Give Away Your Tax Refund

As tax season really gets geared up, many taxpayers are in a panic to get their returns done as soon as possible to receive their refunds. A great deal of tax preparation shops will prepare a taxpayer’s return based on the information from their last pay stub (as I am sure many have seen in the commercials) and they also offer to get your money back to you in as little as 24-48 hrs. Let’s look a bit deeper into how this process works and see if it is really a good deal.

So it is now the end of January, and due to the state of the economy now you want your money back from taxes fast. Most taxpayers do not realize that getting a refund back should not be the goal of their tax strategy. What a refund means is that you paid too much into the tax system and the government is giving you YOUR money back. That means that you loaned the government your money for a year and did not earn any interest on it.

You then proceed to the nearest tax preparation shop and have your taxes prepared where you are then offered to receive you tax return in as little as 2 days via a Refund Anticipation Loan (RAL). This offer may sound good, but don’t forget nothing is done for free. There are additional fees (including the tax preparation fee) that are included in this offer, which can include:

• Refund Account Fees to the Bank making the loan
• Document Preparation Fee to the Tax Preparation Firm
• Finance Charges

In the end, the money you loaned the government with no interest is cut down by additional fees leaving the taxpayer with less money in an economy that is taking a toll on everyone. The tax payer also pays finance charges that have an annual percentage rate of over 100%. A typical $1300 tax refund will be slashed to around $900 when all the fees are deducted. Something to think about as cash strapped taxpayers in this economy.

Keep Your Home Finances N Synergy

Free Productivity Keeps You N Synergy

The list is finally out by PCMag.com of the Best Free Software. Be sure to check it out for there are some handy little jewels out there that will help anyone increase their productivity, save time, and money whether you are running PC, Mac, Windows or any other operating system. With over 170 different kinds of software that is categorized to your needs, there is surely something out there for everyone. Our firms uses a great deal of them in our daily activities. Check them out so they can increase your productivity at work and home.

Stay N Synergy

Tax Season Tips – Selecting a Tax Preparer

My previous post gave taxpayers a bit of information regarding FREE tax filing services for individuals, but what if you have a complicated tax matter, or need a corporate tax return prepared? Odds are the taxpayer is going to have to seek out the assistance of a professional tax preparer. Selecting a tax preparer can become a tricky undertaking for many. As I browsed the postings in the financial section of craigslist, I came across a great deal of “ads” offering taxpayers money for referrals, and some even offering gifts for tax preparation services. Although a majority of these ads stated that they were licensed professionals, their code of ethics seems to fall by the way side. Some ads would guarantee refunds and their payment would be a percentage of the said refund. This is a major no-no from the IRS. Other things taxpayers should avoid are:

• Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.
• Avoid tax preparers that ask you to sign a blank tax form.
• Check to see if the preparer has any questionable history with the Better Business Bureau
• Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.

These are just a few tips to keep a taxpayer in voluntary compliance and avoid penalties and interest in the long run.

Keeping Your Business N Synergy

Free is not always better

The IRS launched their free online filing system for taxpayers on Friday, and I have come across quite a few taxpayers that are thinking about using this service instead of a tax professional. While this is a viable option for cash strapped taxpayers in this economy, there are a few things that tax payers should know about the system. A recent report from the Treasury Inspector General for Tax Administration revealed that the IRS did not resolve some of the security issues before launching the system last week. The security issues are related to system access, monitoring of system activities, disaster recovery and the protection of sensitive data and these vulnerabilities can put many taxpayers information at risk.

Almost 5 million returns were filed with the IRS Free File last year as many taxpayers view e-filing as a better alternative to paper filing. This tax season be sure to keep your personal information secure for a free e-file process may come back to cost you in the long run.

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Auditing on the Front End

Taxpayers thinking of trying to put one past on the IRS think twice this tax filing season. In a recent report by the GAO (Government Accountability Office), they recommend that the IRS begin their enforcement efforts during the returns processing stage of the process as opposed to after the return is filed. In the past a return would be filed, only for a few years to go by before the IRS sent the taxpayer the dreaded “nasty gram”. Well those days are a thing of the past.

There are two major areas recommended in the report where the IRS could audit returns while processing, one are is the eligibility of the child and dependent care tax credit for married filing separately taxpayers. The other area is verifying the EIC (earned income credit) claims by non-custodial parents. These are the two major areas where tax return claims could not be verified.

So taxpayers that think that can get one by on the IRS beware, for you will be caught. If you look at the situation another way the IRS is doing you a favor, instead of catching you later and interest and penalties adding up; you will be caught early and won’t owe as much. Either way it is not a good idea.

