A friend and I saw the play, Scorched Earth, at the Barksdale Theater (Willow Lawn) last night. It is a powerful and challenging production in many ways, not the least of which is the question of whether a mixed race baby, dead shortly after birth, can appropriately be buried in the cemetery of her white mother's church.
That isn't the only thought provoking moral question posed by this play. Based on author/playwright David Robbins' book of the same title, the audience is challenged to respond to conflicts of truth versus justice, forgiveness versus accountability and more.
Don't expect everything to be tied up in a neat little package with all the questions answered. During the play I said to myself more than once, "I didn't see that coming." Since then I've been asking myself, "what happens next in that town," and "did that character do the right thing?" During a Q&A with Robbins and some of the actors after the performance one audience member called out, "sequel" as these unanswered questions were being discussed.
The acting was superb. There's not a weak link in the cast. The set and lighting contributed greatly to the effectiveness of the performance. Director Steve Perigard helped the actors use Robbins' words to craft a great evening. A few ironic chuckles were generated during the show but this is definitely not a laugh-fest.
Scorched Earth is a joint production of the Barksdale and Theater IV and runs through May 20th. Show times and tickets are available here.
Sunday, April 29, 2012
Tuesday, April 17, 2012
Tax Season and Tax Audits
Today marks the "official" end of busy season for most CPA firms and other tax professionals. Now all we have to do is deal with returns our clients agreed needed to be extended. Since those extensions are for six months, there will be another mini-busy season ending on October 15th.
Returns get extended for a number of reasons, most of them related to missing information that should be provided to our clients by partnerships, small business corporations (S-corps) and investment managers. Procrastination being what it is, many of those returns will not be completed until this autumn.
Another source of business for tax practitioners is IRS audits. Tax audits are most often handled by mail and are, reasonably enough, called correspondence audits. The IRS sends a letter to the taxpayer (called a CP2000 or 30-day letter) informing the taxpayer that he, she or they failed to include some income on their tax return of a recent year and assessing taxes, interest and penalty for that omission. The taxpayer has 30 days to respond. If the taxpayer doesn't respond, a 90-day letter is issued. At that point, the taxpayer has 90 days to resolve the issue with the IRS or to file a petition with the United States Tax Court.
Too many people respond by writing a check. If the amount is significant, don't do that. The amount the IRS wants is often more than the taxpayer owes. For example, suppose you bought some stock a few years ago and paid $3,000. In 2010, you sold that stock for $2,000 but forgot to report the sale on your tax return. When the IRS notices, they will send you a bill for back taxes on the full $2,000 as if it were ordinary income -- about $500 for most people plus a year's interest ($15) and penalties ($15 minimum, maybe another $100 for being negligent) for a total of as much as $630. However, instead of owing more taxes, this taxpayer is owed a refund for the missing $1,000 capital loss ($150 to $250 for most people). That's a swing of over $780 to $880. And, that is why, when the IRS says you owe more money, you should seriously consider hiring a tax professional (Certified Public Accountant or Enrolled Agent) to resolve the issue, particularly when you know there are unreported costs associated with that income you forgot to report.
Correspondence audits are sent out year round. More detailed audits tend to occur more often in the summer and fall when either the taxpayer is invited to the IRS office (an office audit) or the IRS visits the taxpayer (usually a business) at the taxpayer's location. In both cases, the taxpayer should engage the services of a tax professional to represent his or her interests.
Again, the IRS has ways of learning about income you may have omitted from your tax return. They don't have a way of determining the deductible costs you incurred creating that income. Do not automatically write a check but, also, do NOT ignore correspondence from the IRS. Deal with it and deal with it by the specified deadline.
Returns get extended for a number of reasons, most of them related to missing information that should be provided to our clients by partnerships, small business corporations (S-corps) and investment managers. Procrastination being what it is, many of those returns will not be completed until this autumn.
Another source of business for tax practitioners is IRS audits. Tax audits are most often handled by mail and are, reasonably enough, called correspondence audits. The IRS sends a letter to the taxpayer (called a CP2000 or 30-day letter) informing the taxpayer that he, she or they failed to include some income on their tax return of a recent year and assessing taxes, interest and penalty for that omission. The taxpayer has 30 days to respond. If the taxpayer doesn't respond, a 90-day letter is issued. At that point, the taxpayer has 90 days to resolve the issue with the IRS or to file a petition with the United States Tax Court.
