From the author Abraham Briloff; Once upon a time in accounting land, there lived eight big giants:  Arthur Andersen; Ernst & Ernst; Haskins & Sells; Lybrand, Ross Bros. & Montgomery; Peat, Marwick, Mitchell; Price Waterhouse; Touche, Ross; and Arthur Young.  These public accounting firms were regarded as gods by everyone in the business community and the accounting profession.  Whenever they spoke, everyone listened.  And whatever they signed, the business community accepted as gospel.

An executive of a corporation wishing to go public interviewed the partners of these various “Big Eight” accounting firms.  He needed their seal of approval on his financials in order to enhance the valuation of his corporation’s stock offering.  In each interview, all he asked of the partners from each public accounting firm was the following simple question:  “How much is 2 plus 2?”  Virtually all of the partners of the Big Eight accounting firms, thinking that the executive was a complete idiot, simply replied, “4, of course”,—that is, all but one partner from a Big Eight firm, who paused and remained silent for a considerable period of time, not replying with the obvious answer that the other interviewees had immediately spurted out.  His response, after some serious reflection, was, “What number did you have in mind?”  Needless to say, upon hearing what he wanted to be understood, the executive selected this partner’s public accounting firm.

Back then in 1972 when the book was written, Abraham Briloff did not think very highly of GAAP (Generally Accepted Accounting Principles), preferring his own acronym, CRAP (Cleverly Rigged Accounting Ploys), to describe the profession’s accounting methodologies.  In fact, Briloff felt that the Big Eight firms in particular had been selling out their requisite professional posture of independence, especially in regard to their audit clients.

The question today, of course, is how much has really changed in the last 40 years?  I would be interested in hearing Briloff”s reply; I suspect that he might say, “not very much”.

Of course you must trust your CPA, and your CPA must obey the law. You will always find Fuel Bookkeeping following the law in the best interest of their clients. Taxes and bookkeeping can be an art as much of a since, having a knowledgable and experienced CPA is a must.

If you have any questions related to bookkeeping, payroll and or payroll tax, or simply anything related to tax please feel free to give me a call.  I hope this blog post was helpful and as always if I can help you with any accounting needs please feel free to call. 1-866-969-FUEL (3835)

The IRS wants taxpayers to be aware of tax scams. These scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. The schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.

Here are three important guidelines to keep in mind:

• You are responsible and liable for the content of your tax return.
• Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
• Never sign a tax return without looking it over to make sure it is accurate.

Beware of these common schemes:

Return Preparer Fraud:
Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.

To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN). Later this year, registered preparers will have to pass a competency exam and take continuing education courses.

Identity Theft:
It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic, call 800-829-1040 to confirm it.

Frivolous Arguments:
Promoters have been known to make outlandish claims such as that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.

For more information about these and other tax scams visit the IRS Web site at http://www.irs.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is http://www.irs.gov.

If you have any questions related to bookkeeping, payroll and or payroll tax, or simply anything related to tax please feel free to give me a call.  I hope this blog post was helpful and as always if I can help you with any accounting needs please feel free to call. 1-866-969-FUEL (3835)

1. How do you charge for preparing taxes and how much will it cost? (Many tax preparers fees vary, the cost to prepare your return should never be based on the amount of your refund.)

2. How long have you been preparing tax returns? Our recommendation is you should always choose someone with many years of experiance. We are not a fan of allowing a new accountant learning on you.

3. Are you open and available year-round? (Taxes are submitted once, however the preparation should be worked on all year. Therefore your tax preparers should be available year-round to help you as needed.)

4. Will I be receiving my refund by way of a direct deposit? (We recommend this method for refunds, it is the fastest and safest way to get your refund.)

5. If the IRS contacts me regarding my return, will you be the individual I contact to help me communicate with the IRS? (The answer should be yes! You must respond if this happens.)

6. Can I receive a copy of my completed tax return and return any original documents I provided? (Yes.)

7. Do you sign my tax return as the tax preparer? (Yes.) May I see your PTIN? (All signing preparers are required to have a PTIN)

8. What professional organizations are you affiliated with?

9. Do you have a professional license, Credential or training? If so, may I see proof including current status?

10. How do you learn about new tax laws? Your tax preparer should answer this question by explaining they regularly attend continuing education courses.

