Wednesday, December 26, 2007


I often have people tell me that they wonder what our staff looks like. If you go to our website we now have pictures of our staff. Simply click on the following link and then on the person's name to see what a great looking staff we have. By the way, the pictures on the website are pictures of our office. Our office is in an old library building and historical landmark. The office with the brick wall is where I spend my time.

Larry Kopsa CPA

Wednesday, December 19, 2007


I read your posting about year end inventory purchases. How do I know what my method of inventory is? Jody

Jody, your method of accounting is set when you file your first tax return. Your tax preparer marked a box on the return establishing your method of accounting. You are stuck with that method unless you file an application with the IRS for a change of accounting method. The process of obtaining a change in method is fairly complicated so make sure that you study this carefully and get professional help if you want to make a change.

You can determine your method of accounting by looking at your tax return and finding the box that tells your method. Where to find the box depends on your type of business. On the Kopsa Otte website I have posted a chart to show you where to look. Simply click on this link to take you to the chart.

It is a pleasure serving you.

Larry Kopsa CPA

Saturday, December 15, 2007


My income is up this year. I was planning on buying some inventory to bring my taxes down. If I purchase $10,000 inventory before the end of the year would that save me some tax money? Karen

Karen, Maybe. There are two different types of inventory purchases

· Inventory for resale
· Inventory for back bar

If you purchase inventory for resale, that purchase would never be deductible. You are required to take a physical count of your retail inventory on hand at the end of the year, and whatever the cost of that inventory is, it is not deductible until the inventory is actually sold.

The purchase of your back bar inventory is another story. Whether or not this purchase is deductible depends on your method of accounting. If you are on the cash receipts and disbursements method of accounting I have good news. You can deduct the purchase even if the back bar inventory is still on the shelf.

Example 1: Jan Clipper is on the cash basis of accounting. On December 27, 2007 she receives an order of color in the amount of $2,000.00 and $3,000.00 of product for resale. Before the end of the year Jan writes a check to the distributor for $5,000.00. Since Jan is on the cash method of accounting she can deduct the $2,000.00 for the color. Jan would only be able to deduct that portion of the $3,000.00 that was sold before the end of the year.

My answer to the back bar purchases is different if you are on the accrual method of accounting. If you are on the accrual method of accounting you are required to take an inventory of back bar along with retail and are not able to deduct until the back bar is used up.

Example 2: The same facts as above but in this case Jan Clipper is on the accrual method of accounting. In this case she would be required to inventory the back bar inventory and only that amount that is used before the end of the year would end up being deductible.

Let me know if you have any other questions. It is a pleasure serving you.

Larry Kopsa CPA

Thursday, December 13, 2007


Got this address on the internet........I have a general question. Would really appreciate an answer. I have a C Corp...... I am planning on buying some expensive equipment........and I can buy it in Dec 2007. The salesperson told me that this would save me a considerable amount of taxes.

Is there any reason I can't pay for it and then Section 179 the depreciation in order to offset some profit.........even if I am not yet using the equipment. Robert

Robert, As your own personal professional tax advisor should have told you, the Section 179 law is very specific about the new equipment needing to be purchased and placed into service during the tax year. Just prepaying for something and not actually using it in your business until the next year will not fly. Any salesperson who told you otherwise is not telling you the whole truth and cares more about his/her commission than being honest. As you apparently understand, if you meet certain criteria you can expense out $125,000 in the year of purchase. You do not need to depreciate the equipment.

The good thing is that when the items are placed into service during the year isn't relevant. Starting to use a new piece of equipment on December 31 is just as good for the Section 179 eligibility as any other date during the year, assuming it is a calendar tax year. I have a primer on the section 179 on our website that explains in detail the fast depreciation rules. Check it out for more information.

It is a pleasure serving you.

Larry Kopsa CPA

Wednesday, December 12, 2007


IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile

IR-2007-192, Nov. 27, 2007
— The Internal Revenue Service today issued the 2008 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.

The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS.

The mileage rate for charitable miles is set by law.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.

Monday, December 10, 2007


If you are offering Medi Spa treatments you might be interested in the following. I just happened to be reading American Medical News and ran accross this article. Actually I don't read the American Medical News, one of my doctor's clients sent the magazine to me. Simply click on the link below to get an idea what the medical profession is doing.

