Our firm has a policy that all computers, except servers, are replaced every three years. We feel that the policy is sound. The main reason we adhere to the program is reliability. We replace equipment before it breaks avoiding the panic that comes from a fried computer. The thought of losing data is paralyzing to us. Although we have backup protocols, the realist in me knows that backup doesn’t always take place.
The other reason of consistent equipment rotation is simply technology. Today’s computer is faster and smarter than yesterday’s computer. All of our software vendors write their software assuming that is will be run on the latest and greatest hardware and operating systems. Better technology makes our staff more efficient and therefore more productive.
As luck would have it, there is a good article in today’s (Thursday) Wall Street Journal. The article by Walter Mossberg is entitled “A Brief Rundown of What You Need In a Laptop.” The article offers a quick synopsis of today’s laptop products. We suggest that you take a look. In the following paragraph, I have noted some of the key points.
Intel is coming out with a new chip to replace the Cor 2 Duo. The new chips will be the “i” series. These should be considerably faster. This is a necessity in today’s graphic driven software. Advanced Mirco Devises (AMD) also makes quality chips. We have used both manufacturer’s products over the years with great reliability.
Windows 7 is a big improvement over Vista and XP operating systems. We began using our first Windows 7 machine a few months ago and have been impressed by its operations. Windows 7 looks a great deal like Vista, but operates far more efficiently. Most of our software does not play well with Mac, so we have no Macs.
Finally, there is the 64 bit dilemma. Most machines and software are designed for 32 bit operations. All of our vendors will be offering 64 bit software within the next 24 months so we are going to move all of our equipment in that direction. This is something that you, as a purchaser, really need to give considerable though toward. We suggest you talk with your major software providers.
Good luck on your new computer search.
Thursday, April 29, 2010
Tuesday, April 27, 2010
IRS Scrutiny of Nonprofits How to Protect Your Organization from an Audit
What makes the IRS hone in on a nonprofit organization? It can be as small as a simple mistake made while filling out the annual 990 or as large as management collusion. For those who fall in the former category, here is a list of a few issues the IRS may target in an audit:
Internet
Be careful about using the Web. The IRS watches internet activity related to politics, lobbying, and income received from advertisements. Virtual charities and Web-based fundraising are also under scrutiny.
Worker Classification
Employee or independent contractor? Use caution when classifying workers. Nearly half of past nonprofit audits have faced headaches due to independent contractors. Organizations tend to classify workers as independent contractors, when in fact, they should be classified as employees. This misclassification can lead to back taxes, penalties and interest.
Joint Ventures
This area has always been highly scrutinized. When nonprofits and for profits combine, the line separating charity and profit becomes skewed. The most examined joint venture tends to be between nonprofits and for profit health care organizations.
Fringe Benefits
Make sure to include fringe benefits in the taxable compensation of managers. Employers often forget to include onsite parking, employer provided automobiles, and employer provided living accommodations in taxable pay.
Gambling fundraisers
Fundraisers are a common way for nonprofits to raise money. Gambling fundraisers, in particular, are a well-known way to bring in some quick cash. However, hosting a bingo night or casino night can sometimes lead to taxable income known as unrelated business income. Hosting too many of these events can even cause an organization to lose their tax exempt status.
Be cautious, be smart, and don’t gamble with the IRS.
Internet
Be careful about using the Web. The IRS watches internet activity related to politics, lobbying, and income received from advertisements. Virtual charities and Web-based fundraising are also under scrutiny.
Worker Classification
Employee or independent contractor? Use caution when classifying workers. Nearly half of past nonprofit audits have faced headaches due to independent contractors. Organizations tend to classify workers as independent contractors, when in fact, they should be classified as employees. This misclassification can lead to back taxes, penalties and interest.
Joint Ventures
This area has always been highly scrutinized. When nonprofits and for profits combine, the line separating charity and profit becomes skewed. The most examined joint venture tends to be between nonprofits and for profit health care organizations.
Fringe Benefits
Make sure to include fringe benefits in the taxable compensation of managers. Employers often forget to include onsite parking, employer provided automobiles, and employer provided living accommodations in taxable pay.
Gambling fundraisers
Fundraisers are a common way for nonprofits to raise money. Gambling fundraisers, in particular, are a well-known way to bring in some quick cash. However, hosting a bingo night or casino night can sometimes lead to taxable income known as unrelated business income. Hosting too many of these events can even cause an organization to lose their tax exempt status.
Be cautious, be smart, and don’t gamble with the IRS.
Friday, April 23, 2010
April 16 doesn’t mean that we’re off for the rest of the year.....
