Wednesday, December 31, 2008

INSTEAD OF A CASH BONUS...GIVE YOUR EMPLOYEES SOMETHING THEY WILL REMEMBER

My good friend Robert Polk reminds me that studies show that noncash rewards, such as incentive trips, are more effective at increasing performance than giving cash bonuses! One primary reason is that cash does not have the staying power that incentives offer.

When a survey conducted by Wirthlin Worldwide, was given to 1,010 people, their findings showed that people saw cash "rewards" as compensation and spent it on necessities rather than a personal reward. For example, 29 percent of the people spent the money on bills, 18 percent do not remember what they spent it on and 11 percent spent it on household items. Additionally, cash rewards do not reinforce association with the company the same way an incentive trip would, nor does it provide a tangible symbol or lasting reminder of their achievement. Do you remember what you spent your last bonus on?

Monday, December 29, 2008

IRA CONTRIBUTION

Larry, I am 63 and plan on retiring at the end of the year. Can I still make an IRA contribution for 2008? Henry

Henry, the answer is yes. For the 2008 tax year you can contribute $5,000...that is assuming that you have earned $5,000. In addition, since you are over age 50 you can add an additional $1,000 for a $6,000 total. It does not matter when during the year you retire so long as you meet the compensation requirement. But you can no longer contribute to an IRA after you reach age 70 ½.

It is a pleasure serving you.

Larry Kopsa CPA

Wednesday, December 24, 2008

CLIENT GIFTS

This may be a little late for this year, but keep it in mind for the future. It is customary to thank customers this time of year with a gift. As you might guess, once again the IRS has to stick its nose into our business. They have rules on how much you can give and still deduct. The biggest problem is that there is a $25 limit per client per year. This amount has not been changed since the 1970’s.

The downside is a dollar limit that makes the IRS look suspiciously like Ebenezer Scrooge. 25 bucks per person, max. (Bah, humbug!) Husband and wife count as one person. (Humbug again!)

How can you get around that limit? Consider these strategies:

Consider giving to groups of people, like "the Kopsa family" (Larry and Maggie ((husband and wife so 1)), Ryan ((son 1)), and Tony((son 1)), for a $75 total) or "the folks at Kopsa Otte CPA’s" (There are 25 of us, for a $625 deduction).

Consider giving a gift of entertainment, which you can treat as a gift (subject to the $25 limit) or an entertainment expense (subject to the 50% limit). For example, tickets to a ball game sell for up to $110 each. If I give two tickets, I can deduct them as a $50 gift or a $110 entertainment expense. That's an easy call. (Almost as easy as giving the tickets away instead of attending the game!)

Ad specialties with a value up to $4 each are deductible as advertising and don't count against the $25 per person annual limit for business gifts. Contest prizes you give to customers (but not employees) also qualify.

I know, I said it's better to give than receive. But why not receive that tax break for your holiday gift if it's out there?

FIVE REASONS WHY THE ECONOMY MIGHT RECOVER FASTER THAN YOU THINK IN 2009

Here is Some Optimistic News

(U.S. News & World Report) -- There are a number of reasons to think that the economy might, just might, shift back into gear faster than most of us think or hope. One is plunging oil prices. Now they're below $40 thanks to slowing global demand. At the same time, gas prices have plunged from over $4 a gallon to around $1.67 nationally. (And some analysts think they're heading to a buck a gallon.) JP Morgan Chase economist James Glassman estimates that the drop in oil prices represents "a boost equivalent to a $350 billion stimulus." Another reason is falling mortgage rates. Rates for a 30-year, fixed-rate mortgage fell to a low, low 5.19% last week. That should help housing affordability and the ability of current homeowners to refinance their mortgages. Other reasons are the actions by the Federal Reserve, which has made it clear that the Fed will buy various debt securities to unfreeze the credit markets, and President-elect Obama's stimulus plan, as the new Democrat-controlled Congress will likely spend somewhere between $750 billion and $1 trillion over the next two years to boost the economy. The final reason is America's deep fundamentals. Overall, the core U.S. economy is in far better shape than it was in the 1970s, with a higher productivity and a better tax and regulatory system. Even though the U.S. economy finally succumbed to the oil shock and the credit crisis in 2008, it held up longer than many predicted thanks to its deep strengths. Who knows, maybe it will surprise the bears again in 2009.

Tuesday, December 23, 2008

TEST TIME

This Math test can predict who can give you the best information to help you to be more profitable. Try it without looking at the answers...No cheating!

Ok get your fingers at the ready.....Pick a number from 1-9.....times this number by 3.....then add 3.....then times by 3 again.....You should have a two digit number.....Add these two numbers together.....You then should be left with a single digit number which will tell you who your best business advisor is.

1. The IRS
2. Your banker
3. Your neighbor
4. Your bartender
5. The federal government
6. Your brother in law that has made every mistake imaginable
7. Oprah
8. Your insurance guy
9. Kopsa Otte CPA’s and Advisors :>)
10. Your momma

Monday, December 22, 2008

FOR THOSE OF YOU THAT ARE CONTEMPLATING USING INDEPENDENT CONTRACTORS OR ARE USING INDEPENDENT CONTRACTORS

With business down and costs up, I have heard from many salons that are considering changing to an independent contractor arrangement as opposed to an employee arrangement. As I have said many times in this blog, independent contractor will most likely not pass muster with the Internal Revenue Service and with your State Departments of Labor.

Here is another reason that you want to stay away from this. This case involves a contractor, but the result will be the same in the salon situation. This individual was considered an independent contractor for a manufacturing company. He worked for the manufacturing company for three years and earned over $128,000. A 1099 was prepared for the individual, in that, they treated the person as an independent contractor.

Here is the problem. The Internal Revenue Service audited the individual and found that he had not paid any income taxes on money received. They also found out that the individual was not in a financial position to pay the tax. Because of this, the Internal Revenue Service looked at the business that was paying him and determined this person was actually an employee. As such, they should have withheld 28 percent federal tax and social security tax of 7.65 percent plus matching 7.65 percent. Before penalties, I calculated that the misclassification of the $128,000 cost the company over $164,000. Mind you, this is before any penalties and interest.

If you are using independent contractors in your salon (not booth renters), you are walking on thin ice.

Friday, December 19, 2008

DEAR PRESIDENT ELECT OBAMA,

Taxing small business will not fix the healthcare crisis.

When it comes to addressing the nation's healthcare crisis, there is a right way and a wrong way to implement change. Unfortunately, many public officials think the easiest way to reduce the number of uninsured Americans is to require employers to contribute toward their employees' healthcare costs. These types of proposals are often referred to as employer-responsibility initiatives or "pay or play" legislation.

As small business owners struggle to stay afloat during difficult economic times, it's unfortunate that some elected officials choose to burden our nation's job creators with more costs they likely can't afford. The reality is that these types of proposals, which set a dangerous example are gaining support in statehouses, cities and courthouses across the country.

