1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.

2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.

3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.

4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer’s Tax Guide.

5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.

6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.

7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.

8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

Alternatively, you can register for your employer’s “Cafeteria Plan.” These plans allow you to deduct your childcare expenses from your wages.

For more details about the rules to claim this credit, see Publication 503, Child and Dependent Care Expenses.

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A small business person can have the same feeling about their business.  You try to manage the business, but the “fires” you have to put out keep you from moving a step forward.  For small businesses, here are some tips:

1. Do a strategic plan. In a nutshell, a strategic plan is :
   1. A vision, maybe 20 years.  This vision is the horizon you want to achieve. 
   2. Create a strategy which is how you generally want to achieve your vision.
2. Take stock of what you have to work with.  How good is the condition of your accounting records?  Can you look at them and see a reasonably accurate history?  Look at  your strengths, weaknesses, obstacles, and your competition.  A small business owner must be honest in accessing what their current status.  To miscalculate will start you on the wrong level.
3. Lay out the actions you need to implement your strategies.  These actions should be disciplined and realistic.  Small business owners must not set up tasks that they cannot achieve.  Try delegating as much as you can.
4. Measure your progress in lieu of your strategy.  Again, I ask the small business owner, how good is the condition of your accounting records?  Can you use them to to establish a basis to measure your progress?  Most small business owners I meet don’t think in those terms.

So, what does this have to do with my garage?  Well, my vision is to get both cars into the garage, but well before a 20 year horizon.  Taking stock in what I have, I see that I can lift most of the objects, but will need one of my three strong boys to help me lift the heavy stuff into the attic. My action plan is to do a little each weekend without putting more stuff into the garage.  Lastly, by measure will be how much of the garage floor I can see each week.

Just like in small business management, small task management can be manageable.

• Name
• Date
• FEIN
• Certification as th whether the employer offers its full-time employees minimal coverage
• Employment must be filed by month

For small business, some guidance has already been provided on the IRS sitewhich includes reporting on the employee’s W-2.  Employers should seek out tax advisors and contact their payroll companies to make sure they are in compliance.

The affordable care act implementation is changing rapidly.  As 2014 draws near, regulations will continue to mount.  Small businesses will have to monitor each change and judge whether they are applicable to their small business.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Carl didn’t have a good strategy that would allow his business (or hobby) to survive him. Once he passed on (or retired), so would his practice of fortune telling.

Mike Periu  could have given Carl some good advice in 4 Ways to Make Sure Your Business Outlives You.  In his article, he really sets out points that can be a part of a strategic plan:

1. Prepare a written succession plan
2. Document all important procedures
3. Gradually turn over control of key relationships and duties
4. Purchase a life insurance policy
   

These are good points, but they contain a hidden fatal assumption, which is that your small business can actually be transferred to another owner.  Many small businesses, especially in the service sector, are really the owner’s alter ego.  In other words, customers  buy from these types of businesses because they want the skills of the owner, not the business.  You can see these in the professional arena like doctors, and obviously in the artistic world like acting.

However, it doesn’t have to be that way. Take Oprah, for example.  If she restricted her business strategy to acting or performing as a talk show host, then her product would only last as long as the tape plays, or reruns.  However, she leveraged her talent to produce other programs and the “O” network.  Arguably, the “O” network will continue after she stops working.

But what about a small business?  Does it stop existing when the owner retires?  That is up to the owner.  If the owner of a small business restricts the development of others in the company, then he will restrict the marketability of the company when he sells.

An owner must delegate in a planned manner with a vision.  If the product or service requires the owner to personally be involved in all aspects, then the small business owner must use that “talent” to leverage other products or services that do not require the owner’s hand-holding.  Once this is found, then a strategic plan can be developed and implemented.  Then, the fort points offered in Periu’s article can be incorporated into the plan.

There are so many opportunties in every business week, to compromise security.  The article, 3 big security blunders You don’t know you’re making by Angela Stringfellow set up some blunders, guidelines and solutions: 

1. Not implementing a mobile security policy.  Protable devices are a security nightmare.  In our CPA firm, nobody is to keep client’s records on a USB drive.  We require that if a CPA (or bookkeeper) transfers information from a client’s computer to a laptop computer to be worked on later, we require their USB drive be erased and access to the laptop have a password. In addition, if the CPA (or bookkeeper)  are accounting records, the access to those records be secured by a password.  The mobile device referred to in the article are devices like cell phones and ipads that can log into a company’s server. For those kind of security breaches, the author recommends NQ Mobile to secure all mobile devices across the board.
2. Using cloud-based applications without security precautions.  More and more CPA and accounting applications are developed on a cloud. You wonder how secure they are, and how secure your connection is.  The author recommends that you understand that a cloud has 24/7 security with an adequate staff.  As CPA’s we are the hub of clients’ information, so our security should be deliberate.
3. Failing to test third-party applications. This flaw is more technical than most CPAs can understand, but what the author states is that eventhough third-party applications test for security, a company’s internal security system can be compromising them. “The most common—and most dangerous—security flaws introduced by third-party apps include SQL injection and Cross-Site Scripting (XSS),”  according to the author.  The bottom line is to hire a company to assess your security protocols, and how that interact with third-party software.