Too many people respond by writing a check. If the amount is significant, don't do that. The amount the IRS wants is often more than the taxpayer owes. For example, suppose you bought some stock a few years ago and paid $3,000. In 2010, you sold that stock for $2,000 but forgot to report the sale on your tax return. When the IRS notices, they will send you a bill for back taxes on the full $2,000 as if it were ordinary income -- about $500 for most people plus a year's interest ($15) and penalties ($15 minimum, maybe another $100 for being negligent) for a total of as much as $630. However, instead of owing more taxes, this taxpayer is owed a refund for the missing $1,000 capital loss ($150 to $250 for most people). That's a swing of over $780 to $880. And, that is why, when the IRS says you owe more money, you should seriously consider hiring a tax professional (Certified Public Accountant or Enrolled Agent) to resolve the issue, particularly when you know there are unreported costs associated with that income you forgot to report.
Correspondence audits are sent out year round. More detailed audits tend to occur more often in the summer and fall when either the taxpayer is invited to the IRS office (an office audit) or the IRS visits the taxpayer (usually a business) at the taxpayer's location. In both cases, the taxpayer should engage the services of a tax professional to represent his or her interests.
Again, the IRS has ways of learning about income you may have omitted from your tax return. They don't have a way of determining the deductible costs you incurred creating that income. Do not automatically write a check but, also, do NOT ignore correspondence from the IRS. Deal with it and deal with it by the specified deadline.
Thursday, April 5, 2012
Audit Protection Racket
Someone might ask, "Hey, Bill, why don't you get into the audit protection racket?" Because it's a racket, I would reply.
On average, 3% or so of the tax returns filed in a year are audited. Averages are deceiving. If all your income is from W-2s, interest and dividends then your chances of being audited are probably immeasurably small (not counting those notifications by mail that you left out the interest reported on a 1099).
So what about these outfits offering "audit protection?" They claim for a low monthly fee that they will represent you if you're audited by the IRS. For example, one of them offers four plans, the 2nd lowest cost one being what they call their "Premium" plan. If you're audited, you get up to 20 hours of a professional's time to deal with the IRS on your behalf. To get that "protection," you pay $12.95 per month.
Let's do what accountant's do. Let's run the numbers. Let's assume that 100 people buy that "Premium" coverage which means the provider takes in $1295 per month or $15,540 per year. A generous assumption would be that 2 of those returns would be audited during the year. The audits I've handled required 4 or 5 hours of my time but let's assume the average here is 7 hours and the provider's hourly cost including direct overhead items is $300 per hour. That means $4,200 go out. Gross profit on the year from those 100 suc... er .. clients is over $11,000.
Each individual pays about $155 per year for "audit protection" (but see below). If the taxpayer passed on this deal and just hired a CPA or EA if and when he/she were actually audited, the cost would probably be less than $2,000 and often a lot less. You would have to be audited about every 12 years, about four times the average, to be money ahead on this deal.
Besides 20 hours of audit defense time and 60 minutes of telephone time, the "Premium" package also says you get $5,000 of "Audit Protection." What is that? I'll tell you what the seller wants you to think. They want you to think they will pay the first $5,000 of any balance due if you get audited. Don't think that because it is NOT true. If you dig into the membership agreement you learn that $5,000 is the maximum value of the services they will provide you if you're audited.
In general, the IRS has three years to audit a properly filed tax return. If you filed your 2008 tax return on or before the April 15th 2009 due date, the IRS has until April 17th of this year to initiate an audit (unless you failed to report a bunch of income in which case they have until April 15, 2015). For most situations, if your 2008 return was going to be audited you would have found out about it in 2010 or 2011 at the latest.
Here's another gotcha. The membership agreement defines "covered return" as "a tax return for a single tax year in which the member was active and in good standing with us and at the time of such Internal Revenue Service Audit the member was and is currently an active member in good standing." What does that mean if you joined up today? First, it means tax years occurring before you joined aren't covered. You didn't join in 2011 so 2011 and earlier years aren't covered. Second, even though 2012 would apparently be covered you have to maintain your membership until that year is actually audited or you're not covered after all. So, scratch that $155 above. It's really going to cost you about $310 to have 2012 covered and you probably won't be audited anyway.
There you have it. These guys are offering a better deal (for themselves) then selling extended warranties on electronic goods or running a casino.
One more thing, these audit protection outfits have a very poor track record of actually providing the promised services to their clients that are actually audited. You pay your money, you get audited, you inform your audit protection company, they do nothing, the IRS hasn't heard from you or anyone else and concludes you're a scofflaw, you pay the IRS even more than the original assessment, the racketeer goes on to the next victim.
Audit Reports on the IRS - the not perfect and the pretty bad
The Treasury Inspector General for Tax Administration (TIGTA) has issued two press releases dealing with IRS operations. The first, issued on April 3, is headlined, "IRS Computer Security Center Effective, Could Be Better." The problems with Computer Security Incident Response Center (CSIRC) include the "host-based intrusion detection system is not monitoring 34 percent of IRS servers, which puts the IRS network and data at risk." Overall, though, CSIRC is described as "effectively performing most of its responsibilities for preventing, detecting, and responding to computer security incidents." And, "The IRS agreed with the recommendations and corrective actions are planned or in process for five of the six recommendations." The press release is here and the audit report is here.