HERE IS WHAT'S HAPPENED IN SAN FRANCISCO

Recently, the 9th Circuit Court of Appeals ruled in favor of San Francisco's healthcare security ordinance, which requires employers with 20-99 employees to pay $1.17 per hour per employee for healthcare costs. Employers with 100 or more employees must pay $1.76 per hour per employee. These rates will increase in January 2009 to $1.23 and $1.85 respectively, and will continue to increase annually.

Employer healthcare payments can be made either to the employee through at traditional employer-sponsored plan, directly to employees as reimbursements for healthcare costs or to the city to fund its Health Access Program.

Thursday, December 18, 2008

TAX REMINDERS

Here are our final tax reminders for this year to help you avoid problems:
  • If you have a flexible spending account balance you must clean it out by Dec. 31 if your employer still has not adopted the 2½-month grace period which is now permitted by the IRS. If your employer has not made the change, any money left in your flex spending account is forfeited.
  • Mail checks for deductible items before year end to ensure a 2008 write-off. You get to claim the deduction this year even if the checks do not clear until January.
  • Make sure you know the rules if you are charging deductible items.
  • For charges that you make with a retail store credit card, you are allowed to claim the deduction for the item only in the tax year in which you pay the bill.
  • For transactions made with a bank credit card, you take the deduction in the tax year that you charged the goods, even though you pay the bill next year.
And our final suggestion for this year:
  • Have a happy holiday season!
The income tax forms will start to arrive in mailboxes in less than three weeks.

Wednesday, December 17, 2008

YEAR-END TAX TIPS

Here are some year-end tax tips from the IRS. Check out the IRS summary at FS-2008-26.

If you are making year-end contributions to charity, keep in mind several important tax law provisions that have taken effect in recent years. Another good summary is in the IRS release
IR-2008-138. Remember that Dec. 31 is the last day for most of these actions to occur.

QUESTION ON RECEIVING INVENTORY

Larry, we will be receiving retail orders from now until the end of the year- should we receive them now or wait until the new year? Sarah

Sarah, remember we want to "match" revenue and expense. If you pay for the inventory you will want to count it. If you include in ending inventory and don't pay for it, we want to make sure that it is in accounts payable even though you are a cash basis taxpayer.

Let me know if there is anything else that we can do for you.

It is a pleasure serving you. Merry Christmas to all.

Larry Kopsa CPA

Tuesday, December 16, 2008

JOE THE PLUMBER

I don’t know how I had missed the following joke during the election season, but thought that you might enjoy. It is about applying the tax policy change philosophy to plumbing bills.

Barack Obama discovers a leak under his sink and calls Joe the plumber to come and fix it.

Joe drives to Obama’s house, which is in a very nice neighborhood where it’s clear that all the residents make more than $250,000 per year (or $200,000 per year or $150,000 per year, depending on who’s speaking and when).

Joe arrives and takes his tools into the house. He’s shown the room that contains the leaky pipe under the sink. Joe figures it’s an easy job that will take less than ten minutes. Obama is standing near the door and asks Joe how much it will cost.

Joe immediately says, “$9,500.”

“$9,500?” Obama replies stunned. “But you said it’s an easy job!”

“Yeah, but what I do is charge a lot more to my clients who make more than $250,000 per year so I can fix the plumbing of everybody who makes less than that for free,” responds Joe.

Obama tells Joe there’s no way he’s paying that much, so Joe leaves.

A week later the leak gets so bad that the Obamas have had to put a bucket under the sink, and it fills up every two hours, so they call Joe back. Joe goes back to the Obamas’, looks at the leaky pipe, and says, “It’ll cost you about $21,000.”

Obama exclaims, “A few days ago you told me it would cost only $9,500!”

Joe explains, “Well, a lot of rich people are learning how to fix their own plumbing, so there are fewer of you paying for all the free plumbing we’re doing for the people who make less than $250,000 - and I refuse to charge the lesser income people for plumbing work.”

Obama tries to straighten out Joe. “But don’t you get it? If all the rich people learn how to do their own plumbing and you won’t charge the poor people, what will you do for money?”

Joe immediately replies, “I guess I’ll run for President.”

Monday, December 15, 2008

LOOKING FOR WAYS TO CUT BACK?

I have received several emails lately from clients and non-clients asking for ways to cut back due to the slow economy. Every situation is different, but here are a few things clients are doing that seem to work.

  1. Add a new service related to your current offerings.

  2. Entice customers with a discount or promotion.

  3. Ramp up customer service. Be extra attentive to existing customers, but court new ones, too.

  4. Split advertising costs with neighboring, non-competitive businesses.

  5. Reduce your inventory to only what you need.

  6. Renegotiate a deal with a supplier.

  7. Cut back on overtime.

  8. Trim the cost of benefits. Some decisions might be tough for employees, but it's better to scale back on benefits than to discontinue them entirely.

  9. Learn the ropes of tax deductions.

  10. Turn down the thermostat in the winter.

  11. Turn off lights when you leave a room and shut down office equipment at night.

  12. When not in use, turn off electronics chargers, which draw power even when not charging.

  13. Have everyone bring in their own coffee mugs instead of going through hundreds of disposable cups each month.

  14. Be honest with employees about how the economy is affecting your business.

  15. Offer low- or no-cost rewards (like an afternoon off) to employees who come up with other cost-cutting measures you can implement.

Thursday, December 11, 2008

QUESTION ON "C" CORP FISCAL TAX YEAR

Larry, I ran across your blog and was wondering if you could answer a question for me. I was interviewing an accountant for my taxes and he was telling me that the only choice for year end for a C Corp fiscal year is either Oct. 1st or Jan. 1st. I could not find the info on the IRS web site. Thanks for your time. Kyle

Kyle, a "C" corporation can have a fiscal year ending at the end of any calendar month. Either there is a misunderstanding, or you need to find yourself a professional tax advisor who is a little more knowledgeable about such basic matters. If this is what the accountant really thinks, consider yourself lucky that this person revealed his ignorance so early in your potential relationship.

Good luck.

Larry Kopsa CPA

Wednesday, December 10, 2008

THE POWER OF PBA

You've heard me say several times how important the Professional Beauty Association (PBA) is. I encourage all salons and spas to be members of PBA. Visit www.probeauty.org to find out how to join.

The following article from the December 2008 issue of www.modernsalon.com shows how helpful PBA is:

"When businesses and individuals join together in an association like Professional Beauty Association (PBA), we are more powerful advocates at the local, state and national level. Public policy and perception can have a profound impact on the professional beauty companies and organizations that populate the professional beauty industry. PBA's government affairs initiatives focus on a range of front-burner issues crucial to the beauty industry, including a tip-tax credit for salon/spa owners, wage and hour issues, health-care costs, license mobility, ADA lawsuits, manufacturing issues, and health and safety issues."

Here's how PBA helped in New Jersey.

"When new and confusing state tax legislation was passed in New Jersey, 'Having PBA to advocate for salons here in New Jersey was a big relief,' said Ed Simon of Mystique Hair and Skin. 'It's comforting to know there are experts on staff at PBA to turn to when issues like this arise.' Through direct lobbying, grassroots engagement and involvement in strategic coalitions, PBA advocates the interests of the beauty industry on issues that matter most."

