Accounting News

Thursday, September 27, 2012
IRS Updates Reimbursement Rates

The per diem rates for 2012-2013 have been issued by the IRS. The new rates were published in Notice 2012-63. These should be used by taxpayers to determine the amount of ordinary business expenses when traveling away from home for business. The new rates become effective for travel on or after October 1st, 2012.

If you are using the high-low substantiation method the rage is now $242 for a high cost locality and $163 for areas outside the high cost localities for meals. Travel is $65 for high cost localities and $52 outside of that. Incidental rates are $5 per day regardless of area. For a full list of what a high cost locality is you can visit the link above.

If you have any questions on the best deduction method for your situation you can visit your local CPA.

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Accounting News

Tuesday, September 25, 2012
Volunteer Tax Prepares Reviewed

The Treasury Inspector General for Tax Administration (TIGTA) completed a review of the tax returns prepared by the IRS's Volunteer Program. The program provides tax preparation for low income, elderly, disabled and foreign language speakers and no charge. The report was trying to determine the accuracy of the returns prepared by the volunteers.

 The TIGTA tested 16 areas for accuracy. Their report found that 49% of the returns were filed correctly based on their review. There were a few areas that lead to a majority of the errors. These were Educator Expenses, Individual Retirement Arrangement contributions, and small business expenses.

This report is a dramatically different than the 92% accuracy rate that the IRS gave its own program. In addition the IRS performs anonymous visits of the preparation locations. Of these they found a 60% accuracy rate. This conflicting data calls into question the accuracy rate derived from the computer sample.

One of the problems is the difficult of some of the returns filed. The program is set up to help tax payers with a standard return using intake sheets designed for the program. When this is what is used then the accuracy goes up. However, in an effort to be helpful some volunteer tax prepares tried to "shoe horn" information into the intake sheets for more complex tax issues.

The TIGTA recommends that the volunteers spend more time going over the intake sheets to make sure that the returns are filed correctly. A step that would also help would be to refer filers who do not fit the sheets to tax professionals. This may cost the filer but is the best way to provide and accurate return. The volunteers will not be there for the individual if the return is audited in the future. The cost for representation for the audit will far outpace the cost of doing the work correctly in the first place.

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Accounting News

Friday, September 21, 2012
Tax Planning with Fiscal Cliff

The end of the year is creeping up and with it the "financial cliff" from the expiring tax and spending laws. The expiring laws include the $1.2 trillion in spending cuts in January that were mandated as part of the deal reached to cut government spending. They were set up to be across the board cuts to force the jSimpson-Bowles commission to make more strategic cuts. In the end the Simpson-Bowles commission could not reach an agreement so cuts to most parts of the federal government are on the schedule.

The second part of the financial cliff is the expiration of the "Bush tax cuts." This would raise the income tax rates on almost every tax payer. There are also payroll tax cuts that are set to expire at the end of the year.

With the upcoming election there is no plan to change anything until after November. Senate Majority Leader, Harry Reid believes a compromise is possible and is working for a longer term solution. While the House Speaker John Boehner in much less optimistic saying he is “not confident at all.” But this is most likely political posturing since very few people seem willing to go over the financial cliff.

The problem for accountants is helping businesses and individuals start their tax planning. Since many small business have revenue that passes through to owners (limited liability corporations) the tax rate can change their plans for taxes. The tax rate will also impact how much cash will be on hand for the business for re-investing in 2013.

Democrats are interested in keeping the tax cuts for only some tax brackets while the Republicans favor keeping the cuts for all tax brackets. The most likely scenario is that most of tax cuts will remain for another year. Then both sides will say that they will have a long term solution next year at this time. I think most people would like to see solutions that are longer than a year.

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Accounting News

Wednesday, September 19, 2012
Financial Literacy

Every parent would like to teach their children financial literacy. One way that has historically been done is with an allowance. The American Institute of CPAs hired Harris Interactive to survey parents about what parents across the country do with their kids when it comes to allowances. If you remember what your parents gave you as a child then prepare to be surprised.

61 percent of parents pay allowances to their children. The time this starts for most people is at age eight. That isn't the surprising part. What shocked me is that the average amount is $65 per month. That comes to $780 per year. And the more likely the parents are to pay for child's' activities the more likely they are to get an allowance also.

For a vast majority of  parents, 89 percent, the allowance is tied to some chores. The average child is expected to do 6.2 hours per week around the home. Many school age children are also paid for good grades. 48% of parents pay for good grades and they average value of an A in these families is $16.60. Pretty good money when grades come out multiple times a year.

So what are the good ways to teach kids about financial literacy? Who better to ask than an accountant who advises people about spending everyday. Here are tips from the National CPA Financial Literacy Commission.

Talk.Keep the lines of communication open. Talk about saving and wise way to spend and what expenses can be eliminated.

Teach Saving. Create short and long term savings goals. Maybe it is a trip for ice cream after a few weeks of saving or a video game after several months. There is nothing more important than learning delayed gratification for managing personal finances.

Be Consistent. Pay your kids on a regular schedule. If it is tied to chores make sure the kids know what is expected of them and when. Don't pay out if the work isn't done. The reward should be tied to the work. You can always half pay for half work.

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Accounting News

Thursday, September 13, 2012
Accountant Staffing Stable in Fourth Quarter

Robert Half International, a staffing agency for accountants and finance has released a report on the expected staffing level for accounting. For their report they surveyed 1,400 CFOs. They were questioned on their staffing level and hiring plans for the fourth quarter of 2012.

The bottom line is that there is no expectation of changing full time staffing levels for the remainder of the year. 89% saw no changes in their staffing levels and 5% saw an increase in accountants at their companies. The remaining 6% thought that they would be reducing the number of accountants on their staff.

If you are looking for a job in the accounting field then the CFOs said you should go to the Middle Atlantic States (New Jersey, New York and Pennsylvania). The survey had 3% of companies planning to grow their accounting staffs.

This is in contrast with how the CFOs saw the outlook for their businesses as a whole. 36% expected their businesses to grow over the last quarter of the year. This may also be a function of the growth in sales in the holiday season.

On big factor that is holding the hiring steady is the use of technology. Better accounting systems allow fewer people to perform the work. This is a trend that was hastened during the economic downturn.

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