Monday, June 28, 2010


M, pls rite on tbs & giv 2 ppl

1. no1 b4 me. srsly.
2. dnt wrshp pix/idols
3. no omg's
4. no wrk on w/end (sat 4 now; sun l8r)
5. pos ok - ur m&d r cool
6. dnt kill ppl
7. :-X only w/ m8
8. dnt steal
9. dnt lie re: bf
10. dnt ogle ur bf's m8. or ox. or dnkey. myob.

What this really says:

Moses, please write on tabs and give to people

1. No one before me. Seriously.
2. Don't worship pictures/idols
3. No Oh My Gods
4. No work on weekend (Saturday for now; Sunday later)
5. Parent over shoulder okay - Your Mom and Dad are cool
6. Don't kill people
7. Kiss only with mate
8. Don't steal
9. Don't lie regarding best friend
10. Don't ogle your best friend's mate. Or ox. Or donkey. Mind your own business.


"Never confuse motion with action."
--Benjamin Franklin

Saturday, June 26, 2010


It should come to no surprise to anyone that home sales were down in May. The new homebuyer credit went out of effect as of April 30th. We saw many clients that accelerated purchases to take advantage of the $8,000 tax subsidy.

New-home sales dropped to record low in May as tax credit faded. Single-family home sales fell to the lowest level in at least four decades, according to the Commerce Department. The report indicates that the economic recovery might be losing steam, although few analysts expect the economy to suffer a double-dip recession. See Reuters (6/24)

Thursday, June 24, 2010


The following blurb was in the June issue of Readers Digest. See if you can decipher the message. I needed the help of my 13 year old son to figure it out.

M, pls rite on tbs & giv 2 ppl

1. no1 b4 me. srsly.
2. dnt wrshp pix/idols
3. no omg's
4. no wrk on w/end (sat 4 now; sun l8r)
5. pos ok - ur m&d r cool
6. dnt kill ppl
7. :-X only w/ m8
8. dnt steal
9. dnt lie re: bf
10. dnt ogle ur bf's m8. or ox. or dnkey. myob.


The IRS has recently issued some frequently asked questions regarding the tanning tax. This is a good website to check out.

Excise Tax on Indoor Tanning Services Frequently Asked Questions

Wednesday, June 23, 2010


Larry, I contacted my Congressman about House Bill 3590, the Health Care bill and asked for a summary of changes. The Aid directed me to go to, enter "HR 3590" in the search box and look for "CRS Summaries."

Starting in 2011—next year—the W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are provided.

It doesn't matter if you're retired; your gross income WILL go up by the amount of insurance your employer paid for. So you’ll be required to pay taxes on a larger sum of money than you actually received; take the tax form you just finished and see what $15,000.00 or $20,000.00 additional gross income does to your tax debt. That's what you'll pay next year. For many it puts you into a much higher bracket. This is how the government is going to buy insurance for fifteen (15) percent that don't have insurance and it's only part of the tax increases, but it's not really a "tax increase" as such, it is a redefinition of your taxable income.

Not believing this I researched the CRS Summary and here's what found:

Title IX Revenue Provisions—Subtitle A: Revenue Offset
"(Sec. 9002) Requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage that is executable from the employee's gross income (excluding the value of contributions to flexible spending arrangements)."

Joan Pryde is the Senior Tax Editor for the Kiplinger Letters. Go to Kiplinger's and read about the thirteen (13) tax changes for 2010 that could affect you.

Why am I sending you this? The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November. So vote intelligently, based on your values. But also adjust your tax withholding, or increase your savings, so that you aren't surprised and put in a jam when your federal income taxes are due on April 15, 2012.

Larry, Do you agree with this assessment?


James, Incorrect. Including the health insurance on the W-2 is correct but this is just for informational purposes only. You do not have to gross up into income… YET.

Larry Kopsa CPA

Tuesday, June 22, 2010


"Nobody who ever gave his best regretted it."
--George Halas
Former Chicago Bears Coach

Monday, June 21, 2010


Last week I had an entry about changes in Social Security and Medicare tax for professional S Corporations. When I published this entry it looked almost certain that the Senate was going to go along with the bill that had passed the House. The provision was part of a bill that was going to extend unemployment benefits. Everyone said it was a slam dunk.