The 2nd press release, issued today, is not so favorable. "TIGTA Finds IRS Designated Payment Codes Inaccurate and Ineffective." The IRS is supposed to keep track of payments from tax payers in a manner that allows appropriate people within the IRS to later determine what a payment was for. This is important when determining what additional collection actions may (or may not) need to be taken. Designated Payment Codes (DPCs) are supposed to be used to provide that information when the payment is related to an IRS enforcement action. "TIGTA reviewed a statistical sample of 138 subsequent payments that posted to taxpayer balance due accounts. Auditors determined that 106 (77 percent) of the 138 subsequent payments were processed without the required DPC. In addition, 11 (34 percent) of the 32 subsequent payments that had a DPC were not accurate." 138 may not sound like a large sample but if it was randomly selected from even a very large population, then it probably gives a good picture of that population. Part of the problem is the IRS does not have DPCs for many payment types and the procedures for applying DPCs are inconsistant. The press release conclusion states, "TIGTA made five specific recommendations to encourage the IRS's more consistent and accurate use of DPCs. IRS management disagreed with TIGTA's findings and recommendations and said they plan to complete their own review of DPCs. TIGTA noted that the IRS has already completed an internal study and did not use its results due to concern over its reliability. The IRS took no further action except to initiate another study." The press release is here and the audit report is here.
There have been enough horror stories about computer systems being hacked into for people to understand threats implied in the April 3 press release. Not coding payments correctly may not be seen as that big a deal -- until you make a payment and the IRS says you didn't because they couldn't code it properly. Sure, the problem gets worked out eventually but not until you (or your accountant) have spent a lot of time proving you did what you said you did.
Taxpayers can maximize the chances of receiving proper credit for a payment by following the related instructions. Send the payment to the correct address. Include any required documentation. Indicate on the memo line of the check what the payment is for.
For what it's worth, this statement caught my eye. "... the IRS has already completed an internal study and did not use its results due to concern over its reliability. The IRS took no further action except to initiate another study." One definition off irrational behavior is doing the same thing over again and expecting a different outcome. I guess (or hope) the second study is being conducted differently from the first.
The 2nd press release, issued today, is not so favorable. "TIGTA Finds IRS Designated Payment Codes Inaccurate and Ineffective." The IRS is supposed to keep track of payments from tax payers in a manner that allows appropriate people within the IRS to later determine what a payment was for. This is important when determining what additional collection actions may (or may not) need to be taken. Designated Payment Codes (DPCs) are supposed to be used to provide that information when the payment is related to an IRS enforcement action. "TIGTA reviewed a statistical sample of 138 subsequent payments that posted to taxpayer balance due accounts. Auditors determined that 106 (77 percent) of the 138 subsequent payments were processed without the required DPC. In addition, 11 (34 percent) of the 32 subsequent payments that had a DPC were not accurate." 138 may not sound like a large sample but if it was randomly selected from even a very large population, then it probably gives a good picture of that population. Part of the problem is the IRS does not have DPCs for many payment types and the procedures for applying DPCs are inconsistant. The press release conclusion states, "TIGTA made five specific recommendations to encourage the IRS's more consistent and accurate use of DPCs. IRS management disagreed with TIGTA's findings and recommendations and said they plan to complete their own review of DPCs. TIGTA noted that the IRS has already completed an internal study and did not use its results due to concern over its reliability. The IRS took no further action except to initiate another study." The press release is here and the audit report is here.
There have been enough horror stories about computer systems being hacked into for people to understand threats implied in the April 3 press release. Not coding payments correctly may not be seen as that big a deal -- until you make a payment and the IRS says you didn't because they couldn't code it properly. Sure, the problem gets worked out eventually but not until you (or your accountant) have spent a lot of time proving you did what you said you did.
Taxpayers can maximize the chances of receiving proper credit for a payment by following the related instructions. Send the payment to the correct address. Include any required documentation. Indicate on the memo line of the check what the payment is for.
For what it's worth, this statement caught my eye. "... the IRS has already completed an internal study and did not use its results due to concern over its reliability. The IRS took no further action except to initiate another study." One definition off irrational behavior is doing the same thing over again and expecting a different outcome. I guess (or hope) the second study is being conducted differently from the first.
Wednesday, April 4, 2012
TaxMasters
The ads are typical and grossly misleading. "Settle your IRS debts for pennies on the dollar." Yeah, right, 98 pennies on the dollar.