Keeping Your Business N Synergy

Tax Deal of the Day

Here is a great deal for those small business owners out there that are confident enough to prepare their own small business tax returns. Get Turbo Tax from Intuit for FREE and you can prepare your own tax return at the same time saving you some money. Fees will apply for the state return, but the savings is well over $100 for the federal return and it comes with federal e-file. Those small business owners that have pretty straightforward tax returns, this deal is right up your alley. If you’re small business finances are a little more complicated and/or you simply do not want to attempt to prepare your own small business return, be sure to seek out the help of a professional tax advisor. The software also does not take the place of efficient tax planning so be sure to take your completed return to your advisor so the both of you can sit down and map out a strategy for 2009 and beyond.

Keeping Your Business N Synergy

Big Brother watching your Small Business

While working as a manager for a previous employer, there were many times when our employees’ productivity would fall due to the many “tech” distractions in the office. The main tech distraction culprit was (and probably still is) the internet. Employees surfing the internet when work needs to be done is a major factor in loss productivity, your data being compromised, and possibly your business losing its competitive edge. The first line of defense in most small businesses is to have employees sign an internet usage policy, but how does a small business owner enforce the policy?

Here is a little software gem that I can across earlier this week that is sure to help small business owners monitor virtually everything that their employees do on their work computers. Spector 360 will track every key stroke, website, IM conversation and more. The cost is only $75 per employee which is a pretty good deal when you think about the savings down the line.

Employees beware; your Big Brother small business owner may be tracking you so stay on task.

Keeping Your Business N Synergy

Get Organized in 2009

Happy New Year to everyone out there in Blogger land. With the beginning of 2009 here, many are professing those usual New Year’s resolutions that are usually broken by the end of this week. One important resolution that everyone should make if they are not already is to be more organized this year. Being more organized can make your life less stressful and in the long run can save you money. Take this example:

Taxpayers that are organized have a better chance of getting all their tax deductions at tax time because they have all the necessary paperwork all in one place. Scrambling at the last minute to find paperwork can cause many taxpayers to be ineligible for some tax credits and deductions if they are not found in time for filing. Organization can also save you money on tax preparation because your tax advisor will spend less time preparing your return if everything is in one place.

Some ideas to help organize your life in 2009 can include using a debit card for purchases instead of checks, consider checking your statements from your bank and credit cards companies online, keeping a mileage log, and using an online calendar to track appointments and tasks. Make 2009 your year to get organized.

Keeping Your Business N Synergy

Your Income Tax….May be Wrong???

Now that the holidays are mostly gone, many of us are looking for ways to pay off the holiday bills that we have built up. Usually the first option that comes to everyone’s mind is their tax refund, and we now scurry to get all our tax information together just like we are scurrying for those gifts for friends and family. Many taxpayers make an attempt to prepare their taxes on their own without the assistance of a tax professional by using off the shelf software and income tax books.

One of the main books that taxpayers use is J.K. Lasser’s Your Income Tax editions. These are rather nice references for a taxpayer to have that include a wealth of information; however the current version (2009) was printed before all of the current tax changes were put into effect. If you were one of the taxpayers that bought the 2009 edition, be sure to check their website for updates to the printed information or speak to a tax professional that has the proper training regarding the new tax law changes.

Keeping Your Business N Synergy

Getting Taxed While Injured and Innocent

While working at a client today, one of their customers overheard us talking about the upcoming tax season and asked if I did taxes. After responding that I did the individual asked me a couple questions about how the IRS handles issues when one spouse owes and the other spouse has debt or other obligations that have not been paid. After telling the taxpayer how it was handled I thought to myself that many other taxpayers may be in a similar situation. The situation can usually be handled using the IRS injured spouse or innocent spouse rules.

Injured Spouse – an injured spouse occurs when the IRS attempts to seize the refund on a jointly filed return when only one spouse owes debts or obligations. Relief for the “injured” spouse can be obtained by filing Form 8379.

Innocent Spouse – an innocent spouse occurs when the IRS seizes the refund of a jointly filed return when only one spouse made fraudulent reports on a joint return. Relief for the “innocent “spouse can be obtained by filing Form 8857.

There may be additional steps that may need to be taken, so be sure to speak to your tax advisor before filing in either situation.

Keeping Your Business N Synergy

Tech Tools to Improve Your Small Business

Keeping with the technology theme of our last post, I simply wanted to give an update on our firm’s field computer woes. We luckily were not “down” very long as it only took the computer repair shop one day to isolate and fix our problem. It turns out that something was wrong with the main PC board on the laptop and being that it was still under warranty, the repairs were free. So we are now back up and running smoothly.

