My grandfather was not an educated man. He grew up in northwestern Louisiana on the family farm. He had to quit school after 6th grade to work on the farm. But, like so many from that era, he was loaded with common sense and wise in the ways of the world.
During the Depression, he traveled from project to project. Each week he brought his earnings home to the family. He wanted to make more money, but the times were difficult. He did his best and the family survived. Regardless of the situation, he felt good about himself and, more importantly, the family felt good about him. There was no shortage of pride and no self pity.
All of this brings be to the Obamacrats efforts to extend unemployment benefits to 99 weeks. Let’s just round that number up a bit and call it two years. At some point, government subsidies stop becoming incentives for employment and become enablers for non-employment. At some point, it is easier to sit on the front porch and wait for the mailman than to be gainfully employed.
Most people, and I include myself in this category, are driven by deadlines. In our tax practice, the volume of tax returns increases as April 15 approaches. I fail to see how lengthening the unemployment benefit aids in creating new jobs. There is no sense of urgency. There is no cause for activity.
The money paid to these folks should be put into projects that create immediate jobs. The money should be made available for businesses to borrow. Business growth is what actually creates jobs. Working creates pride. Pride creates desire. A March 2010 economic report by Michael Feroli of J P Morgan Chase Bank examined this issue. Their finding was “that lengthened availability of jobless benefits has raised the unemployment rate by 1.5%.”
The Tuesday, July 20, 2010, Wall Street Journal reported that a “record 6.7 million people have now been out of work for at least six months….that number was 23.4% in February 2009. Americans tend to support jobless benefits on compassion grounds, but at some point such a policy becomes the false compassion of welfare by keeping people of the job market and thus not learning new skills.”
Perhaps we should tie unemployment benefits to some level of activity. Activity is not going to TWC once a week and signing in on the computer. Activity is real job training programs, picking up trash on the highways, washing police cars, etc. Government claims to be strapped for manpower because of reduced tax funding. All of these people on welfare are being compensated by the government, let them work.
The more you get something for nothing, the more of nothing you are going to receive.
Monday, July 26, 2010
Thursday, July 22, 2010
Top 10 Questions To Ask Your Auditor
Many companies that require an annual audit have no idea what an audit entails or what qualifications the auditor should possess. The following is a list of some of the basic questions you should ask your auditor prior to the engagement. Find out how Cook & Associates, CPAs answers these questions and see if your current audit firm measures up.
1. Are you independent?
Auditors must be independent and objective when conducting audits. They cannot have a prior working relationship with your organization or provide in-house services. At Cook & Associates we maintain a professional relationship that keeps your best interest in mind.
2. What is your audit experience?
The managing partner at Cook & Associates has over twenty-six years experience in auditing. In that time, he has performed in excess of one hundred audits of various entities, including schools, cities, nonprofits, and other governmental entities.
3. How will you manage the engagement?
Cook & Associates is adequately staffed with professional and support personnel to provide all necessary services and to maintain personalized involvement with each client. Each audit is overseen by the managing partner. Staff members are directly supervised by the partner to ensure that the goals, objectives, and deadlines are met.
4. What type of reports do I get?
Our firm provides all reports requested by the audited entity. These generally include an Independent Auditors’ Report, Audited Financial Statements, and a Report on Internal Control. In addition, we generally provide a Management Letter to discuss operational areas that could be improved.
5. What auditing standards are used?
Auditing standards provide measures of quality that can be used to judge the effectiveness of the tests and procedures used to meet the audit objective. Standards for traditional financial audits are known as generally accepted auditing standards (GAAS) and are promulgated by the American Institute of Certified Public Accountants (AICPA) through the Auditing Standard Board.
6. What are your certifications?
Management qualifications: All audit staff at Cook & Associates have received Masters in Accounting. Both partners hold the title of Certified Public Accounting (CPA).
Professional associations: The firm is a member of the San Antonio Chapter of the Texas Society of CPAs. The firm is also a member of the Texas Association of CPAs.
