IRS to recognize same sex marriages on September 16, 2013.

This came in today from Karen Brosi at Western CPE.  She has done all the work but I will make some comments, especially as this change pertains to Tennessee tax payers. Karen Brosi All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes   In late August 2013, the U.S. Department of the Treasury and the IRS ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. Tennessee doesn't recognize same sex marriages.  If a same sex couple marries in a state that recognizes same sex marriages, then Tennessee still will not recognize the marriage.  And Tennessee taxes, such as the Hall Tax on investment income, would still have to be filed separately as if the spouses were still single. Rev. Rul. 2013-17 implements federal tax aspects of the June 26th Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act. Under the ruling same sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit. Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. Legally-married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status. Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. I don't advise rushing off to amend past returns without a great deal of careful analysis.  When a tax return is amended the statute of limitations starts again from the date amended.  This may not mean a problem at all.  I would analyze if the amount of refund resulting from amending the return is worth extending the statute of limitations on the tax return.  Extending the statute of limitations means the return will have a longer time for possible IRS audits.  Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income. Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return. Future Guidance.  Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling. I don't know that this would cause any need for refunds to Tennessee employers since Tennessee doesn't recognize same sex marriages.  On the other hand, these deductions are for federal business income tax returns, so this might very will apply to Tennessee businesses.  If a business owner in Tennessee wants me to research it, I will.  I will also keep my eyes open for any information that comes from the Tennessee Department of Revenue regarding this issue. I have a feeling they will make a statement and when they do, I'll let you know. Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on September 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so (as long as the statute of limitations for the earlier period has not expired).

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What? You want to start your own business? Why? part 2

It's very difficult to know how long a blog entry is until it's posted, so please forgive the overly long previous entry.  If you did make it all the way through to the end, then you know how I came to be in the position of needing more work and why I chose to create a seminar for small businesses.  I won't waste a lot of space going over the previous post.  The short of it, and I'm sure you want the short version, is that I have a lot of information I've either figured out the hard way or have discussed with others in business and I want to pass this on to anyone thinking of starting a small business or already in one and wanting to make certain they are going down the right path.

After my unscientific survey, which consisted of asking as many small business owners as I could about their interest in a seminar like this, I decided to proceed.  What was the first step?  First I needed to research the topics for my seminar.  I could not come up with two and a half hours of small business insights and knowledge on the spur of the moment.  Well, I guess I could but no one would want to pay me to listen to it.  I needed to be more organized and through.

I went to the web page of my favorite professional education vendor and looked over their course list.  In the past the normal course provided eight, sixteen or twenty-four hours of continuing credit which was fine.  In depth is the way to go with tax and accounting topics.  But this time I needed a lot of information about a lot of different topics and didn't have the time or the money to take ten or twelve eight hour courses.  Lucky for me, this year the educational group had come up with some short courses that covered all the topics I wanted to know more about.  Perfect!  I purchased and downloaded my classes and got to work.

I wanted to develop two things before I gave my first seminar, the first was a seminar manual which would go hand in hand with what I was going to talk about and the other was the actual seminar.  The manual would be provided in PDF format so that seminar participants could have it loaded on their computer, iPad, phone or other electronic reading device and be able to refer to it as I conducted the seminar.  The manual would have links to web pages of interest which could be accessed through the manual if the Internet was available.

This seemed to be going well and I was making good progress, then tax season hit.  I took a few months off from my preparation to get some work out and some money in.  Then it was back to work in June on the companion manual which is now almost finished.  I had visited a web page in which all the FAQs were presented in a question-answer format that I found to be easily understood and to present information that I needed without a lot of extra language I didn't want wade through.  I decided to structure the companion manual in that way making it easy to read and not filled with extra information.  Just the facts, ma'am.  The seminar is the place to get the facts filled out and plumped up with extra knowledge. 

Next blog entry will discuss finding a place to hold the seminar and advertising.  One proved easier than the other but both were new experiences for me. 