Oops. As I write this the bill has not gotten through the Senate and there are attempts to strip the S corporation provisions out of the bill. See the following Update on S Corporations:

The American Jobs and Closing Tax Loopholes Act of 2010 did not get enough votes to proceed in the Senate on Wednesday, leading Senate Finance Committee Chairman Max Baucus, D-Mont., to modify several provisions within the bill, including one that would raise taxes for certain S corporations.

Sorry... I will keep you posted.

Larry Kopsa CPA

Friday, June 18, 2010


According to Bloomberg News, "For the first time, the number of Americans receiving food stamps topped 40 million in March. That number represents a 21 percent increase from the year before."

Thursday, June 17, 2010


As you know, large employers with 20 or more employees with health insurance are required to provide health insurance to fired or terminated employees as long as the employee is not released for “gross misconduct.” The question is, what do the courts consider “gross misconduct?” It might surprise you.

In the first case, a fraud conviction is grounds for denying COBRA health care coverage. A professor was fired after the school learned that he had just plead guilty to student loan, bank and Social Security fraud. The school also discovered he had fabricated his credentials and never actually earned a bachelor’s degree. That is gross misconduct, a court says (Moore v. Williams College, D.C., Mass.).

But, according to another court, “mooning” a fellow worker is not gross misconduct. In this case, a female nurse who was fired for exposing her derriere during a dispute with a male coworker. Although this violated workplace protocol, her isolated and impulsive act wasn’t a case of gross misconduct (Stormont-Vail Health Care v. Reavis, D.C., Kan.). According to the court, she can be fired but she cannot be denied COBRA coverage and also is eligible for a 65% subsidy from the federal government of her health care premiums for up to 15 months.

Wednesday, June 16, 2010


I have received about a dozen emails saying that according to an email that is going around, in 2011 employer provided health insurance would no longer be tax-free. This just shows the power and the danger of the instant information Internet society. This information is wrong.

The truth is that in 2011 the employer must report to the IRS on the W-2 the amount of health insurance, but that amount will NOT be taxed as income in 2011. The e-mail is a hoax. Presumably, the reason Congress required the value to be shown on W-2s is to give workers a better appreciation of the amount spent to cover them or to get information on what it is costing them to allow this tax-free fringe benefit.

Tuesday, June 15, 2010


"The boss drives people; the leader coaches them. The boss depends on authority; the leader on good will. The boss inspires fear; the leader inspires enthusiasm. The boss says 'I'; the leader says 'we'. The boss fixes the blame for the breakdown; the leader fixes the breakdown. The boss says 'go'; the leader says 'let's go!'"
--H. Gordon Selfridge


There is really nothing new here but it goes to show why year-end income tax planning for S corporations is so important. In a recent Appeals Court case (Nathel, 2nd Cir.) the owners of an ailing S corporation lent money to the S corporation. Since before the loan the company’s losses exceeded the owners’ basis in the corporation’s stock, they would not have been able to deduct the loss. By making a loan they created basis and the owner was able to deduct the loss. Think of it like this, you lend $100,000 to your S corporation but the loss is $40,000, so now your basis in the loan is $60,000 - not $100,000. Under IRS rules, the excess loss is applied to reduce the tax basis in the loans.

When the corporation repaid the owners’ loans, the owners’ basis in the loans was still less than the principal amount. The court ruled that the owners owed ordinary income tax on the difference between the loan payoff amount and their tax basis in the loans. This recoups the extra S firm losses that their advances allowed them to deduct.

With a little tax planning at the end of the year, this problem could have been anticipated and quite possibly planned around.

Monday, June 14, 2010


Below is a card we sent out to some of our clients who may be impacted by new legislation. If you think you may be impacted, please discuss this issue with your accountant.

