Thursday, April 28, 2011


I blogged a couple of weeks ago that P&G had recalled several hair colour products. Now they have announced two more shades to the recall list of its Clairol Natural Instincts products, taking the total number of shades recalled from the market up to 12.

P&G recalled ten shades of its hair colouring products last week, stating that some of the kits may produce an unwanted color result.

The company said in a statement that a very small number of the two additional products, which will be pulled from sale in the US, Canada and Puerto Rico, are affected. The two additional shades are:

• Natural Instincts 11G Lightest Golden Brown (Amber Shimmer)
• Natural Instincts Vibrant Shade 6A Light Cool Brown (Wake-up Cocoa)

As with the previous recall, P&G says it is taking the step due to a mismatched ColorFresh! Revitalizer sachet in the kits that may create the unwanted colouring.


Occasionally I get emails from people that say my blogs are too conservative or slanted. I was even called Glenn Beck. So this should help to balance it out...


Hi Larry, I know in your travels working with hair salons and owners in the industry, you must come across these issues. I know a gal that used to work in my salon that thankfully went to another salon where she can sell her own retail. She told me she purchases it wholesale at the distributor house and pays tax there on the wholesale because she does not have a resale license. She then sells it to her clients and they pay tax to reimburse her but she does not pay state sales tax. She also is on social security so is hiding income in her sisters account so as not to make over the limit you can make legally. She said she has a really good accountant that is helping her. I wish I did not know all this information, but since I do, what should I do with it? There is a part of me that feels like an accomplice by not reporting her. Then I also believe in, "the wheels of God grind slowly but finely" and leave it alone and walk away. I have known her for many years but did not know she was like this till she worked in my salon. I had to let her go as I felt I could not trust her. It seems like almost every hairdresser that I know that is a booth renter, at least where I work, hides money from the IRS and they talk about it. I do not believe that is honest nor has integrity. Am I just stupid not to do that? I report everything, even my tips. I am not trying to sound self righteous. That is how I was raised. I really struggle financially to pay all that I owe, they all are going on vacations and buying new cars. I am sorry if this sounds petty but I see it as a huge issue in our least where I live. Thanks for your input.

Isn’t it frustrating doing everything right and then find out that others are not playing by the rules. This girl could have some real problems. Regarding the state sales tax what she is doing is wrong, wrong, wrong. The state is getting cheated out of part of the tax. For example she buys the product for $10.00 and pays 70 cents in tax. Then she sells the product for $20 and should be collecting $1.40. The state is out of 70 cents. She is committing a criminal act by not reporting all of her income and is subject to jail time. I am aware of people that are in jail for not reporting all of their income. This is a further problem because she is improperly collecting social security benefits. Shame on her. What can you do? That is tough. If you tip off the IRS you will not know if they have taken any action or not unless she tells people. The IRS is required to be very private about audits unless it goes to court and becomes public record. And, as you can imagine the IRS can be a little skeptical of informants unless they have proof. I would presume that jilted lovers and disgruntled ex employees contact the IRS just to cause havoc. Here is a possibility. There is a new Web site that lets people leave anonymous tips about tax cheats and are forwarded to the Internal Revenue Service. The site,, is aimed at people who want to report tax cheating by others, but wish to remain anonymous. They will not be able to qualify for the IRS’s whistleblower awards, but in most cases they would not be able to qualify anyway. The IRS only pays whistleblowers if the case involves a business that owes over $2 million in taxes, or an individual who earns $200,000 or more a year. The site is run by a retired IRS agent, Al Drucker of Manalapan, N.J.

Sex, chocolate, coffee? No thanks I prefer my cosmetics

According to a recent survey carried out in the US, women are more willing to sacrifice luxuries such as chocolate, coffee or even sex for a week than to give up their favorite beauty product.

The study, carried out by L’Bel USA on over 1300 women, also found out that women are more likely to let an airline security take a pair of beloved shoes and jeans, than give up their favorite skincare or makeup items. "Women not only want beauty products that make them feel radiant inside and out, but products that are customized for their skin and lifestyle. It's no surprise they would rather go without a few of life's other simple pleasures. Once you find a product you love, that's affordable and works, you never want to let it go," said John Krites, L'Bel USA's beauty expert.

A better understanding of women’s attitudes

With its parent corporation Belcorp being the third largest skin care company in South America, L'Bel USA says it commissioned the survey to gain a better understanding of women's attitudes on beauty and lifestyle, and the products that are top of the mind for women this spring. The study also found that three-quarters of women (76 percent) report that they carry a make-up/skin care related product in their purse regularly, with lipstick/lip gloss (63 percent) topping the list of beauty-related items, which L’Bel claims highlights the importance of cosmetic products in consumers’ lives. According to the survey, the top ranked item that women report as a ‘must-have’ when they go out at night is their lipstick or lip gloss. Fifty nine percent of women prefer lip gloss to lotion (17 percent), fragrance (12 percent), foundation/concealer (9 percent) and mascara (6 percent).