BEST for Small Businesses - Get Started & Keep Going

Look on the page listing to the right for more information and to sign up.  There's also more in an earlier blog post.  Just page on down.  Hope you can make it.

Ask some questions, if you like, to see if this is for you.

What? You want to start your own business? Why?

I'm in the process of trying to expand my CPA practice into a new area.  I want to give seminars to other small businesses about how to start a small business, what to expect once started, and if the small business is already plugging along, how to make sure the business is moving in the right direction and not heading over a cliff.

I didn't come up with this over night.  It was a long process.  As I stand on the verge of actually giving a seminar in September, I thought there might be some people who'd like to know how the process of starting a business works.  What?  You want to start your own business?  Why?  Believe me, I sometimes ask myself those same questions.

First some background.  I am a CPA.  I've been a CPA for over two decades and I grew up in my father's small CPA practice in Knoxville, TN.  As soon as my sister and I were able, he had had us pulling blank tax forms from the file cabinet and filling in the tax payer name and ID so he wouldn't have to take time to do that when the client came for their appointment.  (Yeah, I'm so old we used to prepare taxes by hand with paper and pencil.  But I try to stay current.)

I didn't start out to be a CPA.  It wasn't something I dreamed about or planned to do.  In fact, I was certain I didn't want to be in business at all and majored in Liberal Arts with a concentration in Creative Writing while at the University of Tennessee at Knoxville.  Well, that lasted about as long as it took me to realize that the pay check of a "secretary", which was the best job my major could achieve, was not for me.  I could survive on that pay but I didn't want to.  Eventually my father wanted to retire and sell his practice.  My mother suggested he offer the practice to me or my sister first.  My sister had no interest at all, but I thought, "Hey, he makes more money than I do."  I also liked the freedom being self-employed would bring.  I was in.

I had to go back to UT and take all those business courses I'd avoided during my first pass at a college education.  Luckily I was going back to school during the last few days when an individual could sit for the CPA exam with any undergraduate degree and thirty-six hours (if I remember correctly) of accounting and business.  Currently a candidate for the CPA exam must have a Masters in Accountancy which I didn't want to do.  With my extra business credits in hand, I signed up for the Becker CPA review.  Forty hours a week and then some, studying for a two and a half day exam.  It's not that way now but back then, the first time a candidate sat for the CPA exam it started on Wednesday afternoon and finished Friday evening.  Yes, you got to go home in the evenings, but Thursday and Friday, you were back at the testing desk taking that exam.  It was brutal.  The studying was brutal.  The worry over making mistakes was brutal.  I had never studied for an exam in my life the way I studied for that exam.  I had decided to sit for the CPA exam only once, sink or swim.  I was not going through this again.  Since I did want to be a CPA, I wanted to pass the first time.  And pass I did.  I will never forget the day I received my grades in the mail along with the happy news that once I passed my ethics exam and spent two years as an apprentice CPA I'd have my certificate to practice.  It was a happy day for my dad as well.  The day I received my permit to practice, he walked out of the office never to return.

Over night I had a small CPA practice in my hands.  Since all the clients knew me, I didn't lose any business.  During my wandering and unplanned journey through the UT educational system, trying to find a major I enjoyed enough to finish, I had taken a public speaking class.  I now put this skill to good use by giving short talks about various tax issues to business groups at luncheon and dinner meetings all around town.  The practice was growing.  I was in charge.  Life was great.

Then my left leg began to go numb.

Eventually I was diagnosed with Multiple Sclerosis.  Remember I'm old (well, older) and when I was diagnosed there were no medicines for MS at all.  The best that could be done was to try and stop the progression of a flair up and return the patient to "normal" as quickly as possible.  MS is an extremely unpredictable disease and at the moment of diagnosis it is impossible to determine how the disease will progress, but most people lose mobility rapidly and are unable to work.  I didn't know what my future would hold.  I continued to work and had massive MS attacks at every tax deadline.  Lucky for me, I had purchased private disability which my doctor suggest I use, and my mother and I retired to her home town of Woodbury, to await our mutual declines.

