EDITORIAL - WHAT WOULD IT BE LIKE IF THE GOVERNMENT RAN EVERYTHING?

Recently I was in Philadelphia speaking at the Raylon Art of Business Conference. Philadelphia is a great and historic city. I have always wanted to walk where Ben Franklin and the framers of our Constitution walked. I was touched by my visit to Independence hall where the Declaration of Independence and the Constitution were signed. I was not disappointed with my historic tour of Philadelphia.

I did have a problem though; it was ‘off season’ so everything closed exactly at 5:00 p.m. Independence Hall; the Liberty Bell exhibit; Franklin’s court; the grave yards; Betsy Ross’s house; all of the historic locations. I was not the only tourist that was disappointed by this. I talked to at least 20 to 30 visitors that, like me, were left disappointed standing at the door.

As I thought about the ‘business practice’ of closing early, I could only think about my my talk to small business owners at the conference where I had pointed out that many of our clients are expanding hours in reaction to the economy.

Then it hit me- all of these great historical exhibits were managed by the US Park Service – a branch of the Federal Government. The workers, managers, and those making the decisions were all government workers, bureaucrats. Realizing that the government was running the show it made sense that they didn’t care, they just followed the bureaucratic rules.

Then it really hit me! “Would I want the Federal Government running my health care and the banks?” That seems to be the way we are going.

Scary- really scary… I hope that if they do take over our financial institutions and our health care system that they do a better job taking care of their customers.

Larry Kopsa CPA

A MESSAGE FROM ABRAHAM LINCOLN

"You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage by taking away people's initiative and independence. You cannot help people permanently by doing for them, what they could and should do for themselves."

Abraham Lincoln

FYI - JUST HOW IMPORTANT IS THE INTERNET?

The Internet is very important to our accounting business. We do so much with the Internet, from on-line meetings to filing forms to tax research. In addition in our meetings with distance clients the we use the Internet. It is just like we are at the clients location. We would really be lost if we did not have cyber space technology.

But that is nothing compared to the Germans. A new study found that 84% of Germans in their 20’s would do without their significant other before they gave up the Internet. They explain that they could always find another partner to love, but life without the Internet was unthinkable. WOW!

Larry Kopsa CPA

SBA OFFERS ONLINE RESOURCES ON SURVIVING IN A DOWN ECONOMY

If you are interested, the Small Business Administration is offering free online training and other resources to help small businesses during these challenging economic times.Available Free Courses:

1. Strategic Marketing: How toWin Customers in a Slowing Economy

2. Down-Shifting in a Slowing Economy:Business Planning Guide

3. How to Prepare a Loan Package

Larry Kopsa CPA

RAYLON'S ART OF BUSINESS CONFERENCE

I was honored to spend March 15th and 16th in Philadelphia at the Eighth Annual Raylon Art of Business Conference. This conference has been named one of the country's leading seminars for salon owners and managers. It focused on the best business practices for salons and spas. I shared the stage with three of the leading educators in the business; Frank Gambuzza, Geno Stampora and Scott Buchanan. Josh and Howard Hafetz, the president and CFO and all of the DSC's did a wonderful job putting this program together. The seminar was sold out with over 300 in attendance. If you ever get a chance to attend one of their programs, do it. KNOWLEDGE IS POWER!

There was so much Great business information, from information on financials and taxes to soft skills.


The one piece of information that sticks out the most to me is that this is a great time to own a salon. As Geno put it, “You don’t see 600 stylists on MSNBC in the unemployment line." Geno had two compact discs for sale at the program. I purchased both of them. They are both very good. Remember...KNOWLEDGE IS POWER! If you are interested in purchasing let me know at lkopsa@kopsaotte.com and I will send you in the right direction.



I will be sharing more information from the program in future blog entries.



Larry Kopsa CPA

COMMENTARY FROM EDITORS ON PRESIDENT OBAMA'S PLAN TO HELP SMALL BUSINESS

On Monday, March 16, 2009, President Obama announced a new plan to help small businesses. The plan is mainly centered around easing SBA loans. The plan calls for the government to buy up SBA loan securities to free up the secondary markets so banks can sell their SBA loans; it cuts SBA loan fees; and it increases the Federal guarantee on SBA loans to 90%. It also calls for the 21 largest banks getting Federal funding to report on their volume of small business loans each month. The rest of the announced provisions for the most part were already included in the Stimulus package and not new.

So: thumbs up or thumbs down?
I’d say the plan is mildly positive, but mostly it’s just not relevant to the majority of small businesses. Here’s why:

To the extent small businesses actually want SBA loans, this could help. However, not every small business wants or needs a loan. Demand for small business loans is down significantly, according to the U.S. Treasury. As Dawn Rivers Baker noted, lack of loans is not what ails many small businesses. In times when the economy is down, going into debt doesn’t necessarily look all that attractive. Battening down the hatches to get through to better times in the economy, does.