Even after almost 15 years in public accounting, I am still surprised at the number of people out there who don’t really understand what we do. I am reminded of this each year when the calendar hits April 16 and I get questions from my friends asking what I’m going to do for the rest of the year. I always assure them that while the truly hectic time of the year has indeed passed, we still have plenty to do for the balance of the year.
I am convinced that many people see CPAs as either a branch of the IRS (!) or as just another version of the dime-a-dozen tax preparation services that seem to be on every corner. While some CPA firms may focus their efforts on tax preparation, the CPA in public practice generally does a lot more than simply prepare tax returns. In fact, tax preparation services accounted for only 37% of our firm’s total billings in 2009. That means that almost two thirds of what we do is not tax-related.
So what else keeps us busy? At the risk of making this sound like an advertisement, our firm offers a full range of accounting and financial support services. Here are some of the other things that keep us busy when it’s not tax season:
• We prepare audits of governmental, non-profit, and small for-profit entities.
• We prepare and process payroll and payroll tax reports for clients with employees.
• We offer traditional bookkeeping services for small business.
• We offer an “outsourced accounting department”. This involves keeping the books, invoicing, paying the bills, and providing management reports for small businesses.
• We provide QuickBooks consulting and training, as well as third party review and “clean up” services for QuickBooks users.
• We offer small business consulting services (entity selection, management planning, etc.)
• Working with strategic partnerships, we offer financial planning and legal resources.
As you can see, we are much more than just “the tax guys”. When you couple all of the above services with the ongoing tax planning and consulting and the returns that were extended, we plan to be busy all year long......
I am convinced that many people see CPAs as either a branch of the IRS (!) or as just another version of the dime-a-dozen tax preparation services that seem to be on every corner. While some CPA firms may focus their efforts on tax preparation, the CPA in public practice generally does a lot more than simply prepare tax returns. In fact, tax preparation services accounted for only 37% of our firm’s total billings in 2009. That means that almost two thirds of what we do is not tax-related.
So what else keeps us busy? At the risk of making this sound like an advertisement, our firm offers a full range of accounting and financial support services. Here are some of the other things that keep us busy when it’s not tax season:
• We prepare audits of governmental, non-profit, and small for-profit entities.
• We prepare and process payroll and payroll tax reports for clients with employees.
• We offer traditional bookkeeping services for small business.
• We offer an “outsourced accounting department”. This involves keeping the books, invoicing, paying the bills, and providing management reports for small businesses.
• We provide QuickBooks consulting and training, as well as third party review and “clean up” services for QuickBooks users.
• We offer small business consulting services (entity selection, management planning, etc.)
• Working with strategic partnerships, we offer financial planning and legal resources.
As you can see, we are much more than just “the tax guys”. When you couple all of the above services with the ongoing tax planning and consulting and the returns that were extended, we plan to be busy all year long......
Tuesday, April 20, 2010
MORE ON YOUR NEW SOCIALIZED MEDICINE PROGRAM…….
Just arrived for my reading entertainment, RIA’s Complete Analysis of the Tax and Benefits Provisions of the 2010 Health Care Act as Amended by the 2010 Health Care Reconciliation Act. This compelling novel of 960 arrived on April 15, how appropriate. Actually this is the abbreviated version. The actual document exceeds 2400 pages.
Much of the juicy tidbits in this blog were derived from an article by Roger Russell which appeared in Accounting Today. Accounting Today is a non-political publication geared specifically for CPA’s and other tax professionals.
The first thing that strikes you is the “phase-in” periods. While a few provisions hit relatively quickly, most of the major items are “phased-in” or do not take effect until 2014. On thing is for sure, everyone will be affected if the current bill is allowed to stand in its current format. This is an important point because at least 13 states have already filed suits challenging the constitutionality of requiring individual to carry coverage. Insurance has traditionally been a state regulated item.
Here are a few interesting areas of the new legislation
• Beginning in 2014, taxpayers who are required to carry qualifying health care coverage will face a penalty if they fail to comply. The penalty increases from $95 per qualified non-covered individual in 2014 to $695 in 2016.
• Additional federal filings will be required to track compliance. The compliance mechanism has not been defined. In all likelihood, it will be part of your federal tax return filings. This, of course, will add to the cost of tax preparation.
• You will have reduced “itemized deductions” for medical expense beginning in 2013. Currently, you are able to deduct any medical expenses in excess of 7.5% of your gross adjust income on your tax return. In 2013, this number increases to 10.0%. In effect the government is forcing you to pay for the coverage by decreasing your deductions.