A couple of weeks ago, one of the better known (advertising does work) of these outfits filed for bankruptcy, "just as it was preparing to head to court to defend itself from charges of deceptive practices leveled by the Texas attorney general." Now, the verdict is in. A Texas jury as decided that TaxMasters has to pay $195 million in restitution and civil penalties. It remains to be seen whether anyone will face criminal charges.
In fact, if you've been hit with an IRS assessment for back taxes, interest and penalties then you probably should engage a tax professional to represent you. For administrative appeals within the IRS (the usual first step) an Enrolled Agent (EA) or Certified Public Accountant (CPA) can provide the assistance you need. If you're going to court, then an attorney will be required.
Those IRS assessments are often wrong, at least in part, and a tax pro can help identify those errors. Even if the IRS is correct on the amount of taxes owed, it is still often possible to get penalties removed or reduced if your true story is good enough. In short, do not blindly assume the IRS is correct and send them a check. Get help FIRST.
There are plenty of local CPAs, EAs and tax attorneys who can help you if you have tax problems with the IRS. You do not need to go online to hire some outfit in Texas, Nevada, Tennessee or Kansas.
A couple of weeks ago, one of the better known (advertising does work) of these outfits filed for bankruptcy, "just as it was preparing to head to court to defend itself from charges of deceptive practices leveled by the Texas attorney general." Now, the verdict is in. A Texas jury as decided that TaxMasters has to pay $195 million in restitution and civil penalties. It remains to be seen whether anyone will face criminal charges.
In fact, if you've been hit with an IRS assessment for back taxes, interest and penalties then you probably should engage a tax professional to represent you. For administrative appeals within the IRS (the usual first step) an Enrolled Agent (EA) or Certified Public Accountant (CPA) can provide the assistance you need. If you're going to court, then an attorney will be required.
Those IRS assessments are often wrong, at least in part, and a tax pro can help identify those errors. Even if the IRS is correct on the amount of taxes owed, it is still often possible to get penalties removed or reduced if your true story is good enough. In short, do not blindly assume the IRS is correct and send them a check. Get help FIRST.
There are plenty of local CPAs, EAs and tax attorneys who can help you if you have tax problems with the IRS. You do not need to go online to hire some outfit in Texas, Nevada, Tennessee or Kansas.
Sports Quest
As you probably know by now, Dr. Steve Burton is now the former CEO of SportsQuest in Chesterfield County. The new CEO, Dudley Duncan, was selected by a new board of directors.
So far, the project has been a mixture of successes and failures. A series of soccer tournaments have had major positive impacts on the county economy, particularly restaurants and hotels in the immediate area. For example, a few days after one of the first week-end soccer events, an employee at Panera's on Brad McNeer Parkway reported that Saturday had been the busiest in the history of that location. Noteworthy is that interest has already been expressed by another sports/recreation business (RISE) in acquiring the soccer fields.
Not much else has gone right for SportsQuest. Unpaid bills are in 7 figures, law suits abound, and the state AG's office is in the mix.
My own view is the overall project will be a success. It may continue as a single operation or it may be in pieces but there will be an extensive presence of outdoor (for sure) and indoor (farther into the future) recreation on the current SportsQuest property.
Also in my view, Steve Burton is part of a group of entrepreneurs who can generate great ideas but often have difficulty with the implementation. In this case, I believe he tried to go too far, too fast. Hopefully, Dudley Duncan and the new board of directors will bring a more measured, considered pace as opportunities are identified and exploited.
News stories are here, here, and here.
So far, the project has been a mixture of successes and failures. A series of soccer tournaments have had major positive impacts on the county economy, particularly restaurants and hotels in the immediate area. For example, a few days after one of the first week-end soccer events, an employee at Panera's on Brad McNeer Parkway reported that Saturday had been the busiest in the history of that location. Noteworthy is that interest has already been expressed by another sports/recreation business (RISE) in acquiring the soccer fields.
Not much else has gone right for SportsQuest. Unpaid bills are in 7 figures, law suits abound, and the state AG's office is in the mix.
My own view is the overall project will be a success. It may continue as a single operation or it may be in pieces but there will be an extensive presence of outdoor (for sure) and indoor (farther into the future) recreation on the current SportsQuest property.
Also in my view, Steve Burton is part of a group of entrepreneurs who can generate great ideas but often have difficulty with the implementation. In this case, I believe he tried to go too far, too fast. Hopefully, Dudley Duncan and the new board of directors will bring a more measured, considered pace as opportunities are identified and exploited.
News stories are here, here, and here.
Monday, April 2, 2012
Deadline Approaching
April 17th is a deadline for more people than those of us who have to file a 2011 federal income tax return.
It is also the "drop dead" date for people who have not yet filed their 2008 tax return and are owed a refund. That's because the Internal Revenue Code (a law passed by Congress, not made up by the IRS) says that you have three years from the original due date to file a tax return and get any refund owed to you. The due date for 2008 federal tax returns was April 15, 2009 -- almost three years ago.
