SALON INCOME COMPARED TO THE NATIONAL DEBT

Total revenues for all salon industry services (hair, skin, nails) in the USA grew a robust 4.2% in 2011 to $72.41 billion.

Now let’s compare that to the national debt.  If you want to get really concerned look at the debt clock at http://www.usdebtclock.org/

As I write this on Saturday March 31, 2012 at 8:50 AM you can see that our total US national debt (upper left hand corner) is a $15,603,671,688,728.  That’s over fifteen and a half trillion dollars.  It shows the annual deficit at $1,318,819,988,953.  I challenge you to open the hyperlink above and see how much it has grown since I wrote this.

So what does this all mean?  It would take all of the farm income for 19 years just to cover the current year’s budget deficit.  And, that number is growing.  If that is not scary enough, it would take over 794 years of all the farm income in the United States just to cover our national debt.

Politicians need to do something to reverse this trend but it is not politically correct so they do nothing.  Eventually we are going to see higher taxes and less government services.  I hope they fix it before it’s not too late.   

TEN TIPS ON A TAX CREDIT FOR CHILD AND DEPENDENT CARE EXPENSES

If you paid someone to care for your child, spouse, or dependent last year, you may qualify to claim the Child and Dependent Care Credit when you file your federal income tax return. Below are 10 things the IRS wants you to know about claiming the credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, and other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.

4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person; to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.

5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

6. The qualifying person must have lived with you for more than half of 2011. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.

7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

8. For 2011, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income, such as a flexible spending account for daycare expenses.

10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.

If you need any more information let us know.

1%

Want to know where the 1% that everybody is talking about?

OBAMA CARE MISCALCULATION

One of the hot topics this week is Obama Care.  It now seems to be in the hands of the Supreme Court.

One of the most heavily promoted piece of Obama Care turns out to be a dismal failure.The White House endlessly trumped that more than 4 million small business might benefit from the health insurance tax credit. The promise was that because you would get a tax credit for offering health insurance to their employees businesses would provide insurance as a fringe benefit.

In actuality this did not happen.Instead of 4 million small businesses only 300,000 filed for the credit and the average was only $1,200. Far less to make offering insurance to employees.

I have yet to find a client that will spend, for example, $10,000 to save $1,200.

The Supreme Court will hear arguments on Obama Care on March 26 to 28.We are watching closely and will keep you posted.

$1 BILLION AWAITS PEOPLE WHO HAVEN’T FILED 2008 TAXES

Tax refunds amounting to over $1 billion are awaiting an estimated 1 million people who still have not filed a federal income tax return for 2008.

To collect, taxpayers and preparers must file a return with the Internal Revenue Service no later than Tuesday, April 17. The IRS estimated that half of the potential tax refunds are for more than $600.

In some cases, the IRS acknowledged, people may not have filed because they had too little income in 2008 to require filing a tax return, even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund.

TAXPAYERS MUST SUBSIDIZE SENATE BARBERSHOP

Looking for a good job?  You might try applying for a job at the US Senate barbershop.

(The New American) -- TheNewAmerican.com reports that a shave and a haircut at the U.S. Senate barbershop costs "more than double what barbers in some parts of the country charge.  Despite these high prices, the shop, which is supposed to be self-sustaining, ended up $300,000 in the hole last year and got its own taxpayer bailout." 

The article notes that the shop's employees are unionized federal workers, with "benefits and wages are higher than those of many jobs." Comparing the government-owned Senate barbershop with a privately owned barbershop just three blocks away, the story notes that the private barbershop's four stylists made $22,000 to $30,000 last year with no benefits, while the Senate barbershop's "top four barbers and stylists made more than twice that — $54,761; $70,349; $73,658; and $81,641 — plus they have a generous 401(k) plan, health care and paid vacation."

THE BATTLE OF THE BARBER POLES

Growing tensions have a couple of states considering legislation to spell out who can display the iconic spiral-striped barber pole. Licensed barbers say their profession has the exclusive right to the symbol, while beauticians, cosmetologists, and salon owners say that since they cut men’s hair, they should be able to use a barber pole, too. The professions that serve men and women have been at odds with each other for centuries. At least ten states have already reserved the pole for barbers only by law, and Minnesota and Michigan have such bills in the legislative process.

WHICH PRESIDENTS TAX PROPOSAL IS BEST... AND DOES IT REALLY MATTER?

Q: We are seeing a lot of proposals to revamp the tax system.  Obama has a plan and Rommey has a plan.  Which one do you think would be better for the average person?

A: Tax reform plans are popping up all over, like robins showing up in the spring, but don't get too excited.  If you think about it this is just election posturing.  It takes more than just the president to change the tax code.  Legislation must first start with the House Ways and Means Committee and then make it all the way through Congress before it hits the president’s desk.  Sure the president has some power to influence but that is about all.  Because of this I don't get too excited about election promises. 