Recognition: The firm was published in the San Antonio Business Journal.
7. Have you performed audits for our industry before?
Cook & Associates has performed audits for many sectors, including governmental, nonprofit, department of education, housing and urban development (HUD), and nonpublic. We are well versed in the standards and regulations applicable to each.
8. What is your service approach and methodology?
Cook & Associates thoroughly understands the nature of the work to be performed. We have developed programs and procedures designed specifically for these engagements. Both the partners and the staff will have familiarity with the organization’s operating environment due to their ongoing involvement with other clients.
9. Will you provide constructive feedback?
A management letter is provided on every engagement. This addresses internal control issues, potential areas of improvement, and an overall discussion on the health of your entity.
10. Why should we choose your firm?
You need a firm that has extensive audit knowledge, sufficient staffing, and an understanding of your entity. At Cook & Associates we strive to provide top-notch service and present your entity with the reports and feedback it needs to maintain a healthy environment.
1. Are you independent?
Auditors must be independent and objective when conducting audits. They cannot have a prior working relationship with your organization or provide in-house services. At Cook & Associates we maintain a professional relationship that keeps your best interest in mind.
2. What is your audit experience?
The managing partner at Cook & Associates has over twenty-six years experience in auditing. In that time, he has performed in excess of one hundred audits of various entities, including schools, cities, nonprofits, and other governmental entities.
3. How will you manage the engagement?
Cook & Associates is adequately staffed with professional and support personnel to provide all necessary services and to maintain personalized involvement with each client. Each audit is overseen by the managing partner. Staff members are directly supervised by the partner to ensure that the goals, objectives, and deadlines are met.
4. What type of reports do I get?
Our firm provides all reports requested by the audited entity. These generally include an Independent Auditors’ Report, Audited Financial Statements, and a Report on Internal Control. In addition, we generally provide a Management Letter to discuss operational areas that could be improved.
5. What auditing standards are used?
Auditing standards provide measures of quality that can be used to judge the effectiveness of the tests and procedures used to meet the audit objective. Standards for traditional financial audits are known as generally accepted auditing standards (GAAS) and are promulgated by the American Institute of Certified Public Accountants (AICPA) through the Auditing Standard Board.
6. What are your certifications?
Management qualifications: All audit staff at Cook & Associates have received Masters in Accounting. Both partners hold the title of Certified Public Accounting (CPA).
Professional associations: The firm is a member of the San Antonio Chapter of the Texas Society of CPAs. The firm is also a member of the Texas Association of CPAs.
Recognition: The firm was published in the San Antonio Business Journal.
7. Have you performed audits for our industry before?
Cook & Associates has performed audits for many sectors, including governmental, nonprofit, department of education, housing and urban development (HUD), and nonpublic. We are well versed in the standards and regulations applicable to each.
8. What is your service approach and methodology?
Cook & Associates thoroughly understands the nature of the work to be performed. We have developed programs and procedures designed specifically for these engagements. Both the partners and the staff will have familiarity with the organization’s operating environment due to their ongoing involvement with other clients.
9. Will you provide constructive feedback?
A management letter is provided on every engagement. This addresses internal control issues, potential areas of improvement, and an overall discussion on the health of your entity.
10. Why should we choose your firm?
You need a firm that has extensive audit knowledge, sufficient staffing, and an understanding of your entity. At Cook & Associates we strive to provide top-notch service and present your entity with the reports and feedback it needs to maintain a healthy environment.
Tuesday, July 20, 2010
Expiring Tax Cuts Can Mean Big Tax Increases in 2011
In 2001, the nation’s economy was rocked by the terrorist attacks of 9/11. The Government passed a far-reaching set of tax law changes called the Economic Growth Tax Relief Reconciliation Act (EGTRRA). This law provided the most sweeping range of tax cuts in our Nation’s history ($1.35 trillion over 10 years). EGTRRA has been credited with stimulating spending enough to keep us out of recession after 9/11 and it has been blamed for creating the nation’s budget deficit.