I did get a chance to check out some new software that might prove useful for many of the small business owners out there and the great thing about them is they are free. The first one is called Jing Project and it allows users to capture pictures from their own workstations, record video of your click thru’s and then share those click thru’s with others. This is great for those of you who need to walk others through steps and processes (like assisting clients with accounting software). The second is somewhat similar and is called Dimdim. Dimdim is a free web conferencing service (no software to download) that allows you to share your desktop for web based live meetings. They offer a free version but down also have low cost editions that offer more features.

If your small business wants to be on the cutting edge of technology and compete with the Big Boys, be sure to check out these tools. Our firm uses them and loves them.

Keeping Your Business N Synergy

Technology CYA

Recently our office had to deal with a system crash of one of our field laptops. Usually for a small business, a system crash can be a major setback. There are ways to minimize the chance that a system crash does not send you business into a holding pattern and by following a few steps a small business can save money in the long run. Here are a few process and procedures that our firm uses to minimize the chance of lost data when a system crashes.

1. Password protect any (and all) computers – whether they are used within the firm or in the field.
2. Do not save critical data on the hard drive – use an online secure storage service or some other offsite secure storage facility
3. Create (and use) a backup schedule – for very critical data, backup on a daily basis.

These are just a few of the processes and procedures that our office uses to ensure that our critical data is always accessible. If the procedures were not in place, there would be increased costs to retrieve data and/or rebuild data. Setting up similar procedures in your small business can save you money in the long run.

As for the laptop that crashed, we are still awaiting its arrival from tech repair which is still under warranty.

Keeping Your Business N Synergy

S-Corporations Compensation Revisited

This past week while getting ready for tax season, I had the chance to review some of the changes and requirements for S-Corporations (thanks to the IRS and NSA). One of the most common mistakes that S-Corporations make occurs in the area of owner/employee compensation. Typically owners of S-Corporations are considered employees that must take “reasonable compensation” when they perform services for the S-Corp. Once a reasonable compensation has been established, owner/employees can take additional income from the S-Corp as distributions that will not be subject to employment tax rules.

The main question(s) that arises are what is considered reasonable compensation, and how is that compensation validated. The best way to determine reasonable compensation is to look at what the market pays for similar work performed and possibly reviewing information from the employment section of the newspaper or websites. Structuring your compensation plan with your tax advisor will assist S-Corp owner/employees and ensure that their returns won’t come up for audit. Audits of S-Corps increased in 2006, and by taking the necessary steps owner/employees can have less worries at tax time.

Keeping Your Business N Synergy

Disregard the past IRS rules LLC’s

There will be some reporting changes for single member/single owner LLC’s (also known as disregarded entities) in 2009. According to a recent email notice received from the IRS, LLC’s that are considered disregarded entities will have to report employment taxes in the name and EIN of the LLC instead of the single member/owner. The change makes IRS Notice 99-6 obsolete whereas a single member/owner had a choice to use the either the name or EIN of the owner of the LLC. The changes only affect the employment taxes and not income tax reporting for LLC’s. Small business LLC’s that are affected by this change may want to seek the assistance of their tax professional for details on applying for a new EIN.

Keeping Your Business N Synergy

2009 Small Business Accounting Software

Earlier in A Tale of Two Software Freebies we took a look at the free versions of small business accounting software titles Microsoft Office Accounting Express and QuickBooks Simple Start. Well both software vendors have recently undated their paid software titles for 2009. Small business owners that are looking for a change or just starting out may want to take a look at some of the new features that both titles have included.

Microsoft Office Accounting Professional (MOAP)

MOAP has updated their offering to include income tax integration with major tax preparation software that will surely bring a smile to your tax professional’s face. MOAP has also added 20 plus new custom reports to give a small business owner more information about their business. Third party add on’s allow small business owners to accept credit cards online and integrate with E-bay.

QuickBooks Products

QB has two has two products (QB Pro, and Premier) for the small business owner depending on the market and size of your business. The Premier version has more features and provides more reports for small businesses. A major enhancement that caught my attention is the software now has Microsoft Vista certification as there were problems loading previous versions on Vista machines.

Both software is priced right for the small business owner so be sure to test drive them for your business.

Keeping Your Business N Synergy

The IRS Audit Results

In a previous post (see IRS IT Woes), we looked at some of the problems that have been occurring at the IRS. Well it appears that the IRS has a couple more issue that need to be ironed out regarding their operations. An audit report from the Government Accountability Office reveals internal control problems and financial management inefficiencies within the IRS. The main areas that need improvement are controls dealing with information security and the utilization of obsolete financial management systems.

