WE ARE HONORED THAT A CLIENT MENTIONED US

From salon software to accounting, distance is not an issue as we work with clients from coast to coast. We were very excited that Mark Garrison, one of our clients, mentioned us in the Millennium video below.

Who says transitioning to a new software has to be difficult? Listen to Mark Garrison, Beth Minardi and the rest of the team talk about their experience with getting on board with Millennium salon Software.

To watch this video: CLICK HERE

PAUL RYAN

Q: You seem like a pretty bright guy.  What do you think about this?  Some of my friends are critical of Paul Ryan because of his budget proposal that he put out a few years back.  They say that he would take away a lot of benefits that the government gives us.  I have heard others say it is better to do something.

Is his plan something I should vote for?

A: Thanks for the compliment.  My ex would not agree with you about me being such a bright guy.

Before I respond, I have a couple of comments about your question.  First of all, when you vote for president there is really only so much they can do without the backing of Congress.  Secondly, Paul Ryan is the vice presidential candidate.  Romney will be the prime idea guy so voting for Romney/Ryan is not a vote for Paul Ryan's budget proposal.

I also have to make a comment about your friends statement that "he would take away a lot of benefits that the government gives us." You must realize that if the government gives us a benefit that cost money, they must either take money from others or print more money that puts us further in debt.

Now, finally to respond to your question - We have to go back to early 2011 when Paul Ryan was Chairman of the House Budget Committee.  In the opinion of many economists, unlike the typical Congressional budget resolution, the Ryan plan was not only comprehensive in its scope, but it was presented in a refreshingly transparent manner.

Every proposal in this nearly 75-page document—from discretionary spending and Medicaid, to taxes and welfare spending—was explained and justified in a way that any taxpayer could understand.

The press and critics zeroed in on Ryan's bold proposals for reforming entitlements, such as Medicaid and Medicare. Unfortunately, serious attention was not given to the tax side of the plan.  Making the tax system conducive to long-term economic growth is just as critical to solving the nation's fiscal crisis as is reining in uncontrolled spending.

I could go on and on about the plan, but let me say this - At least it was a starting point.  In my opinion, at least he and his committee had the guts to start the process.

IS FISCAL CLIFF ALREADY WREAKING HAVOC?

(CNBC) -- CNBC.com reports that CNBC's Larry Kudlow "thinks the looming 'fiscal cliff' has already started to do serious damage to the economy, and worries the damage could get much worse, with Congress ultimately driving Corporate America right to the edge."  According to the story, the threat of the fiscal cliff, "or confluence of tax hikes and spending cuts that could go into effect as soon as January 2013," has hurt new orders for durable goods or long-lasting manufactured goods, which has dropped to its lowest level in 3-1/2 years.

To read more of this article: CLICK HERE

AVERAGE CHANGE IN REVENUE

Change In Revenue:	2011 (Actual)	2012 (Anticipated)
Decrease 11% or More	9%	2%
Decrease 6 to 10%	5%	4%
Decrease 1 to 5%	11%	4%
0%	18%	8%
Increase 1 to 5%	27%	29%
Increase 6 to 10%	16%	25%
Increase 11% or More	14%	28%

The above is from a survey from the American Spa August 2012 edition.

 

TOP GROSSING SPA SERVICES

TOP-GROSSING SPA SERVICES:

1.    Facial Services

2.    Massage Services

3.    Retail Sales

4.    Nailcare Services

5.    Salon Services

6.    Bodycare Services

7.    Fitness/Exercise

8.    Other

 

BACK-TO-SCHOOL TIPS FOR STUDENTS AND PARENTS PAYING COLLEGE EXPENSES

The IRS just released a nice summary of education credits and deductions. If you have any questions let us know.

Back-to-School Tips for Students and Parents Paying College Expenses

Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

· American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.

· Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.

You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

· Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

· American Opportunity Tax Credit

· Tax Benefits for Education: Information Center
· Publication 970, Tax Benefits for Education
· The American Recovery and Reinvestment Act of 2009: Information Center
· Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

YOU CAN'T ROUND ON YOUR PAYROLL REPORTS

This was hard to believe. The IRS put out a memo and said that rounding to the nearest dollar on Form 941 is not allowable.

Neither the form nor instructions permit rounding. And the law gives filers the option to report in cents on all tax forms, so IRS can’t remove the cents column. Employers will have to keep reporting their payroll tax liability to the penny.

EMAIL SCAM NOT FROM IRS

We have been notified by several of our clients, that they have received an email that looks like this one below:

 

Subject: Your IRS tax transfer is declined.

Your Income Tax remittance (ID: xxxxxxxxxxx), recently ordered for processing from your bank account was turned down by your Bank.

Rejected Tax transfer
Tax Transaction ID:	Row of numbers here
Reason of rejection	See details in the report below
Income Tax Transaction Report	tax_report_.doc (Microsoft Word Document)

Internal Revenue Service St. Davis 00343 NY

This is a SCAM. The IRS does not email you any type of notice in this manner. Please do not open the attachment. If you receive an email similar to this one, but are unsure of its reliability please contact the IRS or your accountant.

