustration of the client but it is a good thing that a CPA intervened and prevented a frustration from becoming an audit.
Not everything that improves your health is a medical expense. This includes exercise equipment, pools, or even better a house in Arizona. The same goes for breast implants and tummy tucks.
Even if you invite a business associate it is not always a business expense. Consider the may who tried to deduct the entire cost of a wedding or three country club memberships.
Not all charity is deductible. If you give blood there is not tax benefit, but you will save a life. And giving money to your deadbeat brother in law isn't any better. But the one I would like to know more about is how burning down a barn is charity. Perhaps it warmed up some squirrels.
And the best of all is the man who wanted to claim a politician as a dependent. His logic was that he "pays his salary." Hard to argue but even if true by the time you calculated just your share it wouldn't we worth the effort to write it down.
Labels: Tax Deductions
Tuesday, February 21, 2012
IRS Delayed Refunds Continue
The IRS is still having problems with delayed returns. Originally they said that taxpayers filing before January 26th might see their returns come a week beyond the projected date. Now the tool that gives the projected date is only giving an error message. Any tax filler can check the status of their return at the site "Where's my Refund
The IRS claims it is a function of the new tools put in place to reduce Identity Theft. The more likely reason is that they are having problems ramping up the new electronic filing system. The irony is the tool was set up to reduce calls about the status of refunds. Now the delays and error messages are driving the call volume up.
They still anticipate issuing refunds within the historical range of 10-21 days. They wanted to disuade calls but it is unlikely to have an impact until the system is working correctly.
Wednesday, February 15, 2012
This week we already talked about how electronic document management has the opportunity to change every accounting firm. On the same thread the IRS has issued guidance
that allow companies to send out electronic K-1s. K-1s are given partners of the business annually by April 15th (April 17th this year).
To send the K-1 electronically, the recipient must consent to electronic format. The consent must demonstrated that the recipient is able to access the electronic document in the form sent. Examples the IRS gives are sending consent via email if that is how the K-1 will be sent or downloading the consent form off of a website if that is where the K-1 will be accessed.
If you plan to send K-1s electronically there are very specific standards that must be followed. For example the subject line of an email with the document or the notification must read "IMPORTANT TAX RETURN DOCUMENT AVAILABLE."
For advice on generating your K-1s or how to send them electronically visit your local public accountant
Tuesday, February 14, 2012
Will The Cloud Change Accounting?
The move to from paper to digital records has changed the way that businesses operate. And it is not just with how work is done inside a company but also how companies integrate with vendors and clients. Florence de Borja has written an article that was published on Cloud Tweaks
about the digital office and how it is changing the way accountants operate.
Accounting software makes it more simple for company bookkeeper to handle more tasks internally. Larger accounting firms are starting to move down the market to make up for lost revenue from their large clients. These two sides are pinching small and medium sized CPA
By applying better ways of interacting with their client businesses, CPA firms can create additional services. Clients can implement document scanning
for all of their invoices and financial documents the accountant and their client now have the same real time access to the accounting data. The CPA can offer more timely advice than a once a month review. The accountant can also spot small problems before they become big ones.
Integrating their records management on the cloud means better service for the client and more revenue for the accounting firm.
Labels: cloud computing
Friday, February 10, 2012
PCAOB Releases Ruling on E&Y
The Public Company Accounting Oversight Board (PCAOB) has issue the final rulings and sanctions on Earnst & Young for the problems at Medicis Pharmaceutical Corporation.
PCAOB ruled that the accounting firm failed to properly evaluate the sales returns reserve of Medicis's financial statements. The company reported the reserve as only the replacement cost when it should have been the gross sales price per GAAP. This is because the product returned was not defective product but expired product and the company allowed customers to receive a credit memo for the full cost of the product.
As a result of the order Earnst & Young has been fined $2,000,000 and the three responsible CPA
s were fined $50,000 and $25,000. Robert Thibault has lost his CPA and Ronald Butler and Thomas Christie were censured.
If you are more interested in the timeline of the problems you can read the entire ruling here
Labels: EY, PCAOB
Wednesday, February 8, 2012
1099-K Overreach Prevention Act
The Housing and Economic Recovery Act of 2008 mandated the distribution of 1099-Ks from third party payment entities. The primary one being credit card processors. So if you have gotten calls from clients about a new tax form they are unfamiliar with that may be the source.