Why is this not ‘old news’? Here’s why: EGTRRA included a provision stating that all changes would sunset after ten years. This means that effective January 1, 2011 all of the tax cuts established under EGTRRA will go away and we will return to the prevailing tax law as of 2001. What does this mean to the average American? Higher taxes for all, of course!
Here are some of the changes that we could all face if the EGTRRA provisions are allowed to expire:
Tax Brackets: Currently, we pay taxes according to six tax brackets: 10%, 15%, 25%, 28%, 33%, and 35%. Unless something changes, there will be five brackets: 15%, 28%, 31%, 36%, and 39.6%. This would mean that everyone who pays taxes will see a tax increase of 3-5%.
Capital Gain Tax: Under EGTRRA, the maximum tax rate on capital gains and dividends is 15%, and people in the 10% and 15% brackets are not taxed on capital gains at all. Without action, next year the highest tax will become 20% on capital gains. Dividends will be taxed as ordinary income, which could mean taxes as high as 39.6%. This would be a huge disincentive for anyone looking to invest in capital assets.
Marriage Penalty: Before EGTRRA, couples routinely paid a “marriage penalty” to IRS. This existed because the brackets and deductions for married couples was not double what it would be for two single people, resulting in a higher tax liability for married couples than for two single people. EGTRRA corrected this problem, but it could be coming back in 2011.
Phase Outs: Pre-EGTRRA, if you were lucky (unlucky?) enough to make a good living, you found yourself forfeiting itemized deductions and personal exemptions on your tax return as a “reward”. A married couple making $170,000 or more would see their itemized deductions phased out and anyone earning more than $252,000 would start to lose credit for personal exemptions. EGTRRA raised those limits slowly before eliminating them completely this year. Next year, they’ll be back in full force unless something is done to preserve the changes.
Child Provisions: EGTRRA increased the Child Tax Credit from $500 to $1000, and made a portion of the credit refundable for families with more than one child. A refundable credit is a credit that you can take even if it exceeds the amount that you paid in for that year. Losing these provisions would mean significantly smaller tax breaks for working families.
Another credit that would be cut dramatically if EGTRRA expires is the Child Care credit. This credit is already woefully inadequate considering the cost of child care, so losing some of this one will especially hurt.
Estate Tax: This is the one change that you have probably heard about. A taxpayer who dies and leaves significant assets behind could once expect to see a good portion of that value end up in the hands of the government. Pre-EGTRRA, estates valued at over $1 million could face a tax bill of up to 50%. EGTRRA slowly reduced the tax brackets for estates, and also raised the exemption level. This year, there is no estate tax. Next year, the rules revert back to their 2001 form. This provision has led to some (not so) tongue in cheek comments about the best estate plan being to die in 2010.
If the President and Congress allow these tax cuts to expire, we will all find ourselves paying more tax next year then we will this year. There has been discussion on Capitol Hill about extending many of these provisions, but there are also talks of letting them all expire and allow the government to close the deficit. Alan Greenspan, former chair of the Federal Reserve Bank, has advised Congress to let all of the breaks expire. However, most pundits agree that at least some of the tax breaks will be saved.
Why is this not ‘old news’? Here’s why: EGTRRA included a provision stating that all changes would sunset after ten years. This means that effective January 1, 2011 all of the tax cuts established under EGTRRA will go away and we will return to the prevailing tax law as of 2001. What does this mean to the average American? Higher taxes for all, of course!
Here are some of the changes that we could all face if the EGTRRA provisions are allowed to expire:
Tax Brackets: Currently, we pay taxes according to six tax brackets: 10%, 15%, 25%, 28%, 33%, and 35%. Unless something changes, there will be five brackets: 15%, 28%, 31%, 36%, and 39.6%. This would mean that everyone who pays taxes will see a tax increase of 3-5%.