If you have any questions related to bookkeeping, payroll and or payroll tax, or simply anything related to tax please feel free to give me a call.  I hope this blog post was helpful and as always if I can help you with any accounting needs please feel free to call. 1-866-969-FUEL (3835)

Any tax guidance in this blog is intended for informational purposes only and is not guidance on which Fuel Bookkeeping intends for you to rely. All tax issues specific to your business or family are largely facts-and-circumstances based and you should consult with Fuel Bookkeeping to discuss how this might relate to you.

Taxes

For many, this is a true art form and an opportunity to turn as many essentially personal expenses into tax deductions as possible.  We all seem to know someone who is clearly too aggressive in the expenses they are claiming for their “business” (i.e. that trip to Cancun with their wife).   On the other hand, I find that many of my small business clients are a little too shy in claiming deductible expenses, worried to look as if they are abusing the system like Mr. Cancun above. 

While I would never encourage a client to deduct an expense that I wouldn’t feel comfortable putting on my own return, I do encourage clients not to be shy in tracking their expenses.  The IRS is not shy in the least about the tax burden levied on small business owners in the form of self-employment tax.   One of the primary tax benefits of being a business owner is the opportunity to deduct the expenses you incur in operating your business to reduce this burden.   Therefore, it is essential to strike a balance between being too aggressive and too passive in the tax deduction game. 

So what expenses can you deduct?  The IRS allows deductions for “ordinary and necessary business expenses.”  In the broadest terms, this means that if someone else in your line of work would consider it a legitimate cost of doing business in your industry, then it is likely a deductible expense.

There are a few things that are specifically disallowed for deductions:

One-Half of Meals & Entertainment - Most people know that you can only take one-half of your meals and entertainment expenses as business deductions.  Since these expenses are so ripe for abuse, the IRS ensures that you do not receive the same benefit for these expenses as other business expenses. 

There are other expenses that fall into a somewhat grey area.  Here are some of these questions that I received on a regular basis:

Can I Deduct My Professional Wardrobe Expenses?  What about My Dry Cleaning?

I have heard people answer this question differently, but my answer is No and No unless you are required to wear a specific outfit (i.e. uniform) for your business.   The necessity to look professional on the job doesn’t make it a business expense.  Clothing is an inherently personal matter so unless you are restricted to wearing something you would never otherwise purchase then it is probably not deductible. 

What Part of My Travel Expenses Are Deductible?

It is not unusual to have travel expenses for a trip that is both business and personal.  For instance, if you go to a conference in New York that lasts three days and you stay over for another two days for some sightseeing, how much of that trip can you deduct? 

If the “primary purpose” of the trip is business, then 100% of your airfare is deductible.  If, however, you brought your spouse and they are not there on business purpose, then their airfare is not deductible.  You can deduct lodging for the nights you are on business, so in my example, the first three nights’ hotel is deductible. 

Can I Deduct Wellness Expenses Related to My Job?

Many business owners will ask something along these lines: “My business causes me a lot of stress.  Can I deduct a weekly or monthly massage as a business expense?”  Again, the answer is likely no.  The same goes for getting your haircut, your nails done, or anything else that is an inherently personal expense.  Would you need to get your haircut regardless of running your business?  Since the answer is yes, it doesn’t qualify as a business expense. 

If you have any questions related to bookkeeping, payroll and or payroll tax, or simply anything related to tax please feel free to give me a call.  I hope this blog post was helpful and as always if I can help you with any accounting needs please feel free to call. 1-866-969-FUEL (3835)

Last month, President Obama signed the “VOW to Hire Heroes Act” into law, telling those in attendance:

“Back in September, I sent Congress a jobs bill. And in it, I proposed a tax credit for any business that hires a veteran who’s been unemployed for at least four weeks. I proposed an even bigger tax break if a business hires a veteran who’s been unemployed for at least six months. And if a business hires an unemployed veteran with a disability related to their service, I proposed doubling the tax break that we already have in place.

Today, because Democrats and Republicans came together, I’m proud to sign those proposals into law. And I urge every business owner out there who’s hiring to hire a veteran right away.”

The bill gives employers tax credits of up to $5,600 for hiring veterans who have been unemployed longer than six months. It would also give employers a tax credit of up to $9,600 for hiring long-unemployed disabled veterans.

If you are looking to hire people in the next few weeks or months it may be a good idea to look for qualified candidates who meet this criteria.

If you have any questions related to bookkeeping, payroll and or payroll tax, or simply anything related to tax please feel free to give me a call.  I hope this blog post was helpful and as always if I can help you with any accounting needs please feel free to call. 1-866-969-FUEL (3835)