WATCH OUT FOR FAKE IRS NOTICES

These fake scams are out there. I have even received a supposed communication from the IRS. These crooks are good. The communication looks real. Be careful, don't let this happen to you.

The IRS receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the Internal Revenue Service. Many of these scams fraudulently use the Internal Revenue Service name or logo as a lure to make the communication more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use that information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things you need to know about phishing scams:
1. The IRS doesn’t ask for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.
2. The IRS does not initiate taxpayer communications through e-mail and won’t send a message about your tax account. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:
• Do not reply to the message.
• Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.
3. The address of the official IRS website is http://www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.
4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence.
5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov, keyword “phishing.”

Brazilian Blowout drops lawsuit in formaldehyde fiasco

Oregon Occupational Safety and Health Administration (OSHA) has announced that the makers of the Brazilian Blowout hair straightening treatment, has dropped the lawsuit against the Oregon agency.

Spokesperson Melanie Mesaros informed CosmeticsDesign.com USA that OSHA had received a notice of dismissal from GIB’s lawyers and that the case had been dropped.

Mesaros also explained that OSHA were currently unaware as to the reason of this action, and CosmeticsDesign.com USA is currently awaiting response from Brazilian Blowout.

Incorrect and misleading results
GIB were originally suing OSHA as it claimed it was producing incorrect and misleading results that were misleading the public and damaging sales of the Brazilian Blowout keratin hair smoothing treatment.

The test results released last year, stated that the hair treatment omitted unsafe levels of harmful gas formaldehyde, which threatened the health of the salon professional who may have to use it throughout the day.

The uproar in the beauty industry that followed led to GIB filing a complaint against OSHA for misrepresentation of Brazilian Blowout's products.

The complaint stated that Oregon OSHA had done irreparable harm to the company and the professional beauty industry, by distributing inaccurate product testing results and using improper testing protocol.

Confusion over substances tested
According to the complaint, the health and safety agency wrongfully issued alerts after claiming to have measured high levels of formaldehyde in product testing of Brazilian Blowout solution, although, according to GIB, they were measuring and reporting concentrations of a different substance, methylene glycol.

“Leading chemists agree that methylene glycol and formaldehyde are very different, both chemically and physically. Methylene glycol is a liquid; formaldehyde is a gas that can be inhaled,” said Mike Brady, CEO of Brazilian Blowout, said in December 2010.

“Yet Oregon OSHA has inaccurately declared that these are 'synonyms' even though these two substances have very different chemical compositions and belong to different chemical families.”

Home based keratin hair straightening product debuts on HSN

Boca Cosmetics has attempted to bring the salon to the home by launching Zelo, its keratin hair-straightening product designed for home use.

The ‘do it yourself’ sprayable straightener is the first of its kind according to Boca, and is designed to achieve salon results with no harsh smells or irritants.

"Our goal was to develop a quality product that women can do at home and achieve the same results they would get in a salon and save money" said Gisela Basilio, co-founder.

Market currently scrutinized for formaldehyde
The product will be launched through US television’s Home Shopping Network (HSN), and comes at a time when keratin product manufacturers are being heavily scrutinized for the use of formaldehyde.

The dangers have been highlighted recently in both the US and Europe, with criticisms over the release of the potentially harmful gas and the effects it can have on clients and salon professionals.

Boca says that because of this it was imperative for it to provide a solution for women needing a product that helps them manage their hair without formaldehyde.

The Keratin Straightening kit, includes a DVD and written instructions in English, Spanish and French as well as attached gloves, hair claws and comb, all designed to simplify the application process.

The kit itself contains a shampoo and conditioner, and Zelo's contains keratin, replacing the keratin protein that is lost between shampoos and other treatments.

The makers of the hair product insist that it will not interfere with other hair applications and can be washed the same day it is applied without losing its affect.

Adding ‘hair back to hair’
According to Zelo, hair is made up of 75 percent keratin protein but as it is exposed to the elements, treatments, hair color, and so on, the Keratin is stripped out.

Basilio said "Zelo is like "adding hair back into the hair," this is truly a miracle product for women that have to use an iron everyday to manage their hair.”

“When you can tell a woman it reduces styling time in half every morning, still look beautiful and save money, then we know we are making a huge difference," She added.