"All of the work PBA is forging in government affairs is supported by individuals like you - citizens of a dynamic industry who understand the real cost of apathy and the true power of ideas and action."

POLITICALLY CORRECT GREETING

For those of you so inclined, here’s a Christmas greeting that will offend no one whatsoever. Well, let me re-phrase that…it might very well offend Christians but no one else.

A Politically Correct Holiday Greeting

Best wishes for an environmentally conscious, socially responsible, low-stress, non-addictive, gender-neutral, winter solstice holiday, practiced within the joyous traditions of the religious persuasion of your particular choice, but with respect for the religious persuasion of others who choose to practice their own religion, as well as those who choose to not practice any religion at all. Additionally, a fiscally successful, personally fulfilling, and medically uncomplicated recognition of the generally accepted calendar of 2009, but not without due respect for the calendars of choice of other cultures, whose contributions have helped make our society great, without regard to race, creed, color, religion or sexual orientation.

(Disclaimer: This greeting is subject to clarification or withdrawal. It implies no promise by the wisher to actually implement any of the wishes for him/herself or others, and no responsibility for any unintended emotional stress these greetings may bring to those not caught up in the holiday spirit.)

The American Legion Magazine, December 2008

Monday, December 8, 2008

WATCH OUT FOR THESE NEW PHONE AND EMAIL SCAMS

Just another reminder to not give out private information to anyone that calls you on the phone.

The latest one is a Jury Duty Scam. I have personally gone out to the FBI website to verify this report.

This scam appears to be spreading fast so be prepared should you get this call. Most of us take those summonses for jury duty seriously, but enough people skip out on their civic duty that a new and ominous kind of fraud has surfaced. The caller claims to be a jury coordinator. If you protest that you never received a summons for jury duty, the scammer asks you for your Social Security number and date of birth so he or she can verify the information and cancel the arrest warrant. Give out any of this information and bingo; your identity was just stolen. The fraud has been reported so far in 11 states, including Oklahoma, Illinois, and Colorado. This swindle is particularly insidious because they use intimidation over the phone to try to bully people into giving information by pretending they are with the court system. The FBI and the federal court system have issued nationwide alerts on their web sites, warning consumers about the fraud.

Don't believe me, check it out here:
http://www.fbi.gov/page2/june06/jury_scams060206.htm http://www.snopes.com/crime/fraud/juryduty.asp
http://www.truthorfiction.com/

FRAUDULENT GRAND JURY SUMMONS CONTAINING MALWARE

04/17/08
—The IC3 warns consumers of recently reported spam e-mail containing a fraudulent subpoena notifying recipients they are commanded to appear and testify before a Grand Jury. The e-mail attempts to appear authentic by containing a court case number, federal code, name and address of a California federal court, court room number, issuing officers’ names, and a court seal. Recipients are directed to click the link provided in the e-mail in order to download and print associated information for their records. If the recipient clicks the link, malicious code is downloaded onto their computer.

The e-mail also contains language threatening recipients with contempt of court charges if they fail to appear. Recipients are also told the subpoena will remain in effect until the court grants a release. As with most spam, the content contains multiple spelling errors.

If you receive this type of notification and are unsure of its authenticity, you should contact the issuing court for validation.

Be aware; if you receive an unsolicited e-mail, especially from an unknown sender, it is recommended you do not open it. If you do open the e-mail, do not click any embedded links, as they may contain a virus or malware.

If you have received an e-mail similar to this, please file a complaint at
www.ic3.gov.

Friday, December 5, 2008

IMPORTANT PENSION INFORMATION

IF YOU ARE OVER 70 ½ AND HAVE NOT TAKEN YOUR REQUIRED MINIMUM DISTRIBUTION FROM YOUR PENSION, THIS IS IMPORTANT
Required payouts from IRAs and plans may yet be waived for 2008, even though Congress decided not to do anything for this year. In light of the stock market’s decline this year, lawmakers considered not requiring folks who are at least 70½ to take payouts for 2008. That way, they wouldn’t be forced to sell investments in their plans with the market near the bottom. New legislation that may be taken up in Dec. would waive payouts for ’09. That’s no help for 2008. Treasury is still seriously considering providing relief for 2008 payouts. Our advice is to delay withdrawals to late Dec. if you don’t need the money. That way, you can take out less if Treasury decides that it can ease the payout rules.

Thursday, December 4, 2008

HITLER ON YOU TUBE

How would Adolf have handled the current financial crisis? Click on Zer Dunkoff to find out.

Wednesday, December 3, 2008

NEW MILEAGE RATES ISSUED

The Internal Revenue Service has issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:

· 55 cents per mile for business miles driven
· 24 cents per mile driven for medical or moving purposes
· 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008.

The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.

The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.

BE ON THE LOOKOUT FOR THESE ERRORS

Watch out for an error in the instructions for Forms 1099, 1098 and W-2G, and similar information returns. The correct due date for businesses to give a copy of the form to taxpayers is Feb. 17, 2009; not March 2 as the instructions state. The IRS can slap penalties on late issuers. The earlier date was OK’d by Congress in Oct.

Tuesday, December 2, 2008

HERE IS A GIFT IDEA FOR CHILDREN OR GRANDCHILDREN

If your child or grandchild worked this year and had wages or other earned income, funding a Roth is a great gift. You can give $5,000 or what the child earned, whichever is less. But keep in mind that the gift does count toward the $12,000 annual gift tax exclusion. This does not create a tax deduction but a Roth can grow into a nice nest egg, especially if you keep making pay-ins each year.

Monday, December 1, 2008

PINCH PROOF

For those of you that missed, I was quoted in an article written by Stacey Soble in Salon Today. The article, titled Pinch Proof, deals with the possible slowdown in salons due to the economy. The following was my contribution.

"Larry Kopsa, a partner of Kopsa Otte CPAs, an accounting firm that serves the beauty industry, concurs. 'As I read about the recession, it's been really interesting to examine our wide range of salon clients from small salons to large chains - many are performing more services per client and seeing numbers go up.'"

"Every strategic plan starts with a budget. 'If you're not working with a budget, you don't even know if you're hitting your numbers. You have to have that information upfront, so you can do things differently.'"

"While Kopsa says some salon owners have protested they can't afford to hire a financial expert to help establish and maintain a budget, he cautions that you can't afford not to. 'If you can't afford it, you shouldn't be in business. That's like buying a racehorse, but not being able to afford the trainer.'"

"Kopsa advises all his clients to establish two-to three-months worth of cash reserves in the bank just in case. 'Whether you are facing a recession or strong competition moves in across the street, it's always wise to establish cash reserves. If you put aside every year and end up never needing it, then you have funds for future projects like expansions and remodeling. What you don't want is a situation where you're going down the tubes, putting $100,000 on credit cards trying to save your business.'"

"One word of caution with the holiday season ahead, don't be tempted to use your gift certificate receipts as cash reserves. 'It's hard not to view that money as operating capital,' says Kopsa. 'Owners tend to spend it, but then you're just postponing your problem. As those certificates are redeemed, you'll be stuck dealing with paying for the labor and products associated with those sales.'"

Read the whole article in the November, 2008 issue of Salon Today.

