CPA Tax Tip: High Tech Tax Tools to Help You

Rick_E_Norris_An_Accountancy_Corporation_CPA_Tax_Tip_High_Tech_Tax_Tools_to_Help_YouI know, don’t trust the government when it gives you something free.  But in the area of phone tapping, drones, and internet bugging, it probably won’t compromise your privacy too much to take advantage of the high tech candy.  Here are some of the IRS tips to help you:

Are you on the go but need the latest tax information at your fingertips? There’s an app for that. The latest version of the innovative IRS2Go app is now available.

Here’s what you can do with the redesigned IRS Smartphone app IRS2Go, version 4.0, available in English and Spanish:

  • Check the status of your refund. The new version of IRS2Go includes an easy-to-use refund status tracker so taxpayers can follow their tax return step-by-step throughout the IRS process. Just enter your Social Security number, filing status and your expected refund amount. You can start checking on the status of your refund 24 hours after the IRS confirms receipt of an e-filed return or four weeks after you mail a paper return. Since the IRS posts refund updates on a daily basis, there’s no need to check the status more than once each day.
  • Find free tax preparation. You may qualify for free tax help through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. A new tool on IRS2Go will help you find a VITA location. Just enter your ZIP code and select a mileage range to see a listing of VITA/TCE sites near you. Select one of the sites and your Smartphone will show an address and map to help you navigate.
  • Get tax records. You can request a copy of your tax bill or a transcript of your tax return using IRS2Go. The post office will deliver to your address on record.
  • Stay connected. You can interact with the IRS by following the IRS on Twitter @IRSnews, @IRStaxpros and @IRSenEspanol. You can also watch IRS videos on YouTube, register for email updates or contact the IRS using the “Contact Us” feature.

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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.

 

 

Business Security in an Insecure World

Rick_E_Norris_An_Accountancy_Corporation_Business_Security_In_An_Insecure_WorldOver twenty-five years ago I met with a new client who told me why he fired his last accounting firm.  He received a phone call from a good samaritan that the person had found
my client’s tax records in a phone booth.  Apparantly, his CPA (from one of the largest CPA firms) had left my client’s tax records when he stopped to make a call in a phone booth.

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.

CPA Tip: Tax Scam Alerts from the IRS

Rick_E_Norris_An_Accountancy_Corporation_CPA_Tip_Tax_Scam_Alerts_From_The_IRSThe IRS actually tries to help taxpayers.  Here they list the biggest tax scams the hook taxpayers who do not have their guard up.  Be careful of who you are giving your information to, and what you put down on your                                                                                 tax return.

Identity Theft.  Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Combating identity theft and refund fraud is a top priority for the IRS. The IRS’s ID theft strategy focuses on prevention, detection and victim assistance. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft. This compares to $14 billion in 2011. Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should immediately contact the IRS so the agency can take action to secure their tax account. If you have received a notice from the IRS, call the phone number on the notice. You may also call the IRS’s Identity Protection Specialized Unit at 800-908-4490. Find more information on the identity protection page on IRS.gov.

Phishing.  Phishing typically involves an unsolicited email or a fake website that seems legitimate but lures victims into providing personal and financial information. Once scammers obtain that information, they can commit identity theft or financial theft. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. If you receive an unsolicited email that appears to be from the IRS, send it to phishing@irs.gov.

Return Preparer Fraud.  Although most return preparers are reputable and provide good service, you should choose carefully when hiring someone to prepare your tax return. Only use a preparer who signs the return they prepare for you and enters their IRS Preparer Tax Identification Number (PTIN).  For tips about choosing a preparer, visit www.irs.gov/chooseataxpro.

Hiding Income Offshore.  One form of tax evasion is hiding income in offshore accounts. This includes using debit cards, credit cards or wire transfers to access those funds. While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements taxpayers need to fulfill. Failing to comply can lead to penalties or criminal prosecution. Visit IRS.gov for more information on the Voluntary Disclosure Program.