FDA urged to work with OSHA to determine safe levels of formaldehyde

The US Food and Drug Administration (FDA) has been urged to work together with the US Occupational Safety and Health Administration (OSHA) to establish if hair smoothing treatments emit unsafe levels of formaldehyde, given the industry outcry over the last six months.

Following the Cosmetic Ingredient Review (CIR) Expert Panel’s preliminary findings on the safety of formaldehyde and methylene glycol in these products, John Bailey, chief scientist Personal Care Products Council (PCPC), released a statement explaining there must be an understanding of ingredients and conditions of use.

The non-profit scientific panel reached the conclusion that formaldehyde and methylene glycol are safe in cosmetics products when formulated to ensure use at the minimal effective concentration and reiterated that amounts used in formulations should not exceed 0.2 percent.

Unsafe in aerosolized products
However, the Panel said it could not conclude "that formaldehyde/methylene glycol is safe in cosmetic products intended to be aerosolized or in which formaldehyde/methylene glycol vapor or gas will be produced under conditions of use."

Bailey explained that PCPC joined FDA and consumer groups several months ago in requesting that CIR review the safety of formaldehyde and methylene glycol as they are used in professional hair straightening and smoothing products, and that it supports the findings.

“We urge FDA to work expeditiously with OSHA and appropriate state and local organizations to objectively determine if salon hair smoothing products emit levels of formaldehyde gas that are unsafe for consumers or salon workers under their intended conditions of use and taking into consideration salon ventilation practices,” he said.

Dependent on ventilation levels
Safe and proper use depends largely on the ventilation in the salon and the application procedure.

Bailey advised that consumers do not use these products at home and to check with salon professionals that the environment is properly ventilated to meet OSHA guidelines before receiving the treatment.

“Until the review is completed and regulatory authorities have had the opportunity to assess it and come to their own conclusions, we urge consumers to exercise caution in using these products” said Bailey.

OSHA is responsible for regulating workplace safety and has established limits as to the safe levels of inhalation exposure to formaldehyde gas.

Heating products is a cause for concern
When hair smoothing products that contain formaldehyde or methylene glycol are heated, they can release low levels of formaldehyde gas.

These ingredients are sensitizing agents, and consumers or salon workers may experience allergic reactions if they become sensitized.

The Oregon arm of OSHA recently hit the headlines having been sued by Brazilian Blowout, a manufacturer of hair smoothing products.

The lawsuit has since been dropped for an, as yet, unknown reason. A spokesperson from OSHA told CosmeticsDesign.com USA that OSHA was unaware of the reason, and we are yet to hear back from Brazilian Blowout.

IRS TO HOST FREE WEBINAR FOR SMALL BUSINESS

I thought that you might be interested that the IRS is going to host a Webinar on March 29 at 2 p.m. (E.T.) entitled “Business Taxes for the Self-Employed: The Basics.” It will be presented by three senior analysts from the agency. According to IRS, participants will learn about reporting profit or loss from a business or profession, self-employment tax and estimated tax payments, Schedule C and C-EZ, deducting business expenses, husband and wife businesses, and recordkeeping.

Registration can be completed at http://www.visualwebcaster.com/IRS/77024/reg.asp?id=77024 .

ARE YOU GETTING ALL OF YOUR TAX CREDITS

If you’re like most business owners, you qualify for all sorts of valuable tax credits. Lately I have been speaking at several Salon Shows and I am amazed by the number of owners that are not aware of some of the new credits. If they are missing the credits they are overpaying their tax.

If your accountant isn’t looking out for you, you may be losing your share! Has your accountant talked to you about credits like these?

• New Hire Credit: If you hired new employees between February 4 and December 31 of 2010, you may qualify for a credit of up to $1,000 against your employer share of that employee’s payroll tax.

• Small Business Health Care Tax Credit: Do you pay at least half your employees’ health care premiums? If you have less than 25 fulltime equivalent employees and pay average wages under $50,000, you may qualify for credits up to 35% of your premium costs.
If you want to make the most of these tax credits and more, you can’t settle for an accountant who just records history. You need someone proactive to help you write it!

Email us if you would like more free information on these credits. Or better yet, sign up for a Second Opinion and we will find the mistakes and missed opportunities that may be costing you thousands today, and discover where you may be vulnerable to higher taxes tomorrow.