IF YOU ARE A SINGLE MEMBER LLC, TAKE NOTE

If you have a single member LLC and you pay wages, you will need to have an ID number starting January 1, 2009. Per new IRS rules, single member/single owner limited liability companies are required to change how they report wages and pay federal employment taxes in 2009.

Wednesday, November 26, 2008

HAPPY THANKSGIVING!

Click The Pumpkin

STAY ON TOP OF THE SALON INDUSTRY

I am saying it again!!!
~STAY ON TOP OF THE SALON INDUSTRY


The Beauty Industry Report Newsletter is the one publication that gives me the best insight into the industry (but no pictures or fluff). Editor, Mike Nave, provides straight information and facts without all the glitter. It is one publication that I read the day that it hits my desk. Below is a taste of what you will read in the BIR.

We Must Teach Salons to Retail
By Bob Oppenheim

Well, I guess it’s official: It’s the manufacturers who are responsible for most of the diversion in our industry. Regis president Paul Finklestein made it official with his statement in a recent BIR that, “Manufacturers bear 95% of the blame.” Coming from Paul, it is a confirmation of what most of us have believed all along. Those ads and earnest protests against diversion were just smoke and mirrors to tell the hairdresser somebody else might be doing it but not us.


So how does “professional” merchandise get into supermarkets, mass merchandisers, independent and chain drug stores? Easy. The retail operations send their trucks and the manufacturers load them up. Or the retail organization orders merchandise and the manufacturer ships it. Or, if they want to deny that they do this, they allow distributors to sell to retail operations while they look the other way. You must remember that when vast quantities of merchandise are diverted, everybody except salon owners makes out. The distributor gets his profit, the manufacturer’s sales person selling to the distributor makes his numbers and the manufacturer cries all the way to the bank.

It’s not going to stop, folks. There’s too much in it for everybody—except the salon owner. And it won’t work simply to discontinue lines you see on retail shelves. That would eliminate almost, but not quite, everybody. Even outfits like Regis’ Trade Secret might have to fold their tents.

What to do? Consider this: Among the giants in our industry, we have all the knowledge there is to be had about retailing. There’s Procter & Gamble, L’Oréal, Estée Lauder and Shiseido. That’s a lot of retail know-how. In fact, it’s everything about retail know-how. Let’s call on all of them to do the right thing. Teach salon owners HOW to retail. There’s advertising, marketing, merchandising, displaying, inventory control and on and on.

Remember manufacturers, Revlon grew to eminence by having a crew of women traveling the country incessantly teaching salon owners about manicuring. Revlon became the leader. Clairol had a couple of hundred haircolor consultants calling on salons, giving classes, clinics, workshops. And Clairol became the leader. Paula Kent Meehan had an educational juggernaut to convince salon owners that, yes, they could retail. And Redken became the leader. When the Nordstrom family owned Creative Nail, they had an army of nail techs out there evangelizing and they thrived. Manufacturers that teach and demonstrate the many aspects of successful retailing will be rewarded by sales to and orders from appreciative salon owners.

Salons can compete with standard retail operations. Salons have unique advantages, but they think (because they have been taught) that they must have exclusive products. Not so. They must learn HOW to compete. Manufacturers who teach them will be rewarded not only with increased sales but with the ability to look in the mirror and know they are helping not hyping. Do it manufacturers! You’ll sleep better at night.

Click here to review a BIR free issue bironline.com – then sign up. This will be the best money you ever spent and tax deductible!!

Monday, November 24, 2008

FOLLOW THIS ADVICE TO HELP ELIMINATE SPAM

Here is some sound advice from Snopes.com. This may eliminate some spam from your mailbox if you follow it.

1) Any time you see an E-Mail that says forward this on to '10' of your friends, or sign this petition, or you'll get bad luck, good luck, or whatever, it almost always has an E-Mail tracker program attached that tracks the cookies and E-Mails of those folks you forward to.

The host sender is getting a copy each time it gets forwarded and then is able to get lists of 'active' E-Mails to use in SPAM E-Mails, or sell to other spammers.

2) Almost all E-Mails that ask you to add your name and forward on to others are similar to that mass letter years ago that asked people to send business cards to the little kid in Florida who wanted to break the Guinness Book of Records for the most cards. All it was, and all any of this type of E-Mail is, is a way to get names and 'cookie ' tracking information for telemarketers and spammers - - to validate active E-Mail accounts for their own profitable purposes.

You can do your friends and family members a GREAT favor (PLEASE) by sending this information to them. You will be providing a service to your friends, and will be rewarded by not getting thousands of spam E-Mails in the future!

If you have been sending out (FORWARDING) the above kinds of E-Mail, now you know why you get so much SPAM!

Do yourself a favor and STOP adding your name(s) to those types of listings regardless how inviting they might sound! You may think you are supporting a GREAT cause, but you are NOT in the long run. Instead, you will be getting tons of junk mail later! Plus, we are helping the spammers get rich! Let's don't make it easy for them!

Also: E-Mail petitions are NOT acceptable to Congress/Parliament or any other organization. To be acceptable, petitions must have a signed signature and full address of the person signing the petition.

Friday, November 21, 2008

IS YOUR VEHICLE OWNED BY YOUR CORPORATION?

If you are a corporation with a vehicle owned by the corporation, don't forget to add back to your W-2 the personal use of your corporate vehicle. The IRS has charts on how to calculate per use. Check out www.irs.gov for more information.

If you have any questions, please feel free to contact us.

Larry Kopsa CPA

Thursday, November 20, 2008

FOLLOW-UP ON MANAGEMENT TOOLS NEEDED FOR A SUCCESSFUL BUSINESS

I posted an entry on November 10th on important tools for salon owners. Other than good financial statements, I feel that it's important to have excellent software in place, and to know how to use it.

Ken Cassidy, noted educator, followed up with his recommendations. I agree with his comments which are listed below.

"Larry, I would have also said that it's important to have a good industry contract for my employees, along with a policy and procedural manual to guide and direct my staff for success. In the booth arena I think it's important to have an Industry Space Sub Lease if salon or spa owners do not own the business. If they own the building where their salon or spa is located, then it would be a Space Lease. And let’s not forget management forms to guide your staff regardless of what title you have bestowed upon them." ~Ken Cassidy

Wednesday, November 19, 2008

CHRISTMAS CAKES






The Holidays are upon us...what a busy time of year! If you plan to do any baking in the midst of all the holiday chaos, you might enjoy the following link. Pick A Cake

I thought it was pretty cool. I forwarded it to my wife... I'm not sure if she will get the hint. All you have to do is click on a link and the recipe will come up.

Enjoy!

Larry Kopsa CPA

CAN MY PURCHASE BE DEDUCTED AS AN ORDINARY AND NECESSARY BUSINESS EXPENSE?