• Beginning in 2013, if your adjusted income exceeds $250,000 for a joint filer, then you will be subject to surcharge on your investments of 3.8%. This group of taxpayers will also pay an increased Medicare tax of .9%.
• If you current coverage includes a flexible spending account or a HAS, your covered products will be reduced.
This legislation is worrisome for two reasons. First, in Texas, everyone can get healthcare. Healthcare can not be denied. Second, in the UK, someone that makes approximately $57,000 (US) is in the 20% tax bracket while that same income would taxed at about 10% in the US.
Congress is on a spending roll now. Wait until you see the cost of the proposed “financial institution reform program”. Let’s just hope that we can avoid the inflation of the late 70’s and 80’s.
Much of the juicy tidbits in this blog were derived from an article by Roger Russell which appeared in Accounting Today. Accounting Today is a non-political publication geared specifically for CPA’s and other tax professionals.
The first thing that strikes you is the “phase-in” periods. While a few provisions hit relatively quickly, most of the major items are “phased-in” or do not take effect until 2014. On thing is for sure, everyone will be affected if the current bill is allowed to stand in its current format. This is an important point because at least 13 states have already filed suits challenging the constitutionality of requiring individual to carry coverage. Insurance has traditionally been a state regulated item.
Here are a few interesting areas of the new legislation
• Beginning in 2014, taxpayers who are required to carry qualifying health care coverage will face a penalty if they fail to comply. The penalty increases from $95 per qualified non-covered individual in 2014 to $695 in 2016.
• Additional federal filings will be required to track compliance. The compliance mechanism has not been defined. In all likelihood, it will be part of your federal tax return filings. This, of course, will add to the cost of tax preparation.
• You will have reduced “itemized deductions” for medical expense beginning in 2013. Currently, you are able to deduct any medical expenses in excess of 7.5% of your gross adjust income on your tax return. In 2013, this number increases to 10.0%. In effect the government is forcing you to pay for the coverage by decreasing your deductions.
• Beginning in 2013, if your adjusted income exceeds $250,000 for a joint filer, then you will be subject to surcharge on your investments of 3.8%. This group of taxpayers will also pay an increased Medicare tax of .9%.
• If you current coverage includes a flexible spending account or a HAS, your covered products will be reduced.
This legislation is worrisome for two reasons. First, in Texas, everyone can get healthcare. Healthcare can not be denied. Second, in the UK, someone that makes approximately $57,000 (US) is in the 20% tax bracket while that same income would taxed at about 10% in the US.
Congress is on a spending roll now. Wait until you see the cost of the proposed “financial institution reform program”. Let’s just hope that we can avoid the inflation of the late 70’s and 80’s.
Friday, April 9, 2010
LATE NIGHT WITH COOK CPAs – TOP TEN THINGS TO DO AFTER APRIL 15
1. Sleep.
2. Bring your golf score back below 100.
3. Watch massive amounts of mindless television.
4. Start that exercise regimen you swore to January 1.
5. Visit the grocery store. You know…that place that sells real food.
6. Have a normal conversation (i.e. without using the word “credit” or “deduction”).
7. Re-learn how to move your facial muscles in a manner resembling a smile.
8. Get together with your friends (this might help with #6 and #7).
9. Have the doc check your liver.
10. Did I mention sleep?
LeAnn Carlson
2. Bring your golf score back below 100.
3. Watch massive amounts of mindless television.
4. Start that exercise regimen you swore to January 1.
5. Visit the grocery store. You know…that place that sells real food.
6. Have a normal conversation (i.e. without using the word “credit” or “deduction”).
7. Re-learn how to move your facial muscles in a manner resembling a smile.
8. Get together with your friends (this might help with #6 and #7).
9. Have the doc check your liver.
10. Did I mention sleep?
LeAnn Carlson
Tuesday, April 6, 2010
Blood is Thicker Than Water, but not a Revenue Stream
As a CPA, I often see both the best and the worst in people. The best comes when you see someone “make it” in the business world. There is no prouder moment than to see a young entrepreneur succeed with his or her dream, or even to see a grizzled veteran of the business world finally hit a home run with their latest idea. The worst, unfortunately, comes when people are willing to cast aside lifelong friendships – or even family – over money.
I have seen brother fight with brother over control of a business, marriages torn apart over financial issues, parents and children go years without speaking because of disagreement over the family fortune, and the list goes on. How can a prudent individual preserve the financial health that they have worked so hard to build without causing friction in the family? The answer is surprisingly simple – they must plan.