Thursday, December 6, 2007

Saturday, December 1, 2007


Hello - I have a question....State Board of Equalization recently did a surprise visit to the salon and fined several of the hairdressers for different minor violations. The owner would like to open the salon on a Sunday and give all the proceeds to those stylists to help them pay their fines. Is there a way to give them the $ without them having to pay taxes? Can we just classify the payments under Penalties, since ultimately that is what the money is going to?

Hope you are well!

-M-, Sorry for the problems that you had. I hope the fines were not too stiff. I have bad news for you regarding the very nice gesture that you want to do for your staff. Anytime an employer gives the employees cash, it is considered wages and is subject to federal, state, FICA and Medicare withholding. If the salon is the one that is being penalized then the salon should be the one paying the fines. If that were the case, then it would not be income to the staff. The penalties are not a deductible expense to the salon or to the employees. If you have any questions on this let me know.

It is a pleasure serving you.

Larry Kopsa CPA

Monday, November 26, 2007


Larry, We've been doing a little restructuring lately and it has brought up a question I'm sure you can answer. Is it acceptable and/or legal for our salon to charge a service charge? We appreciate your input. Kim

Kim, I hope finds you well. You had asked whether or not it was legal for a salon to use a service charge. When you say service charge, I presume you are meaning that the commission stylist is paid a percentage, such as 50%, and then there is a 5% commission that is subtracted out as a service charge.

Although employment law can be somewhat complicated and there are some variances from state to state, service charges are a legal method of calculating the compensation, as long as the individual is paid at least a minimum wage.

It's a pleasure serving you!

Larry Kopsa CPA

Wednesday, November 21, 2007


IRS Warns about California Wildfire Email Scam: The IRS warned taxpayers of a new email scam purporting to come from the IRS and the U.S. government for charitable contributions to victims of the California wildfires. The email urges recipients to click a link on a fake version of that opens a donation form requesting personal and financial information. Taxpayers can forward suspicious emails to an electronic mailbox,, using instructions found in "How to Protect Yourself from Suspicious E-Mails or Phishing Schemes" on the genuine IRS website. News Release IR-2007-183.

Wednesday, November 7, 2007


I know that most salon owners and their stylists don't want to hear this, but NOW IS THE TIME TO INCREASE YOUR PRICES. Wouldn't you agree with me that the price of everything is going up? Why shouldn't it be any different with your business? It just makes good sense to increase prices on an annual basis.

My rule of thumb for price increases is to increase annually and to do it right now before we get into the busy holiday season. Right now... the first part of November. Get those price increases in and take advantage of the increase now, when you are busy. The second time I recommend raising prices is when a stylist increases by a level or is 60% booked.

I have never ever heard of a salon that did a 3% to 10% increase in prices and in the end felt that it was a mistake. Never! If you have a different conclusion, I would like to hear it. Sure, you may lose a few clients but think about it. If you increased prices by 5% and lost 5% of your clients, you would still be making the same money but working less. What is wrong with that?

I know that when we owned our salon and increased prices, we would have a few clients go elsewhere but for some reason we always got busier. Maybe people thought that since we were at a higher price we were better. I don't know, but that is my experience.

Most salons are working on a small profit margin to start with. It's time for you to get paid what you are worth.
So... Just Do It!!!

Tuesday, November 6, 2007


Okay, I know that this is supposed to be a somewhat serious business blog covering items of interest for persons in the salon and spa industry, but I could not help but forward this on to you. My head secretary (the person that really runs the office) sent me this and I thought it was pretty cool. I forwarded it to my wife... I'm not sure if she will get the hint.

Anyway, I know that this is a busy time for you but just in case you are looking to bake Christmas cookies, all you have to do is click on a link and the recipe will come up.