Where to spend the paycheck…

Fragrance was found to be the number one item on which women would spend their paycheck. An estimated 25 percent of women would use their paycheck to splurge on fragrance, and one in ten women said that if they could use their paycheck to splurge on one beauty product, they would choose foundation/concealer (12 percent) or lotion (10 percent).

Wednesday, April 27, 2011


According to First Data Corporation the average gift card holder spends $33 beyond the value of the card.

P&G voluntarily recalls Clairol hair colorants due to unwanted results

So your clients think that they can color their own hair? Check this out.

Procter and Gamble has recalled ten shades of its Clairol Natural Instincts products with immediate effect, stating that some of the kits may produce an unwanted color result. The voluntary recall takes place in the United States, Canada, and Puerto Rico, with the company saying it is taking the step due to a mismatched ColorFresh! Revitalizer sachet in the kits that may create the unwanted coloring.

David Letterman's Top Ten Tax Tips

10. IRS deadlines are just suggestions. File your taxes whenever you want.

9. Warlocks may not claim trolls as dependents

8. Make filing more personable by naming your calculator. Mine is named “Owen.”

7. Make sure your accountant went to a real school and not a phony internet college like I did.

6. H Block: Good guy, R Block: complete grease ball

5. Getting a refund? Log on to to spin the wheel and play “double or nothing”

4. If you don’t remember your social security number, make one up

3. Do not use Wesley Snipes’ accountant

2. Not really a tax tip, but accountants are wild in the sack

1. Take it from me, prison’s not so bad

Tuesday, April 26, 2011


Q. My partner wants to let our current front desk person go and hire a person that will work for minimum wage. We pay our current receptionist $12.00 and she is really good. I would hate to lose our current girl. My partners says we can save a lot of money with the cheaper person. What do you think?

A. Pay peanuts and you get monkeys.


Did you miss us? Just in case, check out Larry’s article in Skin Inc. ‘Understanding Your Financial Statements’. This is something that all businesses need to do in order to run a GOOD business.


Professional football player Craig Steltz, age 24, who plays for the Chicago Bears. Steltz notes that he currently doesn't have health insurance due to the NFL players' union dispute with NFL owners. Steltz says he went on his parents plan since he is only 24, as allowed by President Obama's health care law. The story notes that the "new federal health care law allows those who are 26 years old and younger to return to their parents' health insurance." Steltz told the paper, "Out of the blue, someone reminded me that 'Man, you are 24; you can get on your parents' insurance.' ... I said, 'Man, this is awesome. I'm a professional athlete and I am getting on my parent's insurance.'"

Monday, April 25, 2011


As most of you know my daughter-in-law, Jessica Bedient, was killed by a drunk driver last fall. Last week the young man was sentenced to 10 – 14 years in prison. Jessica was an outstanding human being. She was so into giving. Below is a link to a news report that aired Sunday 04.24.11.

Check it out:

To honor Jessica my stepson Tony is raising money for Tanzania. My son, other family members and friends are honoring Jess by running in the Lincoln Half Marathon. We are raising money in order to carry out Jess’s dream of building a school and missionary support in this poor county that Jessica had done missionary work in a Tanzanian orphanage.

To support Running for Jess:

I want to thank you for your support and prayers.
Larry Kopsa

Saturday, April 16, 2011


Q. The bank wrote off a portion of my home loan. I thought that was a good deal now somebody told me that was taxable. I thought if anybody could help me you could. So help! Tell me it isn’t so. A. First and foremost this can be complicated so make sure you get help to advise you on your particular circumstances. Here are the basic rules. 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. Mortgage debt that is partly or entirely forgiven during tax years 2007 through 2012, may allow you to be able to claim special tax relief and exclude the debt forgiven from your income. 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 but proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision; however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions. You normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed. Examine the Form 1099-C carefully. As I said at the beginning, make sure you obtain counsel on your particular case from a trusted advisor.