Keep the estate from becoming a source of conflict
No one likes to envision a day when they are no longer with us. I understand that. However, I would bet that even fewer like to envision their families torn apart over financial matters after they are gone. For that reason, my top tip to avoid financial conflict within the family is to have an adequate plan for the estate. Whether it’s a simple will or a more complex plan involving trusts, everyone should have a specific plan for what will happen to their possessions upon their departure.
In fact, I would go one step further and say that this plan needs to be made crystal clear to all involved. I know there was a societal taboo about discussing terms of the will with the heirs, but how much less conflict could there be if everyone knows what to expect well in advance? The top reason that wills are challenged is that someone is shocked to hear that they either got less than they hoped for or that they were left out entirely. Avoid that by discussing your plans with all the parties involved.
Keep business, business
My next tip for avoiding financial conflict within a family is to keep the business part of the relationship completely professional. If two family members go into business together, my advice to them is to act like they are total strangers when setting up the business. Draw up legal contracts. Make a partnership agreement. Clearly document each persons’ expectations and responsibilities. Draw up a clear succession plan. Make sure the process for one buying out the other is clearly defined.
If anything, be even more careful than you would be going into business with a stranger. Almost every time I have seen family go to war over a business, there has been little to no formal structure to the business and it ends up being “he said, she said”. These experiences become emotionally draining and take an even bigger toll on the family. Avoid even the chance of this type of heartache by reducing everything to written requirements, and leave the heart out of it.
Just (don’t) do it
Of course, the easiest way of all for someone to avoid financial conflict with their family is to simply not deal in financial matters with them. I realize this is easier said than done, but when you add the emotional charge of family matters with the emotional charge of dealing with finances, you have a potentially explosive situation almost every time.
If I had a nickel for every time I saw two brothers think it would be “fun” to go into business together, only to end up not speaking to each other by the end....I could retire early. Same for the cousin who always wants to borrow money, or the estranged child who suddenly wants to go to college on mom and dad’s dime. In the end, the less financial interaction you have with those closest to you, the more likely you are to keep them close.
--Dan Musick is the Tax Matters Partner at Cook & Associates, a full-service CPA firm with offices in San Marcos and San Antonio, TX.
I have seen brother fight with brother over control of a business, marriages torn apart over financial issues, parents and children go years without speaking because of disagreement over the family fortune, and the list goes on. How can a prudent individual preserve the financial health that they have worked so hard to build without causing friction in the family? The answer is surprisingly simple – they must plan.
Keep the estate from becoming a source of conflict
No one likes to envision a day when they are no longer with us. I understand that. However, I would bet that even fewer like to envision their families torn apart over financial matters after they are gone. For that reason, my top tip to avoid financial conflict within the family is to have an adequate plan for the estate. Whether it’s a simple will or a more complex plan involving trusts, everyone should have a specific plan for what will happen to their possessions upon their departure.
In fact, I would go one step further and say that this plan needs to be made crystal clear to all involved. I know there was a societal taboo about discussing terms of the will with the heirs, but how much less conflict could there be if everyone knows what to expect well in advance? The top reason that wills are challenged is that someone is shocked to hear that they either got less than they hoped for or that they were left out entirely. Avoid that by discussing your plans with all the parties involved.
Keep business, business
My next tip for avoiding financial conflict within a family is to keep the business part of the relationship completely professional. If two family members go into business together, my advice to them is to act like they are total strangers when setting up the business. Draw up legal contracts. Make a partnership agreement. Clearly document each persons’ expectations and responsibilities. Draw up a clear succession plan. Make sure the process for one buying out the other is clearly defined.
If anything, be even more careful than you would be going into business with a stranger. Almost every time I have seen family go to war over a business, there has been little to no formal structure to the business and it ends up being “he said, she said”. These experiences become emotionally draining and take an even bigger toll on the family. Avoid even the chance of this type of heartache by reducing everything to written requirements, and leave the heart out of it.
Just (don’t) do it
Of course, the easiest way of all for someone to avoid financial conflict with their family is to simply not deal in financial matters with them. I realize this is easier said than done, but when you add the emotional charge of family matters with the emotional charge of dealing with finances, you have a potentially explosive situation almost every time.
If I had a nickel for every time I saw two brothers think it would be “fun” to go into business together, only to end up not speaking to each other by the end....I could retire early. Same for the cousin who always wants to borrow money, or the estranged child who suddenly wants to go to college on mom and dad’s dime. In the end, the less financial interaction you have with those closest to you, the more likely you are to keep them close.
--Dan Musick is the Tax Matters Partner at Cook & Associates, a full-service CPA firm with offices in San Marcos and San Antonio, TX.
Subscribe to:
Posts (Atom)