“Free Money” from the IRS & Tax Scams Involving Social Security.  Beware of scammers who prey on people with low income, the elderly and church members around the country. Scammers use flyers and ads with bogus promises of refunds that don’t exist. The schemes target people who have little or no income and normally don’t have to file a tax return. In some cases, a victim may be due a legitimate tax credit or refund but scammers fraudulently inflate income or use other false information to file a return to obtain a larger refund. By the time people find out the IRS has rejected their claim, the promoters are long gone.

Impersonation of Charitable Organizations. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. Taxpayers need to be sure they donate to recognized charities.

False/Inflated Income and Expenses.  Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. In many cases the taxpayer ends up repaying the refund, including penalties and interest. In some cases the taxpayer faces criminal prosecution. In one particular scam, taxpayers file excessive claims for the fuel tax credit. Fraud involving the fuel tax credit is a frivolous claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims.  In this scam, the perpetrator files a fake information return, such as a Form 1099-OID, to justify a false refund claim.

Frivolous Arguments.  Promoters of frivolous schemes advise taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These are false arguments that the courts have consistently thrown out. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages.  Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, scammers use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to improperly reduce taxable income to zero. Filing this type of return can result in a $5,000 penalty.

Disguised Corporate Ownership.  Scammers improperly use third parties form corporations that hide the true ownership of the business. They help dishonest individuals underreport income, claim fake deductions and avoid filing tax returns. They also facilitate money laundering and other financial crimes.

Misuse of Trusts.  There are legitimate uses of trusts in tax and estate planning. But some questionable transactions promise to reduce the amount of income that is subject to tax, offer deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits. They primarily help avoid taxes and hide assets from creditors, including the IRS.

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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.

What Are You Worth? Or, Are you a Guppy in a Red Ocean, or A Whale in a Blue Ocean?

Rick_E_Norris_An_Accountancy_Corporation_What_are_you_worth_or_are_you_A_Guppy_in_a_red_ocean_or_a_whale_in_A_blue_oceanTwo respected strategist friends and I had lunch discussing new service businesses.  Erik asked how much a person should charge when creating a newer field.  Robert responded that there is no magic “price,” but that you should base it on the value you are creating (or saving) the client.  In other words, if your services are saving the client $1 million dollars, a fee of $50,000 is not unreasonable, especially if nobody else has your skill set.

Being a CPA/Strategist, The Blue Ocean Strategy popped into my mind.  In a blue ocean, you are selling a unique product or service in an “ocean” that was not previously inhabited.  If your product or service is offered by others, you are swimming in a red ocean where sharks are eating each other to lower their value and personal worth.  These concepts are outside the normal business mentality usually used by CPAs.

In other words, when you swim in a red ocean where you compete by price, you have reduced yourself to the level of a commodity.  When that happens, it is time to change your product or service.  Even though you might rely on your CPA (as your business consultant) to tell this, he/she probably won’t be able to because they deal in historical financial statements.

Very few people look at their careers in such a light.  Their strategy, if they even have one, is sometimes to do what someone else has done, but cheaper.  Sure, you can say they want to perform “better service,” but even that has limitations.  As a CPA, I have seen companies wither away because they cannot get out of this commodity rut.  Eventually they lower their prices so much, they lose sustainability.

So in this economy when everyone is changing so quickly, what can a person do in business?  One way is to follow Jim Collin’s business suggestion, The Three Circles of the Hedgehog Concept.  One circle is “What you are deeply passionate about,” the second, ” What drives your economic engine,” and third, ” What you can be the best in the world at.”

Consulting as a CPA, I have found these circles to work with personal careers, not just businesses.  Where the “hedgehog” part comes in is the hedgehog outsmarts the fox by just doing one thing: rolling up in a ball.   The fox is very intelligent and tries many things, but the hedgehog just does one and survives.

But what is the intersection of the three circles?  Jim Collins could say that it is the Big Hairy Audatious Goal mentioned in his Built to Last book.

I am not saying that the metrics that you CPA provides to your company are not valuable.  But, these are indicators of whether you are following your vision.  You need the vision, the strategy, the tactics, and then the benchmark metrics.  To do otherwise is running your business blindly.