Your company’s data is your lifeblood. But your concern must go beyond the company’s computers and to those who share your data like your attorney and CPA.  The analysis should also work its way to your company procedures and empolyees.  As a CPA firm, we have different measures to secure client’s check stock, tax returns, financial statements, personal information, etc.

And within a couple of years, somebody adapted the shape of these drill bits to do such a job, adding a handle and such to make it a specialized device to remove broken nipples.  IT was called an EZ out tool.  It reminded me of my friend Seena Sharp where in her article of Sharp Insights wrote, ” The question is not just who needs what you are selling, but who else needs what you’re selling.” How can you find them? How can they find you?”

In other words, in my example, a drill bit company could have adapted their current product to tackle a new market that didn’t even remotely connect with drilling holes.  To understand this though, the drill bit company would have to understand the customer’s needs of a whole different market, and the current trends of that need.

But the analysis doesn’t stop there.  In addressing the current trends, the drill bit company would have to understand the changing industry.  If they were to discover that the sprinkler industry was converting from galvanize to plastic, then their drill bit nipple remover could reach obsolescence before they recouped their investment in R & D.

Another trend could be that people are moving from sprinklers to drip systems.  These types of market analysis can be the difference between a company blasting into a new market with successful  results, and a company arriving too late to an industry that has changed.

Before moving into another market, understand it.  Then develop your strategies.

Before continuing, here is a little history.  Prior to the Reagan tax acts, tax-shelters were the name of the game. Now, I am not talking about moving money offshore to the Netherlands Antilles, or buying  a pallet full of Bibles at a deep discount so you can donate them at FMV 12 months later. 

No, I am speaking of apartment buildings, commercial strip malls, and commercial buildings carrying historical credits.  Most of these “tax shelters” evaporated with the dodo bird since they were “passive losses” and could not be offset against your active income like W-2s and businesses.

However, there are some investments that are not restricted by passive losses, and are still included in investment portfolios of the very wealthy.  The problem with the previous paragraph are the last two words, “very wealthy.”

So many investment salespeople tend to limit their strategy to a very small segment of our population who control 99% of the wealth.  The salesperson’s rationale is,  Why spend 10x more energy to get ten people to invest, when I can just work on one person who is 10x more wealthy?” 

With the improving economy, I believe this is a poor strategy for these reasons:

1. Many competitors are jockeying for this small market.
2. If one of your large clients discontinue with your company, you most likely will feel the effect.  Therefore, your risk is concentrated.
3. There may be a number of people in the top 90% that can use this product is delivered to them in an understandable way.

This reminds me of Jim Collin’s comments of why Nucor became the greatest at steel manufacturing.  They started with new technology, a new internal culture and moved from producing the lowest gauge of steel to the best.  Their competitors like Bethlehem Steel abandoned the lower markets, and as the Nucor tides rose, they also dominated the higher grades of steel.

In the same way, by developing a marketing strategy that addresses the top 10% of our population, instead of just the top 1% for this commodity tax shelter, the sales manager would be creating a “large pie.”  According to Dr. Stanley Abraham’s book, Strategic Planning, this marketing analysis would incorporate this attribute of target market, with other attributes like degree of penetration, customer needs, and distribution channels.

Business should not be content with fighting for a larger share of a smaller pie.  Many times, this strategy reduces all competitors to a commodity because the target market cannot distinguich one competitor’s offering to another competitor.

But what does this short blurb say or not say about tax deductible items?  It is true that the entertainment industry does offer tax deductions that other industries may not offer just by it’s nature.  For example:  Most industries would be challenged to deduct movie tickets and pay per view movies.  Yet, for a producer these expenses are a necessity.  Or, take a stuntman, they can make a good case for deducting gym expenses.  However, an accountant was denied such deductions in recent memory.