The loss of my tax practice was devastating.  I love taxes.  The tax code is crazy and funny and weird.  I love reading it.  I love preparing taxes.  I love talking with clients.  My Knoxville monthly write-up clients followed me to Woodbury, first via mail and phone, and then by email and skype.  I didn't have to be in the same town as my clients to do my job.  But working still wasn't easy.

Gradually as client's needs changed my practice contracted and I started a family.  The decline in the stock market and the US economy decimated my disability income.  I needed more work.  As a stop gap measure I went to work for a local client who was in need of reliable help.  It wasn't easy work but it was steady and gave me time to think.  I came up with the idea to give seminars for small businesses.  Not the small business by IRS definition of grossing five to fifteen million dollars, but the real small business with one employee - the owner.  The small business owner who sells the job in the morning and goes back in the afternoon to do the job.  The small business consisting of the husband and wife working together; one doing the work, the other handling the paperwork while their kids played under the kitchen table.  The small business that doesn't have time to stop and ask questions because they are living on the edge and stopping to reflect and ask questions doesn't happen very often.  Most often, when something happens to throw the whole train off the track.

I began to ask the small business people I know if they would have been interested in a seminar like this when they were starting out.  Oh, yes, was the answer every time.  So I began to do the research and put together my seminar while living off the line of credit on my house.  The line of credit is running low and the time is now to begin.  Even after being in business for decades, starting a new type of business is frightening.  If it's frightening for me, a seasoned business professional, I can only imagine what it's like for someone with no experience.  Therefore, these blog entries.

As I write this I don't know if my Business Education Seminars Today or BEST of Small Businesses will even pay for the advertising I have already agreed to buy.  And it is frightening.  But nothing ventured, nothing gained.  Let go of the rope.  You know all the old adages as well as I do.  The bottom line (another old adage) is that I have to start somewhere and I've started.

Next blog entry: how I prepared and shaped my new venture before I booked the venue or advertised.

45 Days to Open Enrollment for ACA

It's only 45 days until open enrollment for the Affordable Care Act begins.  States, employers, employees, insured and uninsured are all waiting and wondering how this will work.  I wish I could give some idea about what will happen but I feel I'm not alone in not knowing anything about it.

Here's what I do know.  You can sign up now at www.healthcare.gov to set up an account so that you'll be ready to start shopping on October 1.  You can also sign up to receive email notifications as new information becomes available.

What does this mean for small businesses?  Most small businesses I know are exempt.  Employers must have 50 or more employees to be required to provide health insurance.  And that was recently moved back one year.  Small employers, that is businesses with 49 and fewer employees, may provide health insurance if they wish or have their employees buy insurance through the Marketplace exchanges.

Tennessee has chosen not to set up a state exchange or to modify Medicaid to accept low income individuals and families.  The Governor hasn't ruled out modifying Medicaid in the future, but as of right now, Medicaid in Tennessee won't be changing any rules to allow more low income people to apply for and receive insurance.  We'll have to wait and see what happens there.

This means that some low income individuals and families still won't be able to obtain insurance in Tennessee.  If an individual makes less than $11,500 ($23,840 for a family of 4) and is not eligible for Medicaid, then they can buy insurance on the Marketplace if they can afford it (I would assume that is doubtful) but they won't get any federal subsidies to pay for the premiums.  They will have to pay the full premium to receive insurance.  If you make too little to receive a subsidy for health insurance premiums but also don't quality for Medicaid, you won't have to pay a penalty for not having insurance.  You will be exempt from this penalty.  That's good news, I guess.

Another possibility for good news, I don't know if this will be true, is that people who were previously unable to obtain insurance because of preexisting conditions and had to pay very high premiums may now be able to buy insurance at a more affordable rate.  It still might be high, but might be lower than before.  We'll have to wait and see.

