How is the economy effecting our clients? Everyone is asking.

April 5, 2008
The chart to the left comes from Zillow.com as of today. It shows the change in real estate values for the last 12 months in the USA. Until we bottom out our economy is generally going to be down also.
I am amazed at how far the effects of the real estate downturn is spreading. I visited an antique shop recently and he told me that his sales are down 50% from last year. I asked why and he explained that because condos are not selling here in Panama City, FL that people don't need to buy antiques if they have no place to put them. I am hearing this from many owners of many different occupations that did not seem at first to be related to the real estate industry.
What can be done about this? You have to be very aggressive during this time to seek new customers. Even myself, I have felt the effects. Normally it is easy for me to get new clients when I visit prospects. But now, even though they want my service, their sales are down so much that they many times cannot afford my fees. I have to see more prospects to get the same customer count. It does work as I have more clients then ever before, but it is literally twice as hard to get them. So don't give up trying to grow your business. You will need to be more creative.
I will keep watching the internet to see when the real estate market finally bottoms out. Then we can look forward to better times. I'll keep you posted. Henry (CEO)

Phone scams are on the rise again. Please be careful.

December 15, 2007
I have had several clients get caught in a scam this year. An owner of a trucking company; a restaurant; and one who works on boats. Most of the time it involves a foreign company. Sending money to get a government grant for a minority owned business; receiving a phoney cashiers check for too much money and the scammer asking you to send back the excess money; ordering supplies with multiple credit cards and having you pay the shipping to a phoney company. In each case the scam involves you sending or spending thousands of dollars.
Before you agree to send money over the phone, please talk to your accountant first. I would be able to tell you if other clients have been ripped off by the same gimmick. It hurts to see my clients lose typically some $3,000 on these phoney deals.
Be careful please.
The photo above was taken on the "Liberty Clipper" on Thanksgiving day with my family, my wife Pat, myself, our daughter Andrea, and our son Daryl, in Key West, Florida.
Henry (CEO)

Daryl and I have decided to expand our business to Central Florida.

June 15, 2007
Over the last 26 years, we have expanded our business as far away as Pennsylvania and Arizona but have neglected our own state of Florida except for the Panhandle.
So as of this month, we will begin to expand our accounting business to [I-75] Lake City; Gainesville; Ocala; and [I-95] St. Augustine; Ormond Beach; and Cocoa Beach, in Central Florida for starters.
This will be a fun project and should take several years. Daryl has already told me that he wants Key West too! I guess, I will never retire at this rate!
The above photo is from last years New Mexico XLR Rendezvous (our first Cadillac XLR event!). (You can click on the photo to make it larger.) At the XLR Rendezvous having just left Carlsbad Caverns, NM, a young girl asked us when we stopped at a lookout view area, if she could sit in Kent's XLR. How could he refuse!!! Henry (CEO)

"Henry, when I retire, I would like to transfer my business to my son. What suggestions do you have?"

January 4, 2007
You have many choices. Like most of my clients, you have an incorporated business.
..1) You could issue stock to your son on a gradual basis. However, you would lose some control when you pass on stock.
..2) Or if you want to stay in complete control until you retire, then you could create a will listing your son as the beneficiary of your corporate stock. But when you use a will, it means that your asset will go through probate. Say your business is worth $350,000.00. An attorney's fees might be 4% to 8% of the assets. That means your estate could pay $14,000 to $28,000 just to get the business transferred to your son.
..3) Another option is creating a Living Revocable Trust. It serves like a will, but avoids probate and the cost of probate. Setting up the trust should cost $1,400 to $1,900. This is much less than compared to the large fees above. Usually the settlement of the trust is quicker than probate. The subject is more complicated than can be fully explained here. Feel free to set up a meeting so that I could explain more in person.
Above is a photo of my Cadillac XLR Roadster and my friend Jean's XLR (from New Mexico) while hanging out in downtown Panama City. Henry (CEO)

"How is my business doing compared to others?"

November 28, 2006
I receive this question from my clients on a regular basis. The survey below compares a sample of my clients in the southern United States using 2006 vs 2005 data.

.................................Percent of Sales..Variance from last year
Sales................................100.0%..................+10.2%
Cost of goods sold...............50.5%..................+10.8%
................................=============================
......Gross Profit....................49.5%..................+09.6%
Administrative Expenses
...Advertising..........................1.0......................+16.2
...Auto Expense..................1.3...................... +37.6
...Bank Charges......................0.4......................+41.7
...Contributions......................0.2.......................-23.6
...Dues & Subscriptions.........0.1.......................-30.1
...Insurance............................2.0.......................+12.6
...Office Supplies.....................1.2......................+01.1
...Outside Services............3.1...................... +66.8
...Professional Fees.................0.6......................+13.7
...Rent-Lease Payments..2.6..................... +26.3
...Repairs & Maintenance.......0.4.....................-05.8
...Salaries & Wages.................21.0....................+14.9
...Taxes & Licenses..................0.7.....................-13.0
...Telephone..............................0.8.....................+17.3
...Travel & Entertainment.....0.0......................-54.0
...Uniforms................................0.2.....................+05.1
...Utilities...................................0.7.....................-04.0
...Other - Miscellaneous..........0.2..................+302.6
................................=============================
.....Total Administrative........36.4%..................+17.7%
................................=============================
Net Income..........................13.1%................... -07.9%