ACCOUNTANTS NOT OPTIMISTIC ABOUT THE ECONOMIC FUTURE

I don't think any profession is in a better position to judge the economy than CPAs. We are on the front line dealing with clients in all aspects of their business.

Now a new survey from our governing organization, the American Institute of Certified Public Accountants (AICPA) shows that CPA's economic outlook has diminished.

CPA executives’ optimism over the U.S. economy has faded substantially over the past two quarters, the AICPA’s Business & Industry Economic Outlook Survey for the third quarter shows. After a significant rise in confidence that ended in the first quarter of 2012, CPAs report dimming expectations in virtually every major economic indicator.

The CPA Outlook Index--a comprehensive gauge of executive sentiment within the survey--fell four points to 63 for the quarter. The index had matched a post-recession high of 69 at the start of this year, but has declined each of the past two quarters.

AVEDA LAUNCHES VIRTUAL MAKEOVER APP

Aveda released its My Aveda Make-Over iPad application and web-based platform.  Available through the iTunes store and at aveda.com/myavedamakeover, the free app allows guests to virtually change their hair color or style.  Users can explore ideas for new looks by choosing from a variety of color offerings created with Aveda Full Spectrum Professional Hair Color and a library of hairstyles – from long locks to short crops, bouncy-curly to sleek and straight. 

My Aveda Make-Over also serves colorists and stylists as a consultation tool to help guests envision a new color, cut, or style.  The app also features an Aveda spa and salon locator; guest discounts; the option to chat live with Aveda experts for all things beauty, including style, skin-care, and makeup; a sharing feature to allow users, stylists, and friends to upload favorite photos to the gallery; and an easy-to-use shopping feature.

DID YOU GET A CHECK BACK FROM YOUR INSURANCE COMPANY

Some employers are receiving health insurance rebates. If you are one of those lucky employers you are required to act quickly.

Generally you have three months to pass the employees’ share back to the employee.

If you are wondering why you received the rebate, it is because the health reform law requires insurers that don’t spend enough of the premiums on medical care and quality improvement to rebate part of the premiums.

The rebates started going out in July. We are seeing some employers generating goodwill by giving the full amount to employees through premium reductions or cash payouts, even though businesses can generally keep the portion of rebates attributable to employer contributions.

A work of caution, there are complicted rules on the potential taxability of the rebates.

TIPS ARE STILL AN ISSUE WITH THE IRS

Over the past few years the IRS has made it a concentrated effort to educate salon owners and their employees on the tax law regarding tips.  One of the salon owners greatest ally is the Professional Beauty Association.  One of the many functions that they do for you is keep an eye on what is happening in Washington DC.

Below is an email from Myra Y. Irizarry the Government Affairs Director of PBA regarding new guidance on tip reporting.  I suggest you do two things.

·         Read the guidance carefully and make sure you understand your requirements.

·         Secondly, if you are not a member of PBA, join now.  There is power in numbers and the more members the more they can do to serve you.  For more information on PBA visit probeauty.org

From: myra@probeauty.org
To: myra@probeauty.org
Date: Wed, 1 Aug 2012 11:22:47 -0700
Subject: IRS Guidance Addresses Tax Treatment of Tips Under FICA, Tip-Related Business Audits

PBA Leadership,

Please share the following information with your fellow salon owners.  Thank you!

IRS Guidance Addresses Tax Treatment of Tips Under FICA, Tip-Related Business Audits

The Internal Revenue Service released three documents June 2012 related to taxes imposed on tips under the Federal Insurance Contributions Act (FICA), audit direction relating to tips, and interim guidance on auditing businesses where tipping is customary.

Revenue Ruling 2012-18 provides guidance for employers and employees in a question-and-answer format on the taxes imposed on tips under FICA including information on the difference between tips and service charges, reporting of the employer share of FICA under tax code Section 3121(q), and the Section 45B credit.

Rev. Rul. 2012-18 http://www.irs.gov/irb/2012-26_IRB/ar07.html#d0e170

SBSE-04-0612-057, dated June 7, provides administrative guidelines to examiners auditing businesses where tipping is customary and/or where a business adds service charges to customers' bills, which are then distributed to employees.

Memorandum SBSE-04-0612-057 http://www.irs.gov/pub/foia/ig/spder/sbse-04-0612-057.pdf

Announcement 2012-25 provides administrative guidelines to examiners about Revenue Ruling 2012-18 and seeks public comments by Sept. 24 on the interim guidance and whether additional time is needed to ensure that systems are compliant.

IRS Announcement 2012-25 http://www.irs.gov/pub/irs-drop/a-12-25.pdf

 

Myra Y. Irizarry

      Government Affairs Director | Professional Beauty Association (PBA)
      15825 North 71^st Street, #100, Scottsdale, AZ 85254
      p 480.455.3451 |f 480.905.0708

PBA is a non-profit membership association. Visit probeauty.org for information.