If an individual makes more than $11,500 ($23,840 for a family of 4) then they will receive a federal subsidy to buy health insurance and will have to pay a penalty if they don't buy any.

How much will this insurance actually cost?  No one knows.

Everything is is in a state of flux.  And just like Medicare, Social Security, Medicaid and all other Federal programs the state of flux is constant.  Hold on to your hats and tighten those seat belts.

New Information about Tennessee Unemployment

This information comes from an article I read in the Tennessee CPA Journal, the magazine published by the Tennessee Society of Certified Public Accountants.  It was written by Stacie Caraway with Miller & Martin PLLC in Chattanooga.

Ms. Caraway brings Tennessee employers up to date about the definition of "disqualifying misconduct" which was included in amendments to the unemployment benefit law.

Every employer with payroll pays into the unemployment pool to provide benefits for those who lose employment.  The fewer former employees who draw unemployment compensation on an employer's account, the lower the employer's percentage rate.  To put it another way, if no employee ever draws unemployment on your account, then your rate is as low as it can be to pay unemployment taxes.  If you have a lot of employees drawing unemployment on your account, then your rate will go as high as it can go.  That way employers who have more employees drawing unemployment pay more and employers who have few or no employees drawing unemployment, pay less.

Obviously, as an employer, you want to keep those who draw unemployment on your account to a minimum.  That means when you receive a letter informing you that a former employee wants to draw unemployment you have to fight the claim if you believe it is unreasonable.  It seems this has been made a bit easier to do now.

To show "qualifying misconduct", that is the reason the employee is no longer employed and why that cause means the employee doesn't get to receive unemployment, the employer has some guidelines.  These are as follows:

• Conscious disregard of the rights or interests of the employer (example: starting competing business on employer's time);
• Deliberate violations or disregard of reasonable standards of behavior that the employer expects of its employees ("deliberate" will require proof of notice via handbook);
• Carelessness or neglect of such a degree or recurrence as to show an intentional or substantial disregard of the employer's interests;
• Deliberate disregard of a written attendance policy and the discharge is in compliance with such policy;
• A knowing violation of a regulation of this state by an employee of an employer licensed by this state, which violation would cause the employer to be sanctioned or have the employer's license revoked or suspended by this state; or
• A violation of an employer's rule, unless the employee can demonstrate that he/she did not know, and couldn't not reasonably know, of the rule's requirements, or the rule is unlawful or not reasonably related to the job environment and performance.

Well, that's quite a bit.  What I noticed is that there seems to be a need for some sort of employee handbook.  If you're like many of my clients, not only don't you have a written employee handbook, you also don't have anyone to write it or anyone who knows what to put in it.  You don't have the money or desire to create a whole department to write a handbook and to keep it updated.  I guarantee you that once you have a handbook, you will need to update it from time to time.

Good news.  There are freelance employee handbook writers.  That's right just as you can hire a CPA when you need one and ignore him the rest of the time, you can also hire a Human Resource or HR department when you need one.  There are many small businesses that help other small businesses work better.  I know who they are.  If former employees who don't deserve to draw unemployment on your account are a problem, let me know by commenting on this blog entry and I will put you in touch with a small business HR department.  They will be happy to work with you to create a written employee handbook that will outline what is correct and proper to your employees.  And this will give you back up when trying to fight an unemployment claim.

If you want to read the entire article you can find the March/April edition of the Tennessee CPA Journal on the TSCPA web page.

BEST for Small Businesses - Get Started & Keep Going

You'll notice that I've added a new page to the right.  On this page you'll find all the information you need about my first small business seminar - Get Started & Keep Going.  If you don't find everything you need to know, post something to this blog entry and I'll answer your question.

You'll also notice some buttons for pay pal through which you can pay to attend the seminar.