Hi Larry, I own a skincare studio and I often purchase retail products from drugstores and the like to be in the know when clients ask me about product lines they've heard of or tried. I am also constantly sampling products because there are new things coming out all the time and sometimes I end up bringing something new on as a result. I also occasionally get facials to scope out the competition and compare my services. Are these tax deductible? I wanted to classify them as Research & Development but my accountant said I wasn't able to do so. She doesn't specialize in the spa industry though so I thought I'd check with you. ~Abbey

Abbey, I think the key to your questions is documentation. With good documentation I think a reasonable amount of items could be purchased and deducted as an ordinary and necessary business expense. Of course, you couldn't purchase the same product over and over again, but if you had a listing of the products that you purchased and why you purchased them, I would presume that the IRS would allow a reasonable amount, as you call it, for research and development. Regarding going to other spas to get a treatment, I think it's documentation. Of course, you couldn’t go to the same spa over and over again because you would not be learning anything new. If you went to a spa and came back and used your minutes for a staff meeting about customer service and how the treatment went, I think this would satisfy the IRS that this is a reasonable expenditure.

If we think about it, I would imagine Pepsi Cola is always looking at what Coca-Cola is doing. You can’t tell me that the Marriott people aren’t having people go to the Hilton Hotels to see what they are doing. I’m sure they are deducting all of those things. Pizza Hut always has something new on the menu. I would imagine a lot of the items they have are part of the copying they are doing from other successful pizza restaurants. It’s part of doing business and if it sounds reasonable enough and with documentation, no guarantees, but I think you are fine.

Larry Kopsa CPA

Larry, thanks for the information. I can document everything but I am a 1 person business so although I am using the information to improve my services, I don't have any employees to train with the new info. Do you think that is still OK, as long as I document? ~Abbey

Abbey, if it were me I would still document my expenses and reasoning and take the deduction. The worst that could happen is that the IRS would audit you and disagree, and if you decide not to fight them you would pay the tax and some interest. You would not be committing tax fraud so there should not be penalties. I can guarantee this, if you don’t take the deduction the IRS will not give it to you.

Larry Kopsa CPA

JUST HOW BAD IS THE ECONOMY? MAYBE YOU CAN'T BELIEVE ALL YOU HEAR

All we seem to hear is bad economic news. If you read the "real" economic news, the economy is not great, but certainly not as bad as you would think. The "talking heads" on the tube would make you think that the big depression is coming back. As the columnist George Will recently said, "an airplane that lands safely does not make news." Did you know that in October the economy rose by about 3%? That is off from past growth, but is still positive.

Here is an article that I thought might shed a little light on the subject.

(Star Tribune, Minneapolis) -- Suppose that everything you know is wrong.

· Consider the commonly held belief that corporate America is headed into a recession, tapped out for cash. Not so. Cash compared with total corporate debt is near a 50-year high.
· Certainly consumer debt appears unmanageable, with late payments nearing record levels on credit cards and real estate, right? Not true. The percentage of home loans 30 days or more past due, while rising, is nowhere near record levels.
· You say troubled home and auto loans are dragging down the economy as never before? Wrong again. While together such loans lopped 1.5 points off U.S. economic growth in recent quarters, it has been worse. In the final three months of last year, housing and auto pared more than 2 points from the chief barometer of economic progress.

“Most of that, I’ve got to believe, is behind us,” said Jim Paulsen, chief investment strategist at Wells Capital Management. Paulsen argues that the economy has more going for it than popularly believed. Paradoxically, the president, Congress and Federal Reserve officials have stoked fears instead of calming them, in Paulsen’s view. “We’ve never had a fear crisis like this,” he said. “All of our monetary and fiscal tools are to restore economic fundamentals. When it comes to fear, our toolbox is empty.” In earlier economic crises, three of every four problems were fundamental roadblocks to economic growth, Paulsen said. “This one is three-quarters fear.”

Tuesday, November 18, 2008

DEDUCTING TRAVEL COSTS

Hi Larry, I have a question for you regarding a tax write off. I am a partner of a salon that is a Corporation. I belong to a non-profit organization. Several of my clients (at least a dozen) belong to this organization. Next year I will be representing the state of Mo. and will travel several times a week. Also in my travels I will be doing other women's hair for our functions. We do give to several Charities. My question is could I take any expenses off for this? ~Rachel

Rachel, thank you for your charitable efforts. It is always good to hear from someone who is giving back to the community. You asked if you could deduct your travel costs for the functions that you are going to be attending. The answer is yes. Mileage is deductible at $.14 and then of course any land or air transportation would be at actual costs. These deductions would be to you personally as opposed to the corporation. One thing that is important is to be sure that you are a delegate of the organization. There have been instances where someone has good intentions and attends a convention but they were not actually requested or required by the organization to attend. The IRS has disallowed the deduction.

As an example, let’s say I was an assistant Boy Scout leader and I went to Las Vegas to attend a Boy Scout leader’s convention. If the Boy Scout troop or the sponsor of the Boy Scout troop requested that I go to the convention, then I could take deductions for my airline ticket, my $.14 a mile to the airport, my hotel and my food while at the convention. On the other hand, if I just went there because I was looking for an excuse to get out of the house and go to Las Vegas and they had not requested or required me to go, then this would be considered a personal expenditure by the IRS.

As far as the haircutting and other work that you do, the only thing that would be deductible would be your actual supply cost. The value of your time would not be a deduction.

Let me know if you have any other questions.

It is a pleasure serving you.

Larry Kopsa CPA

Monday, November 17, 2008

OFFERING HEALTH BENEFITS

Larry, I own a small salon with 5 stylists. They want health benefits. An insurance agent said it would be best in my instance to offer them a bonus based on performance that they can use as they want, and have them take out their own policies so I am not involved.

Do you have experiences/solutions on how I can offer insurance without getting into something I cannot afford? Linda

Linda, I received your question regarding health benefits. This is really difficult. We want to attract good people, but at the same time with health benefit rates as high as they are, it’s hard to maintain profitability if we’re offering fringe benefits. It is somewhat a “catch 22.”

My advice to you at this time would be to wait. For our clients that are considering health benefits, we are advising them to wait to see what President-elect Obama is going to do with health care. I think it is a good consensus out there that one of the first things that President-elect Obama is going to attack is the health care problem. It would be foolish to put a system in at this time and then find that next year, that system is completely changed due to new government policy.

Keep in touch with me on this and if I do see anything, I will let you know.

It is a pleasure serving you.

Larry Kopsa CPA

Friday, November 14, 2008

INVESTING IN TODAY'S CHALLENGING MARKET

The stock market has made headlines this year with record volatility, record drops, and even record gains. And while many investors are still sitting on the sidelines, you may already be looking for bargains amidst the wreckage. So, we're writing to alert you to a possible problem with acting now.

Are you considering buying mutual funds in a taxable account (as opposed to an IRA or 401K)? Then you should be aware that most funds distribute capital gains this time of year. These distributions are taxable to you as long-term capital gains, even if you just bought the fund.

The average U.S diversified stock fund is down about 33% for the year. Funds in most other categories are down as well. But many of those funds sold assets for nice profits earlier this year. This means you may get socked with a nasty tax surprise!

There are generally two ways to avoid this bite. The first is to find funds without capital gains to distribute. The second is to wait until a fund actually pays out capital gain distributions. Make sure that you discuss with your broker to see if they expect distributions, and if so, when they will be paid.

Today's challenging market makes it even more important to invest with an eye on taxes.