Capital Gain Tax: Under EGTRRA, the maximum tax rate on capital gains and dividends is 15%, and people in the 10% and 15% brackets are not taxed on capital gains at all. Without action, next year the highest tax will become 20% on capital gains. Dividends will be taxed as ordinary income, which could mean taxes as high as 39.6%. This would be a huge disincentive for anyone looking to invest in capital assets.
Marriage Penalty: Before EGTRRA, couples routinely paid a “marriage penalty” to IRS. This existed because the brackets and deductions for married couples was not double what it would be for two single people, resulting in a higher tax liability for married couples than for two single people. EGTRRA corrected this problem, but it could be coming back in 2011.
Phase Outs: Pre-EGTRRA, if you were lucky (unlucky?) enough to make a good living, you found yourself forfeiting itemized deductions and personal exemptions on your tax return as a “reward”. A married couple making $170,000 or more would see their itemized deductions phased out and anyone earning more than $252,000 would start to lose credit for personal exemptions. EGTRRA raised those limits slowly before eliminating them completely this year. Next year, they’ll be back in full force unless something is done to preserve the changes.
Child Provisions: EGTRRA increased the Child Tax Credit from $500 to $1000, and made a portion of the credit refundable for families with more than one child. A refundable credit is a credit that you can take even if it exceeds the amount that you paid in for that year. Losing these provisions would mean significantly smaller tax breaks for working families.
Another credit that would be cut dramatically if EGTRRA expires is the Child Care credit. This credit is already woefully inadequate considering the cost of child care, so losing some of this one will especially hurt.
Estate Tax: This is the one change that you have probably heard about. A taxpayer who dies and leaves significant assets behind could once expect to see a good portion of that value end up in the hands of the government. Pre-EGTRRA, estates valued at over $1 million could face a tax bill of up to 50%. EGTRRA slowly reduced the tax brackets for estates, and also raised the exemption level. This year, there is no estate tax. Next year, the rules revert back to their 2001 form. This provision has led to some (not so) tongue in cheek comments about the best estate plan being to die in 2010.
If the President and Congress allow these tax cuts to expire, we will all find ourselves paying more tax next year then we will this year. There has been discussion on Capitol Hill about extending many of these provisions, but there are also talks of letting them all expire and allow the government to close the deficit. Alan Greenspan, former chair of the Federal Reserve Bank, has advised Congress to let all of the breaks expire. However, most pundits agree that at least some of the tax breaks will be saved.
Monday, July 12, 2010
Multiple Payment Options Present Control Issues
I don’t know about you, but I rarely make payments with a paper check. More often than not, I swipe my credit or check card or pay with an online transfer. This is true for our business as well. Paper checks are quickly becoming a thing of the past while wire transfers and electronic payments are taking the forefront. While these types of payment are convenient and efficient, they create a lack of standardization which can lead to duplicate payments and improper recording.
As more and more firms transition away from paper checks, the more important it becomes for firms to follow set procedures for issuing a payment. The following are some best practice aids to properly manage accounts payable.
• If feasible, limit the payment type to just one format. Whether it is Purchasing cards, wire transfer, or paper checks, using just one format provides better control over the purchasing process.
• Sign off on purchase orders after payment has been made. This is a simple step that can prevent duplicate payment.
• Include the invoice number when coding the payment.
• Make sure that all departments understand the coding standards. These need to be entered in the same manner for each purchase.
• Institute a payment timing policy for all purchases.
As more and more firms transition away from paper checks, the more important it becomes for firms to follow set procedures for issuing a payment. The following are some best practice aids to properly manage accounts payable.
• If feasible, limit the payment type to just one format. Whether it is Purchasing cards, wire transfer, or paper checks, using just one format provides better control over the purchasing process.
• Sign off on purchase orders after payment has been made. This is a simple step that can prevent duplicate payment.
• Include the invoice number when coding the payment.
• Make sure that all departments understand the coding standards. These need to be entered in the same manner for each purchase.
• Institute a payment timing policy for all purchases.
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