We guarantee you’ll leave with new information, or we’ll donate $50 to your favorite charity. So contact Amanda at ahaumont@kopsaotte.com now to schedule your Tax Analysis, and make sure you’re getting all the credits you deserve!

HOW LONG DO I NEED TO KEEP THESE RECORDS?

One of the questions I get asked a lot this time of year is "how long do I need to keep these records?" Below is a link to our Record Retention Guide. I hope that this is helpful.

I can guarantee that if the IRS comes around you will be glad that you kept good records. We have an audit going on right now where the IRS is asking for some information back to 1993. If the client had used our guide we would have the records. As it is we are having to depend on the mercy of the auditor. That is a scary thought.

Using our record retention guide will help "audit proof" your return.

http://www.kopsaotte.com/salon/files/file/RecordRetentionGuide_SalonSpa(1).pdf

SKIN CARE OCCUPATIONS HAVE A BRIGHT FUTURE

According to the March 13, 2011 issue of the Parade magazine the Skin Care profession is where it is at.

According to the publication there will be an estimated 14,700 new jobs for skin-care specialists of the next decade, thanks to the boom in spas and cosmetic centers.

I imagine that the aging population does not hurt that profession.

TODAY IN HISTORY: PRESIDENT PAYS TAX FOR THE FIRST TIME

Today marks the anniversary of the first U.S. President filing an income tax return. On March 14, 1923, President Warren G. Harding filed his income tax return for the 1922 year, paying about $17,000 in tax on his presidential salary of $75,000, although further details were not released.

The income tax had been enacted in 1913, but then-President Woodrow Wilson was protected by Article II, Section 1 of the Constitution, which states that the President's salary "shall neither be increased nor diminished during the Period for which he shall have been elected." From the 1860s until 1939, it was held that a new tax or tax increase diminished salary, and thus could not go into effect for presidents and federal judges (judges have a similar provision protecting them).

The New York Times of February 15, 1921 reports that then-President-elect Harding spoke against a proposed bill that would make the President permanently immune from the income tax, effectively killing it. (Interestingly, many European and international organizations have such an exemption.)

HELLO FROM CHICAGO

Greetings from Chicago. I am making a quick trip to the Windy City to do two presentations at the American Beauty Show (ABS). I am honored that the great equipment company Belvedere booked me to speak on "mistakes that owners make" and a second session on "taxes." There was standing room only at my tax class.

If you are not a client and are interested in a one on one tax consolation with me contact Amanda at ahaumont@kopsaotte.com and she will set up a time.

Since I was at the IBS show in New York City the week before and now at the ABS show in Chicago I thought I might comment on the difference between the shows.

• It is really hard to tell about attendance at the shows. I spoke to a director at the ABS show and he said that they had over 55,000 participants. At the IBS show I heard the number 40,000. Both shows were crowded.
• Both of the shows seemed to be well organized. It seemed that the registration line was longer at the ABS show but that might have been due to when I walked by.
• If you were looking for business speakers definitely the ABS show gave you more options. At the same time, you can only see one program at a time.
• Chicago seemed to have more hands-on classes.
• There was more spa in New York City because of the joint International Esthetics's, Cosmetics and Spa Conference (IECSC) going on at the same time. Of course there was a separate entry fee for each.
• The Chicago show seemed to have all of the major manufacturers represented. I saw Rusk in New York but that was about it. Matrix, Redken, Purology and were all in Chicago. I did not get all the way through the floor but I am sure by the signage that there were more.

Both shows were very good. It would be hard for me to say which one I would attend if I had to choose. I really appreciate having the opportunity to participate in both excellent shows.

Larry Kopsa CPA

TAX PLANNING FOR CHARLIE SHEEN

Sitcom star Charlie Sheen's public meltdown has grabbed more headlines than any story since pop star Michael Jackson's death. Public consensus is that Sheen is a man in desperate need of help. So naturally, we were wondering, is there any help waiting for him from the IRS?

We're not here to "pile on" like so many commentators. (That's what Saturday Night Live is for!) But if you're following the story like so many of us, consider how the tax code helps Charlie in these areas:

• Drug Rehab. Charlie's rehab bills are a deductible medical expense. And unlike some deductions that are specifically limited (like mortgage interest on your primary residence and just one additional home), there's no limit to how many times you can write off rehab.