As a CPA, I tell young business and individuals, that you must find your Blue Ocean before waisting money on a business plan.  To dive into  a Red Ocean is an hour glass for failure.  Once you find your Blue Ocean, you can measure your value to the client and adjust your fee accordingly.

Business and Rock and Roll History Repeats itself

Rick_E_Norris_An_Accountancy_Corporation_Business_and_Rock_and_Roll_History_Repeats_itselfWatch this great performance of Alex Chadwick play 100 Riffs (A Brief History of Rock N’ Roll).  Within about 12 minutes he peels through some of the greatest guitar riffs from the  1950s to the present.  I’ll have to watch it again and learn several of them.

As I watched Alex play these, I was thinking of how much the great guitarists of the last 50 years  evolved using variations of the blues scale.  They mastered the basics and improvised creating sounds that were original and innovative.

As a CPA consultant, I can see that the same type of innovation can be applied to small business while adhering to the basics. It doesn’t matter if you publish music or manufacture tile, the basic business concepts are the same:

  1. What is your small business mission and vision? We are not speaking of the next 5-10 years, but the next 20 years.
  2. Who are your customers? Have you focused on who they are and what are their needs, or are you just throwing out the same product/service as your competitors?
  3. Who are the people in your company that can help you achieve your vision? Are you restricted by family politics? Are you looking at each individual and developing their personal abilities, or are you trying to force a person into a position that they are not qualified to function efficiently?
  4. Do you have the resources to get off the ground and ultimately fulfill your vision? Small businesses fall short when they only focus on the vision and not the resources to creatively navigate there.
  5. Have you identified all of your stakeholders? A stakeholder can be anyone who has a stake in your business: You, your employees, your bank, your suppliers, and customers.
  6. Do you have meaningful metrics to manage your business? How will you know if you are moving in the right direction?  Do you look at the business metrics daily? weekly?  monthly?
  7. Do you have a plan to grow? Many companies get growing pain.  There is a balance to growth.
  8. How do you manage your cash? Have you prepare a budget?  Do you compare you budget to your actual performance?
  9. Are you making alliances? You should not exist as an island but be connected to a network of individuals and companies that enhance your vision.
  10. Do you have the right professional assistance? Small business has gotten more and more complex in the last 50 years.  Leverage those with certain expertise to keep up with the pace.

We see many businesses ignore these points because we sometimes operate as an outside accounting department for companies.  As a CPA firm, we try to help clients not lose focus on what is important to their small businesses.  Even the entertainment clients lose sight of their vision.  All to often they ignore our advice until they fall into a crises.  A crises usually stifles creativity due to the stress.

As a small business, you should constantly reinforce the basic principles.  If you don’t, you might find yourself playing the same three chords while your competitors are composing symphonies.

Deadline Tax Filing Tips from the IRS

Rick_E_Norris_An_Accountancy_Corporation_Deadline_Tax_Filing_Tips_From_The_IRSBack in the 1980’s I lived in the San Fernando Valley near the main post office.  At about 9 pm on April 15th, I would walk my dog to the post office to watch the late tax filers.  A line of cars always stretched around the corner and up the 405 Sherman Way freeway offramp up into the slow lane.  But the best part were the anti-tax people protesting the existence of the income tax.  They would be picketing in front of the post office telling drivers not to throw their returns into the large canvass bins manned by postal employees.  What a circus, I loved it.

If you are one of those last minute people, here are some tips from the IRS:

1. File electronically Most taxpayers file electronically.
If you haven’t tried it, now is the time! The IRS has processed more than 1
billion individual tax returns safely and securely since the nationwide debut
of electronic filing in 1990. In fact, 112 million people — 77 percent of all
individual taxpayers — used IRS e-file last year.

2. Check the identification numbers Carefully check
identification numbers — usually Social Security numbers — for each person
listed. This includes you, your spouse, dependents and persons listed in
relation to claims for the Child and Dependent Care Credit or Earned Income Tax
Credit. Missing, incorrect or illegible Social Security numbers can delay or
reduce a tax refund.