Suppose you haven't filed any returns for 2008, 2009 and 2010 and you're due a refund for 2008. The IRS might hold your check for 2008 until you file 2009 and 2010, just in case you owe for those years. They will also hold a refund if you have any other unpaid tax liabilities they know about or for things like back child support. Even then, filing your 2008 return could reduce those debts which is a good thing.
It is also the "drop dead" date for people who have not yet filed their 2008 tax return and are owed a refund. That's because the Internal Revenue Code (a law passed by Congress, not made up by the IRS) says that you have three years from the original due date to file a tax return and get any refund owed to you. The due date for 2008 federal tax returns was April 15, 2009 -- almost three years ago.
Suppose you haven't filed any returns for 2008, 2009 and 2010 and you're due a refund for 2008. The IRS might hold your check for 2008 until you file 2009 and 2010, just in case you owe for those years. They will also hold a refund if you have any other unpaid tax liabilities they know about or for things like back child support. Even then, filing your 2008 return could reduce those debts which is a good thing.
Thursday, March 29, 2012
Traffic Alert - Richmond Area
March 29 (Thursday)
I-95 north/south – From 8 p.m. Thursday through 6 a.m. Friday, I-95 will be reduced to one travel lane in each direction at Laburnum Avenue (mile marker 79) as crews replace the I-95 northbound bridge over Laburnum Avenue. I-95 north traffic will merge onto the southbound bridge. Both I-95 north and south traffic will use the southbound bridge to maneuver around the construction. Also, Boulevard drivers will be restricted from accessing the ramp to I-95 north during the nightly bridge replacements. Expect major delays along I-95. Use I-295, Route 288 and the Downtown Expressway (toll)/I-195 to bypass the construction.
From: http://www.virginiadot.org/projects/richmond/i-95_bridges.asp
I-95 north/south – From 8 p.m. Thursday through 6 a.m. Friday, I-95 will be reduced to one travel lane in each direction at Laburnum Avenue (mile marker 79) as crews replace the I-95 northbound bridge over Laburnum Avenue. I-95 north traffic will merge onto the southbound bridge. Both I-95 north and south traffic will use the southbound bridge to maneuver around the construction. Also, Boulevard drivers will be restricted from accessing the ramp to I-95 north during the nightly bridge replacements. Expect major delays along I-95. Use I-295, Route 288 and the Downtown Expressway (toll)/I-195 to bypass the construction.
From: http://www.virginiadot.org/projects/richmond/i-95_bridges.asp
Monday, March 26, 2012
Abusive Home-Based Business Tax Schemes
One of the tax breaks for some start-up businesses is the fact that some otherwise non-deductible personal costs become deductible as home office expenses if certain conditions are met. To be qualified, the home office must be used regularly and exclusively for the taxpayer's trade or business. The home office deduction amount is limited to the profits earned by that trade or business.
Unfortunately, criminals have used, and continue to use, this feature of the tax law as a part of schemes to rip off unsuspecting people. The IRS has information on some of the perpetrators of these schemes here. These include people who have gone to prison for tax evasion, money laundering, fraudulent use of the U.S. mail and other crimes.
By the way, most of these home based business cons were pyramid schemes as well.
Unfortunately, criminals have used, and continue to use, this feature of the tax law as a part of schemes to rip off unsuspecting people. The IRS has information on some of the perpetrators of these schemes here. These include people who have gone to prison for tax evasion, money laundering, fraudulent use of the U.S. mail and other crimes.
By the way, most of these home based business cons were pyramid schemes as well.
Friday, March 16, 2012
Damages for Physical Injury or Illness
The general question is, "if I get compensation for damages someone else has done to me, is the money taxable?"
As with any tax question the answer is, it depends. That money is usually taxable, however.
A more specific question is, "if I get compensation for physical injury or illness that someone else has inflicted upon me, is the money taxable."
The answer is still, it depends, but settlements like these are usually not taxable.
Here is the general rule.
"So what's the big deal," you might ask. "It doesn't seem like rocket science."
Do be sure to read the disclaimer at the top right of this page.
As with any tax question the answer is, it depends. That money is usually taxable, however.
A more specific question is, "if I get compensation for physical injury or illness that someone else has inflicted upon me, is the money taxable."
The answer is still, it depends, but settlements like these are usually not taxable.
Here is the general rule.
- The settlement has to be for a tort or tort-like action. "Tort" is one of those legal-babble terms that means you got damaged by someone else. You don't have to go to court for this requirement to be met.
- The settlement has to be because of a physical injury or illness. Making you bleed is what we call a "good fact." Internal bleeding counts. So do bruises.
