Friday, June 29, 2012

Business travel, proposed reg may apply rules for travel close to home

Prior to this year, business travel was always defined by the IRS under code section 162. In addition, under Reg 1.262-1(b)(5) the IRS defined business travel as travel away from home, and if you were not away from home, these expenses were not allowed.

However, the IRS has changed its stance in new Proposed Reg 1.162-31(b), which would allow for business travel expenses while you are not away from home if all the conditions are met:

1. The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function.

2. The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.

3. If the individual is an employee, his employer requires him to remain at the activity or function overnight.

4. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation or benefit.

It is important to note that the IRS has also included specific examples whereby travel expenses would be allowable under the new Proposed Regulations. Some of these examples show important determinations by the IRS, with just as important implications. One example is particularly interesting:

In the example the employer has a large project with a tight deadline. This employer has requested that the employee stay at a nearby hotel for the night to work longer on the project, and also to alleviate the 2 hour commute this employee would have had to incur. This example is interesting because the IRS allows the employer to take the expense, but the employee also has to include the amount of the hotel stay as compensation. The IRS contends that the employee has received a benefit by avoiding the long commute. 

Tuesday, June 26, 2012

Identity Theft: A rapidly growing IRS problem

Whether you realize it or not, one of the larger issues the IRS has to deal with in recent years is identity theft. Overall, identity theft has increased significantly in the last three years, from just under 52,000 in 2008 to nearly 170,000 in 2009 to over 248,000 in 2010. Usually the theft involves individuals filing false returns, and cashing refunds of other taxpayers, but cases also include employment fraud. Most individuals find out they have been a victim of identity theft, when they go to file their return, and it is rejected due to a return already filed under their social security number. Usually fraud claims take quite a long time to iron out with the IRS, but there are a few changes the IRS has implemented in recent years to try to counteract fraudulent claims.

One major change the IRS has implemented is issuing special pin numbers to past victims of fraud. The use of these pin numbers can cut down on the incidents of fraud, because only the true recipient of the pin number will be able to e-file their return, and as an extra layer of security, the pin numbers are not issued or accessible by the IRS, so would-be fraudsters cannot gain access to this information. However, there is a small problem if a person who has been issued a pin number cannot find their pin. Since the pin numbers cannot be accessed by the IRS, if a person loses their pin, they will not be able to receive a replacement pin, thereby eliminating the extra security their return should have received.

These changes are good, but what can a person do to prevent their information from being stolen, and a false return being issued in their name? At the end of the day, the best practice is diligence. 

Do not provide sensitive information to unscrupulous sources. Destroy sensitive information appropriately. Try to secure your mail, to try and eliminate access to otherwise sensitive information. Be careful what type of information you make available through email and the internet. There are many ways you can help to avoid providing access to your personal information, but if you do have a false return filed in your name, try to rectify the discrepancy as soon as possible with the IRS, and be diligent in this task to make sure the IRS agent is following through with their promises and deadlines.

The information age can be a good thing, but certain information in the wrong hands can lead to headaches. 

Monday, June 25, 2012

Listening Skills: the most under-rated quality of a top performer

This article talks about truly listening to your business managers and shows specific examples of how listening to your business managers allows a CEO to make great business decisions. Even though, I do not run a Fortune 500 company I see the difference between talking and listening. Here is an example:

A small business owner comes in and talks about how they are not getting the results they thought they should be getting from their business. After talking to them for a short period of time, we come up with the real problem, they have been in business for a number of years, have been trying the same marketing and advertising strategy of only advertising in the phone book and have not seen the same results they were seeing only a few short years ago...Does this scenario sound familiar?! It seems like business owners fall into the same traps each of us do. When things are not working the way we would like them to work first we get mad then we get frustrated then we...Change (hopefully).

As a CPA I have learned a lot of things outside of school, but the most important thing no one taught me was  how to listen. If you are not listening to others you are missing out on one of the most important, cheapest and easiest tools at you disposal. If you want to be great at what you do, or truly improve your business you have to listen; to your workers, your board and most importantly to your customers. If you listen to them analyze what they are telling you and improve your system you will have a limitless potential for success.

Here is a link to the article on the Harvard Business Review blog. 

Saturday, June 23, 2012

Michigan is ahead of the curve...

According to data released by the US Department of Labor, their Bureau of Labor Statistics indicated that Michigan ranked 12th among all states in the number of green jobs within the US in 2010.

According to the report nearly 80,000 green jobs are held by Michiganders. Manufacturing lead the way, followed by construction and natural resources and mining sectors. It is important to note that the number of green jobs only makes up a small portion of total employment in Michigan (approximately 2.1%), but this is a good sign for a Michigan economy that is still trying to recover and reinvent itself at the same time (not an easy task). 

The moral of the story here is, keep it up Michigan! If sustainable products and industries are the things of the future, Michigan should be in a good position to capitalize on this new and changing market.  

Tuesday, June 19, 2012

Never Received a W-2

Have you ever had this happen to you? It is the middle of February and you have not received your W-2 from your employer. Many taxpayers have probably been in that situation, but what if you never receive your W-2? What do you do then?