 

INDIA’S BEAUTY INDUSTRY LURES INVESTORS

According to the Wall Street Journal Blog, even as India’s economy loses steam, the country’s nascent beauty and wellness industry is growing rapidly, and catching the interest of private-equity and venture-capital investors.

These investors are looking to fund the expansion plans of India’s salons, spas and other companies that provide skin and hair treatment and slimming and fitness services.

“You are not going to stop manicure and pedicure because of an economic slowdown,” says Kanwaljit Singh, partner at Helion Venture Partners, which manages around $600 million in assets.

To read more of the article: CLICK HERE

LOOPHOLE - A ROSE BY ANY OTHER NAME WOULD SMELL THE SAME

I was recently speaking about taxes at a convention in Orlando, Florida. After my session one of the participants came up and said that he did not like my reference to a few of the tax "loopholes." He felt that a loophole was a shaddy idea that was on the verge of something that was illegal.

That conversation got me to thinking. "Loopholes" is one of those words with different connotations for different listeners. To some, it's a dirty word — I've seen editorials calling the exclusion for employer-provided health insurance a "loophole," and making it clear that a "loophole" is one small step removed from out-and-out graft. Others of us love it. In fact, from time to time I refer to myself as "Loophole Larry."

My understanding of the word "loophole" has always been a law that's passed for one purpose that gets used for another —sort of like when a doctor prescribes a drug for off-label use. My favorite example is Code Section 132(j)(4):

(4) On-premises gyms and other athletic facilities

(A) In general-Gross income shall not include the value of any on-premises athletic facility provided by an employer to his employees.

(B) On-premises athletic facility -For purposes of this paragraph, the term 'on-premises athletic facility' means any gym or other athletic facility -

(i) which is located on the premises of the employer,

(ii) which is operated by the employer, and

(iii) substantially all the use of which is by employees of the employer, their spouses, and their dependent children (within the meaning of subsection (h)).

Do you have a home-based business? Do you or any of your family qualify as employees? Do you have a pool in your backyard? Congratulations! You've got a tax-deductible on-premises employee athletic facility!

Now, we all know Washington didn't pass that law to let folks like us write off our swimming pools, treadmills, or elliptical machines. They passed it to clarify that when Corporate America sticks a gym in the basement of his big glass tower, his employees don't get stuck with taxable income for working out instead of taking lunch.

But clever planners like us take a law that was passed for one purpose, and explore it to the fullest definition. If a big employer can deduct the money it spends providing a swimming pool for its employees, should a small employer not be entitled to the same opportunity? For some, it's a "loophole" and for others it's a "strategy." Either way, it takes astute planning to take a law that was passed for one purpose and use it for a slightly different but honest and defensible purpose.

So I've never shied away from promoting "loopholes" as something my clients should want to take advantage of.

So if we want to get technical, Dictionary.com defines "loophole," in part, as "a means of escape or evasion; a means or opportunity of evading a rule, law, etc.: There are a number of loopholes in the tax laws whereby corporations can save money." Is that the same as the understanding I just outlined? Nope. Is it a pejorative? Not to me, but I see how it is for others.

So, what's our bottom line here? My job is to point out alternatives to my clients.Let them know the color (black, white, or gray), but don't let them not follow the law.

I try to throw in a quick definition when we use those terms. For example, I might tell a client "when I say 'loophole,' I mean a law that Congress passes for one purpose that gives someone else an unintended benefit. It's perfectly legal, even if Washington didn't realize that's how we could use that law."

ON A PERSONAL NOTE

I hope everyone had a great Labor Day weekend.  I spent the weekend camping out and canoeing with my 15 year old son, Ryan, and his Boy Scout Troop.  We spent a day on the water going down the Niobrara river.  This beautiful river has been named one of the top 25 canoeing rivers in the United States. The scenery and the wild life are amazing.  Even though the bugs were really bad and it was really hot, it was a great time.  (I should add that the ground was a little hard.)  As my family has heard me say several times,  “life is short, make memories.”

I hope that you made as many memories this Labor Day as I did. 

NEW ISPA STATS SHOW PROMISE

The International SPA Association (ISPA) has released new statistics from the ISPA 2012 U.S. Spa Industry Study. ISPA commissioned PricewaterhouseCoopers (PwC) to conduct the survey which is updated every year with five key statistics crucial to the spa industry including revenue, spa visits, the number of spa locations, total employment in the industry and square footage.

	2010 (Year End)	2011 (Year End)	Percent Change
Revenue	$12.8 billion	$13.4 billion	+4.5%
Spa Visits	150 million	156 million	+4.1%
Locations	19,900	19,850	-0.4%
	2011 (May)	2012 (May)	Percent Change
Total Employees	338,600	339,400	+0.2%
Full-time	149,200	163,100	+9.3%
Part-time	134,200	128,500	-4.3%
Contract	55,200	47,800	-13.4%
Square Footage	76 million square feet	77 million square feet	+0.8%