Generally, tax deductions must be ordinary and necessary to the conduct of your business.  Sometimes, you cannot deduct an expenditure (completely) in the year you spent the money because it may have a “tax life.”  An example would be a building, furniture, and automobiles.  There are some elections you can make that can even allow you to deduct some of these though in the first year.

These concepts should be something that you should be thinking about during the tax year, not after it when you are preparing your tax return.

In the case of the rappers they were drawing a nexus between then tipping the strippers and the rappers’songs they were dancing to.  I heard that they felt it was necessary to tip the strippers in order to get their songs played.

In law, there is such thing as public policy.  Sometimes, the spirit of the law trumps a literal application of it.  The IRS and the tax court may say that these kind of expenses are against public policy, not to mention, unsubstantiated.  You also may be required to show a connection between the expense and its ultimate generation of income or publicity.  In other words, if audited, you may get caught with your pants down.  Be careful.

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In a strange way, their image came to me when reading Richard P Rumelt’s Good Strategy/Bad Strategy and his four major aspects of bad strategy. Rumelt writes that you can detect bad strategy out of four hallmarks: “fluff, failure to face the challenge, mistaking goals for strategy, and bad strategic objectives.”

According to Rumelt, ” A strategic objective is set by a leader as a means to an end.  Strategic objectives are ‘bad’ when they fail to address critical issues or when they are impracticable.”

I recall reading about a problem with the Carter presidency.  In that article, the commentator claimed that President Carter tried to micromanage programs and directives he set in motion.  I cannot tell you what transpired between Carter’s high level strategy of setting goals (over all values and horizons) and the objectives that were implemented to reaching those goals.  But if  he orchestrated objectives, he violated good strategic planning practices.  A good leader does not have to define specific objectives.  They should direct the company from the 30,000 feet level and allow his/her senior and middle management to design the objectives that will allow the strategy to move forward.  These objectives should be measured with metrics.  Partially based on Rumelt’s book, here are some tips:

1. Don’t mistake a long list of things to do and lable them strategies.  For example: Don’t list a diverse set of objectives that has no cohesiveness towards a specific horizon.
2. Don’t establish a strategy that is so obscure or outlandish that your company cannot design actions to get to your strategic objectives.  For example:  You want your company to be the best in the world at producing movies.  OK, how?
3. Don’t shift strategic objectives in midstream without giving them a chance to develop.  This could mean that you did not establish a good objective from the outset.

This four part article can apply to any industry and strategy.  It can even apply to career-based strategic plans.  I have been applying these business concepts to artist’s careers, non-profits, and even a professor’s software vision.  Good strategic planning can open up ideas and doors that are hidden in the shadows of success.

In a strange way, their image came to me when reading Richard P Rumelt’s Good Strategy/Bad Strategy and his four major aspects of bad strategy. Rumelt writes that you can detect bad strategy out of four hallmarks: “fluff, failure to face the challenge, mistaking goals for strategy, and bad strategic objectives.”

In this issue, we will discuss the third horseman, “mistaking goals for strategies.” Many bad strategies are just statements of desire rather than plans for overcoming obstacles.  Many companies express their desires as goals, not strategy.   For example:

• We will be the industry company of choice
• We will grow our revenues 10% per year
• We will sustain a profit margin of 15% per year

The problem with this kind of pseudo strategic thinking is that it is looking at the trophy, not the method to earn it.  A simple example is using two components of the SWOT tests (strengths, weaknesses, opportunities, and threats.)  What strengths and opportunities are you going to use to build a strategy to get to those goals?

If you have a difficult time distinguishing a goal from a strategy, always think of a tightrope walker.  Their goal, or vision, is to get to the other platform.  Their use of a wire, training, a balancing pole, and other aspects feed into the overall strategy that will get to the other side.

But do we ignore numbers?  Absolutely not.  Metrics work as milestones or sign posts along the way.  They can have the effect of measuring the strategy and altering tactics that can get you to your vision.  But for these metrics to mean something there has to be an action that creates the conditions that will allow the company to reach its visionary goals.

Performance goals have little to do with strategy.  But the real challenge is thinking strategically.  Take the military, for example. Would this be a proper response by General Eisenhower to President Roosevelt in his strategy to defeat the Germans in WWII?  “Mr. President, we plan to defeat the Germans in six months.”  His response stated a goal, but not a strategy to getting to that goal.

The same can be said on how individuals “strategize.”  In Los Angeles, a singer may say, “I want to get a recording contract.”  Or, “I want to earn five platinum records by time I am 35.”  These are not strategies, they are goals.  The challenge is to go through the process of creating a basic roadway.  This roadway joins where you are now to where you want to be.