The downside here is that medical expenses are deductible only to the extent they exceed 7.5% of "adjusted gross income." Sheen reportedly makes $1.8 million for each of 22 episodes, which suggests he can only deduct medical expenses topping $3 million/year. Even for Charlie, that might be a stretch! However, he might establish a Medical Expense Reimbursement Plan through a business entity to avoid that 7.5% floor. If you own your own business, even a startup or sideline, call us to see if you can benefit from that same strategy.

• "Goddesses." Sheen lives with two young blondes whom he calls "goddesses," and whom he says help take care of his twin toddler sons. If he actually pays those women for child care, payments up to $6,000 per child may qualify for the Dependent Care Credit. The rules say you can't pay a member of your own family to care for younger children — but they don't say anything about paying goddesses!

• Job-Hunting Expenses. "Two and a Half Men" producers have officially canned Sheen, arguing he's violated a morals clause in his contract. Job hunting expenses to help Sheen find new and artistically challenging roles are deductible as a miscellaneous itemized deductions, subject to a 2% floor on adjusted gross income.

• Legal Fees. Odds are good that anyone with a mouth like Charlie needs a lawyer who bills by the hour. Sheen can deduct legal fees relating to the $300 million lawsuit he just announced against CBS, along with any additional fees related to tax-deductible alimony paid to his three ex-wives.

Sheen has tiger blood and Adonis DNA to help him through his current troubles. But even Hollywood train wrecks can't hide from taxes without a plan. So call us if you're looking for savings without the headlines!

HOW TO MAKE SURE THAT AN IRS LIEN HAS BEEN RELEASED

Q. The IRS has released a lien that they had because I was behind on paying some tax. Even though they said they released the lien I don't trust them. Is there any way I can make sure that the lien has been released?

A. You don't trust the IRS? They are "from the government and here to help."

Here is what you should do. If you have questions regarding basic lien inquiries such as routine lien releases and lien payoff amounts, contact the Centralized Lien Unit by calling the toll free telephone number (1-800-913-6050).

In addition you can request a Certificate of Discharge from the IRS to prove that you paid the tax debt, should any problems arise in the future.

There is a problem is that the lien may impact your credit score even if it is timely paid. If this is a concern, you should dispute the public record notation of the tax lien that appears in your credit report with the credit bureaus. You should do this after you have paid off the debt and the lien has been released. The credit bureaus will then investigate the tax debt. The IRS, however, has little to no incentive to validate the fact that you once owed a tax debt if the debt has already been paid. Paying the lien and having it subsequently removed from your credit report will erase the last traces of the lien for good.

Larry Kopsa CPA

HOW WOULD YOU LIKE TO DO W-2'S QUARTERLY?

Don't you just hate preparing those year end W-2 forms, giving copies to the employees and sending the information off to the IRS. Well if President Obama gets his way you will be filing W-2's more often.

In President Obama's 2012 budget there is a provision that would require W-2s to be reported on a quarterly basis, rather than annually. But don't worry. That same provision was in prior years budget and did not get passed.

We will keep you posted.

Larry Kopsa CPA

TAXES AND BREAST PUMPS

The IRS has changed their minds on the cost of breast pumps and other lactation supplies and now have classified as a medical expense that can be reimbursed by flexible spending accounts.

Late last year the IRS privately ruled that those costs weren’t deductible medical expenses and could not be reimbursed. I wonder why they changed their mind?

HELLO FROM NEW YORK CITY

As I write this, I am in New York City. I am honored to be speak at the International Beauty Show (IBS) at the Jacob Javits Center in downtown Manhattan. This is the forth year that I have spoken at the show and each year the show gets better.

There are over 50,000 attendees at this show and energy abounds everywhere. My wife Maggie is along with me and my trusty sidekick Amanda Haumont . This is a great program and a great city. Consider attending the program next year. The city can be a little expensive ($5.50 for a cup of coffee at the hotel) but there is no place like it.

By the way, next Sunday (March 13th)I will be at the ABA show in Chicago. If you are there stop by and say "hi."