Friday, April 15, 2011


The Federal Occupational Safety and Health Administration has released its latest call warning salon professionals about the danger of potential formaldehyde exposure when using hair smoothing treatments. This hazard alert was the result of investigative work done by California OSHA, Oregon OSHA, and federal OSHA into hair-styling products, some of which are labeled as formaldehyde-free, and comes after Health Canada published its latest list of solutions containing unsafe levels of the substance. Flaw in the accompanying information "The work done jointly by federal OSHA and Cal/OSHA has found a critical flaw in the information accompanying these products, resulting in completely avoidable overexposures to a carcinogen, sensitizer, and irritant that simply should not be present in hair products," said Ellen Widess, Chief of Cal/OSHA. "Workers have a right and need to know about harmful substances they work with in order to protect themselves." OSHA regulates formaldehyde as a cancer causing substance, and formaldehyde is listed as a chemical known to the State of California to cause cancer. Formaldehyde also irritates the skin, eyes, throat and respiratory system, and can cause asthma and skin and respiratory sensitization. Cal/OSHA's testing of Brazilian Blowout's Acai Professional Smoothing and Brazilian Blowout Professional Solutions last year, found that formaldehyde was present in these products, and testing performed by federal OSHA found that use of these products caused workers to be overexposed to formaldehyde in the air they were breathing. Formaldehyde not listed Cal/OSHA further found that GIB, the US distributor of Brazilian Blowout, did not list formaldehyde as an ingredient on the products' labels, and in fact Acai Professional Smoothing Solution was labeled as "Formaldehyde Free." They also did not list formaldehyde on the Material Safety Data Sheets (MSDS) that are required to accompany the products when sold which are violations of California's Hazardous Substances Information and Training Act and occupational safety and health standards and resulted in the issuance of citations to Brazilian Blowout. OSHA explained there are also several ongoing investigations into the products nationwide, including one by its Californian arm involving a hair salon in Long Beach. "Because of the serious risks to both workers and consumers from exposure to these products, Cal/OSHA is also working with the Attorney General's office and the Department of Public Health, to ensure that workers and the public are informed and protected," said Widess.


President Signs 1099 Repeal into Law President Obama signed legislation Thursday repealing the expanded 1099 reporting requirements in the health care reform law and Small Business Jobs Act.

Thursday, April 14, 2011


Eight Facts on Penalties

When it comes to filing a tax return – or not filing one - the IRS can assess a penalty if you fail to file, fail to pay or both. Here are eight important points the IRS wants you to know about the two different penalties you may face if you do not file or pay timely.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and explore other payment options in the meantime. The IRS will work with you.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you timely filed a request for an extension of time to file and you paid at least 90 percent of your actual tax liability by the original due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Wednesday, April 13, 2011


It's that time of year again when the IRS publishes their Dirty Dozen Tax Scams. Beware of these and other scams. They are getting really sophisticated. We have seen bogus IRS notices that look very real. Here is the 2011 list.

WASHINGTON –– Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, the Internal Revenue Service announced today. “The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said. “Don’t fall prey to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.” The IRS works with the Justice Department to pursue and shut down perpetrators of these and other illegal scams. Promoters frequently end up facing heavy fines and imprisonment. Meanwhile, taxpayers who wittingly or unwittingly get involved with these schemes must repay all taxes due plus interest and penalties.

Following is the Dirty Dozen for 2011:

Hiding Income Offshore

The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans. In early February, the IRS announced a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011. The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. In response to numerous requests, information about this initiative is available on in eight different languages, including: Chinese, Farsi, German, Hindi, Korean, Russian, Spanish, and Vietnamese.

Identity Theft and Phishing

Identity theft occurs when someone uses an unsuspecting individual’s name, Social Security number, credit card number or other personal information without permission to commit fraud or other crimes. For example, a criminal can use someone else's information to run up bills on that person's credit card, empty that person’s bank account or take out a loan in that person’s name. And when it comes to taxes, a criminal with someone else’s personal information can file a fraudulent tax return and collect a refund.

Phishing is one tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. Phishing involves the use of phony e-mail or websites -- even social media. A scammer may pose as an institution such as the IRS. IRS impersonation schemes flourish during tax season. Spyware, which can be loaded onto an unsuspecting taxpayer’s computer by opening an e-mail attachment or clicking on a link, is another tool identity thieves use to steal personal information. Identity theft is a major problem that affects many people each year. That's why it's important that taxpayers protect their personal information. Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. More information on identity theft and taxes is available on the IRS website. A suspicious e-mail or an “IRS” Web address that does not begin with should be forwarded to the IRS at

Return Preparer Fraud

While most return preparers are professionals who provide honest and excellent service to their clients, some make basic errors or engage in fraud and other illegal activities. Dishonest return preparers can cause big trouble for taxpayers who fall victim to their ploys. These fraudsters derive benefit by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by making false promises. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against dozens of others. To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of requirements for paid tax preparers, including registration with the IRS and a preparer tax identification number (PTIN), as well as competency tests and ongoing continuing professional education. The new regulations require paid tax preparers (including attorneys, CPAs, and enrolled agents) to apply for a Preparer Tax Identification Number (PTIN) before preparing any federal tax returns in 2011. Higher standards for the tax preparer community will result in greater compliance with tax laws, increase confidence in the tax system and ultimately lead to a better experience for taxpayers.