Larry Kopsa CPA

1-2-3 Cookies 7 Layer Cookies Allie Nelson's Famous Snickerdoodle Cookies Almond Crescent Shortbread Amish Sugar Cookies Andies Candies Cookies Angel Crisps Angenets Applesauce Cookies Apricot Fold-Overs Aunt Edy's Molasses Crinkles Auntie Linda's Ginger Gems Bakeless Dream Cookies Banana Drop Cookies Best Chocolate Chip Cookies in the World Biscotti Biscotti Blueberry Cookies Boiled Chocolate Oatmeal Drop Cookies Bronwnies Brown Sugar Shortbread Brownie Cookies Brownie Delight Brownies Buccaneer Snowballs Buried Cherry Cookies Butter Cookies Butter Nut Balls Butterballs Butterscotch Haystacks C.O.P. Cookies Candy Cane Cookies Candy Cookies Caramel Shortbread Cheesecake Brownies Cherry Buns Cherry Crowns Cherry Winks Chewies Chewy Noels Chinese Chews/Haystacks Chocolate Chip Cookie Bars Chocolate Chip Cookies Chocolate Chip Meltaways Chocolate Chip Peanut Butter Cookies Chocolate Christmas Trees Chocolate Cream Cheese Squares Chocolate Crinkles Chocolate Mint Snow-Top Cookies Chocolate Oatmeal Cookies (no bake) Chocolate Snowball Cookies Chocolate Streusel Bars Chocolate Sundae Cookies Chocolate Walnut Crumb Bars Choco-Scotch Crunchies Choose A Cookie Dough Recipe Christmas Crackers Christmas Crunch Bars Christmas Ginger Snaps Christmas Macaroons Christmas Mice Cookies Christmas Shaped Cookies Church Window Cookies Coconut Cookies Congo Squares Cookie in a Jar Corn Flakes Cookies Cornflake Christmas Wreaths Cowboy Cookies (oatmeal) Cream Cheese Cookies with Apricot Filling Crème De Menthe Chocolate Squares Crème Wafers Crescent Cookies Crispy Crunchies Date Nut Balls Date-nut Pinwheel Cookies Diabetic Peanut Butter Cookies Disgustingly Rich Brownies Doodles Double chocolate chip cookies Double-Chocolate Crinkles Eatmore Cookies Eggnog Cookies Elizabeth's Sugar Cookies Elves Quick Fudge Brownies Emily Dickinson's Gingerbread Cookie Recipe Emily's Best Brownies Famous Oatmeal Cookies Firemen Cookies Fluffy Shortbread Cookies Forgotten Cookies Frosted Peanut Butter Brownies Fruit Cake Cookies Fruitcake Squares Fry Pan Cookies Gems Ginger Cookies Ginger Crinkles Gingerbread Baby Gingerbread Cookies with Butter Cream Icing Gingerbread Men Gingerbread Men Ginny's Gluten Free Chocolate Chip Cookies Glory's Golden Graham Squares Glory's Sugar Cookies Gramma Chapman's chocolate coconut drops Grandma Elsie's Zimt (cinnamon) Cookies Grandma J's Butter Cookies Grandma Olson's Parkay Cookies Great Grandmothers Sugar Cookies Gum Drop Cookies Gumdrop Gems Haystack Cookies Ho-Ho Bars Holiday Cereal Snaps Holiday Chocolate Butter Cookies Holiday Raisin Walnut Bars Holly Cookies Hungarian Cookies (Little Nut Rolls) Ice Box Cookies Irresistible Peanut Butter Cookies Italian Cookies Jacob's Peppermint Snowballs Jam Bars Jessica's Famous Brownies Jessie's Chocolate Chip Cookies Jubilee Jumbles Juliet's Peanut Butter Blossoms Jumbo Chocolate Chip Cookies Kentucky Colonels Kiefle (cream cheese cookies with jam filling) Kifflings Kiss Cookies Lacy Swedish Almond Wafers Lemon Angel Bar Cookies Lemon Bars Lemon Cake Cookies Lemon Cream Cheese Cookies Lemon Squares Linzer Tarts Log Cabin Cookies Luscious Lemon Squares M&M Cookies Magic Cookie Bars Melt in Your Mouth Cutout Sugar Cookies Melting Shortbread Meme's Cream Cheese Cookies Milk Chocolate Florentine Cookies Mincemeat Cookies Mincemeat Goodies Molasses Cookies Molasses Forest Cookies Molasses Sugar Cookies Mom Mom's Crescent Cookies Mom-Mom's Ginger Cookies Mom's Nutmeg Sugar Cookies Mom's Old Fashion "Puffy" Sugar Cookies Monster Cookies Moravian Christmas Cookies Nana's Famous Soft Southern Cookies Nitey Nite Cookies No Bake Chocolate Cookies No Bake Chocolate Oatmeal Cookies No Bake Cookies No Bake Cookies No Bake Peanut Butter Cookies No-Bake Chocolate Oatmeal Cookies No-Bake Cookies Norwegian Sugar Cookies Nut Balls Oatmeal Bars Oatmeal Chocolate Chip Nut Cookies Oatmeal Coconut Crisps Oatmeal Cookies Oatmeal Scotchies Old Fashioned Sugar Cookies Ooey Gooey Caramel Chocolate Dunk Ooey Gooey Squares Orange Slice Cookies Parking Lot Cookies Peanut Blossoms Peanut Butter Bars Peanut Butter Blossoms Peanut Butter Cereal Cookies Peanut Butter Chewies Peanut Butter Chocolate Bars Peanut Butter Cookies Peanut Butter Cookies Peanut butter fingers Peanut Butter Reindeer Peanut Butter Surprises Peanut Marshmallow Cookies Pecan Puff Cookies Peppermint Snowballs Peppernuts Persimmon Cookies Persimmon Cookies Petey's Yummy Spicy Almond Thins Pfeffernuesse Pffefferneuse Cookies Pineapple Filled Cookies Pizzelles Potato Chip Cookies Potato Flake Cookies Praline Cookies Praline Strips Pterodactyl Nests Pumpkin Bars Pumpkin Bars Pumpkin Chip Cookies Pumpkin Chocolate Chip Cookies Pumpkin Cookies Queen Biscuits Quick Cookies Raised Sugar Cookies Raisin Filled Oatmeal Bars Raspberry Meringue Bars Really Peanutty Butter Cookies Reese`s Brownies Reese's Peanut Butter Bars Rich Flavor Christmas Cookies Rich Lemon Bars Ricotta Cheese Cookies Royal Almond Christmas Bars Rudolph Cinnamon Cookies Russian Tea Cookies Russian Teacakes Samantha & Kelsey's Chocolate Chip Cookies Sand Art Brownies Santa Claus Cookie Pops Santa Claus Cookies Santa's Butterscotch Melts Santa's Shorts Santa's Special Squares Scotch Cakes Scotch Shortbread Scotcharoos Scotcheroos Seven Layer Cookies Short Bread Cookies Shortbread Skor Squares Snicker Doodle Cookies Snickerdoodles Snickerdoodles Snow Balls Sour Cream Apple Squares Sour Cream Christmas Cookies Special K Cookies Spice Cookies Spicy Oatmeal Raisin Cookie Spritz Cookies Stained Glass Window Cookies Stir & Drop Sugar Cookies Sugar Cookies Sugar Cookies Sugar Cookies Swedish Pepparkakor (Pepper Cake) Cookies Swedish Sugar Cookies Sweet Marie's Swiss Treats Taralle (Italian Cookies) Tea Time Tassies Texas Brownies The Best Shortbread in The World Thumbprint Cookies Thumbprint Cookies Toffee Squares Traditional Christmas Sugar Cookies Traditional Gingerbread Men Cookies Triple-Chocolate Chip Cookies Ultimate Chocolate Chip Cookies Vanilla Waffer Balls Walnut Butter Cookies Walnut Crumb Bars White Chip Chocolate Cookies Wild Oatmeal Cookies Will's Famous Apple Jack Cookies Yummy Yummy Peanut Butter Blossoms