The survey does not take into account depreciation and interest expense. Sales are up, but Administrative expenses are way up from last year. Notice a large increase in auto expense and outside services even rent and lease payments, causing actual profits to go down. Photo above taken this past spring, with my wife and I, on our 24 foot Sea Ray Sundeck. Henry (CEO)

"As a business owner, can I collect Social Security at age 62?"

November 10, 2006
Before you decide to take early retirement at age 62, please do research on the rules. As an owner of my own business just like yourself, the Social Security Administration will look at us very differently compared to our employees who want to retire.
In my opinion:
..1) You should NOT be an officer some 6 months prior to retiring.
..2) The new officers should NOT be related to yourself.
..3) If you want to work part-time after retiring, it should be a lot less than 45 hours per MONTH
..4) You should NOT collect any rent or dividends from the company nor your spouse.
..5) Do not receive any additional retained earnings while retired.
..6) And according to my congressman's assistant, your cell phone and home phone should either have NO voice mail or at least make NO reference to your business.
These are tough rules if you want to retire early. We just got back from our recent Caribbean cruise. See photo above. Henry (CEO)

Professor Tax USA now celebrating 25 years in business

July 19, 2006
Our company is now celebrating its 25th anniversary. We began operations on July 1st, 1981. About 9 years ago, our company was ranked in the bottom 78th percentile. Now we have climbed into the top 15% in the nation. Indeed, we have made considerable progress. Photos above taken at a recent party hosted by our friends Doris & Russell, their first Hawaiian luau party! (You can click on the photos to make them larger.) Henry (CEO)

Mason-Dixon Dragway

April 27, 2006
While visiting clients in Pennsylvania, I was invited to the Mason-Dixon Dragway to see Erik racing his Camaro and his friend Dave taking his cycle on the 1/4 mile run. Dave set his all-time record for the quarter mile at 9.86 seconds. Unfortunately when it was Erik's turn, it started to rain and the race track had to close. Erik was the only one in his class that showed up because of the weather. Had it not rained for another 30 minutes, Erik would have won $1,000 big ones just by running the 1/8 mile. Don't ask me how Erik feels about that, unless you want me to type some weird symbols! Henry (CEO)

"How long should I keep my records in case of an audit?"

January 15, 2006
It depends on the kind of audit and whether it is the Internal Revenue Service or the state Department of Revenue that is doing the audit. Currently the I.R.S. is auditing the 2003 year tax returns.
However when they audit one year they usually want to see the year before and the year after which means that your 2002 and 2004 tax returns will also be looked at. Generally the statute of limitations runs out three years after you filed your income tax returns.
However the rules are different when it comes to payroll and sales taxes.
One of our clients got a notice from the I.R.S. in December, 2005 asking about the 3rd quarter Form 941 for the year 2001! So obviously they waited more than 4 years to inquire.
Another client got a notice in January, 2006 from the state Dept. of Revenue about their 2002 sales tax figures that did not seem to match the Schedule C that they filed on their 2002 federal income tax return. Again the state waited more than 3 years to inquire.
So it seems that it would be good to save your records for at least 5 years to cover normal income tax, payroll tax, and sales tax audits. Pictured above is our room at the La Mansion Del Rio where we stayed on the Riverwalk in San Antonio, Texas. Henry (CEO)

"Do you work with businesses that are behind in their payroll taxes and need a payment plan to repay them?"

December 10, 2005
We do try to help people with their payroll problems. The IRS is quite strict when it comes to businesses that don't pay their withholding taxes on time. The penalties are high but if the business owner makes the current payroll payments on time then the Internal Revenue Service will allow installment payments on the prior payroll periods. Pictured above is our cruise stateroom while arriving at Tortola, British Virgin Islands. Henry (CEO)

"Please explain what is the tax advantage of an 'S' corporation."

December 5, 2005
From a tax point of view, generally an 'S' corporation only pays tax on the profits and not on the withdrawals, unlike a 'C' corporation which pays a tax on the profit AND the stockholder pays on the dividend withdrawals. Sole proprietors; limited liability companys (LLC); and partnership income is generally subject to self-employment taxes. 'S' corporations don't pay any self-employment taxes on the profits, however the Internal Revenue Service does expect the owners to pay a "reasonable" compensation for services provided to the corporation by the owners. Pictured above is my wife at a small village in Tortola, British Virgin Islands. Henry (CEO)