There are a few required steps you should take if it is past January 31, and you have not received your prior year W-2:
1. Contact your employer to find out about its mailing and verify the address they mailed it to.
2. If you have not received the W-2 by February 14th you are encouraged to call the IRS directly and provide them with the employer’s information, dates of employment, and estimated wage information.
3. You should probably wait until the absolute last minute to file your return, to make sure you will not receive your W-2, but if you have not received your W-2 by the tax filing deadline you should file your personal return as normal, with an additional attachment 4852, or you can ask for a personal extension if you believe the W-2 will be provided to you.
4.  If you receive a W-2 after you file your return, you may have to file an amended return, if the information differs from your previously filed return.

So you do have a few options for taking care of your personal return even if you do not have a W-2 and you do not believe you will receive one for some reason.  

However, if you just lost your W-2, you should be able to ask your employer for an additional copy. They should be able to get you a copy of the original as they are required to maintain certain documents of this type for a long period of time. 

Friday, June 15, 2012

Barter Income

Every other year or so, the IRS releases a tax-tip or memo that covers barter transactions. It seems like when hard times come along, individuals and businesses try different strategies to keep the same level of income. The IRS recognizes the need to get creative in times of need, however, just because you may not receive cash as payment for goods or services does not mean that you have not completed a taxable transaction.

The IRS recently released a Tax Tip related to barter transactions, in which it reminds tax payers that barter transactions are usually reportable as some sort of income on their personal or business return. It also reminds barter exchanges of their 1099-B filing requirement (Tax Tip 2012-33).

If you have a situation whereby you receive property other than cash for goods or services, you have probably engaged in a barter transaction and should report this income on the appropriate income tax return for the year. If you have additional questions related to barter transactions, please consult this IRS publication, or your tax professional.  

Tuesday, June 12, 2012

Customer Loyalty Programs

Check out this interesting blog entry on the Harvard Business Review website, it talks about customer loyalty programs. It almost makes you question as a business owner if, you really believe in customer loyalty programs, or if you are not creative enough to come up with a better solution to create real customer loyalty...Check out the entry here

Friday, June 8, 2012

Michigan Legislature introduces bill to significantly increase minimum wage

There is an interesting article on M Live this morning about a bill introduced in the Michigan Senate that would significantly increase Michigan's minimum wage, taking it from its current level of $7.40 to $10 by 2015. The Senator that introduced this bill sighted increased inflation and its toll on minimum wage earners as the primary reason for this bill.

I think all legislators should be required to have a college degree with a major in economics if they are going to have the power to influence the economy, maybe that should be the next bill introduced!

Let me know what you think....

Here is a link to the news article on M Live, have a great Friday! 

FBAR Reporting: A simple tool to use

In the last couple of years the Internal Revenue Service has really advanced its fight against offshore income, the initiative called FBAR, or Foreign Bank Account Reporting. In connection with the FBAR, it has implemented a few additional filing requirements for individuals and entities (usually businesses and trusts/estates) that have offshore accounts beyond certain low thresholds. As is usually the case, these additional filing requirements have also given rise to many questions. For this reason, the IRS has created a simple chart that breaks down the similarities and differences between the two new reporting requirements.

For this reason, if you believe you may have a filing requirement for an offshore account, check out this link. After reviewing the FBAR reports, if you still believe you have a reporting requirement, contact your CPA or attorney. 

Wednesday, June 6, 2012

Great Blog Article!!!

For those of you who do not know, the Harvard Business Review is a great resource for business people. They have interesting articles about a lot of different subjects. Also, for those of us who would like to sample the Harvard Business Review without the cost, you can sign up with them, and gain access to their blog entries, as well as a limited amount of their online content with little more information than your business email (a fair trade indeed)!

This is a great article about the pitfalls associated with always saying yes to your clients and/or taking on projects that do not fit perfectly with your business model...

Friday, June 1, 2012

Home Office: Corporations

Please remember that we are answering the following question on this post:

What if I have a corporation that does not have a formal office space, can I take an expense for the business use of my home (office)?

Unfortunately there is not a clear cut yes or no answer to this question. However, there are a few interesting ways to get the same or similar expenses on your personal return (potentially).

Sometimes in the tax code, it seems like we are back in the wild west, for that reason I will introduce you to the good the bad and the ugly...

The Good:

Corporations pay rent to those persons, or entities whom they occupy space from. With that in mind, under the right set of circumstances, it would not be out of the question for the Corporation to pay an individual for the exclusive use of a space for business purposes. There are a few pitfalls in this strategy, so before you go paying yourself rent, please contact your accountant or attorney to go over the legal and business ramifications of this decision. However, if your Corporation uses the space and would like to reimburse you for that use, this may be the best tax position for both the individual and business.

The Bad:

Corporations have employees, often the business owner happens to be an employee of the business entity. For this reason, if the business owner were an employee and had to use his home office exclusively for the needs of the business as an employee and was not reimbursed for this use. This employee may be entitled to a deduction for unreimbursed home office expenses on Schedule A. The amount of the deduction would be limited by 2% of AGI, but sometimes a reduced deduction is better than no deduction at all.

The Ugly:

This plan is not advisable, and has been shot down more times in court than I would be comfortable recommending. But, some Corporations have tried to introduce an expense reimbursement plan that would reimburse employees for specific expenses. One of the expenses they included in this plan was a reimbursement for business use of home office expenses. This plan is riddled with problems, and is not a good idea, but it has been tried in the past.