Thursday, November 13, 2008

LESSONS FROM A $90 BOTTLE OF WINE

Larry, I saw you in Lake Geneva last week. You were talking about increasing prices and you mentioned something about a $90 bottle of wine. Could you pass this information on to me again. Thanks - Brenda

Brenda, we published this article on our blog back in February. Here it is again. I hope this helps. Larry

At a recent program I gave in Wichita Kansas a couple of the salon owners challenged me when I was talking about increasing prices. They said that I did not understand that they lived in a small town and that if they increased their prices they would lose many of their clients. They said that there were several salons in their small towns that their clients would go to. I asked them what they charged and they told me $25 for a cut and style. When asked when they last increased their prices they said that it was three years ago and that nobody in town was increasing prices.

That is not the first time I have heard that excuse for not increasing prices. My comment to them is that if they were providing great customer service they would not lose clients by doing normal increases. I also told them that when my wife Maggie was cutting hair 11 years ago, she was charging $65 when everyone around her was charging $20 to $40. I also told them that every time she increased her prices she got busier. After I said this, several people sitting next to them agreed that higher prices many times can bring more business.

Now we have a study about the price of wine that proves I was correct.

Researchers at Stanford Graduate School of Business have finally proven what most of us suspected long ago. Expensive wine tastes better!

Researchers used MRIs to study Caltech grad students' brains as they swallowed five red wines priced at $5, $10, $35, $45, and $90 per bottle. They found that as the price of the wine rose, so did the activity in the subjects' medial orbitofrontal cortexes. (Apparently, that's the part of the brain that experiences pleasure.)

The "catch," of course, is that the subjects didn't drink five different wines -- they drank three. The $45 wine was really the $5 wine -- and the $10 wine was really the $90 wine.

So why did the subjects like the $5 wine more when they thought it was $45? And why did the $90 wine taste like swill when they thought it cost $10? Researchers concluded that the perceived price of the wine actually affected real quality -- at least, "real" as interpreted by the medial orbito . . . er, brain.

So what's the lesson? (If you answered "you can fool some of the people some of the time," well, you're right -- but that's not what I'm looking for.)The real lesson is that the price you charge for your service affects the value your clients see in it. If you're offering a $90 bottle of wine -- and you want your clients to value it at $90 -- don't pour it into a cardboard box with a $10 price tag!

Do you give your clients more value than your competitors down the street?

Are you charging what you're worth or are you pouring $90 wine into a $10 cardboard box?

Clients will pay more for your service if they see you give them more. The Stanford study proves they'll even feel better paying more! Competing on price is a losing proposition unless you offer the lowest price of all. It's better to compete on value. Give your clients a reason to do business with you, not your competition. Give them a reason to pay more. And they will. Really, they will. The key is showing confidence in your value -- and when you do that, you sell yourself, not your price. You should find it much easier selling yourself than your fee.

Larry Kopsa CPA

Tuesday, November 11, 2008

CALL TO ACTION

A NEW ADMINISTRATION….NOW WHAT?

As we have heard, “change is coming.” We are concerned that one change that is coming is higher taxes! Given the projected increases in the federal income tax, capital gains, and qualified dividend rates, you may want to take action before December 31st to keep more of your money in your pocket. To determine if you'll be affected, we have prepared the enclosed checklist for you. Please click on this link to review the checklist: Call to Action Checklist.

If you feel that you might be impacted by any or all of these items, contact us! If you already have a pretax appointment scheduled with us, we will be discussing these items at that time.

We are watching the activity in Washington D.C. very closely so that we can best serve you, therefore we will keep you posted. Let us know if you have any questions.

It is a pleasure serving you!

Larry Kopsa CPA

Monday, November 10, 2008

MANAGEMENT TOOL NEEDED FOR A SUCCESSFUL BUSINESS

Larry, thank you for newsletters, I appreciate the information I get off your blog. You’ve really helped me to be more profitable. You are certainly an asset for our industry. What I was wondering is how you would answer this question. “What is the most important management tool that a salon owner should have?” I know you’re going to say good financial statements so make that other than good financial statements, “What do you think the most important tool an owner should have?” Clare

Clare, thank you for your kind comments. We are struggling to help the salon industry be successful. It's words like yours that keep us going.

You're right, good financial statements tell you where you’re going. You understand that, so I won’t get into it. Your question is, what’s the second most important? How would you like to have a friend – person that is a genius at booking appointments, can track retail sales by individual, can monitor the frequency of clients, can look at prebooking, has memorized client’s birthdays and important events, and can determine when a client hasn’t been in for a while? Finding someone like that, especially someone who can do that with a smile on their face, is probably an impossible task. Even though we cannot find an individual like that, we can get the same information from our salon software. There is excellent salon software out there that can provide an enormous amount of management information. The key is having the software in place and knowing how to use it.

One of the things we find with most of the software companies is that they are very good at what they do, and as such, they have the ability to prepare numerous reports. The key for salons is finding those reports that give them the information they need and then using those reports. As part of our services to our clients, we pull many of those reports and do some summaries so that we can spot trends. Trends are very important. If you can see an upward or downward trend, you can correct or capitalize on those situations.

Thank you for your inquiry. I hope this helps you.

Larry Kopsa CPA

Sunday, November 9, 2008

SPA OWNERS - HOW DO YOU COMPARE?

Salon and spa owners are always wondering how they compare to others. The August 2008 issue of American Spa magazine had an article that was titled, “Spa Confidential.” In this article, American Spa readers shared their thoughts on the latest industry trends by a web survey and printed the results. You can obtain more information on this from americanspamag.com.

Friday, November 7, 2008

THINK DAY

Do you want to take your business to the next level? Try this...

I am a small business owner like you. I know that on a day to day basis, we are busy doing what we need to do to operate our business. How many times do we say, “If I just had time to …?”

As I write this, I am taking time to do exactly that. I am held up at Embassy Suites for the weekend doing a “think-business development day.” No family...no friends...TV is unplugged...books all over the place, but I have an agenda. I am lucky that my family understands the importance of me getting away just to concentrate on business.

I’ve brought along the stack of magazines I’ve been meaning to get to, the staff evaluations, the client list, the budget and some business development books. I have spent Friday night, Saturday and most of Sunday just concentrating on business. Monday will be back to normal, but over this weekend I am developing strategies and doing the things that will help to make sure my business is running properly.

I read that Bill Gates takes four days a year he calls “think days”, to go out and strategizes. If success leaves clues, certainly Bill Gates, the founder of Microsoft, would be a good example to follow.

If you haven’t done this, try it.

Larry Kopsa CPA

Thursday, November 6, 2008

QUESTION ON ENERGY CREDITS

Larry,
I hope you can help me with a personal question. I understand that there are some energy credits that I can get by purchasing energy efficient insulation, etc. I’ve been trying to find what actually qualifies and what doesn’t. Could you help?
Charles

Charles,
There are some energy credits out there that could reduce your income tax bill by $500. Not a big deal, but if at the same time you are making some purchases; you just as well get the credit. One thing you have to remember is that the credits are not in effect until purchasing after January 1, 2009 and ending December 31, 2009. You might want to wait until after the first of the year.