You don't need to pay for a manual unless you want one printed out on paper.  You will receive a free PDF manual via email when you sign up for the seminar.  You can print your own pages from that.  But if you really want me to print one for you, I will do that for $20.

I hope you plan to come.  Sign up early, it's cheaper and there's a limit to how many can come.

Introducing BEST for Small Businesses - or Best Education Seminars Today

I'm about ready to launch my first seminar for small businesses.  It's quite a daunting task.  Starting something new is never easy but it is often exciting.  I'm finding this new venture to be both.

These seminars are focused directly at small businesses.  Not the small businesses of the IRS Tax Code definition that gross $5,000,000 (yes that's FIVE MILLION DOLLARS), or $15,000,000 in some places in the Code, but the small, perhaps microscopic businesses operated in every town and city all over the country.

My seminars are directed at the "mom and pop" operations or just the "mom" or "pop" who is going it alone, with maybe a friend or relative strong-armed in now and then to help out.  These seminars are for the business that is so small it doesn't have time to stop and consult with a CPA, or any other professional, and certainly no money to hire one.

These seminars will be short - no one has the time to leave their business to learn about business even if the knowledge is desperately needed.

The seminars will be inexpensive - small businesses are confronted weekly, if not daily, by someone with their hand out.  Donate to this, buy that (it will be helpful), use this, advertise here.  There's no extra cash in a small business.

The seminars will be informative for small businesses.  No speaking in tax code and no belaboring information that's only important when there are 30 employees and $2 or $3 million in the bottom line.

When I began the research for these seminars I found myself digging though volumes of information that didn't matter to the small business because they were so small.  But the authors of these research papers were trying to be all things to all businesses and I realized the majority of the information didn't apply to my audience.  I realized if I was bogged down with unnecessary information, and I knew what I was looking for and I knew what applied, then a stressed out small business owner would be completely lost in the overload of technical jargon.

So, I decided to fill a need.  I grew up in a small business as did both my parents and for the most part so did their parents (farming is a small business, too).  So much is second nature to me because I heard about deductions and taxes all my life that I think everyone in business knows what I know.

When a client of twenty years asked me if she could deduct toilet paper and paper towels that she and her employees used in the shop, I was floored.  Yes, certainly, that is a completely deductible business expense.  But to her it wasn't.  These items had nothing to do with her business and she hadn't been deducting them.  Not a big deal.  But every deduction helps against the bottom line.

BEST for Small Businesses was born.

The first seminar is called Get Started and Keep Going.  This will cover a great many general issues facing small business owners such as the different types of operating entities - corporation (both C and S), partnerships, LLCs and sole proprietorships; how to be considered a for profit business and not a hobby and why that's important.  I'll discuss the home office and how to deduct it as well as other business expenses.  Taxes - local, state, federal, sales, payroll, personal property, the list is long - will be covered as well as records retention, hiring family members and what to expect during an audit.  This seems to be a lot of information but the seminar is designed to sift out all the information that pertains to the larger business and focus on only what is meaningful to the smaller.

From this general seminar I will create others based upon the feedback I receive from the participants at this one.  I have to start somewhere and this seminar was born out of all the questions I've received from small business owners during the past two decades that I've been a small business owner.  For more information on this first BEST for Small Businesses see my face book page - LuAnnCurleeCPA - and Eventbrite, but I recommend paying here since it's the cheapest way to go and everyone needs to save money.

Keep an eye open for my next post on the seminar.

Good News about Business Taxes.

From the blog - Tennessee Tax Law - a very succinct review of the new business tax law which will start changing business taxes in the year 2014.

The most important piece of information was that small businesses grossing less that $10,000 no longer need to worry about this tax.  These businesses grossing more than $3,000 and less than $10,000 will still have to pay a minimal business tax fee, but no more reporting and paying the tax.  If you want to read the full blog click on the link from my blog to get all the scoop.

Keep your guard up!