Filing False or Misleading Forms

IRS personnel are seeing various instances in which scam artists file false or misleading returns to claim refunds to which they are not entitled. In one variation of this scheme, a taxpayer seeks a refund by fabricating an information return and falsely claiming the corresponding amount as withholding. Phony information returns, such as a Form 1099 Original Issue Discount (OID), which claims false withholding credits, are usually used to legitimize erroneous refund claims. One version of the scheme is based on the bogus theory that the federal government maintains secret accounts for its citizens and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS. The IRS continues to see instances in which people file false or fraudulent tax returns to try to obtain improper tax refunds. The IRS takes refund fraud seriously, has programs to aggressively combat it and stops the vast majority of incorrect refunds. Because scammers often use information from family or friends in filing false or fraudulent returns, beware of requests for such data. Don’t fall prey to people who encourage you to claim deductions or credits you are not entitled to or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance. Nontaxable Social Security Benefits with Exaggerated Withholding Credit The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Abusive Retirement Plans

The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited.

Disguised Corporate Ownership

Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.

Zero Wages

Filing a phony wage-or-income-related informational return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS. IRS personnel have recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Fuel Tax Credit Scams

The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupations or income levels make the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The identity of the person filing the report can be kept confidential. Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Tuesday, April 12, 2011


Tax Freedom Day will arrive on April 12 this year, the 102nd day of 2011, according to the Tax Foundation's annual calculation using the latest government data on income and taxes. Americans will work well over three months of the year—from January 1 to April 12—before they have earned enough money to pay this year's tax obligations at the federal, state and local levels. For those of you that are interested in how taxes have changed over the years check out the Tax Foundation Special Report No. 190, "Tax Freedom Day Arrives on April 12, " Tax Foundation Staff Economist Kail Padgitt, Ph.D., traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and calculates a Tax Freedom Day for each state. "Tax Freedom Day 2011 is later than last year largely because of income changes rather than statutory tax law changes," said Padgitt. "As the economic recovery continues, individuals' rising income pushes them into higher tax brackets. Also, corporate tax revenue has seen a resurgence." Although income increases are the main reason for the later Tax Freedom Day, several tax law changes are also partly to blame. The federal estate tax has returned after a one-year repeal, this time at a rate of 35 percent and with an exemption of $5 million. In addition, taxes associated with the Patient Protection and the Affordable Care Act con­tinue to be phased in. But that does not include the deficit. Add 41 Days to the Cost of Government Tax Freedom Day, like almost all tax burden measures, does not take into account the current year's federal budget deficit. Only taxes that will actually be collected dur­ing 2011 count in the tally. In many years the deficit is fairly small as a percentage of total government spending, so Tax Freedom Day alone is a good guide to the size of government. Since 2008, however, deficits have increased dramatically. As a result, Tax Freedom Day may give the impression that the burden of government is smaller than it is. If the federal government were planning to col­lect enough in taxes during 2011 to finance all of its spending, it would have to collect about $1.48 trillion more, and Tax Freedom Day would arrive on May 23 instead of April 12—adding an additional 41 days to the nation's work for government. This date for a deficit-inclusive measure is the latest since World War II.

Sunday, April 10, 2011


We are getting near to tax filing deadline. For 2010 returns, the tax return deadline is April 18, 2011 since April 16th is Emancipation Day, and April 15th is declared a Legal Holiday in Washington DC. Here are some last minute reminders.

1. Remember to report all income. It is hard to defend the exclusion of income. Reconcile your 1099s and Form W-2 to your tax return.

2. If you have a business or rental property, carefully review all expenses that were ordinary and necessary for the production of income. Many people get sloppy and miss some of the smaller deductions. These missed deductions add up.

3. Look for deductions to charities and costs associated with charitable work. Charities are required to give you receipts for goods and services donated to them during the year. But some donations may not be the responsibility of the charity. For example, did you donate goods or services like driving the scouts to camp? You can deduct 14 cent a charitable mile. The tax court also said that hiring a babysitter while you performed charitable work is also deductible. The out of pocket costs for charitable costs and services add up to more deductions and that will keep more money in your pocket.