We are watching and will keep you posted.

MORE ON NLRB

Recently I posted that the National Labor Relation Board (NLRB) was requiring businesses to post a notice for the employees telling the employees that they could form a union.  This requirement was challenged in the courts and now, as listed below a judge has ruled that the NLRB has the authority to make this requirement.  Also below is an announcement that the judge’s decision will be challenge.

'Judge Rules NLRB Can Require Businesses To Display Union-Rights Posters'

(AP/FoxNews.com) -- The AP reports, "A federal judge ruled Friday that the National Labor Relations Board (NLRB) can require most private businesses to put up posters telling workers they have a legal right to form a union. But U.S. District Judge Amy Berman Jackson limited how the board can enforce the requirement." In her ruling, Berman Jackson said that nothing in the notice posting suggests that employers favor collective bargaining activities.

To read more of this article: CLICK HERE

AND

'Business groups appeal court ruling on union poster rule'

(The Hill) -- TheHill.com reports, "Several business groups" -- including the National Association of Manufacturers -- "filed appeals Monday to a court ruling that allowed the National Labor Relations Board (NLRB) to require union posters in the workplace."  NAM President Jay Timmons said:  "Manufacturers will appeal this decision on the numerous grounds available in order to reverse this unfair rule. The Board has grossly overstepped its authority."

To read more of this article: CLICK HERE

A REMINDER: FEDERAL TAX FILING DEADLINE IS APRIL 17 THIS YEAR

The good old IRS sent us a reminder, they sent out a video this week reminding everyone that this year's tax filing deadline is Tuesday, April 17, 2012. This is because the traditional April 15 deadline is a Sunday, and April 16 is a holiday in the District of Columbia.

This give us two extra days to get your taxes in!

HOW MUCH OF THE GAS PRICE IS TAX - SEE THIS MAP

This new map show the state gasoline tax rates. How much does your state tax gas?

YOU MAY OWE TAX IF CREDIT CARD DEBT FORGIVEN

Q: I just received a 1099C from a credit card company.  The attachment says that the amount is due to debt that they forgave.  They said that it may be taxable. Can you explain?  I did not get any money from the company.  How can that be taxable?  The amount is $31,269.

A: This can be a little complicated.  I strongly suggest that you work with a competent professional on this matter. 

You aren't the only ones surprised by 1099C's.  There are a lot of them being sent out due to the poor economy.  Lenders, like the credit card companies, are required to send out these 1099's or face steep penalties.  Realize that they also send a copy to the IRS.  We have found some discrepancies in the 1099's.  Discrepancies include amount of debt written off, when the debt was written off and wrong taxpayer numbers.

Here is the deal on the tax law:  Debt that is canceled or forgiven is considered taxable income.   There are a couple of exceptions which is why you need to be working with a competent professional.  If you can prove that the debt was discharged in bankruptcy or if you were insolvent then you might meet the exception. 

If you happen to meet one of the exceptions you still need to recognize the 1099C on the tax return and then explain why it was not taxable.  If you do not, you most likely will get a letter or visit from the IRS.

ONE OF THE WALL STREET PROTESTERS SALUTED ME

I can't figure out why this happened.  I have been trying to figure out the psychology of why a young man would for some reason give me the middle finger salute.  I finally came to the conclusion that he was angry at me because I was part of the establishment.

Here is what happen.  First of all I have to tell you I have a nice car.  Not a Rolls or a Porsche, but a really nice black Infinite.  I have to tell you I have earned this vehicle by working hard (and smart).  For example during the last two weeks I have put in over 70 hours each week.  I am not complaining but just trying to justify my Infinite 50FX.  It is a good car for me because it is like me.  It is a SUV that thinks it is a sports car and I am a old guy (63) who thinks he is a young guy.

On Monday I was in Waterloo Iowa doing a class on how to take your business to the next level.  My wife Maggie came along with me.

After the program I put my brief case in the back of my SUV.  My car was dirty so I grabbed my California Duster and started wiping down my car.  I noticed a guy who was about 25 years old with tattooed arms and sloppy clothes walking accross the parking lot to a car behind me. 

I noticed him but did not even make eye contact because I was concentrating on my car.  When I got in my car my wife, who was waiting patiently in the car said that before the young man got into his car looked towards me and although i was not looking he felt it necessary to give me the middle finger salute. 

Just why would he do that?  Because I have a nice car.  Because I cared how it looked? Because apparently I am successful.  If someone knows why I deserved this please let me know.  I know that my new friend will not be reading this.  I doubt if he can read.  By the way new friend, if you do happen to be reading this, I did notice that your pants were falling off.