I just returned from the Marshalls Fall Show at Lake Geneva, Wisconsin. During the show I gave two different seminars, one For Booth Renters Only and the second program was on Taxes for Salons and Spas. I was probably asked the following question at least 10 times during the weekend.

"How long do I need to keep my records?"

I thought that you might be interested in my answer.


First, for your convenience, we have prepared a free handout that shows in detail how long you have to keep specific items. You will find this handout by visiting our website at

The following is an overview of the rules.

When determining how long to keep most of your income tax records, we look at the time frame over which the IRS can audit a return and assess a tax deficiency, or the time frame that you can file an amended return. For most taxpayers, this period is three years from the original due date of the return or the date the return is filed, if later. For example, if you file your 2005 Form 1040 on or before April 15, 2006, the IRS has until April 15, 2009 to audit the return and assess a deficiency. However, if a return includes a substantial understatement of income, which is defined as omitting income exceeding 25 percent of the amount reported on the return, the statute of limitations is extended to six years.

A good rule of thumb for keeping tax records is to add a year to the IRS statute of limitations period. Using this approach, you should keep your income tax records for a minimum of four years, but it may be more prudent to retain them for seven years, which is what the IRS informally recommends. State tax rules must also be considered, but holding records long enough for IRS purposes will normally suffice for federal and state tax purposes, assuming the federal and state returns were filed at the same time.