4. Can you make a contribution to an Individual Retirement Account (IRA)? If under 50 years of age at the end of 2010, you can contribute the smaller of $5,000 or taxable compensation for 2010. If over 50 years of age at the end of 2010, you may contribute up to the smaller of $6,000 or earned taxable compensation in 2010. The amount that you are allowed may be reduced depending on your Adjusted Gross Income (AGI) and you may be limited if you or your spouse is in a pension plan. The good news is that IRA contributions can be made up to April 18, 2011 and count as a 2010 deduction for income tax.

5. Do you have any tax credits that you can claim? Following is a list of credits to consider: earned income tax credit, Health coverage credits, child tax credit, child and dependent care credit, education credit, foreign tax credits. If you qualify for tax credits they may reduce your tax dollar for dollar.

6. If you inherited property and then sold at a gain, remember to step your cost basis up to the FMV at the date of death. This is often overlooked when preparing tax returns.

7. If you are a member of an LLC, did you incur any supplemental business expense that you did not submit for reimbursement? You may claim these expenses.

8. If you were out of work, remember to review all costs associated with job hunting and starting a new job. (resume writing, travel expense to interview for new position, and moving expense). For 2010, unemployment is also subject to tax.

9. Remember it is okay to take the deductions if you have substantial authority for the expense. Substantial authority includes visits to your rental property, paying kids in your business, and business convention expense in Hawaii or Bermuda. Know the tax rules and how to take advantage of lowering your income tax burden.

10. If you are in business don’t forget the new fast depreciation rules.


Do you rent property to others? If so, you’ll want to read the following tips about rental income and expenses. You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. The IRS Publication 527, Residential Rental Property, includes information on the expenses you can deduct if you rent property.

1. When to report income.
You generally must report rental income on your tax return in the year that you actually receive it.

2. Advance rent.
Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it, regardless of the period covered.

3. Security deposits.
Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.

4. Property or services in lieu of rent.
If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.

5. Expenses paid by tenant.
If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses.

6. Rental expenses.
Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Don't forget your mileage and supplies.

Thursday, April 7, 2011


Lisa Cochran, a giving and amazing woman, donated her kidney to Domenic Cicala in November. For everything she has been thru in her life and her unselfish act of kindness to Domenic, we are proud to have her as a client and friend.

Please click on the article below by Modern Salon to read more about this gift of kindness:

For more information on organ donation:


As we have posted here several times, last year, a new law was put into place as part of Obama Care that in 2012 required reporting of all transactions over $600 to any vendor in a year. This included business payments to Walmart, your gas station and everybody else for services and materials.

Good news!
On March 5th the Senate passed a bill which President Obama is expected to sign quickly a repeal of this new law. This is great news for anybody in business. However, please note that the old form 1099 reporting requirement for services is still in effect.

Cosmetics firm warned by FDA for drug-like marketing claims

The Food and Drug Administration (FDA) has sent out a warning letter to a US cosmetics firm for its supposedly drug-like marketing claims. Earlier this month, the US regulatory agency sent a letter to Jaba Labs regarding the product claims that appeared on its Stemcellfacecream and Synovialabs websites.

According to the letter, the StemCellin Intensive Emulsion, StemCellin Deep Wrinkle Serum and Faitoz-25 are ‘promoted for uses that cause these products to be drugs under the section 201(g)(1)(C) of the Federal Food, Drug and Cosmetic Act’. This is due to the fact that the claims suggest the products are intended to affect the structure and function of the human body, the letter continues.

Some of the claims highlighted by the letter include:
“Lose your wrinkles! without painful injections” “Hyaluronic acid [an ingredient of Faitoz-25] helps reduce spider veins….” “Argireline mimics the actions of Botulinum by … relaxing muscle contractions....” “This incredible PhytoCellTec apple stem cell cream emulsion is the first product to harness the regenerative potential of your own facial stem cells to renew skin …. It will actually ‘rejuvenate’ your skin by ‘awakening’ your body’s own reservoir of undifferentiated stem-cells.” According to the FDA, the company is required to ensure that its products and labeling are in compliance with the laws and regulations of the FDA and is advised to take prompt action. No one was available for comment at Jaba Labs at the time of publication.

Definition questions
Cosmetics, according to the FDA’s definition, are for cleansing, beautifying, promoting attractiveness or altering the appearance. But if a product is intended to affect the structure or any function of the body then it becomes a drug. Many industry insiders have suggested that this definition may need to be updated as it was constructed when cosmetics were very different and may not have kept up with what the science has made possible. Anti-aging creams that were once expected to simply smooth over and fill in the wrinkles, now regularly promise to regenerate, synthesise and repair – claims that very obviously rely on their ability to affect the structure of the body.

