Sunday, February 28, 2010

Avoid the rush aka You can stop freaking out!

Now if you are reading this blog you probably fall into 2 categories. People panicked about getting their taxes done, or your CPA who is panicked about you panicked about getting your taxes done.

To both groups I say this… Take a breath.

You are going to figure this out. Yes, taxes can be complicated, but that doesn’t mean you have to have a minor cardiac event thinking about them.

I know you can feel it in your marrow, April 15th looming ahead.

But instead of sticking your head in the sand (besides avoiding that hot kind of mess), let’s figure out what you can do to get those taxes DONE and over with (then you can go into denial for another year).

And do you know who your best friend in this time of crisis is?

Your CPA (they may need oxygen of course to get through it themselves, but that’s another blog).

No matter where you are in the process of organizing your files, call and make your appointment.

Yes, in a perfect world do all CPA dream a little dream of our clients coming in with collated receipts and perfect documents? Of course we do.

But beyond that, we want to help you not only pay the correct (which isn’t always least, however that’s another blog) amount of taxes, but also give you peace of mind.

So no matter if you’ve got a shoe-box filled with a jumble of ketchup-stained receipts and torn W-2’s, make your appointment.

It may feel overwhelming, but imagine how much better you will feel once it is over with.

And then you can make sure to be organized for next year!

Yah, yah, yah, I know that’s another dreaming the impossible dream (and another blog as well!) moment.

Call your CPA
Find W-2s
Gather Receipts (and your wits)

You’ll thank me in the morning :-)

Sunday, February 21, 2010

Love your Kindle? Prepared to pay more taxes to use it?

This week, the LA times ran a story about California seeking to require sales tax on Amazon purchases, despite the fact you are in California but Amazon is not based in the state. Why? So that California can generate sales from the site on all purchases made by residents.

This may seem like quite a stretch but California already has a Use Tax (you ‘use’ – read buy – it, you pay taxes) on the books. Just with the current fiscal conditions, the state is looking to enforce it.

But how are they going to do it? Let’s take a look at the excerpt from the Franchise tax Board on Use Tax:

""You may owe use tax on purchases you made from out-of-state or Internet sellers. Use tax is similar to the sales tax paid on purchases you make in California. You may report use tax on your income tax return instead of filing a use tax return with the State Board of Equalization. To report use tax on your income tax return, use the Use Tax Worksheet in the tax booklet.""

I don’t know about you, but I have no idea how to interpret that code, so I’m not surprised no one at the FTB knows either.

In my practice we have been inquiring the FTB about whether a taxpayer actually incurred some use tax or not in 2009 and are required to report same in their tax returns.

To add fuel to fire I have recently read that the FTB may look at the USE TAX as an audit area.

So it’s a damned if you do and damned if you don’t situation.

Let’s break it down: If you don’t report your purchases (and associated taxes) you could be audited. If you do report your purchases this could trigger a red flag and the FTB audit for not declaring enough. Go figure.

Here’s another problem. What about if I live in California, but am vacationing in Arizona and I download a book and read it while in Arizona. Do I have Use Tax on this?

How is the FTB going to rule on that?

And lastly, who is going to enforce this new tax? The FTB, who are already overworked and over burdened, or some other agency?

Good luck and welcome to sunny, beautiful, yet aggressively taxed, California.

Sunday, February 14, 2010

So is this Hire An Employee Tax Credit all that it’s cracked up to be?

Short answer? No.

Longer answer? Probably not. I’m getting a lot of feedback from my business clients that they are starting to feel the benefit from the stimulus package, but new hires are still a ways off.

So this tax credit is almost a non-starter.

One client broke it down beautifully (as a matter of fact I’m totally going to start taking credit for this analysis!)…

By the time he pays for a new employee’s health insurance, payroll taxes, and CA worker’s comp insurance, this tax credit wouldn’t even begin to chip away at the cost of a new employee.

The government needs to understand that an employee’s salary is just the tip of the financial outlay for an employer.

And I can believe it!

In our office our health care costs went up again this year from 11% to 12%. That’s real money.

Real money I must pay out on my current employees that I can’t spend on hiring a new one.

What’s the answer?

I’m not sure, but this new tax credit was no bull's eye!

