9 Factors to Legitimize Your Biz

Recently I was privileged to speak at the Atlanta Professional Business Network (APBN) event celebrating National Small Business Week and the topic was how entrepreneurs can legitimize their businesses and minimize the chances of an IRS audit. We went over quite a bit of material that evening, but here are the major points:

According to the IRS, whether or not an activity is presumed to be operated for profit requires an analysis of the facts and circumstances of each case. Deciding whether a taxpayer operates an activity with an actual and honest profit motive typically involves applying nine non-exclusive factors contained in Treas. Reg. § 1.183-2(b). Those factors are:

1. the manner in which the taxpayer carried on the activity,

2. the expertise of the taxpayer or his or her advisers,

3. the time and effort expended by the taxpayer in carrying on the activity,

4. the expectation that the assets used in the activity may appreciate in value,

5. the success of the taxpayer in carrying on other similar or dissimilar activities,

6. the taxpayer's history of income or loss with respect to the activity,

7. the amount of occasional profits, if any, which are earned,

8. the financial status of the taxpayer, and

9. elements of personal pleasure or recreation.

No one factor controls, other factors may be considered, and the mere fact that the number of factors indicating the lack of a profit objective exceeds the number indicating the presence of a profit objective (or vice versa) is not conclusive. A profit objective in an earlier year does not automatically provide a taxpayer a blank check with regard to losses incurred in later years.

The bottom line for small business owners is to keep good records, operate in a businesslike manner and have a profit motive as your goal.

The Tech Accountant

5 Taxpayers the IRS is Targeting

There was a great deal of news that occurred over this past weekend but one of the more important stories was probably the deal between AT&T and T-Mobile to merge pending government approval. This will make AT&T the largest mobile provider and will affect a great deal of customers. There is however a little bit of other news that many tax payers may want to know regarding a new list out from the IRS.


According to the IRS, they are targeting specific groups of taxpayers for audits this year and taxpayers need to ensure that their return will not be flag by the IRS’s “Discriminant Function”. The 5 areas where the IRS is putting more focus is:

1. Schedule A Filers – Those that itemized their deductions

2. Schedule C – Those solo entrepreneurs that are not corporations

3. Schedule E – Those that own rental properties

4. Cash Basis Businesses – Those businesses that only use cash and not credit

5. Sales of Assets and other investments – Those taxpayers that have investments or assets for investments

What’s a taxpayer to do to ensure that their return is not flagged by the IRS? The most important factor is keeping good records that proved your deductions or credits are valid and that you qualify for them. Keeping good records can also help if your tax return is selected for an audit. Audits go a bit more smoothly when your paperwork is organized and typically result is no change or maybe even a little more money back for you.

The Tech Accountant

A Lame Duck still Quacks

All the votes have been tallied and all the precincts have reported…some people are happy with the outcome and some are not. Whether your Congress person won or not is not the issue at this point, the issue lies in what is going to happen in the lame duck session of Congress for the rest of the year and will you as a taxpayer be prepared. Here’s a quick rundown of what is on the table for taxpayers before the year ends:


• Bush Tax Cuts extended?

• Estate Tax?

• AMT?

• Health Care Reform?

I am not a betting man but would have to think that more than likely some taxes are going to go up. What taxpayers do before this year ends is important but you may need to call the psychic hotline or a crystal ball to assist you. When I looked into my crystal ball this is what I have come up with.


Be sure to speak to your tax professional (psychic) to ensure that all of your ducks are in a row for the upcoming tax season.

The Tech Accountant

Using your “INTUITion”

Well one of the worst weeks for Intuit the makers of QuickBooks software is behind them (not without another “outage” on Saturday)and although I did get a chance to read all the comments from various media and social media outlets I will not provide an opinion regarding what happen. I will only provide questions/comments on how Intuit can possibly use their Intuition in the future to create better transparency and show that they actually care about their customers.