Wednesday, April 6, 2011


I am always humbled when an editor contacts me for assistance with an article. I was honored to have TWO articles published in last month's Nails Magazine. Please check them out~

Ready, Set, File:

Financing the Dream:

Tuesday, April 5, 2011


OPINION: 'More Americans in gov't than in manufacturing, farming, fishing, forestry, mining and utilities -- combined' (Wall Street Journal) -- In an op-ed posted at, Stephen Moore writes: "Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government." He adds that "more Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined."

Monday, April 4, 2011


Q. I sat in on your class at ISSE Midwest in Chicago. I just opened my own salon back in November and got lucky enough to be able to start with mostly used equipment. In your class you made mention to the fact that in 2011 you can write off all equipment purchases in full. I was wondering if you would mind giving me a little more info about it and if there is a certain way I have to go about it. I was also curious about what your firm charges for your tax preparation services. Right now it's just me in the salon and I'm currently using a CPA that does know a little about the business I would love to use someone like Kopsa Otte that deals strictly with salons so that I can ensure I get the best service. Thanks in advance.

Good luck on your new business. Owning your own business can be very rewarding but also can be very frustrating at times. In response to your question, normally equipment is written off over 5 to 7 years based on some percentages laid out by the IRS. This is what is normally referred to as “depreciation’ or “MACRS.” MACRS is IRS terminology short for Modified Accelerated Cost Recovery System. As an alternative to deducting the cost over 5 to 7 years you can elect to chose what is called the “expensing election” or technically the Code Section 179 deduction (§179). The §179 of the law says you can expense up to $500,000 of “tangible personal property,” new or used (other than certain automobiles). You can choose the amount that you want to expense. You do not have to expense the entire amount. The equipment can be new or used and still qualify. Warning, your first-year expensing deduction for an activity can’t exceed your taxable net income from the activity. This amount can be expanded by including certain W-2 or other earned income. This gets a little technical and I would need to look at your particular circumstances to determine if you could deduct more than the income from the salon. I also want to mention that if you elect §179 that if you can’t claim all this year you can carry over the unused portion to the next year. Taking fast depreciation depends on your circumstances. It is not an automatic that we advise fast deprecation. Again I would have to look at your situation to give proper advice to you. Amanda of my office will be in touch with you about our tax and other services.

Sunday, April 3, 2011


With April 15th (actually the 18th this year) bearing down on us, some people don't have the cash to pay their tax. Here is what we advise.

First and most importantly, don't let your inability to pay your tax liability in full keep you from filing your tax return properly and on time. It is also important to remember that an extension of time to file your tax return doesn't also extend the time to pay your tax bill.

Even if you can't make full payment of your liabilities, timely filing your return and making the largest partial payment you can will save you substantial amounts in interest and penalties. Additionally, there are procedures for requesting payment extensions and installment payment arrangements which will keep the IRS from instituting its collection process (liens, property seizures, etc.) against you.

Overview of the most common penalties.
The “failure to file” penalty accrues at the rate of 5% per month or part of a month (to a maximum of 25%, reached after five months) on the amount of tax your return should show you owe.

The “failure to pay” penalty is gentler, accruing at the rate of only 0.5% per month or part of a month (to a maximum of 25%, reached after fifty months) on the amount actually shown as due on the return.

If both apply, the failure to file penalty drops to 4.5% per month, so the total combined penalty remains at 5%—thus, the maximum combined penalty for the first five months is 25%. Thereafter, the failure to pay penalty can continue at 0.5% per month for 45 more months, yielding an additional 22.5%. In total, these combined penalties can reach 47.5% of your unpaid liability in less than five years.

Both of these penalties are in addition to the interest that you will be charged for your late payment. If you also missed estimated tax payments, an additional penalty is tacked on for the period running from each payment's due date until the tax return due date, normally April 15th. This penalty is computed at 3% above the fluctuating federal short-term interest rate for the period.

Borrowing money to pay taxes.
Given the rate at which the above-mentioned penalties and interest accrues, it might be a good idea to borrow money to pay the taxes. In many situations, the rate of interest that you would pay to a family member, or even to a bank, is less overall than that which you would have to pay the IRS.

Note that the interest on a loan to pay taxes is nondeductible personal interest. In contrast, if you can take out a home equity loan (if anyone still has equity left in their home) and use the proceeds to pay off your tax debts, you will probably be paying at a lower rate than with other types of loans, and the interest payments will be deductible even if the loan proceeds aren't used in connection with the house.