Upside down? Underwater? Drowning?

This week I’ve been inundated (it’s tax season so when I say inundated, I mean all seven lines ringing off the hook) with clients distraught they are completely underwater in their homes, that no matter how much they tighten their belts, they simply cannot pay their mortgage anymore.

Know you are not alone. People who would never dream of walking away from their house are packing their bags.

Making it even harder to make this heart-breaking decision is the implication from numerous, national articles discussing the fact that walking away from a toxic mortgage is somehow immoral.

Wait a minute. The banks are reaming millions of Americans while making record profits and one of my clients who lost his job and can’t pay his exorbitant, interest-inflated mortgage is somehow the villain in this scenario?

And just when we need some actual action from the Feds, they want out of the rocky mortgage business because it’s so rough and tumble.

Just think about it for a minute. If the banks were forced to lower everyone’s interest rate down to 3% or even 3.5%?

How would that change my client’s life let alone the American economy as a whole?

First off, the vast majority of mortgages jeopardized would be brought current. Not only would it resolve the looming 2.4 million foreclosure disaster, it would help people that haven’t defaulted yet.

Those people barely keeping their heads above water to make their payments would have more discretionary income to buy things. And isn’t that exactly what all the economists keep saying will jump start the economy?

We need to buy more. We as Americans need to invest again. But how can we as a society when every penny goes to the bank in 7% interest payments?

It seems the government stepped in and dictated (well, at least to a certain degree) to the credit card companies what is fair and accepted interest rates.

Why aren’t they demanding the same of the home loan industry?

If you lose your credit card, there are of course consequences.

But if you lose your house? Families are destroyed.

Wouldn’t an overhaul of the ARM interest rates be a win/win for everyone? The homeowner, the local businesses, the stock market.

Well, for everyone but the banks.

But you know what? We bailed them out once.

I think it is about time for them to return the favor!

Tuesday, February 9, 2010

You’ve just received an IRS audit notice. Wait, don’t faint, you haven’t actually gotten one, this is just a blog in case you do!

Okay, let’s PRETEND (you can put your asthma inhaler away, we are only pretending) you’ve gotten an IRS notice in the mail.

There’s basically two ways to handle this. One is the ‘headache’ client way, the other is the ‘Gold Star’ client way. I’ll let you figure out which is which! ☺

1. Clean up pee on floor.
2. Panic (or did that happen just before #1?)
3. Call everyone you know, except your accountant
4. Listen to your friends who tell you to call the IRS immediately or you
will go to jail…
5. Call the IRS yourself
6. Curl up into the fetal position wishing you had instead…

1. Faxed your notice to your accountant (now that you are BFFs and everything)
2. You write a mild to moderately panicked cover letter
3. You wait patiently for your CPA to call you back (alright, fine go
ahead and pace)
4. You do NOT call the IRS yourself like everyone else is urging you to do
5. You remind yourself you do not need to panic because your CPA rocks
and will handle this on your behalf.

Okay, so pretty obviously the second scenario is the Gold Star client.

And do you know why they held it together so well (maybe so well is an over-statement, but at least they didn’t call the IRS) is their CPA had told them from the get-go that 85-90% of these letters can be resolved with a simple letter or phone call from your CPA.

Minimal fuss, muss, or bother.

Pick a good accountant and they will be good to you (and forgive you for the fourteen messages you leave that day)!

Monday, February 8, 2010

How to prepare for your appointment with the CPA, or a.k.a. how to be your account’s BFF

Alright, you’ve found a CPA you can hopefully bond with for a lifetime (or at least this tax season, you don’t want to be easy or anything), and you’ve got an appointment.

Actually let’s call it a first date, because that’s what it is.

You are checking them out to see if they’re a keeper while she is trying to see if you are going to be a pain in their booty. You know, usual date stuff.

And just like a first date, you want to put your best foot forward. Unlike a romantic date, instead of turning attention to your make-up or wardrobe, on this first date it matters what you bring to the table.

I mean, literally to the table. The quality of items you hand over to your CPA is going to put you squarely either in the pain in the booty or Gold Star category.

Bring your W-2s. Your receipts. Your interest statements.