"So what's the big deal," you might ask. "It doesn't seem like rocket science."
You would think. However, there are a lot of people running around out there who believe there are other exceptions. Here are some myths in descending order of pervasiveness.
- Myth #1: If you get physically injured by someone else and they compensate you for lost income, that part is taxable. Not so! It makes no difference how the dollar value of the physical injury is computed, the payment is still tax free.
- Myth #2: If the compensation includes an amount for emotional distress or something similar, that part is taxable. This one is trickier because another part of the tax code says compensation for emotional distress is taxable. However, that other part refers to emotional distress when that's the only damage done to the person. If the emotional distress (including pain and suffering) is a result of the physical injury, the payment is still tax free.
- Myth #3: Payments to anyone besides the injured party are taxable. Wrong again. If a person is banged up in an automobile accident and the spouse gets a payment for his/her suffering as a result of that accident, those payments are tax free. If a spouse is killed by someone else in an accident and the settlement results in the estate getting money, the estate does not have taxable income. If that settlement goes to the surviving spouse or other family member, the payment is still tax free.
Do be sure to read the disclaimer at the top right of this page.
Thursday, March 15, 2012
Invitation to be scammed
Here is how the scam works.
"""""""
Start your own <pick a job> business
First things first. The only way you can start a new business and reduce your tax liability is to lose money on that business. If you are losing money, you aren't making $100 an hour. Additionally, most of these "reduce your taxes" come-ons revolve around taking a home office deduction. However, one of the requirements for taking a home office deduction is making a profit. If you're making a profit, your tax liability goes up. If you're already losing money, your home office deduction is zero.
Most of these "opportunities" are nothing more than poorly disguised pyramid schemes. What you're really invited to do is either pay an upfront fee, or work for free, in order to acquire the right to sell the "opportunity" to the next sucker.
Here's my offer. If you want to pay someone to watch you read IRS Publication 17, Your Income Taxes, I'm available. Plus, one hour free of my watching you read if you can figure out specifically what prompted this post (and tell me what it was, of course).
"""""""
Start your own <pick a job> business
- You can earn $100/hour <or some other pie in the sky number per some time period>
- You can work whenever and however you want <not if you want a successful business>
- You can reduce your own tax liability <yeah, right>
- You will be in demand for your skills <if you have marketable skills>
- You can work from home <or not, depending on local zoning regulations>
- You can work full-time or part-time <depending upon whether or not you want a profitable business>
First things first. The only way you can start a new business and reduce your tax liability is to lose money on that business. If you are losing money, you aren't making $100 an hour. Additionally, most of these "reduce your taxes" come-ons revolve around taking a home office deduction. However, one of the requirements for taking a home office deduction is making a profit. If you're making a profit, your tax liability goes up. If you're already losing money, your home office deduction is zero.
Most of these "opportunities" are nothing more than poorly disguised pyramid schemes. What you're really invited to do is either pay an upfront fee, or work for free, in order to acquire the right to sell the "opportunity" to the next sucker.
Here's my offer. If you want to pay someone to watch you read IRS Publication 17, Your Income Taxes, I'm available. Plus, one hour free of my watching you read if you can figure out specifically what prompted this post (and tell me what it was, of course).
Check out those charitable organizations
The IRS has announced, in News Release 2012-34, the creation of an online search tool to get information about exempt organizations. Unfortunately, if all you have is the name, this might not be too useful. A search for "American Red Cross" yielded 21,146 hits and "American Cancer Society" yielded 34,931. Unfortunately, adding Atlanta, GA (the location of its headquarters) to the ACS search still provided 130 hits. The ACS was 4th on that shorter list but what if it had been 97th?
Maybe you better get its tax ID number from any charitable organization you have doubts about. A search with that number should yield one hit.
The search tool itself is accessible here.
Maybe you better get its tax ID number from any charitable organization you have doubts about. A search with that number should yield one hit.
The search tool itself is accessible here.
Wednesday, March 14, 2012
It's education, stupid
Will Davis said it again. "The quality of [local] schools is the deal maker or breaker on many [economic development] projects." The managers of those companies thinking about investing in Chesterfield don't just ask about the schools, they point at a specific one and say, "I want a tour. Now." Not in a couple of months after some cosmetic fix-ups.
Virginia enjoys a reputation for quality education at all levels. So does Chesterfield County. However, that reputation is on the brink of being flushed down the toilet by a state legislature with too many members who cannot, or will not, think beyond the next election.
In Chesterfield, some of the new School Board members show signs of (1) seeing the connection between quality physical plant (an important component of quality education) and economic revitalization and (2) being willing to do something about it.
The final outcome remains to be seen but those who care about good jobs, a stable economy, and a reasonably high quality of life for everyone had better also begin voicing their support for restoration of school budgets and teaching positions.