That is as far as the Act went. The IRS has taken it further and is requiring businesses to reconcile the reports with internal records. The difficulty is the 1099-K does not include refunds or credits that would make the reconciliation much less difficult.
But before it goes into effect there is a legislative push to remove this burden on businesses. Representatives Aaron Schock and Bobby Schilling of Illinois have introduced
the 1099-K Overreach Prevention Act to congress to that end. The bill is still young and it is unclear what support it has but Senator John Thune of South Dakota plans to introduce a similar bill to the senate.
The reporting requirements on business are only growing every year. This is sometimes the IRS but can also be state or local laws that increase regulation. It is impossible for the average small business owner to navigate all the paperwork alone. A small business accountant
is a great source for information and help to reduce any future legal threats.
Labels: 1099-K, IRS
Monday, February 6, 2012
IRS Issue Guidance on Medical Devices
As part of health care reform law, medical devices now have an excise tax. The tax is 2.3 percent of the sale price of the device. The law goes into effect on January 1, 2012. The IRS has issued some clarification
on what is a taxable device.
The IRS has defined a device as taxable if "under the Federal Food, Drug & Cosmetic Act of 206 as an instrument,
apparatus, implement, machine, contrivance, implant, in vitro reagent,
or other similar or related article, including any component, part, or
accessory, that is recognized in the official National Formulary, or the
United States Pharmacopeia, or any supplement to them; intended for use
in the diagnosis of disease or other conditions, or in the cure,
mitigation, treatment, or prevention of disease; or intended to affect
the structure or any function of the body, and that does not achieve its
primary intended purposes through chemical action within or on the body
and that is not dependent upon being metabolized for the achievement of
its primary intended purposes."
The FDA has listed around 1,700 devices that fit the generic definition. There is an exception for eyeglasses, contact lenses, hearing aids. This also applies to devices that are purchased by the general public at retail establishments.
Friday, February 3, 2012
Home Buyer Credit Tool
The IRS continues to struggle with the debacle that was the First-Time Homebuyer Tax Credit. The credit was claimed by a significant number of people whom did not not qualify. The IRS sent notices to those tax payers telling them that they needed to repay the credit. This underpayment of taxes is considered a no-interest loan bu the IRS. They have mandated that the loan must be paid back in 15 equal installments beginning with the 2010 return.
The problem was the notice was sent to many tax payers whom did qualify. The end result was a large number of people being confused about if they owe and if so how much and when is it due.
To help with all of the headache there is now a First-Time Homebuyer Credit Tool
on the IRS website. Tax payers can enter their information and find out what they owe on their 2010 taxes and the remaining balance. The repayment should be claimed on form 5405.
If you took the First-Time Homebuyer Tax Credit.and have questions we have knowledgeable accountants
who can help. They will make sure your return is filed correctly and help with strategies to limit your overall tax burden.
Labels: first time homebuyer tax credit, IRS website
Wednesday, February 1, 2012
Senate Looking at Tax Extenders
The Senate Finance Committee is holding hearings this week to investigate a better solution to tax extenders. These are portions of the tax code that only last for a year or two and then need to be "extended" or they will expire. This creates problems for the IRS and tax preparers
. The problem exacerbates when the extensions happen at the very end of the year. And now they are passing extenders that are not even full years. The poster child of the problem is the payroll tax cut that was passed in December for two months. Now the wrangling over an extension has already begun.
The Finance Committee is looking to reduce the extenders and simplify the tax code. They have the negative effect of reducing the tax base and requiring higher tax rates. They also require a great deal of legislative time every year.
The fundamental problem is that the Senate does not want to simplify the tax code. They are the primary beneficiary of a complex tax system and extenders in particular. When an extender comes up for a vote then they are contacted by lobbyists and special interests. The lobbyist brings in campaign donations in exchange for extending the tax break. The Senate isn't going to cut off a great source of campaign cash.
So don't hold your breath waiting for a simple tax code. It may make perfect sense, but the Senate won't cut out their campaign money without a fight. More likely they will hold some hearings, make grandiose speeches, and then let the whole thing fade away.
Labels: tax code