Certain tax records, however, should be kept much longer than described above and some should be kept indefinitely. Records substantiating the cost basis of property that could eventually be sold, such as investment property and business fixed assets, should be retained based on the record retention period for the year in which the property is sold. Tax returns, IRS and state audit reports, and business ledgers and financial statements are examples of the types of records you should normally retain indefinitely.

Keep in mind that there may be non-tax reasons to keep certain tax records beyond the time needed for tax purposes. This might include documents such as insurance policies, leases, real estate closing statements, employment records, and other legal documents.

It is also important to know that the IRS permits taxpayers to store certain tax documents electronically. Although the rules are aimed primarily at businesses and sole proprietors, they presumably apply to other individuals as well. The rules permit taxpayers to convert paper documents to electronic images and maintain only the electronic files. The paper documents can then be destroyed. Certain requirements must be met to take advantage of an electronic storage system, so contact us if you want more details.

The timetables listed above are the requirements for tax purposes. You should contact your attorney for additional guidance on record retention for legal purposes.

Larry Kopsa CPA

Friday, November 2, 2007


The Democrats just introduced legislation in Congress that will not pass, but does give us an indication of what's to come in 2009 if the Democrats retake the White House and retain control of both houses of Congress. There will be debate over the estate tax, and all of the tax cuts that we have had over the last 8 years will be out the window.

There will be some tax cuts, especially in the area of the alternative minimum tax and standard deductions. In addition, those low income people not paying income tax and still getting a refund through the earned income credit will be getting even more money back. To fund this there are a number of tax hikes that will impact us.
  • They are proposing a surtax of around 5% once your income gets above a certain level.
  • Tighter limits on itemized deductions for persons doing the long form.
  • Tighter limits on who can claim the normal personal exemption amount.
  • Less miscellaneous itemized deductions.
  • Self employment tax on all S Corporations and Partnerships.

It is going to be a mess, but trust that we will keep you posted.

Larry Kopsa CPA

Thursday, November 1, 2007


I read your explanation about cash contributions. Thanks for the information. I bet the Salvation Army guys aren't too happy about this. Could you answer this question? My church is doing a building fund drive and I was thinking I saw that I could use my IRA money. Is that correct?


BR, This all depends on your age. When the rules on charities changed, Congress did throw one bone to the charity lobby. Taxpayers age 70 1/2 or older can now contribute up to $100,000 directly from an IRA to a charity without paying tax on the money. This helps taxpayers who don't itemize or who have to exceed a percentage of their adjusted gross income (7.5% for medical expenses, 2% for miscellaneous itemized deductions) in order to claim a deduction. But Congress wasn't all that generous -- this provision is only good through 2007.

So, unless you are over age 70 1/2 this won't work for you. As with all of my answers, make sure you discuss with your tax adviser before you finalize your decisions.

It is a pleasure serving you!

Larry Kopsa CPA

Monday, October 29, 2007


Congress is looking everywhere to find more money to put in the government coffers. Now they are even squeezing money from charities. The record keeping that you need to do to substantiate charitable contributions starting in 2007 is a nightmare. Starting in 2007, to claim a deduction, things get more complicated and most likely, you will not be able to claim all of your charitable contributions. I know that in the past I estimated some of my cash contributions. For example, when I am traveling I put cash in the collection plate. I deducted this cash on my personal return. Starting in 2007, I will not be able to deduct the cash.
  • As mentioned, you can no longer deduct cash contributions. When I say "cash" I don't mean checks, sometimes people get confused by this. This means that any cash that you drop in the the collection plate or give to the Salvation Army Santa Claus will not be deductible on your return.
  • Checks are valid substantiation for gifts of $250 or less. For example, my wife just wrote a check for $400 to a charity. Unless we get written confirmation from the charity (see below), we will not be able to deduct this charitable contribution. On the other hand, if she would have written two $200 checks, we would have been under the $250 limit and the checks would have been sufficient. She now knows better!
  • For donations over $250, you will need a written confirmation from the charity acknowledging the contribution and stating that you did not receive anything of value for the contribution. For example, last year I gave $1,000 at a silent auction for the right to be "cook for the day" at our local school. In 2007, in order to claim such a deduction I will need to have a written statement stating that there was no value in the contribution.