Virginia enjoys a reputation for quality education at all levels. So does Chesterfield County. However, that reputation is on the brink of being flushed down the toilet by a state legislature with too many members who cannot, or will not, think beyond the next election.
In Chesterfield, some of the new School Board members show signs of (1) seeing the connection between quality physical plant (an important component of quality education) and economic revitalization and (2) being willing to do something about it.
The final outcome remains to be seen but those who care about good jobs, a stable economy, and a reasonably high quality of life for everyone had better also begin voicing their support for restoration of school budgets and teaching positions.
Tuesday, March 13, 2012
Manchester Growing
44 new apartments are being built in Manchester, a section of Richmond south of the James, by Urban Development Associates. The BizSense article mentions several other projects under way in that area.
Successful revitalization in south Richmond is crucial to revitalization efforts in adjoining areas of Chesterfield County.
Successful revitalization in south Richmond is crucial to revitalization efforts in adjoining areas of Chesterfield County.
Monday, March 12, 2012
2011 AICPA National Accounting Competition
Students from N. C. State, my alma mater, have won the 2011 AICPA National Accounting Competition. The Journal of Accountancy story is here. "The members of the team, Wolfpack in the Black, are: Alan Perry (captain), Amanda Dew, Brian Jones, Seanna Robey and Eileen Taylor (faculty adviser)."
I was one of the first five students in the N C State accounting program to take the CPA exam. Leon Ennis, Cranstoun Reinoso, Bill Pinna and Mac McBurney, the instructors, laid the foundation for a great program. Full disclosure: We had to commute to Chapel Hill one semester to take auditing from Junius Terrell, with apologies to Joe Ben Hoyle, probably the best auditing teacher in the land. Four of us passed the auditing section (including one who didn't retain credit for it because it was the only section passed).
We first five received credit for 40% of the parts attempted on our first sitting - not bad when the "premier" program in the state was just over 50% and the national rate was below 20%. I also taught at State for 8 years.
______
Just to show you how good an auditing teacher Junius Terrell was, one of the students in that class, Phil Ameen, had the highest combined grade in North Carolina on the May 1972 CPA exam. If I remember correctly, he had the second highest combined grade in the country.Phil went on to do relatively well in the profession. His bio is here. It is a bit out of date; Phil is retired now although I wouldn't be surprised if he were even less retired than I am.
I'd like to say that Phil and I were bosum buddies but we weren't. He sat on the front row of the class and I was way in the back with the other interlopers from NCSU. I spoke with him at a professional meeting a few years ago. He claimed to remember me but he was probably just being polite.
I was one of the first five students in the N C State accounting program to take the CPA exam. Leon Ennis, Cranstoun Reinoso, Bill Pinna and Mac McBurney, the instructors, laid the foundation for a great program. Full disclosure: We had to commute to Chapel Hill one semester to take auditing from Junius Terrell, with apologies to Joe Ben Hoyle, probably the best auditing teacher in the land. Four of us passed the auditing section (including one who didn't retain credit for it because it was the only section passed).
We first five received credit for 40% of the parts attempted on our first sitting - not bad when the "premier" program in the state was just over 50% and the national rate was below 20%. I also taught at State for 8 years.
______
Just to show you how good an auditing teacher Junius Terrell was, one of the students in that class, Phil Ameen, had the highest combined grade in North Carolina on the May 1972 CPA exam. If I remember correctly, he had the second highest combined grade in the country.Phil went on to do relatively well in the profession. His bio is here. It is a bit out of date; Phil is retired now although I wouldn't be surprised if he were even less retired than I am.
I'd like to say that Phil and I were bosum buddies but we weren't. He sat on the front row of the class and I was way in the back with the other interlopers from NCSU. I spoke with him at a professional meeting a few years ago. He claimed to remember me but he was probably just being polite.
Saturday, March 10, 2012
Former IRS agent/tax preparer trys to put out contracts on two clients
Read this article carefully and see if you can figure out who MH and MS are.
Friday, March 9, 2012
Study refutes theory that workers returning to the job market will jack up the unemployment rate
Another article in today's Richmond Times-Dispatch has this headline. "Older workers are exiting fast, shrinking the labor force, study says."
The authors of the study, economists at Barclays Capital, said (emphasis added),"Based on our reading of the evidence, the conventional view that in recoveries the unemployment rate will stop falling and even start to rise because of surging labor force participation rates amounts to something of an urban legend. Such an event has not happened in the past, and we do not believe it will this time either."
In other words, the unemployment rate will probably not increase as the economy improves due to disheartened people returning to the work force to look for jobs.