3. Double-check your figures If you are filing a paper
return, double-check that you have correctly figured the refund or balance due.

4. Check the tax tables If you e-file, the software will do
this for you. If you are using Free File Fillable Forms or a paper return,
double-check that you used the right figure from the tax table for your filing
status.

5. Sign your form You must sign and date your return. Both
spouses must sign a joint return, even if only one had income. Anyone paid to
prepare a return must also sign it and enter their Preparer Tax Identification
Number.

6. Send your return to the right address If you are mailing
a return, find the correct mailing address at www.irs.gov.
Click the Individuals tab and the “Where to File” link under IRS Resources on
the left side.

7. Pay electronically Electronic payment options are
convenient, safe and secure methods for paying taxes. You can authorize an
electronic funds withdrawal, or use a credit or a debit card. For more
information on electronic payment options, visit www.irs.gov.

8. Follow instructions when mailing a payment People
sending a payment should make the check payable to the “United States Treasury”
and should enclose it with, but not attach it to, the tax return or the Form
1040-V, Payment Voucher, if used. The check should include the Social Security
number of the person listed first on the return, daytime phone number, the tax
year and the type of form filed.

9. File or request an extension to file on time By the
April 17 due date, you should either file a return or request an extension of
time to file. Remember, the extension of time to file is not an extension of
time to pay.

10. Visit IRS.gov Forms, publications and helpful
information on a variety of tax subjects are available at www.irs.gov.

If you hire a CPA to help you file, you don’t have to worry about these things.  But, just like dancing, everything in taxes depends on timing. So, make sure you stay in step, or it can cost you penalties or delays.  Discuss this with a tax professional before making any decisions.

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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.

Are You a Bomar Enough to Move to the IPad in Your Small Business?

Rick_E_Norris_An_Accountancy_Corporation_Are_You_Bomar_Enough_To_Move_To_the_IPad_In_Your_Small_BusinessBack in the 1970’s, I was amazed at a new small business gadget, the Bomar Brain.  This little $40 calculator could add, subtract, divide, and do other mathematical functions.  You could even carry it with one hand.  Good by to the clunky adding machines whose tapes rolled under the desk across the power cord. Every small business soon had a handheld calculator, though the Bomar Brain faded into the techie sunset.

In the last few years, business has now come to another technological crossroad.  Is the iPad necessary to run a business?  According to Lauri Kulikowski in Why Every Business Needs an iPad?, it is necessary. According to the article, businesses can be flexible with product demos, videos, images in a mobile setting.  This article did not surprise me since I have watched people in the entertainment industry use the iPads to show demos, head shots, and movie clips.

What has kept me from buying an iPad was Microsoft Office.  I was told that iPad did not support Microsoft Office but had its own word processor, spreadsheet, etc.

However, this may have changed.  Check out online.com.  Apparently, Online.com provides an App (either free or $4.99 a month) that can bring the Microsoft Office to life.  I have to try this out, but this could be the missing link for me and the iPad.  Most of my work entails analysis, accounting, etc.  The imaery doesn’t help very much.

However, if you are a small business Android lover, the Onlive Desktop bridges that, too.

Either way, what you must remember in a small business is that technology can open up opportunities and change how your clients see you.  Small businesses must be vigilant with technology.

 

Don’t Mess with Taxes

Rick_E_Norris_An_Accountancy_Corporation_Don't_Mess_With_Taxes(From Marx Brother’s Duck Soup)

The new Secretary of War Chicolini( Marx brother Chico) is discussing the  funding of the war:

Minister of Finance: Something must be done! War would
mean a prohibitive increase in our taxes.

Chicolini: Hey, I got an uncle lives in Taxes.”

Minister of Finance: No, I’m talking about taxes – money,
dollars.

Chicolini: Dollas! There’s-a where my uncle
lives. Dollas, Taxes!

