When to DIY and When Not to DIY

Case Study: When to DIY and When Not to DIY

I have a client who has worked as a Full-Charge Bookkeeper for various companies for over 20 years. A couple of years ago, she started up a side business and hired me to prepare her 2007 corporate tax returns (her first year in business). Then in 2008, she decided to save some money by doing them herself.

Last week, she came to my office and showed me a notice from the IRS for approximately $675 worth of penalties & interest and another notice from NYS for $500 worth of penalties & interest. While reviewing the corporate tax returns that she self-prepared and filed, I also discovered that she had overpaid her taxes by $1,600.

So, by trying to save my $500 year-end corporate tax return preparation fee, she cost herself $2,775 ($1,600 of unnecessary tax + $1,175 of penalties & interest) that she shouldn't have had to pay.

I’m fixing all of the mistakes she made by filing amended tax returns. I will be able to get her back $1,600 and some of the penalties, but the majority of the penalties & interest will stick and during the amendment process, her audit risk will be extremely high due to the fact that we’re asking for almost all of her 2008 tax bill back in the form of a refund.

And this is a woman who has been a professional bookkeeper for over 20 years! Imagine what happens when small business owners with even less bookkeeping/tax experience attempt to do the same!

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Why I can't stand the "my 401(k) became a 101(k)" quote

Over the past year or so, a popular new phrase has emerged that has people jokingly say that "my 401(k) became a 101(k)."

While it was clever at first, like all funny quotes, it became overused quickly. However, that is not what bothers me about it...

Although a more accurate statement would be "My 401(k) became a 201(k)," what really bothers me the most is that people are still saying it. That leads me to believe that people are not aware of their current financial situation and I blame two things for it:

1) After opening depressing brokerage account statement after depressing brokerage account statement last year, many people became programmed to stop opening their statements. Therefore, they have no idea where they stand these days

2) The media has been VERY diligent at telling us how miserable our lives have become over the past couple of years, but they have not yet started to tell us how things have turned around and that the economy is heading in the right direction

So, for those of you who have not been following the stock market, here is what the quote should be at the moment:

"My 401(k) became a 201(k) and now it's back up to a 301(k)."


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Buy Real Estate Now

Buy Real Estate Now

With real estate values approaching all-time lows and interest rates near their all-time lows, now is the perfect time to look at acquiring real estate. Here are some groups of people who can benefit:

• Business owners who want to stop paying rent and own their own building/office/store/shop/etc.
• First-Time Homebuyers
• People looking to purchase residential rental properties (especially multi-family units)
• People looking to purchase commerical rental properties

If you fit into any of the above categories and would like to explore your options, respond to this e-mail and we can discuss how you can make the most out of this historic real estate market!

Why business owners should own their own building:

• In most cases right now, your monthly mortgage payment may be lower lower, similar, or only slightly higher than your current monthly rental payment
• When you rent, you are subject to rent increases. When you own the building and you have a fixed-rate mortgage, you will lock in your monthly payment. The only item that will increase over time will be your property taxes. For example, if you are paying $1,000/month rent right now, you will most likely end up paying $2,650/month for the same space 20 years from now. However, if you lock in a $1,000/month mortgage payment, you will be paying $1,000/month 20 years from now.
• Once your mortgage is paid off, you won't have to worry about monthly mortgage payments or rental payments. All you have to do is pay your property taxes.
• When all is said-and-done and you are ready to retire or sell your business, instead of simply walking away from your lease, you can either sell your building (most likely for a lot more than you paid for it) or hold it and generate a monthly income stream by renting it out.
  
  

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New Law Takes Effect 10/26/09

New Law Takes Effect 10/26/09

Effective 10/26/09, ALL employers in New York must provide the following information IN WRITING to any new hire:

• Pay Rate
• Changes in Payday
• Earnings Statement (Paystub)
• Time Off Policies
• Termination

Additionally, all employers must obtain WRITTEN acknowledgement from each new hire that they have been provided with each of the above items AND employers must meet a minimum recordkeeping requirement by keeping detailed payroll records for at least three years.

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How to Fix the iPhone Autocorrect

What is the most frustrating thing about the iPhone?? By far, it's the Autocorrect feature where the iPhone decides to step in and say "I'm smarter than you, this must be what you were trying to type."

Everytime I type "me" the iPhone Autocorrects to "mr."
Everytime I type "so" the iPhone Autocorrects to "SP."
One time I typed "check" and the iPhone Autocorrected to "Checkov."

So I did a little research and here is how you "program" the iPhone Autocorrect feature:

1) Open up a New Window from within Safari
2) In the Google search box, start typing the words that the iPhone Autocorrect has a tendency to mistakenly autocorrect.
3) When the iPhone attempts to Autocorrect you, tap the little "x" in their suggestion box

For some reason, this is the only way to currently overwrite the iPhone’s Autocorrect dictionary. Hopefully, Apple will recognize this problem and create a simpler solution (a way to access the dictionary, a way to overwrite the dictionary from other programs/apps/etc, or an App to overwrite the dictionary).

It frustrates mr SP much that there is no other way to Checkov the dictionary. So, until then...this will have to do.


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Senator Flanagan Calls for Repeal of MTA Tax

The newest in a long line of taxes nagging small business owners is the New York State MTA Commuter Tax. With the intention of having small businesses supplement the always-running-at-a-deficit MTA (Metropolitan Transportation Authority...the organization in charge of running the LIRR, NYC Mass Transit, NYC Subways, Metro-North, Bridges & Tunnels, etc.), this tax has proven to be nothing short of a mess since it was first introduced...