There is a web site out there that gives you some good information. You might check out
www.ase.org\taxcredits.

Here’s a summary:

· Purchasing insulation, exterior doors or roofs. There’s 10% cost of the product but not the installation of up to $500. This includes seals to limit air infiltrations such as caulking and weather stripping materials as well as storm doors. Roofs must meet certain standards before they qualify.
· Central air conditioner, heat pump, water heater or corn stove. You can receive a credit of up to $300 towards the full purchase price of any qualifying items including the installation cost.
· Exterior windows that meet certain standards, including sky lights and storm windows. There is 10% of the total cost up to $200.
· Furnace and Boiler. Can give you a credit up to $150 towards the full purchase price or $50 for efficient air circulating furnace fans including installation cost for both furnace and fan.
· Windows, doors, insulation and roof must be expected to last at least five years. A two year warranty is sufficient to demonstrate this.

Remember, the over all cap is $500. I hope this is helpful.

Larry Kopsa CPA

Wednesday, November 5, 2008

RECALLING THE FOUNDER'S WISDOM










“A people ... who are possessed of the spirit of commerce, who see and who will pursue their advantages may achieve almost anything.” - George Washington


“A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned -- this is the sum of good government.”- Thomas Jefferson

“Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise.” - Thomas Jefferson

“To take from one because it is thought that his own industry and that of his father’s has acquired too much – in order to spare to others, who, or whose fathers, have not exercised equal industry and skill – is to violate arbitrarily the first principle of association, the guarantee to everyone of a free exercise of his industry and the fruits acquired by it.” - Thomas Jefferson


"The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government -- lest it come to dominate our lives and interests." - Patrick Henry


“[T]he government of the United States is a definite government, confined to specified objects. … Charity is no part of the legislative duty of the government.” - James Madison

“There are more instances of the abridgement of the freedom of the people by the gradual and silent encroachment of those in power, than by violent and sudden usurpation.”- James Madison


“When the people find that they can vote themselves money, that will herald the end of the republic.” - Benjamin Franklin


“It does not take a majority to prevail ... but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.” - Samuel Adams

Tuesday, November 4, 2008

NO-COMPROMISE LEADERSHIP

I'm sure you all know Neil Ducoff, author and founder and CEO of Strategies. Neil has a new book out called No-Compromise Leadership. I can't wait to get my copy. Neil has such insight into the industry. Neil’s new book just rolled off the presses to rave reviews.

I have spoken to Neil about his book and he is very pleased with the end product. No-Compromise Leadership is all about the thinking, behavior and accountability that support all leadership results and outcomes,” explains Neil. “Joined together, these two simple words immediately establish a higher standard of leadership thinking and behavior; it’s a powerful internal compass that keeps you and your company steadfastly on course. By design, no compromise cuts through the myriad excuses, emotional blockages and procrastination that silently infect leadership performance. When no compromise becomes your mandate—the guiding principle upon which all other leadership behavior emanates—the resulting business outcomes will be nothing short of breakthrough.

You can help Neil to make No-Compromise Leadership a national best seller if you place your order on Amazon.com between Sunday, November 2nd and Saturday, November 8th. Neil needs all orders to be placed within this one-week time period.

To thank you for helping Neil reach this goal, just forward your amazon.com receipt to:
orders@nocompromiseleadership.com and Neil will give you a No-Compromise Leadership DVD, a $100 value!

Monday, November 3, 2008

CONTROLLING YOUR RETAIL INVENTORY

To control your retail inventory, keep an eye on the most popular inventory items and your slow moving items.

· Make sure that as you reorder, you’re reordering your fast moving items not your slow moving items.
· To determine what your hot items are, just look at your last couple of weeks sales. Usually, your last weeks sales are a good indication of what your future sales will be.
· Have your computer run items which have been on the shelf and have not sold for a long time. Consider donating these items or doing a fire sale to get rid of items that are not selling.
· Put yourself on a purchase budget. Assuming that your mark up is 100%, when you make your two week order, take your retail sales from the last two weeks, divide that number by two and that number is the amount that you can reorder. Stay within that reorder point. For example, if in the last two weeks you’ve sold $6,000 worth of retail products, then you would be on a budget to purchase only $3,000 worth of items this year ($6,000 x .5%).

Using these tactics will only keep your inventory at its current level. You are going to have to be careful that you replace those items that you are selling quickly. If you want to reduce your inventory, you need to make sure that you have your shelves full on those items that you need to keep, but at the same time you need to reduce your items to get your inventory down to a reasonable level.

I hope this is helpful.

Larry Kopsa CPA

Friday, October 31, 2008

BRRRR! SNOW BLANKETS LONDON AS HOUSE OF COMMONS APPROVES GLOBAL WARMING BILL

(The UK Register) -- Snow fell as the UK's House of Commons debated Global Warming yesterday -- the first October snow fall in the London metropolis since 1922. The Mother of Parliaments was discussing the Mother of All Bills for the last time, in a marathon six hour session. In order to combat a projected two degree centigrade rise in global temperature, the Climate Change Bill pledges the UK to reduce its carbon dioxide emissions by 80% by 2050. The bill creates an enormous bureaucratic apparatus for monitoring and reporting, which was expanded at the last minute. In the Commons, there wasn't an out-and-out skeptic to be found. It was 90 minutes before Member Peter Lilley, in amazement, asked why there hadn't been a cost/benefit analysis made of such a major change in policy. He was told to shut up by the Deputy Speaker. Lilley was one of only five out of 653 Members to vote against the Climate Bill in its second reading.

Wednesday, October 29, 2008

WORDS OF WISDOM

The happiest people don’t necessarily have the best of everything. They just make the best of everything. - Author Unknown

Monday, October 27, 2008

RENTING YOUR HOUSE TO YOUR CORPORATION

Larry, is it possible to rent out my vacation home for a business? Tina

Tina, I received your note about the possibility of renting your house to your corporation and taking a deduction. I think this is an excellent idea, as long as we follow the rules.

First of all, the tax law allows you to rent out your house for 14 days tax free. The income that is received for those 14 days is not taxable to you. At the same time, you do not have to reduce any of your interest or real estate taxes as a deduction. This 14 day rule is what is referred to as de minimus (meaning so small, not worth the effort to keep track of).

An important element of audit proofing this deduction is making sure that you have good documentation; documentation at the time that you’re using the house for your staff training. You can attain this with the following:

  • Pictures of the event

  • An agenda for items that are going to be covered during each of the days

  • A signed log of people in attendance

The other item that you need to do is document the fair market value of the rental. You can do this by going to different venues that offer space for daily meetings and determine what that reasonable cost would be. Keep a file of this in case the IRS ever wonders how you arrived at the fair market rental. You want to be aggressive but remember the old saying, “Pigs get fed and hogs get slaughtered.”

You would want the corporation to write a check to you personally. This check would then be deposited into your personal account.

Remember that 100% of the food and beverages that you provide at those meetings would be deductible. Many times people erroneously only deduct 50% of the food and beverages. Keep this separate in your QuickBooks.

