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).

connect with us          forward to a friend   Copyright © 2013 Western CPE, All rights reserved.  Comments by Lu Ann Curlee, CPA are in blue.  Lu Ann Curlee, CPA, is not affiliated with Western CPE in any way and her comments are her own..

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.