While having people permanently exit the work force has, by itself, a positive impact on unemployment rates, the article notes that a smaller work force means, all else being equal, slower economic growth. The article didn't mention that many retirees still have significant disposable income.When a person leaves the work force, it does not mean he or she will suddenly stop spending any money at all.
The article also does not address the impact that increasing worker productivity has on economic growth. My guess is the negative impact on economic growth of a smaller work force will be so small as to be unnoticeable by most of us and by most economists.
The authors of the study, economists at Barclays Capital, said (emphasis added),"Based on our reading of the evidence, the conventional view that in recoveries the unemployment rate will stop falling and even start to rise because of surging labor force participation rates amounts to something of an urban legend. Such an event has not happened in the past, and we do not believe it will this time either."
In other words, the unemployment rate will probably not increase as the economy improves due to disheartened people returning to the work force to look for jobs.
While having people permanently exit the work force has, by itself, a positive impact on unemployment rates, the article notes that a smaller work force means, all else being equal, slower economic growth. The article didn't mention that many retirees still have significant disposable income.When a person leaves the work force, it does not mean he or she will suddenly stop spending any money at all.
The article also does not address the impact that increasing worker productivity has on economic growth. My guess is the negative impact on economic growth of a smaller work force will be so small as to be unnoticeable by most of us and by most economists.
$164 million for transportation projects
Yesterday (March 8) the Richmond region Metropolitan Planning Organization approved allocation of $164 million of federal funding for regional transportation programs over the next several years. Now all that has to happen is for Congress to appropriate those funds over the next several years. This morning's Richmond Times-Dispatch has an article, here, in the business section.
Not mentioned in the article was $200,000 to be expended in FY 2016 for a feasibility study for extending Tuckahoe Creek Parkway to Ridgefield Parkway. Although this was on the list of Goochland County projects, Henrico Supervisor Patricia O'Bannon said all the construction would be in Henrico, that 35 to 40 homes would have to be purchased to complete the project, that the connector is not in the Henrico comprehensive plan nor the Henrico thoroughfare plan, that she opposed it, and that it (the connector) was not feasible.
Not mentioned in the article was $200,000 to be expended in FY 2016 for a feasibility study for extending Tuckahoe Creek Parkway to Ridgefield Parkway. Although this was on the list of Goochland County projects, Henrico Supervisor Patricia O'Bannon said all the construction would be in Henrico, that 35 to 40 homes would have to be purchased to complete the project, that the connector is not in the Henrico comprehensive plan nor the Henrico thoroughfare plan, that she opposed it, and that it (the connector) was not feasible.
Sunday, March 4, 2012
Yet Another Tax Refund Scam
On March 2 the IRS issued a warning of a scam involving the American Opportunity Tax Credit. This credit is available for certain qualified education costs but the scammers falsely assert the credit is available for some, usually seniors, who have not recently enrolled in or paid for college. Full details are available here on the IRS web site.
Be aware that the IRS does not initiate contact with taxpayers by email. Be wary of any tax "idea" that sounds to good to be true.
Be aware that the IRS does not initiate contact with taxpayers by email. Be wary of any tax "idea" that sounds to good to be true.
Saturday, March 3, 2012
Personal Financial Planning
Here's a useful, though admittedly just a tiny bit self-serving, post on the AICPA's Insights blog.
A good investment advisor will consider the life goals of his or her clients and present alternatives directed at achieving those goals, even if the advisor's compensation is commissions on the sales made to the client. Sometimes though even an outstanding fee-only and commission based advisor will overlook an important tax factor affecting one or more of the available investment alternatives.
Much of financial planning by individuals or businesses revolves around the tax impact of various alternatives. Is is important to have those alternatives evaluated by a tax professional who does not have a vested interest in the final choice made by the investor. If you are already having your tax returns prepared by a licensed professional (CPA or Enrolled Agent), then discuss your investment plans with him or her BEFORE signing anything. If you don't have a CPA or EA and your thinking about investing what seems to YOU to be a lot of money, then find one. Most of us will provide a free half hour of general discussion of your tax situation.
A good investment advisor will consider the life goals of his or her clients and present alternatives directed at achieving those goals, even if the advisor's compensation is commissions on the sales made to the client. Sometimes though even an outstanding fee-only and commission based advisor will overlook an important tax factor affecting one or more of the available investment alternatives.
Much of financial planning by individuals or businesses revolves around the tax impact of various alternatives. Is is important to have those alternatives evaluated by a tax professional who does not have a vested interest in the final choice made by the investor. If you are already having your tax returns prepared by a licensed professional (CPA or Enrolled Agent), then discuss your investment plans with him or her BEFORE signing anything. If you don't have a CPA or EA and your thinking about investing what seems to YOU to be a lot of money, then find one. Most of us will provide a free half hour of general discussion of your tax situation.
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