If you have any other questions on this or other matters, please feel free to contact me.

It is a pleasure serving you.

Larry Kopsa, CPA

Friday, October 24, 2008

SWITCHING FROM EMPLOYEE TO INDEPENDENT CONTRACTOR

Larry, payroll taxes are killing me. Now I find out that I am supposed to pay payroll taxes on the tips that my staff is receiving. A friend of mine told me to just make all of my workers independent contractors. She said that she changed her people over and it is working great. Before I switch I thought I would see what you thought. Valerie

Valerie, I hope this finds you well. You recently emailed me asking about switching your people to becoming 1099’s or independent contractor as apposed to employees. I concur with you that this would be great if you could avoid paying payroll taxes and fringe benefits on all the people that work there, unfortunately this is not legal.

I know that you can find several salons in California that do this. Unfortunately, we are seeing a lot of activity now, not only with the IRS looking at the status of individuals but also the EED coming in. I personally have one new client that we just started working with that had the EED come in and they had to write a check for $30,000 in penalties. We are still working on that case to see if we can get those penalties reduced. I also have talked to other salons that have the same problem. It seems like the State of California, in their effort to find money, is looking under every rock and this is a rock where they can easily find money. You don’t want to go there.

In addition to this, the IRS is looking at independent contractors. If you would go to www.IRS.gov and key in Form SS-8 you would find a form that gives you an idea of what the IRS looks at when they are determining whether a worker is an independent contractor or an employee. You can see by the twenty or so questions that if you have any control of the individuals at all, then they are probably your employees. As we say out here in the Mid-West, “if it walks like a duck and talks like a duck, it’s probably a duck.” In addition to this, the IRS has several other weapons that they are using to identify misclassified workers. One of the new items they are using is red flagging every company that has over five 1099’s greater than $25,000.

If you would like to discuss this with me, please feel free to give me a call.

It is a pleasure serving you.

Larry Kopsa CPA

Thursday, October 23, 2008

SOME THINGS NEVER CHANGE

Did you possibly think that we were the first to have problems? Some things never change!!

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest we (Rome) become bankrupt. People must again learn to work, instead of living on public assistance.” Cicero — 55 BC

Wednesday, October 22, 2008

STAY ON TOP OF THE SALON INDUSTRY

I read all of the salon magazines. My wife thinks I just like to look at the pictures; but the truth is, it's a great way to stay on top of the Salon Industry.

One publication that gives me the best insight into the industry (but no pictures or fluff) is the Beauty Industry Report Newsletter. Editor, Mike Nave, provides straight information and facts without all the glitter. It is one publication that I read the day that it hits my desk. If you're interested in receiving the BIR Newsletter, email bironline.com for a free copy.

Monday, October 20, 2008

AUTO DEDUCTIONS

The attached is a good summary of the rules for auto deductions. Let me know if you have any questions: Maximizing Car and Truck Deductions.

It is a pleasure serving you.

Larry Kopsa CPA

Saturday, October 18, 2008

EVERYTHING YOU WANTED TO KNOW ABOUT AIRLINE FEES BUT WERE AFRAID TO ASK

Here is the perfect list that puts together all the fees that the airlines now charge their customers.

One click to:
http://www.swabiz.com/travel_center/pod_chart.html
and you can see what each airline charges for everything from making a reservation by phone to checking in oversized baggage.


Here’s how you can pay $702 in fees on your next $120 flight from Omaha to Chicago.

If you looked at the chart above at all the fees, you can see how crazy they are. To illustrate, I thought I would build a hypothetical flight to go golfing in Chicago taking my golf clubs on the trip. The cheapest airfare is a bargain for about $120 roundtrip. Now come the extras. First, lets assume you check in two bags each way ($15 for the 1st and $50 for the 2nd = $65 each way = $130 total); select a special seat assignment ($25 each way = $50); have a meal ($5 each way = $10); enjoy a drink ($6 each = $12) plus add $125 each way ($250 total) for an oversized bag (golf clubs) and add $125 each way ($250 total) for one of your bags being over 50 pounds. Add all those fees up and you could actually pay an extra $702 in fees (585%) to fly the friendly skies. Maybe in the future the airlines should give away seats if you pay all the fees.

Friday, October 17, 2008

US TREASURY HUMOR

Treasury released the new US Dollar bill today.



2008 ELECTION

My dad always said don't talk about religion or politics, but I just had to pass this on.

Thursday, October 16, 2008

EMPLOYERS TO PROVIDE COMMUTER BENEFITS IN SAN FRANCISCO

If you're an employer in the San Francisco area, you might be interested in the following information.

San Francisco is requiring employers to provide commuter benefits if they have 20 or more employees. In the first such mandate in the U.S., firms have these choices: Give out transit passes. Offer pretax payments of $110 per month to be used for transportation. Or provide transportation themselves.

DO SPOUSES THAT ARE COLLEAGUES QUALIFY FOR BUSINESS DEDUCTIONS?

Larry,
I read your September 18th blog: Eat, Drink, & be Deductible. What if your spouse is a partner in the business? Am I not a professional colleague?

Margaret

Margaret,
I hope that this finds you well. In answer to your question you are correct that your spouse is a colleague and there for qualifies for business deductions. Of course the IRS is always a little perspicuity when looking at related party meals and entertainment therefore we need to make sure we have adequate documentation to "audit proof" the deduction. Also we need to make sure that we are not deducting every meal. An example would be in a recent case where the taxpayer was a legal firm and they had noon meetings and therefore deducted all of their noon lunches (think the television show LA Law). In this court case the IRS won because it was every meal. We want to be aggressive but make sure that you pass the "smell test."

Let me know if you have any other questions.

It is a pleasure serving you.

Larry Kopsa CPA

Wednesday, October 15, 2008

QUESTION ON FILING TAXES OUTSIDE THE US

Larry,

I hope this finds you well. I have enjoyed reading your messages and am so happy I took your class. Thank you! I have a dilemma that I am looking for some incite or suggestions. My fiance and I just got married this last Friday, for many reasons, one most important is because he got a job in Thailand. We currently have a ceremony arranged for us in Mexico next year which we will still embark upon. The point is that it is almost the end of the year. He leaves at the end of this week and I go in about 5 weeks. The company he will be working for is going to be paying our social security for the U.S. But what should I do to file my taxes and then his for 2008? I will have computer and web access to file if need be. Though still I am worried on what my options are. Any words of wisdom??

Regards,
Natalie

Natalie,

It is so nice to hear from you. I think this is the first email that I’ve ever received from someone who presumably is on their honeymoon. To be married on Friday and to be contacting an accountant on Monday says a lot for your question.

I believe your question is how to go about filing your 2008 tax return? The tax law is quite clear on this. Since you are married, you will either have to file as married filing jointly or married filing separately. Since you will both be out of the United States on the filing date of April 15, you are given some additional time to file your tax return. There are some special rules regarding people working in foreign countries. It is very possible that your husband may qualify for some tax free income and possibly housing allowance.

I hope this answers your questions. If you have any follow up, please feel free to contact me.

It is a pleasure serving you. Best of luck and congratulations!

Larry Kopsa, CPA