Small business owners get told a lot of things.  They get told things by their customers.  They get told things by their suppliers.  They get told things by their families.  They get told things by their friends.  They get told things by their competitors.  They get told lots of things.

It's difficult during the course of the day to figure out what it true and what is false and what to act upon and what to ignore.  The best advise I can give is to think a little bit before acting or reacting.

Here are some examples.  I had a client who called all bothered because she'd received a letter from an organization stating that she was required by law to post in her shop certain information for her employees and this company would, for a fee, provide her with the proper information to post that would make her compliant with the law.  The letter made it sound like this was a new law and that inspectors would be coming around soon to verify that she had this information posted for her employees to read.  If the information wasn't posted, she would be fined.

There's always some truth in a good lie.  There is information required to be posted for employees to read and be aware of their rights.  This information can be printed for free from the tax authority's web site.  The State of Tennessee has this information.  Laminated pages can be purchased but it's not necessary.  If something is required to be posted, it is usually provided for free.  Not all the time, but I'd check into that before I paid any money for a display.

Recently I was told by a small businessman that foreigners, he didn't specify which group of foreigners, but I got the impression he wasn't talking about people from the North which used to be the main type of foreigner here in the South, but people from and born in another country.  These "foreigners" don't have to pay sales taxes because the state wants them to open businesses here.  I told him I'd never heard of this and was certain it wasn't true.

It's not true.  First I looked on Snopes.com and found it was an urban legend that had been making the rounds for years.  Next I called the state to make sure.  But maybe as a small business owner you don't have that kind of time.  Let's apply some logic to then.

Would the state legislature pass a law to help out people who can't vote them back into office and hurt people who can?  I can't see that happening at all.  If such a law was passed, wouldn't the press let us all know?  I never heard anything about it.  Believe me, if the Republicans advanced this, the Democrats would let everyone know and the reverse if the Democrats brought this to the floor.  It pays to keep an ear open for current events.

I've also been told that one Tennessee county paid a different liquor tax than another.  Bring logic into it again.  A state tax is a state tax.  Counties don't have the ability to change it.  State taxes are the same throughout the state.

Another individual was upset that health insurance premiums were going to be added to gross pay on the W-2 and taxed.  Gross pay is gross pay.  Nothing can be added to gross pay.

As a small business owner, you need the best information you can obtain to make a decision.  Sometimes the information you need is right there in your head.  Does it make sense?  Even if you don't have the time to check everything out, logic and knowledge of the way things work will take you far.  People don't mean to pass on false information, but sometimes they don't think before they speak.  The old adage is still true:  Don't believe anything you hear and only half of what you read.  Except my blog, of course, you can believe 75% of it, maybe even 80%.

When can you file certain forms?

The IRS can only act a quickly as Congress.  Since Congress worked literally until the 12th hour making changes to the tax structure, the IRS is still working on updating forms and instructions.  If you want to know which forms will be ready and at which dates, click on the link to the right on this blog page that says IRS General Information Home Page.  That link will take you directly to the IRS.  Then click on the orange/red section that says Forms and Pubs.  At the top of the next page is a link to all the forms still under programming.  Most will be ready by the first of March and most people don't use them.  So it's very possible you can file right now, if you haven't already done so.

As always, if there is something specific you want to know, leave a comment and let me know.

W-2s, 1099s and Year End Payroll Reports

It's about time to get those tax statements out to employees and sub-contractors.  These need to be mailed by the end of January but don't have to be filed with the IRS (for 1099s) or the Social Security Administration (for W-2s) until the end of February.  The reason for this?  If there are errors in name, address or ID number, in either the 1099 or W-2, the recipient of the form will let the sender know.  A corrected form can be generated and the documents needed to be sent to to the taxing authority can be corrected before the forms are sent in.  That's the easiest way to do it.