People usually stress about taxes in the first quarter of every year.  What a person doesn’t need is a negligent or dishonest tax preparer.  Brian O’Connell wrote an article, 5 Signs You’ve Got a Lousy Tax Preparer which offered some good advice.  However, the points he raised really seemed to point to a dishonest tax preparer, as opposed to a lousy one.  Here are the points:

  1. Your preparer promises a big tax refund:  This is comical.  Why would a tax preparer proclaim a big refund especially before seeing the documents unless they are going to “create” numbers?
  2. Your preparer doesn’t have proper credentials:  The IRS has really buckled down on the education and registration of tax preparers.  This of course doesn’t apply to CPAs where we have our own standards to adhere to.
  3. The tax preparer requires that your refund be deposited into their bank:  This is a clear red flag to run.  We never take our client’s refunds in any circumstance.
  4. The preparer’s fee is based on a percentage of your refund:  This is another ethical violation for CPAs.  Never take the bait.

Taxes are not something to gamble with.  Make sure you understand your tax return.  Expecially understand where the numbers come from.  Make sure your preparer is not dreaming up numbers.  Discuss any advice given here with your tax advisor before making any decisions.

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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.

Roots and Rooted Maps, the Kunta Kinte of Strategy

Rick_E_Norris_An_Accountancy_Corporation_Roots_and_Rooted_Maps_The_Kunte_Kinte_of_StrategyRemember in the TV series Roots when Omoro, Kunta’s father, held his infant son,Kunta Kinte,  up to starry sky and said, “Behold the only thing greater than yourself!”

I felt the article, Remapping your strategic mind-set by Pankaj Ghemawat was screaming that to egocentric senior executives about mental maps, and the executives’ view of the  world.  Mr Ghamawat wants executives to focus on a “rooted map to leaders enhance their intuition about the opportunities and threats inherent in our semi-globalized world.”  Rooted maps, unlike conventional maps “depict the world from a specific perspective with a specific purpose in mind…They do so by adjusting the sizes and proportions of countries in relation to a specific home country… ”

This type of concept could be used by small business.  Now, the obvious application is for a small business to draw a map according to countries it exports to.  In other words, if their target is countries where English is commonly spoken, then they would “blow up” the size of those countries on the map.

However, a small business that does not export can use the same type of map.  For example, in Southern California a business may want to see which districts are Spanish speaking and “blow” those districts up on a map.  You should also color the districts by size and have a quantitative legend to add  another dimension.

Small businesses have a tremendous ability to act like the big  boys.  As a CPA firm, we see both worlds at times.  Try a map like this and see if it shows you something greater than what you have known.

How does your sales strategy match the map?  How does your allocation of resources match the map?

A CPA’s Guide to Charitable Tax Contribution Documentation

Rick_E_Norris_An_Accountancy_Corporation_A_CPA'S_Guide_To_Charitable_Tax_Contribution_DocumentationYear’s ago I went to great lengths to report and document the tax donation of a client’s Picasso.  The tax return was completed and signed by the qualified appraiser, who supplied by the client.  Little did I know that this appraiser was the same person who sold the art to the client.  When challenged by the IRS, the IRS appraiser carried more weight due to his “independence” over our appraiser.

At this time of year, clients ask what kind of tax documentation is needed for their year end tax donations.  Here is a partial list of tax documentation requirements that may help:

  1. Cash donations: Written communication from the charity and proof of payment for each donation.
  2. Non cash donation of less than $250: Donee receipt.  I always also recommend pictures and a detailed description.
  3. Non cash donation of  $250- $500: Contemporaneous written acknowledgement, pictures and a detailed description.
  4. Non cash donations between $500 and $5,000: Written acknowledgement with all the aforementioned items along with a detailed history of how purchased, date, cost, and form 8283.
  5. Non cash donations over $5,000: Signed Qualified appraisals, form 8283, detailed photos

There are other requirements like for stock, boats, etc.  However, this should provide a good starting point over the next two weeks.  It is recommended that you contact your tax advisor before taking any of these steps.  As CPAs we see  that tax situations vary among taxpayers.  Be careful when claiming tax deductions for any charitble donation.

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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.