Basically if you spent your hard-earned money on something and you want to deduct it, you need to, ya know, give that info to your CPA.

I can’t tell you how many people want to deduct their gas and mileage for work related travel.

“Great,” I say, “Let’s total up your expenses.”

The Pain in Booty Client answers, “Um, my bro was with me in the car, he’ll vouch for me.”

I say… (well after a slight pause) “Um… the I.R.S. doesn’t operate on the buddy system. We kind of need proof.”

The Gold Star Client answers, “Here are my receipts and thank you, CPA for helping me so kindly and efficiently.” (Okay, that last part never really happens, but hey, it’s my role-playing scenario so let me have my props! :-)

Now that was my side of the equation. What should you be looking for in this first date to know if this CPA is your CPA?

For me, the most important indicator is if the accountant asks you forward thinking questions. Because, honestly, the taxes are the easy part (I know, you can whack me later for being so cavalier). It is making the tax code WORK for you that is the more challenging part.

Are you starting an at-home business? How will the deductions you take this year affect your returns next year?

Are you investing enough in your retirement?

This is YOUR money. This is how you decide your life-style.

How much taxes, and even type of taxes, you pay directly affects every aspect of your life, nearly every day.

Why would you want an accountant that doesn’t care about that? That doesn’t ask you about your spending patterns or your plans for the next year?

These are the questions that will decide whether you can fund your hopes and dreams or not. We might want to spend a few minutes in this meeting talking about them, right?

Alright, now that you are prepared, head out to that first date with confidence (and lots and lots of receipts).

And if you find “The One,” be sure to thank them for being so kind and efficient!

Hehe Even an accountant can dream!

Wednesday, February 3, 2010

I need a CPA Stat!

But tax consultants aren’t one size fits all.

T-Day, April 15th is fast approaching. Your family is doing it. Your friends are doing it. Your mother is even doing it.

Making the dreaded appointment with an accountant to get their taxes done. Only the cringe-worthy dentist appointment strikes as much fear into the hearts of good men and women alike.

But does it have to be that bad?

CPAs don’t steal children or eat puppies (well, at least the ones I know).

For the most part they are just hard working folks like you, using their skills to help their clients.

Oh, and deal with I.R.S. on a daily basis. We’re the middleman between real people and those that want to claim your money. For that alone we should maybe rank a few rungs above the spit-in-the-cup doctor, right?

But I digress.

As always a personal reference to a tax specialist is best, from someone who is really, really, happy with their accountant, but even that might not be a good match.

So once you figure out a CPA and get them on the phone, just make sure you two can communicate.

If the guy seems kind of down, like you want to get him a sample pack of Prozac, maybe not the right guy to be planning your financial future.

Or on the other hand is she super cheery and promising you the moon? Slash your taxes in half and save you a bundle?

Sounds great, right? But what about it that screws you over for the business you are starting? Or disqualifies you for an even bigger deduction next year?

You don’t want a wham-bam-thank-you-madam type relationship with the person who is standing between you and an I.R.S. audit, you know what I mean?

You want someone in this for the long haul. Someone who wants to know more about you and your business and your goals and your future before they tell you they can help you. Well that, and doesn’t seem homicidal.

Tuesday, February 2, 2010

Tax Day is Just 70 Days Away!

Ah, I can hear the anguished screams echoing across America.

But it doesn't have to be painful. Okay, maybe a little painful, I mean any money leaving your pocket involuntarily is going to smart, but the more you prepare, the less will be flying out of your account April 15th.

So take a breath. But not too many. I can sense (with my Bond-like observational skills) that many of you are saying to yourself 'hey, it's SEVENTY days away. That's like two months and some change.' We've got plenty of time.

While I do not like to make people hyperventilate, the terms, 'paying taxes' and 'plenty of time' seldom play well together!

The first question you ask might ask yourself is, do I have a professional tax expert I can trust? Not your uncle's best friend's neighbor who got all his money back last year or an unnamed large corporation who cares more about their fees their your deductions.

I mean a well-seasoned, up-to-the-minute CPA who has built their practice on years of saving individuals and corporations millions in taxes.

And no, I'm not talking specifically about me, but someone who has the experience and skills to maximize your refund and protect your ass...ets :-)