Remember the deduction for the contribution of old clothes or household items? Things will get trickier in 2007. Under the Pension Protection Act of 2006, you can't deduct charitable donations of clothes or household items (such as furnishings, electronics, appliances and linens) unless they're in "good" condition or better. Congress never defined "good," but I suspect my old socks and underwear are out. (Remember when Bill Clinton disclosed his tax return when he was president and he reported taking a donation for "used boxer shorts" at $4.50 per pair?)

Congress did give the IRS the power to issue regulations to deny a deduction for items with "minimal monetary value."

Even if an item is clearly "good," if you claim a value of more than $500, then you must include a qualified appraisal with your return. That's $500 for an item, not total.

Even if no item is valued at more than $500, if the sum of the non-cash contributions is more than $500, you will still have to file Form 8283 with the date of the contribution, the date acquired, your cost, the fair-market value, and the method used to determine the fair-market value. Special rules apply to contributions of cars, boats, and other items (such as art, jewelry, and collections) with a claimed value of more than $5,000.

Thursday, October 25, 2007


A few days ago I published an example of the problem that the politicians have when they cut or increase taxes. As an accountant that has been around for awhile, I have seen how taxes impact the economy. If you look at history you can see that tax cuts have invigorated the economy while tax increases have slowed the economy down. If you think that I am overly paranoid about the future of special tax rates for long-term capital gains, check out this prediction of Democrat plans, including raising the current 15% rate to 35%.

For those of you that don't go to the link, please read an excerpt from the article. Read carefully Robert Rubin's advice to Bill Clinton when he was president and how his advice changed the economy. As Rubin says, "it is the high taxpayers that create jobs."

Enter Rubin, at first a mere assistant to the president. Updating the Roosevelt view of Wall Street as a New Yorker cartoon, Rubin reminded Clinton that the rich create jobs. As Bob Woodward reported in ``The Agenda,'' Rubin at one point provided what could be termed the Great Reality Check of the 1990s, saying, ``Look, they're running the economy and they make the decisions about the economy. And so if you attack them you wind up hurting the economy and wind up hurting the president.''

Changed Direction
Aided by Republicans who gained control of the House and Senate in 1994, and egged on by Federal Reserve Chairman Alan Greenspan, Rubin proceeded to redirect the administration. He turned Clinton, who was, after all, a governor from Arkansas, into a bond-market expert who nattered on about basis points. By 1997, James Carville was uttering his famous quote about being reincarnated as the bond market, because then `you can intimidate everyone.''

Clinton gave up on health care. Rubin even pushed him into cutting the capital-gains rate to 20 percent, a level below that of the second half of the 1980s during the Reagan years.

Reality Check
The Rubin Reality Check was so powerful it affected both parties long after Clinton left the White House. Through Rubin, Democrats learned that expansive experimentation has a downside because of the fear it can generate. Through Rubin, Republicans were reminded that capital-gains-rate cuts can generate extra revenue. The economic-growth rate of the late 1990s, 4.1 percent on average, was something to brag about -- and still is. Protecting the economy from uncertainty was Rubin's hallmark. He even titled his 2004 memoir ``In an Uncertain World.''

Democrats today are back where they were when Begala, Carville and Reich were leading the transition team: bouncing with ambition to do something grand. But much more talk -- never mind laws -- about a big capital-gains increase will sock equities in the face, just like the mortgage crisis socked subprime and commercial paper in recent months.

Thursday, October 18, 2007


I was talking to a stylist that just moved her salon into her home. One of the items that we discussed was her insurance coverage. Since I am not an insurance expert, I advised her to talk to her insurance agent about her coverage. I thought I would pass my thoughts on to you just in case you have your salon in your home, or if you have some type of home-based business.

By running a business out of your home, the risks can add up fast. Since you see customers, you could be sued if someone trips on the steps. A short in your dryer or other salon equipment could cause a fire. Your have inventory or equipment that could be stolen. All of these are risks, but the biggest risk of all is assuming that your homeowner's policy will cover these damages.

Talk to your agent, but normally regular homeowner's policies cover only a fraction of business-related claims -- yet many salons and home-based businesses don't buy additional coverage, leaving them potentially exposed to huge losses.

I read somewhere that a typical homeowner's policy covers only about $2,500 of on-premises business equipment, and just $250 off premises. In addition, the policy is unlikely to contain any liability coverage for business-related accidents.