According to Brad Smith, CEO of Intuit in a statement from their website:

“I want to share with you what we know at this time about what happened. The disruption occurred during a routine maintenance procedure. An accidental but severe power failure during that procedure affected our primary and backup systems, taking a number of Intuit’s websites and services offline.”

Question Mr. Smith, would your intuition tell you not to setup redundant servers in the same location as your primary server? This is still the main question that is on everyone’s mind.

Some also feel that Intuit did not handle the outage in a manner befitting a large corporation. Specifically many individuals felt that they were left to find out information on their own since calls and e-mails to Intuit only provided canned statements that they were “working on” the problem. Personally from what I saw on social media, there was more “support” there than via taking the corporate route. Again intuition would tell one to handle P/R in a more efficient manner.

Well those are some of the issues that Intuit has to deal with at the present time. All in all their products work for most small businesses owners but as for recommending their cloud based offerings at the present time would require more research. Bottom line….cloud computing is here to stay. Small business owners interested in moving to the clouds should do their due diligence before selecting a cloud vendor.

Be sure to voice your opinion or check out the comments on Intuit’s website.

The Tech Accountant

Intuit and Sage not ready for SaaS?

I was initially going to post a video today about ways to use Sage’s Peachtree small business accounting software for your small business, but their rival Intuit and their problems will put that post to the back burner for awhile. Now back to Intuit’s problems. Today I received an e-mail from Intuit that stated the following:


“I wanted to make you aware that there is currently a large outage in the San Diego Data Center and as a result many of our sites such as Intuit.com, Quickbooks.com, Intuitwebsites.com, Payroll.com, Payments, TurboTax, etc. are down. Intuit is actively working the problem. I'll send out an update when I hear about a resolution.”

The outage is surely affecting millions of small business owners (since QB has the largest share of the small biz market) who can’t have their businesses grind to a halt. The question is when will Intuit have the problem resolved and is this something we can expect from Intuit in the future?

Earlier in the month Sage (the makers of Peachtree) also had an outage of their online systems that affected their e-mail, order entry system and customer relationship management (CRM) software. The outage lasted 22hrs and according to the e-mail that I received they isolated the issue and are working to fix the problem. You can find more information here.

With a vast majority of small business vendors taking their products/services to the clouds (online) via software as a service (SaaS) will these “outages” make small businesses push away from using cloud based solutions?

Feel free to let us know if you are losing time and money due to the Intuit's or Sage's outages.

The Tech Accountant

Protecting Your Business

According to a recent report by the Association of Certified Fraud Examiners (ACFE) occupational fraud continues to be on the rise in the US and countries abroad. The 2010 Report to the Nations on Occupational Fraud and Abuse provides a wealth of information on workplace crimes, how much they cost businesses and how they were detected. The charts and graphs outlined on this link revealed some surprising statistics:

• Financial statement fraud schemes made up only a small percentage of cases, they were the most costly
• Most fraud perpetrators were from the accounting department
• Anonymous tips were used the most to detect fraud as opposed to audits

So what is a company to do to prevent fraud? One of the most important things to do is to closely monitor your business and keep an eye on all aspects of operations. For small business owners it may be difficult to implement the more traditional control functions (such as separation of duties in the accounting department) but the use of technology can assist the small business owner with controlling fraud. Just recently JP Morgan Chase Bank has released a free fraud protection service for small business account holders that will:

• Control check payments and returns with Reverse Positive Pay
• Keep tabs on your account activity with Security Alerts
• Get Paperless Statements to keep your statements from being intercepted in the mail

Check with your bank to see if they offer similar protection services so that you can make you small business more secure.

The Tech Accountant

Digital Image Risks

If you have not heard or seen the reports on tv lately. There is a risk associated with using a digital fax, copier, scanner in your business. Basically the digital images are stored on the equipment's hard drive (yes copiers and the like have hard drives) and once the equipment is sold can be access by those wanting to steal confidential information. If you have not seen how this can be done or who is at risk be sure to watch the video below



The Tech Accountant