TEAM-BASED PAY

We are asked a lot about different commission structures. We believe that team-based pay is one of the best out there and Neil Ducoff has perfected it! 

If you are interested in team-based pay check out Neil's FREE webinar: CLICK HERE

UNEMPLOYMENT BENEFITS

Q:  I was laid off last year and fortunately I received unemployment benefits.  That really helps as I look for work.   I received a 1099 form in the mail.  Do I really have to pay tax on this?

A:  I am sorry to say but, unemployment benefits are considered taxable income.  You will need to include this 1099 when you file your tax returns.

THANKS FOLLOWUP

Last week I posted a piece on thanking clients.  If you missed it, check it out.

After I posted it I thought "maybe I should include thanking your staff."  When is the last time you thanked them for all that they do?

Give them 'The Pickle!

NEW VEHICLE RATES

Each year, IRS issues the amounts that can be claimed as depreciation for vehicles placed into service that year, over their useful lives. As has been the case since these Luxury Vehicle rules were implemented in 1984, they do not apply to vehicles weighing more than 6,000 pounds gross vehicle weight (GVW).

The IRS has just issued the following amounts for business vehicles placed into service during 2012.

Passenger Automobiles:
Year 1 – $3,160 ($11,160 if bonus depreciation applies)
Year 2 – $5,100
Year 3 – $3,050
Year 4 and on – $1,875 per year

Trucks and Vans:
Year 1 – $3,360 ($11,360 if bonus depreciation applies)
Year 2 – $5,300
Year 3 – $3,150
Year 4 and on – $1,875 per year

THE IRS IS WINNING CASES WHEN S CORP OWNERS PAY LOW WAGE TO AVOID SOCIAL SECURITY TAX

The IRS is continuing its assault on S corporations that pay low salaries to owners.

Many owners of S companies take low salaries so the bulk of the profits are passed through to their own returns free of Social Security and Medicare taxes.  This has been a good strategy that has saved thousands of dollars but the approach may be coming to an end.  The IRS and now the courts are balking at this practice.

In a recent case, a CPA set up an S corporation to serve as a partner in an accounting firm. He took a $24,000 salary from the S firm in a year when its share of the partnership’s profits was $203,000. An Appeals Court agreed with IRS that the pay was unreasonably low.  The IRS brought in an expert who testified that the CPA’s services were worth $91,000. The Court held that $67,000 of the profits was properly reclassified as salary and subject to payroll taxes (Watson, 8th Cir.).

Determining what is a reasonable salary is the key. In this case, the reason the CPA’s services were valued at less than half of his share of the partnership’s profits was that employees who weren’t partners also performed significant services thus creating income.  The approach did not convince the judge.

TAX REFUND DELAYS

The Internal Revenue Service is providing an update on the status of the tax refund delays that plagued the agency this season.

In late January, the IRS sent an email to us tax professionals warning that tax refunds could be delayed a week this tax season because of new anti-fraud safeguards. The IRS had fine-tuned its identity theft filters to prevent the growing trend of tax refund fraud. Many taxpayers who wrote to have said that they were experiencing much longer delays than a week.


The IRS also had problems with its “Where’s My Refund" tool giving a different date whenever taxpayers checked up on the status of their refunds, and last month the page told many taxpayers that it had no information on the status of their tax refunds.

COMMENT ON THE DEBT LIMIT

A few months ago, after a lot of hoopla and after a threat of downgrading of the USA's AAA debt rating Congress increased the debt ceiling to $16.4 TRILLION.  Sure there was a Super Committee set up to come up with a solution but that did not work out so well did it?

Washington was smart enough to allow for borrowing enough money to get through the November election, but that is it.

Here is the problem, the debt limit is just a limit for old obligations, not for new obligations but for current obligations. And we still keep spending money we don't have.

That would be like asking for a higher credit limit on your credit card but having already made the charges at the store. You could not run your business or your house budget like this. 

We need to ask ourselves 'Where is the money going to come from?'

NEW STATISTICS ON REFERRALS

One of the 5 Ways To Make More Money that I discuss with my clients and in my programs is REFERRALS.  I think we all know the importance of growing our business through a referral so I won't get into that discussion.


What I do think is interesting in a new study that came out reported asking for a referral once brings negligible results, BUT asking a second time in the same year is proven to bring significant results.  That's not all, a third time brings even more clients.

So why do so many referral programs fail?  I believe the problem is management.  When I ask owners that have low referrals what their systems are they say "we tell them to ask" or "it's in the handbook."  Statistics show that does not work.  What owners need is intergrated systems to monitor and focus on referral.  I know I sound like a broken record (okay some of you do not know what a broken record is, so ask someone that is over 45) but WHAT YOU CAN MEASURE YOU CAN MANAGE! 

Watch your referrals and discuss them with your professionals at staff meetings and during your one on one's.