Congress has recently passed two laws that may reduce your taxes. The rules on these two bills are somewhat complicated, so rather than send you all of the detail, I am letting you know the basics. If you think that you might be impacted, contact our office and we will let you know if you qualify and what you need to do to keep more money in your pocket.

HIRE BILL - The primary focus of the HIRE program is to give companies incentive to hire. There are two main points focused on that. The first is a break from paying Social Security taxes for the remainder of 2010 on any new workers they hire, if they have been unemployed for at least 60 days. If you have any new hires after 2/03/10, you may qualify. Contact us.

HEALTH CARE BILL - I know that you may have received a card from the IRS on this. If you have less than 25 full-time equivalent employees and you pay for at least 50% of their health insurance, the government will reimburse you up to 35% of the premium. If you think you might qualify, contact us.

Larry Kopsa, CPA



Monday, June 21, 2010

12:00 PM - 1:00 PM CDT

There is a lot going on in Washington right now, so allow Larry Kopsa CPA to show you his ‘crystal ball’ on how the following may affect your business:Health Care Reform, PCI (if you take credit cards and you don’t know about this make sure you tune in!), CAP and Trade, Value Add Tax, New Tax Laws, Hire Act, and the Union Check Card. In this one hour webinar, Larry will show you how these items could potentially affect your bottom line.

System Requirements
PC-based attendees
Required: Windows® 7, Vista, XP, 2003 Server or 2000

Macintosh®-based attendees
Required: Mac OS® X 10.4.11 (Tiger®) or newer

Reserve your Webinar seat now at:

Friday, June 11, 2010


Check out this site for more information:


Last week I posted a summary of the Tanning Tax. Here is an update. On Friday, June 11, 2010 the IRS issued final, temporary and proposed regulations to provide guidance on the new 10% indoor tanning services excise tax. The summary that I posted follows the new law but I thought you might be interested in the recent announcement from the IRS. I have highlighted some of the new rules.

The Patient Protection and Affordable Care Act (PL 111-148) created a new 10% excise tax on amounts paid for indoor tanning services after June 30, 2010. Like a sales tax, the excise tax will be collected from the person tanning when payment for the tanning services is made.

The regulations provide that “amount paid” includes all amounts paid to a tanning services provider for indoor tanning services, including any amount paid by insurance. However, because many tanning salons sell other goods and services in addition to tanning services, the regulations provide rules for determining the tax when the provider charges for various goods and services in addition to the tanning services. Tanning providers avoid collecting tax on other goods and services if the charges are separable, do not exceed the fair market value of the other goods and services, and are shown in exact amounts in the records pertaining to the indoor tanning services charge. If the charges are not separately stated and the total amount paid includes indoor tanning services, the tax will be based on the portion of the amount paid that can be reasonably attributed to the tanning services.

Liability for the tax arises at the time payment is made for the services, but in some cases (such as when a gift card is purchased), it may not be possible at the time of purchase to determine if the payment is for tanning services. The regulations provide that in that case, payment is treated as being made (and liability for the tax arises) at the time it can be reasonably determined that the payment is made specifically for indoor tanning services (for example, when the gift card is redeemed to pay specifically for indoor tanning services).

The regulations clarify that the person who pays for the tanning services is liable for the tax, even though the tanning services may actually be performed on someone else (for example, where the payor buys a tanning gift certificate for someone else).

The regulations carve out an exception for “qualified physical fitness facilities” that include access to indoor tanning facilities as part of a membership fee. The IRS has determined that where such access is incidental to a physical fitness facility’s predominant business, the amount attributable to the indoor tanning access would be difficult to determine. Thus, amounts paid to qualified physical fitness facilities in that situation will not be subject to the 10% tax. However, the regulations narrowly define "qualified physical fitness facility" to exclude businesses that predominantly engage in indoor tanning or other cosmetic services.

The definition of indoor tanning service does not include phototherapy services provided by a licensed medical professional. The regulations define “phototherapy service” and specify that the service must be performed by and on the premises of a licensed medical professional in order to qualify for the exemption from the tax.