The other reports that need to be sent in by January 31, no extension on these forms, are the 941, the 940 and the state unemployment.  These have to be sent in by the end of the month.  The main thing to remember about these reports is that they all need to balance to each other.  The four quarterly 941 reports need to match the the W-2s in gross payroll.  The gross payroll total of the 941s need to equal both the quarterly state unemployment reports and the total payroll for the annual 940 or federal unemployment.  If these reports don't match, you will find out about it years later and have to dig through your old files to figure out what the error is and how to correct it.  Best to get it right the first time.

Now let's take a look at the W-2.  New this year on the W-2 is the requirement to include the value of health insurance.  Small employers are exempted from this requirement.  Only large employers need to worry about this.  In any event, this amount is not taxable to the employee but is included for information purposes only, to let the employee know the value of health insurance paid on his behalf.  If the employer can't afford health insurance for the employee, then there is nothing to include.

That's a brief overview, except to let you know that there are a multitude of 1099s - miscellaneous, interest, dividends, mortgage interest (actually a 1098), and a host of others.  So don't forget any of them.  You still have time to get them out.  Have fun.

Link on blog to TN Corporation Annual Reports

I have just added a link to filing the Tennessee Corporation Annual Report on line.  You can pay online with a credit card - I believe there is an extra charge for that - or you can fill out the form, print it and mail it in with payment.  Unless there are changes made, the fee is $20.00 annually.  Once your corporation is registered with the state, you will receive a notice each year with your control number on it.  With the control number, you can gain access to your annual report.  If you lose the notice, you can call the Secretary of State's office.  The number for the Business Services Division is 615-741-2286.

New Link to TN Business Taxes

I have added a new link to my list of tax pages.  This one is for the Tennessee Business Tax.  With this link you can pay your Tennessee business tax on line.  You can find out what category you business falls under so you'll know when to file your taxes and what the tax rate is.  The only thing you can't do is apply for the business license.  The business license is what you renew each year when you pay the business tax.  To start the business tax process you need to get in touch with your county or city clerk and pick up a form.  The clerk can help you figure out your business classification as well, if you don't want to go on line.  On the business tax page you can also find out if your business is exempt from the license and the tax, in which case you won't have to bother seeing the clerk and picking up a form.  Accounting is a business exempt from business tax, for example, along with lawyers, doctors and a host of others.  Many of those exempt from the business tax, such as accountants, have to pay a professional privilege tax, which is business tax by another name.

Any questions?  If so, leave a comment and I'll get back to you.

Should you amend a tax return?

In my last blog I ended by stating the I didn't always recommend that a client amend a tax return to apply for the full refund to which he or she might be entitled.  Why would I do that?  Why wouldn't I want my client to have every penny of their hard earned money refunded by the government?  What kind of CPA am I?

I'm a cautious CPA.  First let me say that I always do what the client wants, as long as it's legal.  But here are some reasons why it might not be the best idea to amend a prior year's tax return.

Every tax return carries a statute of limitations based upon when it was filed.  That time period for personal taxes or 1040s is three years.  If you file, that is submit your tax return to the IRS, on April 15, 2013, for tax year 2012, the IRS has until April 15, 2016, to question the return.  After that date, no more questions.  Unless fraud, that is out right lying on the return, is suspected, then these rules don't apply.  But for this discussion we're going to assume no fraud.

How do you know for certain when the statute begins?  The IRS will have a record of when the tax return was received and you'll know that as well based upon the date on your copy of the return.  You can go to the lengths of sending your tax return via return receipt if you wish but I've never had a client do that unless they were really worried or under the gun by the IRS for some reason.  Of course, if you file electronically, which is becoming more and more popular, then you know exactly when the return was received and accepted by the IRS.

So what does all this have to with amending a tax return to get back more money?  When a tax return is amended, the statute of limitations is extended.  That's not usually a problem but it is a consideration.  If the amount to be refunded with an amended return is $50, the tax payer might not want to extend the time the IRS could examine the return for that small amount.