It started off as a huge battles as various state politicians weighed (aka argued) the benefits of supplementing the MTA system with the downside of adding yet another tax on small businesses in an already weakened economy.

It ended up being one of the most poorly administered taxes in the history of NYS (and possibly the country). Had the tax been formally imposed back when it was introduced, the first filing would have been due on April 30th, 2009 and it would have only covered the month of March. It would have been a nice, simple one-month introduction to the tax that would have had the average small business with $100,000 of annual payroll paying approximately $28. Instead, the April 30th filing deadline came and went without the state making a decision of how they would implement the tax (as a separate line item on the NYS-45 quarterly payroll tax return or via a separate filing)...then the second filing deadline of July 31st also came and went with still no decision on how to implement the tax.

What we ended up with was a November 2nd filing deadline that now covers 7 months worth of payroll and that same company that would have only had to pay $28 the first time around is now stuck paying $198. Talk about bad first impressions...

This tax has been a mess from concept to implementation and it is the last thing that a small business owner needs at a time when every last dollar counts.

In a press release on October 15th, NYS Senator John Flanagan (R-2nd Second Senate District), who represents Smithtown, Huntington, Northport, E. Northport, Stony Brook, Centereach, Commack, and Hauppauge, among others, called for a repeal of the MTA Tax.


You can read a copy of the press release by clicking on this link: http://www.nysenate.gov/press-release/senator-flanagan-joins-small-businesses-and-non-profits-call-repeal-mta-payroll-tax


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Don't Be Greedy

Last year, when I was looking for an office building to purchase, I had a verbal agreement with the owners of a building here in Smithtown to purchase their building for $950,000. The best part of the deal for them was that I had found them before they had hired a realtor, which meant that they were going to save approx $45,000 in broker fees.

They were selling the building because they had gone out of business...tying up some loose ends due to their business closing lead to a two week delay from the time we reached a verbal agreement to the time we were putting everything in writing.

Using the strong-arm tactic of "we have someone else bidding higher, if you still want the building, you're going to have to pay more," they now told me that the purchase price was $1,050,000 ($100,000 higher than we agreed upon), plus they were now throwing in several other clauses/stipulations that were never discussed prior and were all obviously detrimental to me.

Frustrated with their desperate attempt at negotiating, I decided to take the weekend to look at some other buildings. Luckily I did and I found a building just a few blocks away that was a much better fit for my offices (more office space, better parking, great location, etc.) for a lower purchase price.

When I informed the owners that I would be walking away from their deal, they started to bring their purchase price back down to the $950,000, but it was too late.

It is now 17 months later and I drive past their building at least twice a day (on the way to my office and on the way home from my office)...the "For Sale" signs have been up ever since...they are now on their second realtor and there are "Price Reduced" signs now up on the lawn as well. As of today, the asking price is $925,000.

So, to take a step back and analyze this scenario, by being greedy, these owners have so far lost $142,000 between 17 months worth of mortgage interest, real estate taxes, maintenance, utilities, and the fact that they will now have to pay a broker fee if & when they do sell their building. This $142,000 loss assumes that they sell their building tomorrow for full asking price, which in this economy, I don't think will happen. I forsee this building selling for somewhere in the low to mid $800,000s sometime at the beginning of 2010.

Moral of the story: Don't be greedy, especially in an economy like this. Know when a good deal is staring you in the face and make it easy for your customer/client/buyer to do business with you.

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MicroBusinesses are Growing - Don't Ignore Them!!

Microbusinesses are one of the largest and fastest growing segments of the US Economy, yet far to many service providers ignore them.

For example, I recently wrote a book, Effective Tax Planning for the MicroBusiness. It was not until after I finished the book and started to market it that I discovered that I had written the first (and so far, only) tax planning book that talks to the specific needs of the MicroBusiness. Why are so many people ignoring this market??

Some facts about MicroBusinesses & Small Businesses:

• The Small Business Association's Office of Advocacy reports that firms with 500 or fewer employees have generated between 60 and 80% of new jobs each year over the past decade.
• 90% of all businesses in the US employ 5 or fewer employees
• 63% of all businesses in the US have $50,000 or less in annual revenue
• New York, California, and Texas have the largest percentage of MicroBusinesses in the US
• There are 22.5 Million MicroBusinesses in the US
• 94.7% of all businesses in the US have 10 or fewer employees
• .07% of all businesses in the US have 500 or more employees
• 75% of all small businesses have no employees other than the owner(s)

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The #1 Thing Your Tax Preparer Won't Tell You

The #1 "Thing Your Tax Preparer Won't Tell You" From Smart Money's Top 10 Things Your Tax Preparer Won't Tell You

"A big name doesn't always mean better service."Roughly 135 million Americans file tax returns, and of those, two-thirds pay for help. While solo acts like CPAs and so-called enrolled agents have plenty of clients, almost 20% of taxpayers go through a big franchise like H&R Block, Jackson Hewitt or Liberty Tax Service to get their refund — last year an average $2,255 per return. Problem is, tax preparation and advice depend on the preparer, and in a system of franchises, that means thousands of seasonal employees and limited quality control.

The results can be dangerous. When staffers from the Government Accountability Office went undercover to get returns done by the big chains, they found "nearly all of the returns prepared for us were incorrect to some degree," according to the report. Worse yet, recently filed lawsuits allege that the owners of 125 Jackson Hewitt franchises cost the government $70 million in tax fraud and created an environment "in which fraudulent tax-return preparation is encouraged and flourishes," according to the Department of Justice. Jackson Hewitt says it stands behind its compliance procedures as well as its nationally standardized educational curriculum.


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