Credit cards.
It is relatively quick and easy to use credit cards to pay the income tax bill, whether you file your income tax return by mailing a paper copy or by computer. In addition, three companies (Official Payments Corporation at 888-872-9829, Link2Gov Corporation at 888-729-1040, and RBS WorldPay, Inc. at 888-972-9829) are authorized service providers for purposes of accepting credit card charges from both electronic and paper filers. We do not normally advise the use of credit cards because not only is it likely to be at relatively high interest rates and the interest is not deductible, the service providers typically charge an additional fee based on the amount you are paying.

Installment agreement request.
If you cannot or prefer not to take out a loan, you might be able to defer your tax payments by requesting that the IRS enter into an installment payment agreement with you. This request is made on Form 9465 or by applying for a payment agreement online. There are various options for making your monthly installment agreement payments, including the direct debit and payroll deduction methods, both of which are made automatically and thus reduce the risk of default.

If you file and request a payment agreement online, there are three available payment options: (1) payment in full within 10 days (which saves on interest and penalties); (2) short-term extension of up to 120 days (for which no fee is charged, but additional penalties and interest accrue); or (3) monthly payment plan (which carries a user fee in addition to the continued accrual of penalties and interest).

You can also request an installment agreement on Form 9465, which can be filed along with either an e-filed or paper return. If the liability is under $25,000, you will not be required to submit financial statements. Even if your request to pay in installments is granted, you will be charged interest on any tax not paid by its due date. However, the late payment penalty will be half the usual rate (0.25% instead of 0.5%) if you file your return by the due date (including extensions).

The IRS charges a fee for installment agreements, which will be deducted from your first payment after your request is approved. The fee for entering into an installment agreement is regularly $105, but it is reduced to $52 when the taxpayer pays by way of a direct debit from the taxpayer's bank account. Notwithstanding the method of payment, the fee is $43 if the taxpayer is an eligible low-income taxpayer. There is a $45 fee to restructure or reinstate an established installment agreement that applies regardless of income levels or method of payment.

Note that an installment agreement request can be made after the expiration of a hardship extension period (described below). Additionally, the IRS has the authority to enter into an installment agreement calling for less than full payment of the tax liability over the term of the agreement if it determines that such an agreement will facilitate partial collection of the liability.

The installment agreement may terminate, and all your taxes become due immediately, under certain circumstances (for example, if you stop making payments).

The IRS is required to enter into an installment agreement at your request (a “guaranteed installment agreement”) if the following apply:
• the tax liability is $10,000 or less (not counting interest and penalties);
• within the prior 5 years you have not (i) failed to file returns or pay taxes, or (ii) entered into a previous installment agreement;
• the IRS determines the tax liability cannot be paid in full;
• the installment agreement provides for full payment within 3 years; and
• you agree to comply with the tax laws during the agreement period.

As a matter of policy, the IRS often grants guaranteed installment agreements even if taxpayers are able to fully pay their accounts.

Undue hardship extensions.
You may also qualify for an extension of time to pay if you can show that payment would cause “undue hardship.” An undue hardship extension is applied for with Form 1127, to which you must attach a statement of assets and liabilities as well as an itemized list of receipts and disbursements for the 3 months preceding the tax due date.

If you qualify for an undue hardship extension, you will be given an extra six months to pay the tax shown as due on your tax return. You will avoid the failure to pay penalty, but you will still be charged interest. If the IRS determines a “deficiency” (i.e., that you owe taxes in excess of the amount shown on your return), the undue hardship extension can be as long as 18 months and, in exceptional cases, another 12 months can be tacked on. However, no extension will be granted if the deficiency was the result of negligence, intentional disregard of the tax rules, or fraud.

To establish undue hardship, it is not enough to show that it would just be inconvenient to pay your tax when due. For example, if you would have to sell property at a “sacrifice” price, you may qualify for an undue hardship extension. However, if a market exists, having to sell property at the current market price is not viewed as resulting in an undue hardship.
To qualify for an extension, you would have to: (i) show that you do not have enough cash and assets convertible into cash in excess of current working capital to meet your tax obligations; (ii) show you cannot borrow the amount needed except on terms that would inflict serious loss and hardship; and (iii) provide security for the tax debt. The determination of the kind of security—such as a bond, filing a notice of lien, mortgage, pledge, deed of trust, personal surety, or other form of security—will depend on the particular circumstances involved. However, no collateral is required if you have no assets.

Avoiding more serious consequences.
Many taxpayers ignore their tax liabilities when they run into financial difficulties—for example, by failing to file their tax returns. However, tax liabilities do not go away if left unaddressed, and failing to deal with the problem often exacerbates it. It is very important that you timely file a properly prepared return, even if full payment cannot be made. Include as large a partial payment as you can with the return, and start working with the IRS on one (or more) of the options discussed above as soon as possible. Otherwise, you may face escalating penalties, the risk of having liens assessed against your assets and income, or even seizure and sale of your property. In many cases, these tax nightmares can be avoided by taking advantage of the arrangements offered by the IRS.