Another consideration is cost to prepare the amended return.  As far as I'm concerned, if I made the mistake, then I correct it for free.  For example, if the client brought in the information and I failed to get it onto the tax return, then after I explain everything to the client - that is my mistake and the statute of limitations - if he or she wants to proceed, then I prepare the amended return for free.  On the other hand, if the reason for the amended return is that the client forgot to bring me some information, then they have to pay for the preparation of the amended return.  And that brings us to the second reason for not requesting the refund.

It takes a lot of time to prepare an amended return.  It might cost $200 to prepare the amended return to receive a $50 refund.  Not very cost effective, however, I did have a client with this situation and he insisted that I prepare the amended return even though he would be paying me more than he would be getting back from the IRS.  His reasoning was that the government wasn't going to keep a penny of his money that it didn't deserve and he didn't care how much he had to pay me to get it all back.  I didn't agree with this reasoning but if that's what he wanted to do, I was happy to collect the fee.

There you have it.  My two main reasons why I don't always suggest preparing an amended return to get back a refund.  Next blog:  How much should I be paying to have my taxes prepared or do CPAs really read 900 pages of tax law or maybe I'll talk about year end payroll taxes and W-2s?  If any of my readers want one topic more than the other, let me know in the comments sections.  Until next time Happy Taxes!

New Year and a New Tax Season Begins

Happy New Year!!!  For most people the change from December 31 of year 2012 to January 1 of 2013 is just an excuse to have a big party and drink champagne.  But for many CPAs and accountants it's the signal that a fast paced few months of increased revenue is about to begin.  Old accounting years end and new accounting years begin.  Books of account are closed and reopened.  Non accountants begin waiting for their tax documents to come in the mail so they can prepare and file their 2012 tax returns.

Are you looking for someone to prepare your taxes?  Planning on using the same person or organization as last year?  Doing your own taxes with a program either purchased or on line?  Is this your first year to file your own taxes?  What to do???

Any of these choices are fine.  Recently I saw an ad on TV, which will be prevalent for the next few months and then die away until next year, from a rather large national tax preparation firm asking for clients to bring in the last three years of tax returns.  The ad suggests that there may be an error on the prior years' returns that, once rectified, would yield large tax refunds missed by the previous preparer.  And that might be true.  It occurred to me that this request for prior tax returns might need some explaining.

Is this usual practice?  Yes, it is.  I always want a new tax client to bring in the previous three years tax returns for my review.  Do I think the prior preparer has made a mistake or missed something?  No, not really.  There are a lot of things I'm looking for when I review a new client's tax returns.  Read on to see what I hope to discover.

First of all I'm looking to see what the client reported for the last three years so I can continue in the same manner.  No need to upset the IRS with changes that don't need to be made.

Second I'm looking for anything that might be missing.  If interest was reported from a certain bank in prior years and there is no interest from that bank now, I want to ask about it.  It could be the account was closed and therefore no interest income for the current year or it could be the tax payer forgot to bring in that 1099.  I also want to check to see how certain items such as installment sales and depreciation were handled.  The list is long and extensive and I won't try to list everything here.

So, if you are going to a new preparer or to a preparer you've used before, it's always a good idea to bring along the previous years tax returns.  Some preparers might not need that since they will be keeping everything on file and can find it themselves.  I'm that way.  A continuing client doesn't need to bring in the previous years tax returns because I keep copies and look back on them if I need to answer a question.

Why only three years?  Why not four or five or ten?  There is a statute of limitations on taxes which means after three years the tax payer can't make any changes and neither can the IRS.  After all, if no error has been found in three years, it probably won't be found.

Am I also looking for errors that might help my new client to receive more money from the government ?  Yes, I am.  Do I always tell a client about these?  Yes, I do.  Do I always suggest that the client act on receiving these refunds?  No, I don't and in the next blog I'll tell you why.

Remember if you have an idea about a blog topic, let me know.  I'm here to respond to what my public wants to read.