FUEL FOR THOUGHT

With the average gas prices climbing up to $3.79 per gallon, we thought a little humor might help us to make the best out of an expensive situation.

LEASEHOLD IMPROVEMENTS

Hi Larry,

Do you get many salons that utilize Section 179 deductions for leasehold improvements? Thanks, Ben

Ben, We use §179 whenever it is to the client's advantage. The problem with leasehold improvements is that, by statute, it does not qualify for §179. Only personal property qualifies. Therefore, with the exception of the 50% up front write off provided by the 2008 Stimulus Bill, leasehold improvements are 39 year property and must be taken over that period of time regardless of the lease term.

One planning technique that we use is what is referred to as Component Depreciation. In essence, we analyze the leasehold improvement to determine if there is any part of the improvement that would qualify as personal property and therefore be subject to §179. We are usually pretty successful in finding that most salons and spas that do leasehold improvements are missing this tax planning opportunity and overpaying their tax.

Let me know if I can be of further assistance.

Larry Kopsa CPA

RETAIL COMMISSION SCALE

Larry, I like the scale your prepared for me. Here's the major problem we have in our salon with retail. From the stylist's perspective: They see service as 50%, and retail as 10%. They know that $500 a week in service commissions corresponds to about $25 a week in retail. Their tips are even greater than the retail! They don't want to risk losing services, tips or customers by "pushing" retail without a justifiable reward. Jim

Jim, This is a problem that most salons have. In most salons that I work with the services pay for the fixed costs and a majority of the profit comes from retail. I think that the solution to selling retail is to have systems in place so that everyone knows that it is their job to offer retail during, and at the end of the service.

Festoons has two salons, one in Berkley and one in San Francisco. Their selling systems are so good that they can't keep products on the shelf. You might want to check out their video and workbook. In my opinion it says it all about having systems.

http://festoonsalon.com/edu_profitability.html.

Festoon owners, John and Melissa Ryan, spoke at the PBA Symposium. They realized people only heard a small percentage of what they were talking about, so they and created The Festoon Retail Video and Workbook. The video is for anyone in the industry who wants to learn how to connect with the client through a systematic way of retailing. The workbook covers everything in the video as well as how to evaluate your current retail situation, from the products you're selling to your relationship with your companies.

Having systems in place also lets the people that work for you (don’t forget that) know that giving the clients an opportunity to buy is important and not an option.

The other thing you might consider to counteract the % difference is to put it in an hourly perspective. For example, a stylist works 32 hours and sells $400 of product. The commission is $40.00 or, to put it another way, $1.25 per hour. What would they do if their spouse got a $1.25 per hour raise? Celebrate I am sure.

Let’s take that another step. Let’s make sure they know what they could do with that money. Ask this, “If you had $2,000 what would you do with it? Vacation, pay down credit cards, savings, pension, clothes, gifts for kids… the answers go on and on. Well it is easy… if you sold $400 of retail a week, in just $80 per day you would have your wish.

Finally, the thing I don’t like but sometimes will jumpstart retail is contests. I hate having to do a contest to have people do what they should be doing anyway, but maybe this would give them the confidence to know that they can sell the products.

Keep me posted.

Larry Kopsa CPA

THE DIFFERENCE BETWEEN TAX PREPARERS AND TAX PLANNERS

In a recent magazine there was an article about taxes, asking which tax preparer gives you the best return. One of the things we at Kopsa Otte pride ourselves in is that we are more than just tax preparers... we are tax planners. As tax planners we use our knowledge, education and creativity to help people minimize their income tax bill. Preparers, on the other hand, just fill out forms.

In the article, Author Jennifer Pellet shadowed "Scott," a freelance photographer, and his wife "Zoe," a government lawyer, as they prepared their taxes with "The Cheap, Do-It-Yourself Time Sucker" (TurboTax), "The Dependable Chain" (H&R Block), and "The Pricey, Fast, Confidence-Inspiring Firm" (Amper, Politziner & Mattia, CPAs). (Click here for the full article.)

Here was the magazine's bottom line:

TurboTax: 6.5 hours and $114 price to calculate a $2,466 refund. Cheap and private, but with "annoyingly chirpy" pop up windows pushing other Intuit offerings.

Block: 2.5 hours and $395 to calculate a $2,442 refund. Fast, predictable, and convenient, but no privacy.

The CPA: 2 hours and $1,000 to calculate a $3,620 refund. Staffers who exude confidence and a closed-door setting that "feels right when you're sharing such private information" -- albeit at a price. Also, the winner!

Why was the client so much happier with the CPA? She took a proactive look at Scott and Zoe's return, writing off the difference between what they were deducting in health insurance as a couple and what they should have deducted for the self-employed husband. That one move dropped their taxable income, and even dropped their AGI low enough to qualify their Roth IRA contributions for the 10% Saver's Credit.

"Sure, her fee was $605 more than Block's, but her value to the client was $1,178 more. So where is the value?"

If you have not done so you should consider our Income Tax Second Opinion package. In this package we review your past tax returns and then talk to you about your tax situation and make recommendations on strategies to minimize the amounts going to the IRS. Why not put a tax planner and a specialist in the industry to work for you? The price is normally $250 but for the first 10 people that contact us we will do the second opinion for a measly $150. Contact Amanda at 800.975.4829 to sign up.

CHANGING OUR STRATEGY

One day, there was a blind man sitting on the steps of a building with a hat by his feet and a sign that read: "I am blind, please help." A creative publicist was walking by and stopped to observe. He saw that the blind man had only a few coins in his hat. He dropped in more coins and, without asking for permission, took the sign and rewrote it.He returned the sign to the blind man and left.

That afternoon the publicist returned to the blind man and noticed that his hat was full of bills and coins. The blind man recognized his footsteps and asked if it was he who had rewritten his sign and wanted to know what he had written on it. The publicist responded: "Nothing that was not true. I just wrote the message a little differently." He smiled and went on his way.

The new sign read: "Today is Spring and I cannot see it." Sometimes we need to change our strategy. If we always do what we've always done, we'll always get what we've always gotten. I hope you have a wonderful day! Spring is finally here and I thank God that I can see it.

STAFF RETREAT

We just returned from our annual Staff Retreat where we held a 3-day meeting at the Embassy Suites in Omaha's Downtown Old Market.

Our goals were to bring our team together for team building and fun, to clearly communicate our company strategy, and to exchange information between staff. Our Retreats play an integral part in helping our Firm to reach our goal of Constant Improvement.

Our guest speaker, Rita Rocker with the Transformation Academy, spoke about the importance of Dining Etiquette, Communicating with Confidence, and the Image of Success. This was entertaining as well as educational, and even included color makeovers.

We spent the next two days discussing our systems and procedures, brainstorming ways to improve upon them, and then setting goals that are tied to our vision statement. Our free time was spent enjoying each other's company, eating wonderful food, and walking through Omaha's historic Old Market.

We came home from the Retreat with a closer knit team and some wonderful ideas that will help to enhance our Firms productivity.

QUESTION ABOUT INCENTIVE REBATE

Larry, I filed electronically, received my refund via direct deposit but, despite my SS# ending in 15, I have not yet received any deposit for the economic incentive initiative which according to reports, should have been deposited 5/2. Turbo Tax indicated I would get the $600.00. Thanks for your response, Carl

Carl, You are not the only one that has not received their refund. The IRS says to wait 60 days. Let me know if you get your electronic deposit. If you don’t receive it, let me know and we will see if the IRS has set up any procedures to track.

It is a pleasure serving you.

Larry Kopsa CPA