The IRS contends that measures have been taken to improve internal controls and improve processes within the financial management systems. Will be interesting to see how these improvements work out in the coming year. Stay tuned.

Keeping Your Business N Synergy

Banking on Small Business

As the economic bailout continues to make its way through the U.S. economy, banks are “banking” on small business to give out the new loans. The only problem is banks are having difficulty finding borrowers. Part of the reason is many small business owners are feeling the bite of the slow economy and have cut back their borrowing needs. SBA loans dropped 30% this year as banks scramble to find creditworthy customers.

Creditworthiness is an important part of the issue when a small business owner considers a loan as a way to finance growth. Small business owners that already have loan or credit lines with banks (and they more than likely have been cut back) should keep an eye on their budgets so that loan payments can be made in the future. If you are a small business owner looking for a loan, lookout in your e-mail/mail box for deals from banks banking on you.

Keeping Your Business N Synergy

A Tale of Two Software Freebies

Last month at the accounting panel discussion, I gave the audience links to a couple of small business software titles that would give a small business owner a jump into the realm of accounting and reporting. Both titles are free and can be downloaded from the internet for use. Microsoft Office Accounting Express and QuickBooks Simple Start were the titles and we will take a look at each to see which one is the best for your business.

Microsoft Office Accounting Express (MOAE)

MOAE has the same look and feel as the current Office programs making the learning curve less steep (To me it looks similar to Outlook). A small business owner can track income and expenses, manage employees, customers and vendors and the owner can setup the business using wizards. MOAE also allows importing of data from QuickBooks, Excel or MS Money.

QuickBooks Simple Start (QBSS)

QBSS similar to MOAE in that it can also track income and expenses, organize employees, customers and vendors, manage payroll, and utilizes wizards in the setup. QBSS does not allow a small business owner to import data from MS Excel, Quicken, or MOAE.

MOAE and QBSS Technology

Both MOAE and QBSS have integrated technology into their offerings. MOAE includes seamless integration into other Office software (Word, Excel, and Outlook) and the software allows small business owners to reach online via EBay and PayPal integration. QBSS allows users to accept credit cards payments into the software, and create a website for online services.

Which is right for you?

That will depend on your needs as a small business owner in the start up phase of your business and the market that you serve. Accounting software should be viewed as a tool that can grow with your business so be sure that the future is taken into account in your needs assessment.

Keeping Your Business N Synergy

New Updates from Microsoft

Our friends over at Microsoft have a couple of new updates that may be of interest to many individuals and small business owners. The firs is a security update MS08-067 which affects many versions of the Windows operating system and server operating systems so be sure to download this update as soon as possible. Many individuals turn off their automatic updates and if that is the case you will have to go directly to the Microsoft website to download the update.

The other update is the unofficial death of the Windows Vista operating system. I came across an article that Microsoft recently revealed the next version of their operating system which will be called Windows 7. Be sure to check out the slideshow that provides screen shots of the new look and feel of Windows 7. Although similar to Vista, Windows 7 has made a great deal of changes that are sure to please new computer buyers when released sometime next year. If you are in the market for a computer and can hold off, waiting until this operating system is released may be a good thing.

Keeping Your Business N Synergy

Tax Provisions "Bail" You Out

This past week I had the pleasure to sit on a panel with other local accountants that spoke to the needs of small business owners and one of the main questions that attendees wanted answers was regarding how the small business would stay afloat after the passage of the bailout bill. The bailout bill had a great deal of tax provisions that were included (and I finally had a chance to take a closer look at) here are a few that will hopefully help bail out small businesses and individuals in this slow economy:

Individual Provisions

• Itemized and “above the line” deductions – state and local sales tax deductions, higher education tuition deduction, additional standard deduction for real property taxes extended through 2009
• Tax free distributions from IRA’s for charity has been extended through 2009
• Child tax credit floor falls allowing more taxpayers to tax the credit

Small Business Provisions

• Leasehold and restaurant improvements now eligible for a shorter depreciation cost recovery through 2009
• Charitable Contributions of food, books and computers extended through 2009
• New markets tax credit extended through 2009, encouraging more small business investment

Be sure to speak with your accountant regarding these new tax provisions and how they may affect your tax planning for 2008 and 2009 tax filing season. As always tax planning should be proactive and not reactive to the economic environment around you.

Keeping Your Business N Synergy