Collection and Payment Procedures

Providers of tanning services must collect the tax and pay it over quarterly to the government. In cases where the tax is not separately stated, the amount paid is presumed to include the tax. If the payor does not pay the tax, the service provider must pay the tax.

The tax is reported by the tanning services provider on Form 720, Quarterly Federal Excise Tax Return. Full payment of the tax is due when the quarterly Form 720 is timely filed; the regulations do not require semimonthly tax deposits.

The temporary regulations will be effective upon publication in the Federal Register.

Thursday, June 10, 2010


"Let's put the seniors in jail, and the criminals in a nursing home. This way the seniors would have access to showers, hobbies, and walks, they'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc. and they'd receive money instead of paying it out.

They would have constant video monitoring, so they could be helped instantly if they fell, or needed assistance. Bedding would be washed twice a week, and all clothing would be ironed and returned to them.

A guard would check on them every 20 minutes, and bring their meals and snacks to their cell. They would have family visits in a suite built for that purpose. They would have access to a library, weight room, spiritual counseling, pool, and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request. Private, secure rooms for all, with an exercise outdoor yard, with gardens. Each senior could have a PC, a TV, radio, and daily phone calls.

There would be a board of directors, to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.

The "criminals" in the nursing home would get cold food, be left all alone and unsupervised. Lights off at 8 pm, and showers once a week. Live in a tiny room, and pay $5,000 per month and have no hope of ever getting out. Justice for all. Yeah…I think I’ll take jail!!!"

Wednesday, June 9, 2010


Summer is here and it is time to consider saving taxes by hiring the kids. If you own a business you can save family income and payroll taxes by putting junior family members on the payroll. You may be able to turn high-taxed income into tax-free or low-taxed income, achieve social security tax savings (depending on how your business is organized) and even make retirement plan contributions for your child. In addition, employment of a child age 18 (or if a full-time student, age 19–23) may be a way to save taxes on the child’s unearned income..

Here are the key considerations.

Turning your income into tax-free or low-taxed income. You can turn some of your income into tax-free or low-taxed income by shifting some of your business earnings to a child as wages for services performed by him or her. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable.

For example, suppose a business owner operating as a sole proprietor is in the 35% tax bracket. He hires his 17-year-old daughter to help with office work full-time during the summer and part-time into the fall. She earns $5,700 during the year (and doesn't have earnings from other sources).

The business owner saves $1,995.00 (35% of $5,700) in income taxes at no tax cost to his daughter, who can use her $5,700 standard deduction for 2009 or 2010 to completely shelter her earnings. The business owner could save an additional $1,750 in taxes if he could keep his daughter on the payroll for a longer period and pay her an additional $5,000. She could shelter the additional amount from tax by making a tax-deductible contribution to her own IRA.

Family taxes are cut even if the child’s earnings exceed his or her standard deduction and IRA deduction. That's because the unsheltered earnings will be taxed to the child beginning at a rate of 10%, instead of being taxed at the parent's higher rate.

Keep in mind that bracket-shifting works even if the child is subject to the kiddie tax. The kiddie tax only causes a child’s investment income in excess of $1,900 for 2010 to be taxed at the parent's marginal rate. It has no impact on the child’s wages and other earned income, which can be sheltered by the child’s standard deduction.

The kiddie tax applies to a child who is age 18 or a full-time student age 19 through 23, if the child’s earned income for the year doesn't exceed one-half of his or her support. Thus, employing a child age 18 or a full-time student age 19–23 could also help to avoid the kiddie tax on his or her unearned income.

For children under age 18, there is no earned income escape hatch from the kiddie tax. But in all cases, earned income can be sheltered by the child’s standard and other deductions, as noted above, and earnings in excess of allowable deductions will be taxed at the child’s low brackets.

What about income tax withholding? Your business probably will have to withhold federal income taxes on your child’s wages. Usually, an employee can claim exempt status if he or she had no federal income tax liability for last year, and expects to have none for this year. However, exemption from withholding can't be claimed if (1) the employee's income exceeds $950 for 2009 or 2010, and includes more than $300 of unearned income (such as dividends), and (2) the employee can be claimed as a dependent on someone else's return. Keep in mind that your child probably will get a refund for part or all of the withheld tax when he or she files a return for the year.