The Small Business and Entrepreneurship Council makes a similar point — saying the President’s focus on SBA lending merely helps on the margins: “While these may help some small businesses that are in a position to borrow money, many small firms are not in sound financial shape or don’t feel it is prudent to increase their debt during the rough economic period.”

Consider, also, how few small businesses actually get SBA loans. For instance, as this Washington Post article reports, SBA loans counted for just 4% of loan volume for small businesses in 2006.

More SBA loans are not a cure-all for every small business — although you would hardly know that based on some reports. For instance, this article on Forbes.com is bizarrely titled “Small Business Loves Obama’s Plan.” However, there are no small business owners interviewed in the article. The title makes it sound as if small business owners spontaneously erupted in applause in favor of the plan. Wishful thinking perhaps … but not what the article says … nor the real-world reaction.

We can just wait and see what will happen.

ONE OF MY FRIENDS QUIT AND IS OPERATING A SALON FROM HER HOME. WHAT CAN I DO?

A few months back one of my best stylists resigned. She told me she was going to stay home with her kids. We threw her a going away party with hugs, tears and all that. Well now we find out that while we were bidding her goodbye she was putting a salon in her basement. Also, she took a copy of her client list, supposedly to bid them goodbye. She is now telling some of my other stylists what a good deal this is and that she doesn’t have to pay taxes on the income. Her leaving and taking clients’ has really hurt my bottom line. Is there anything I can do??
Oprah

Oprah, what a problem. First of all, this person is not really a friend. I assume that you did not have a Covenant not to Compete in your employee contract. If you did, then you should contact your attorney.

Secondly most cities have zoning regulations that usually prohibit having a business in your home. You will need to discus this situation with your city planner or city attorney. If she is breaking the zoning rules, the city can shut down her operation.

Next , check with the state licensing agency to see if she is practicing without a license. The agency can shut her down without her knowing that you turned her in.


Finally, you can turn her into the IRS. It would be helpful if you had proof that she is committing tax fraud by not reporting her income. But this is another avenue for you to pursue.



Good luck.



Larry Kopsa CPA

HAPPY SAINT PATRICKS DAY

It's no use boiling your cabbage twice.--

Irish proverb

COMMON QUESTIONS ON THE STIMULUS TAX PROVISIONS

If you don't already have the tax provisions of the Stimulus Bill figured out, the American Institute of Public Accountants has prepared a Q&A on individual and business tax-related provisions in the American Recovery and Reinvestment Act of 2009. This is only a couple pages and answers many questions that we have been receiving. Among the subjects covered for individuals are the first-time home-buyer credit, college-funding tax credit, unemployment benefits, benefit for use of public transit and the alternative minimum tax exemption. For businesses, the Q&A highlights depreciation, expensing, capital gains, work opportunity credit and penalty relief from underestimating taxes.

WHAT HAPPENS IF I HAVE MORTGAGE DEBT FORGIVEN?

Thanks for all the information you send out. I have a question. A relative of mine had a portion of their mortgage forgiven. I told him that he would have to pay tax on the forgiveness. He said I was wrong. Who is right?

Eagle

Depends. If a mortgage debt is partly or entirely forgiven during tax years 2007 – 2012, you may be able to claim special tax relief and exclude the debt forgiveness income. You are correct in that normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

Here is the catch. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion. However, proceeds of refinanced debt used for other purposes (for example, to pay off credit card debt) do not qualify for the exclusion.

Also, debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.

SURVIVAL IN THESE ECONOMIC TIMES

We have been spending a lot of time advising clients on strategies to weather the economic storm. We call our meetings "Survival Strategy Meetings." Below is an article that summarizes steps that small businesses are taking. I thought you might be interested.

Hey, where is the silver lining on my economic storm cloud?

FOUR CREDITS THAT CAN REDUCE YOUR TAX BILL

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes. Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child (under age 17). This credit can be claimed in addition to the credit for child and dependent care expenses.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply.

If you need more information let me know.

UPDATE ON COBRA CREDITS FOR EMPLOYERS

Last week, the IRS provided information that under the federal economic stimulus package, employers need to claim credit for COBRA health insurance premiums they pay for former employees. The information is posted on the IRS website and includes answers to 20 frequently asked questions. The information also includes an updated version of Form 941, the quarterly payroll tax return that employers must use to claim credit for the COBRA subsidy.

The stimulus law, the American Recovery and Reinvestment Act (ARRA), authorizes a 65% federal subsidy for continuing health care coverage under COBRA for employees who are laid off between September 1, 2008 and December 31, 2009. ARRA was enacted February 17 and the IRS notes additional forms are being revised to implement the COBRA subsidy. More information may be found at http://www.irs.gov/newsroom/article/0,,id=204505,00.html