Larry Kopsa CPA

Saturday, April 2, 2011


I have had a serval people email me asking how to check the status of their tax refund. In case you are wondering, here is information from the IRS website. Take note, "the IRS has an ap for that."

Larry Kopsa CPA

Checking the Status of Your Refund

If you already filed your federal tax return and are due a refund, you have several options to check on your refund. Here are eight things the IRS wants you to know about checking the status of your refund:

1. Online Access to Refund Information Where’s My Refund? are interactive tools on and are the fastest, easiest way to get information about your federal income tax refund. Where’s My Refund? give you online access to your refund information, 24 hours a day, 7 days a week. It’s quick, easy and secure.

2. When to Check Refund Status. If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return.

3. What You Need to Check Refund Status. When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter:
• Your Social Security Number or Individual Taxpayer Identification Number
• Your filing status which will be Single, Married Filing Joint Return, Married.
• Filing Separate Return, Head of Household, or Qualifying Widow(er).
• Exact whole dollar refund amount shown on your tax return.

4. What the Online Tool Will Tell You. Once you enter your personal information, you could get several responses, including:
• Acknowledgement that your return was received and is in processing.
• The mailing date or direct deposit date of your refund.
• Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you may be able to change or correct your address online using Where’s My Refund?

5. Customized Information Where’s My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you may be able to start a refund trace.

6. Toll-free Number. If you do not have internet access, you can check the status of your refund in English or Spanish by calling the IRS Refund Hotline at 800-829-1954 or the IRS TeleTax System at 800-829-4477. When calling, you must provide your or your spouse’s Social Security number, filing status and the exact whole dollar refund amount shown on your return.

7 IRS2Go. This is the IRS’ first smartphone application that lets taxpayers check on the status of their tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.


Q. My wife and I built a new home in 2010. We moved in on March 24 so we lived in the house for over a year, if that makes any difference. Can we take the residential energy credit for insulation, windows, & doors on our 2010 tax return?

A. I am afraid that we do not have good news. The nonbusiness energy credit is normally claimed on form 5695 however, the type of costs described are restricted to existing homes only. The credit is designed to help offset the cost of retrofitting an existing home with energy saving devices.

However, you put in any of the following devices these devices qualify for a credit for both new and existing houses:
• Qualified solar electric
• Qualified solar water heating
• Qualified small wind power
• Qualified geothermal heat pump
• Qualified fuel cells

Enjoy your new home.

Larry Kopsa CPA

Friday, April 1, 2011

Nanotechnology could provide future for hair coloring, study

I am somewhat of a futurist. I have following nanotechnology for several years. The concept of what can be done with this science to help us not only medically but in every facet of our lives is amazing. Now nanotechnology is coming to the hair industry.

Scientists are looking into hair-coloring techniques of the future, including nano-sized colorants and substances that stimulate the genes to produce melanin pigment that colors hair, according to a study published in the American Chemical Society Journal.

The two scientists, Robert Christie and Olivier Morel, note that hair dye already is a multibillion dollar international industry, poised for even greater expansion in the future due to the graying of a global population yearning to cling to a youthful appearance.

And the scientists say the progress towards this could possibly lie with nano-sized colorants as they are composed of pigments that are 1/5000th the width of human hair, allowing easier penetration, thus remaining trapped for longer, and producing a longer-lasting hair color effect.

Explosion of growth
“The explosive growth in nanotechnologies is certain to continue to attract the interest of hair color chemists, for example, to exploit the potential of photonics to make use of materials that manipulate light to create bright colors without using traditional coloring materials, as one way of addressing potential environmental and toxicological concerns,” notes the study.

The scientists are also developing substances that stimulate the genes to produce the melanin pigment that colors hair. It states these substances promise to produce a wider range of more natural-looking colors, from blond to dark brown and black.

The scientists also say other new technologies may stop graying of the hair or prevent its formation altogether.

Outdated approach to hair dye
The reason for the study is said to be that most permanent hair coloring technology, is based on a 150-year-old approach that uses p-phenylenediamine (PPD), a chemical that produces darker, browner shades when exposed to air.

Concern over the safety of PPD and other hair dye ingredients, and demand for more convenient hair dyeing methods, has fostered an upswing in research on new dyes and alternative hair coloring technologies.

The study is the conclusion of an analysis of almost 500 articles and patents on the chemistry of permanent hair dyeing, which foresees much more innovation in the years ahead, including longer lasting, more-natural-looking dyes and gene therapy to reverse the gray.