Social security tax savings, too. If your business is not incorporated, you can also save some self-employment (i.e., social security) tax dollars by shifting some of your earnings to a child. That's because employment for FICA tax purposes doesn't include services performed by a child under the age of 18 while employed by a parent. For example, let's say a sole proprietor who usually takes $120,000 of earnings from the business pays $5,700 to her 17-year-old child in 2009 or 2010. The sole proprietor's self-employment income would be reduced by $5,700, saving her $165.30 (the 2.9% HI portion of the self-employment tax she would have paid on the $5,700 shifted to her daughter). This doesn't take into account a sole proprietor's income tax deduction for one-half of his or her own social security taxes.

A similar but more liberal exemption applies for FUTA, which exempts earnings paid to a child under age 21 while employed by his or her parent. The FICA and FUTA exemptions also apply if a child is employed by a partnership consisting solely of his parents.

Note that there is no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes non-parent partners. However, there's no extra cost to your business if you're paying a child for work you'd pay someone else to do, anyway.

Keep in mind that some of the rules about employing children (such as the maximum amount they can earn tax-free) change from year to year, and may require your income shifting strategy to change, too.

Tuesday, June 8, 2010


Larry, I own a piece of property that I owe about $30,000 to the bank. I paid about $10,000 for the property about 10 years ago. Here is the deal. I have an offer of $30,000 on the property. If I had the buyer pay a note directly off for me, would the sale have to be reported to IRS?


Oscar, the payment to the bank would be considered income to you and you would have to pay tax on the gain just like if you received the proceeds. The IRS considers relief of debt (the pay-off of a loan) to be the same as a cash sale.

Larry Kopsa CPA

Monday, June 7, 2010


I presume everyone knows that Congress, as part of the Health Care Legislation, has put a 10% excise tax on indoor tanning. This law goes into effect on July 1, 2010.

You've probably already heard that in the original bill there was going to be an excise tax on all cosmetic procedures. They called it the "Botax." The White House and Senate Democrats have turned to a proposal to tax breast implants, tummy tucks, wrinkle-smoothing injections and other procedures as they search for ways to pay for costly health care overhaul plans.

Vanity was an easy target as lawmakers scraped for cash for the nearly $1 trillion plan to expand health care to millions of Americans who lack insurance. But it was no joke to the drug makers, people who perform the cosmetic nips and tucks and most importantly people that could afford the procedures. They fought back and Congress and the President backed down and settled instead for a tax on tanning.

Here are some things you need to know if you provide tanning services.

• This is not a sales tax but it looks like a sales tax. The tax is what is known as an “excise tax.”
• The tax rate is 10% on all tanning after June 30, 2010.
• The tax is to be collected from the customer.

For example: Lisa Healthiglo, an ardent tanner, uses the tanning booths at Acme Tanning, Inc. to keep her tan during the fall and winter months. Typically, Lisa pays $30 for a 20-minute session. Under the 2010 Health Care Act, Lisa has to pay an additional $3.00 in tax (10% × $30) for each tanning session. Lisa does not, however, have to pay the tax on the grossed-up cost of the tanning services ($30 + $3).

• Tanning subject to the tax is defined as: defines “indoor tanning service” as a service that uses any electronic product that's designed to incorporate one or more ultraviolet lamps, and that's intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.
• The term “indoor tanning service” excludes any phototherapy service performed by a licensed medical professional.

For example: Jillian Jones, a psoriasis sufferer, undergoes phototherapy sessions at her dermatologist's office to keep the disease in check. Jillian pays $150 for a 30-minute session, a portion of which is paid for by insurance. Because phototherapy services performed by a licensed medical professional are exempt from the 10% tax on indoor tanning services, Jillian's treatment sessions are not subject to the tax.

• Spray tanning is not subject to the 10% tax.
• If the tax is not collected from the customer then the company must pay the 10% and remit to the IRS.
• The tax is remitted to the IRS quarterly using form 720 Quarterly Excise Tax Report. This IRS is including a new line on the form.