Given the risks, experts advise home-based entrepreneurs to beef up their coverage by buying business insurance. There are three general types of policies available. The best choice depends on the size and nature of the enterprise.

First, there are endorsements, also known as riders. These are provisions added to your existing homeowner's policy that bolster the coverage to include your business. If you opt for this type of coverage, check whether it includes liability insurance for your business -- if not, you may need to purchase a separate liability policy. An endorsement usually doesn't offer a great deal of coverage, so it's probably best for businesses with a small amount of equipment and space that don't get visitors or deliveries at the home. A typical endorsement might cover $5,000 of contents and $1 million of liability for about $200 to $250 a year. That's on top of the homeowner's policy.

Secondly an in-home business-owner's policy combines coverage for the home and the business into a single contract, eliminating duplications and gaps in coverage. This type of policy, which generally starts at around $100 to $150 on top of the regular homeowner-policy costs, usually covers you for liability and loss of income. It's a good choice for businesses with limited risk exposure, but not if much of the business is conducted outside the home, because the policy covers only household activities and property.

Finally a business-owner's package policy is the most comprehensive type, and is more like a regular commercial policy than the other two options. It's completely separate from the homeowner's policy, and coverage usually includes liability on and off premises, business property, loss of income and injury.

This type of insurance will probably be best for home-based salons. This option could run about $250 to $500 a year, but may cost more depending on how risky your business is.

In summary, talk to you agent. Make sure that the agent knows everything about your business so that he or she can properly advise you.

Larry Kopsa CPA

Wednesday, October 10, 2007


Someone (my girlfriend) had the poor sense to work in a start-up salon and the start-up failed (all within the tax year). The business is closed and the owner (who registered with the IRS via an EIN) did not report/deposit all withholding (this is probable as there is no W-2 to be had) :

I extended her return but it is due on October 15th. I know how to file her tax return using the last pay stub and the appropriate IRS self-reporting form in lieu of a W-2; but my question is, will she be liable for payroll and withholding taxes deducted but not remitted by this so-called fiduciary/agent employer (if of course all wages were not appropriately reported/deposited)?

Can you let me know?

Unless your girlfriend was in a position within the company to have some control over the payment of bills, she shouldn't have any problem with the IRS. It is the responsible parties within the company, those who chose to use the money for things other than paying the IRS, who will receive the wrath of the IRS and be hit with major penalties.

The IRS considers those people to be thieves, who stole the employees' tax money, and will act very aggressively to recover it from them. The powerless employees whose money was stolen will not be penalized, and will receive the same credits with the government as if the full amount of the taxes had been forwarded to the IRS.

As you apparently are aware, she needs to attach Form 4852, which is a substitute for the W-2, and include it with her return along with an explanation of what happened. She shouldn't have any problems with the IRS.

One very important note. If your girlfriend did have any power over the company checkbook, she should retain the services of an attorney and work on negotiating the scope of her liability with the IRS.

It is a pleasure to serve you.

Larry Kopsa CPA

Saturday, October 6, 2007


Thanks for the information on the price increases. You convinced me. I have one more question I forgot to ask. I was wondering - do you think that I should let the clients know before I do the increase, or just start charging more? Thanks

Your question reminds me of gas prices. Do you know why everybody complains about the price of gas? I think it's because you can't drive down the street without seeing the price of gas. I have often wondered if people would still complain if the prices were not posted in those huge numbers.

But back to your question. There are two schools of thought regarding letting clients know about price increases. One school says to post them in advance so people won't be surprised when they come in. The other school says to just raise prices and let it be.

I am an advocate of the second school. I am not aware of too many items that I purchase where I am informed in advance that the price is going up. An exception to that might be if a company is trying to create sales by telling you that the price is going up soon, but that is normally on big ticket items that you don't purchase on an ongoing basis.

I have found that a majority of people don't even realize the price has gone up unless the increase is substantial. Sure there are some people that are going to complain, but then again, they were going to complain even if you gave them notice.

As you can see, the choice is yours. Whatever you do, make sure that you make a good business decision and set up a system for periodic price increases.

It is a pleasure to serve you.