IT'S NOT TO LATE FOR ACCRUAL BASIS CORPS TO GET AT 2010 DEDUCTION

If you are a calandar year corporation you can still reduce your corporate tax bill for 2010. Businesses that are using the accrual method of accounting (not the cash method) can take a 2010 deduction for payments of accrued salary and bonuses made to workers on or before March 15.

Unfortunately this does not apply to owner employees. Accrued amounts paid to them can be deducted for 2010 only if the payments are reported on their 2010 returns. The same rule applies to owners of any interest in an S corporation, personal service firm or partnership.

Additionally, charitable contributions can be made up to March 15th and be deducted on the accrual basis 2010 corporate return.

Larry Kopsa CPA

SALON 200 FACTS AND FIGURES

As we mentioned a couple of weeks ago, Salon Today announced their 14th Annual Salon 200 awards. We were so proud to have twelve of the clients that we work with make the list. In addition to this, I’m sure other of our clients would have made the list if they would have applied.

Here is some information from the Salon Today regarding the salons that were selected.

Breaking down how the Salon 200 spend their money:

Labor 47%
Supplies 11%
Rent\Mortgage 8%
Profit 6%
Taxes 5%
Owner Compensation 5%
Marketing\Advertising 3%
Employee Benefits 2%
Education Training 2%
Utilities 2%
Professional Services 2%
Insurance 1%
Telecommunications 1%
Other 5%

You might look at your numbers and compare them to these numbers. Note that these are not industry averages but rather the averages of those Salon 200 winners.

Again congratulations to all of those who made it. It is quite an honor.

Larry Kopsa CPA

LK/cm

DO YOU BARTER?

Occasionally I get questions about bartering. There are even companies out there that organize bartering opportunities. These companies claim that you increase sales because potential clients have "barter points," and they look for companies that will accept their barter points. You get barter points and then need to look for someone that you can spend the points on. The normal bartering is someone saying that they will repair my car if I do their tax return.

There are income tax consequences and the IRS is concerned that people are avoiding paying tax by trading taxable services for personal items. There is even a question on the tax return asking if you barter. The IRS auditor always asks about bartering.

The IRS released the following information about bartering. It thought you might be interested.

Larry Kopsa CPA

Four Facts About Bartering

In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market value of the goods and services exchanged must be reported as income by both parties.

Here are four facts about bartering that the IRS wants small business owners to be aware of:

1. Barter Exchange A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is Internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.

2. Barter Income Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another’s products or services - you will have to report the fair market value of the products or services you received on your tax return.
3. Taxes Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
4. Reporting The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.

For more information see the Bartering Tax Center in the Business section at http://www.irs.gov.

COMMENT ON WHY NO COMMENT ON OBAMA BUDGET

Q. I have been following your blog and I have been waiting for you to chime in on the tax consequences of President Obama’s budget proposal. Did I miss your take?

A. Actually I have not commented much on the tax proposals for a couple of reasons. First of all it’s probably all talk. The chances of his proposal getting through Congress are slim. Secondly, it can get confusing. When people read about a proposed change then next thing you know is that someone get’s it wrong and think that it is the real deal. You know what happens next. It hits the social network and people even get more confused. Finally, there has been a lot written about the proposal so I thought that people that were interested probably already had read the articles.

If you want a summary here is a piece from the Journal of Accountancy.

http://r.smartbrief.com/resp/BeiYvscgyzgKoOqkajaoyAalPcWE?format=standard

HOW TO FIX AN OVERPAYMENT TO AN IRA

Q. I accidentally contributed more than $6,000 to my Roth IRS for 2010. I am 61. Am I going to jail?

A. No jail time for this. As a matter of fact you can most likely solve this problem with a call or two. Call your IRA custodian and he or she should be able to walk you through the steps that you need to take.

Generally, the amount that must be withdrawn is computed on Form 5329 Additional Taxes on Qualified Plans (including IRS’s) and Other Tax Favored Accounts. This is a large form not because of the information that goes on it but rather to just fit the title.

If you fail to withdraw the excess contribution you will be liable for a 6% penalty for every year you have over contributed.

Larry Kopsa CPA

BERKSHIRE HATHAWAY ANNUAL LETTER

Here is Warren Buffett's annual letter. Even if you are not an investor it is interesting to learn how he thinks about business and business climate.

http://www.berkshirehathaway.com/letters/2010ltr.pdf