If you have any questions please let me know.

Larry Kopsa CPA


"Hate is like acid. It can damage the vessel in which it is stored as well as destroy the object on which it is poured."
--Ann Landers

Friday, June 4, 2010


Larry, I am going to Las Vegas for a convention and I want to take my spouse. Can I deduct her expenses?


Lou, I presume that you own your own business. I have some really good information on this and other topics on our website in the General Tax Information section. In response to your question, click on the following link:

Larry Kopsa CPA


I know one thing that is certain. Taxpayers hate paying self-employment tax. Hate it, hate it, hate it. Maybe it's because they know the tax goes towards financing Social Security - and they know better than to plan on retiring on Social Security. Now for some professional S corporations it appears that they will lose this wonderful tax advantage.

If you are in the following professions and if the principal assets is the reputation and skill (yet to be defined) of three or fewer workers, you are going to get hit starting in 2011.

• Accounting.
• Law.
• Health.
• Actuarial science.
• Engineering.
• Architecture.
• Lobbying.
• Consulting.
• Brokerage services.
• Investment management.
• Sports.
• Performing arts.

Currently, the tax is 15.3% of the first $106,800 in profits and 2.9% above that.

The change will end a popular tax saver for personal service S firms. Our strategy was to take a modest salary and receiving the rest of the profit as a dividend. The S corporation profits flow through to the owners’ individual income tax returns as dividends. Those dividends are exempt from self-employment tax, but they are hit with income tax.

We saw this coming. A few years ago, Treasury inspectors found massive tax avoidance in this area. More than 35,000 one-owner S companies with profits of $100,000 or more paid no payroll taxes on the profits because the owners didn’t take a salary. The same was true for owners of about 40,000 S firms with profits in the $50,000-$100,000 range. Because of this the tax writers decided to take action to end any possibility of gaming the system.

No exception will be allowed for amounts left in the firm for working capital, at least for small professional service S firms. Dividends passed through to owners of larger S service firms or of S corporations that aren’t in professional service fields will continue to be exempt from self-employment tax but the writing's on the wall. The iceberg is visible ahead. And we can't just sit around waiting for it to hit like the Titanic.

We'll obviously keep a sharp eye on this.

Larry Kopsa CPA

Thursday, June 3, 2010


We are honored to assist Milady in developing their new Financial Analysis and Coaching Tool CD-ROM. There are nine different analysis tools that show you how you how to increase your profits and cash flow. The CD talks you through how to enter the data. No complicated instructions that you need to be a accountant or an engineer to comprehend.

The worksheets cover:
  • The impact of pricing

  • Productivity potential

  • Average Ticket Spreadsheet – Technician potential profit

  • Gross profit calculator

  • Inventory analysis – how much inventory do you need

  • Weekly-Monthly snapshot spreadsheet

  • What should your base price be to break even – or maybe show a profit

  • How to increase your income by increasing productivity

The Kopsa Otte team of Theresa, Megan, Sherri, Amanda and myself helped develop the spreadsheets and are very proud of the finished product.

Here is a link to how you can order the Financial Analysis and Coaching Tool CD-ROM. I highly recommend purchasing.

Wednesday, June 2, 2010


I don’t know if you’ve ever had the chance to call the IRS. I hope it never happens that you do. In our line of business we get this opportunity quite often.

I wanted to share with you the frustration of dealing with the IRS.

Recently I called regarding a client matter. After going through the tree of questions, what language I wanted to hear, the notice and ID number etc., I was finally told to wait, which I did for twenty minutes (which is normal). I then heard the beep that told me I might be next; I heard some crackling on the other end and then a dial tone. I spent twenty-five minutes sitting there waiting to speak to an IRS agent just to get cut off. I redialed the number and the same thing happened the second time.

These are the people who will be in charge of our health care.

Tuesday, June 1, 2010


"Map Quest really needs to start their directions on #5. I'm pretty sure I know how to get out of my neighborhood."