Larry Kopsa CPA

Wednesday, October 3, 2007


Larry, thanks for your blog. I appreciate all the information that you provide. I remember a while back attending one of your programs and you talked about when to increase prices. I have not increased prices for some time and am wondering if it is time for an increase. Do you think that I should increase prices and if so, when? Thanks

In a word, NOW! My wife was a stylist and we owned a salon a few years back. I know how difficult it was to convince my wife and the staff that we needed to increase prices. There was always some reason not to do an increase. At the same time, it is important to be profitable.

Recently I was working with a new client and I asked how she determined her prices. She said that she called around to other salons to see what they were charging. Given that and according to some industry numbers, 70% of the salons in the USA are not profitable. She was most likely setting a price point for failure. She then went on to tell me that most of the salons that she talked to were not making money.

Here is my advice. First, we always increase prices on or around November 1st. I want the price increases to come into effect before the busy holiday season. The price increase offsets the fact that all costs are going up. We do a calculation for our clients and, just to keep up with rising costs, they must increase prices by anywhere from 2% to 4%. If you don't do this you will most certainly lose money.

Secondly, as you or your staff advance, it is time to raise prices. This might be due to education or some other factor. One factor should be how booked the person is. Once someone becomes around 60% booked, it is time for a price increase.

I have not yet talked to a salon that increased prices and regretted it. The only regret I have ever heard was, "I should have listened to you earlier."

Larry Kopsa CPA

Friday, September 28, 2007


It happened again. It's hard to imagine but at least twice a year I talk to someone that has lost all of their computer data.

I recently received a call from a salon that had a computer crash. Unfortunately, the owner did not have a computer backup and all of her data was lost. I advised her to work with a computer technician to see if there was some way to find the lost information on her had drive - but I am not optimistic.

If you are like this unlucky owner and do not have a system in place to backup your computer, just think what would happen if you had a computer crash, if there was a fire and your computer was destroyed, or if someone stole your computer. Not only is there information you could never recreate, think of the time it would take to re-key all of your computer inventory, client information, service prices, etc.

And while you're at it, make sure that your backup copy is secure. We started working with a salon and some of the numbers were looking goofy (this is a technical term that we accountants use). Anyway, unbeknown to us, the salon had an employee that was embezzling. Before we could determine exactly who or what the problem was, the employee sensed that we were closing in on her. Her boyfriend, a computer geek, not only tapped into the computer and erased all of the data, he also had access to the backup copies and corrupted them as well. We lost all the evidence and it took forever to recreate the history and get the backup up and running.

It takes a few minutes a day to backup, but I guarantee that you will be happy that you did.

Larry Kopsa CPA

Tuesday, September 25, 2007


I am so juiced up right now. I just returned from the YBN Retreat in Dana Point, California. This was a great event with great speakers and terrific exhibitors. If you have never been to a YBN Retreat, mark your calendars for next year's retreat on September 28th and 29th, 2008 in La Costa, California. I will definitely be there.

While I was there I met some people that are really dedicated to the salon and spa industry. I asked them to give me a short introduction so that I could pass on to you. Check them out.

Your Beauty Network
We provide Salon & Spa professionals with the business tools and support to help them grow!

Salon Training International
‘Global leaders delivering world class business education’

Professional Beauty Association (PBA - the old TSA)
We are made up of salons & spas, distributors, & manufacturers dedicated to improving their individual business & the industry as a whole.

1 Stop Salon
We have been in business 30 years. We designed the Sensei line of shears, the VIA line of salon tools and have also designed many other products for our many private label customers. We were also the people who created the Centrix line of shears for Cricket but we left them over 10 years ago. We are a very innovative company. For example, we created the first 360-degree rotating shears. We also created the first Ion generating hairbrushes, the first ergonomic brush handles, and the first reversible shears for lefties and these are just of few of our many innovations in the industry.

We started a couple of years ago to make the full range of our products available directly to salons for the first time. We also carry selected products from other manufacturers. For YBN members and TSA members we offer a special ongoing discount off our already low website prices.
Mark Wright

EKO Marketing & Design LLC
We specialize in beauty and cosmetology marketing. We provide services such as logo, brochure, web design, market consulting, media planning, & buying, video production, TV, and radio commercials. We are a California based company. EKO Marketing also has the American Makeover-
Falina Marihart

Boutique Your Salon

Why not utilize your salon’s retail space to the fullest?
Boutique Your Salon is a company that specializes in helping salons generate higher profits by retailing fashion accessories. We provide the merchandise, displays, and education to help salons be successful!
Kerry Ok