In late October of this year, I was a guest speaker at a one hour seminar in El Paso, Texas. The subject matter was the economy and how to survive it.
I talked about: 1) Government regulations; 2) Operating expenses; 3) Marketing strategies; and 4) Payroll expenses. The basic idea is to control expenses during these hard times.
Some highlights of the seminar are below:
.....For instance under Government regulations, once you start making a profit running your business, consider becoming an "S" corporation. Since 1959, corporations have been exempt from self-employment taxes on their profits. Self-employment is basically the same as payroll taxes. This can save some tax dollars. Also, corporations are generally exempt from 1099s. This can save some paperwork.
.....As for Operating expenses, it is important for you to understand how to read financial statements such as a Profit and Loss Statement which tells you how much you are earning. Generally the three largest expenses are: cost of goods sold, payroll, and rent. If you do not have a good understanding of basic bookkeeping, you could be losing money without your paying attention to the problem. This could result in a business failure.
.....Marketing strategies are also important. If you do no marketing your business will not grow. You must market every day. Word of mouth is always good. Be aggressive. Join a networking group like BNI (Business Networking International) where word of mouth is extended by the members of the group. Their motto is "Givers Gain".
.....Payroll expenses if left unchecked can bankrupt a company. You need to make sure that your employees and yourself are productive. You cannot carry unproductive folks in this tight economy.
.....If you like to learn more, attend one of my seminars held around the country. There is no charge for the event. Call my office at 850-914-0054 and speak to my secretary Marlo, about attending or creating a seminar.
Henry (CEO)
Thursday, November 03, 2011
Thursday, October 20, 2011
Another Satisfied Client With Professor Tax USA
All you business owners! Look at this video! Will at Cabinet & Appliance Center in Berryville, Virginia has been a very satisfied and successful client of Professor Tax USA since October 2003.
This small business in Virginia benefits by using Professor Tax to help with their accounting needs. So remember you can definitely make things easier by using Professor Tax USA for you Small Business Accounting Services.
Wednesday, October 05, 2011
An assortment of simple tips for business owners
..........1) Using QuickBooks does not make you an accountant. If you are an experienced bookkeeper then the software can be useful in your business. If not, then you might want to use an accounting firm.
..........2) If you are new in business and want to succeed, consider finding an accountant who will provide you with FREE consultations.
..........3) Once you are established, then consider becoming an "S" corporation. Currently corporation profits are exempt from social security taxes.
..........4) You want your accountant to be aggressive otherwise you will pay more taxes than necessary.
..........5) You need an accountant who will respond to phone calls and willing to visit you on a regular basis.
..........6) It is important that your accountant's personality works well with your personality. You need to feel that your accountant is working for you not the Internal Revenue Service.
..........7) Watch out for scammers. If someone wants several thousand dollars from you before they will fix your problem or offering you FREE money from government grant programs use your common sense. If it sounds suspicious, avoid these offers.
..........8) When you send important mail to the Internal Revenue Service consider using Certified Mail. This way you can prove you sent the package timely.
..........9) How long to keep your records. The IRS usually audits income tax returns for 3 years, payroll tax returns for 4 years and the state usually audits sales tax records for 5 years.
........10) Deduct your business mileage. As of July, 2011 it is 55.5 cents per mile.
........11) Most times it is better not to have corporations own Real Estate property. LLCs are usually better for real estate ownership. When closing down corporations, real estate becomes taxable, not so for LLCs.
........12) At age 66 you can collect social security while still working full-time without wage limitations.
........13) Please pay attention to deadlines, file taxes on time, especially payroll. If your payroll taxes exceed $2,500 per quarter, then you must pay on line monthly to avoid penalties.
........14) Need cash flow, how about trying Bartering. And do not forget about networking!
Henry (CEO)
..........2) If you are new in business and want to succeed, consider finding an accountant who will provide you with FREE consultations.
..........3) Once you are established, then consider becoming an "S" corporation. Currently corporation profits are exempt from social security taxes.
..........4) You want your accountant to be aggressive otherwise you will pay more taxes than necessary.
..........5) You need an accountant who will respond to phone calls and willing to visit you on a regular basis.
..........6) It is important that your accountant's personality works well with your personality. You need to feel that your accountant is working for you not the Internal Revenue Service.
..........7) Watch out for scammers. If someone wants several thousand dollars from you before they will fix your problem or offering you FREE money from government grant programs use your common sense. If it sounds suspicious, avoid these offers.
..........8) When you send important mail to the Internal Revenue Service consider using Certified Mail. This way you can prove you sent the package timely.
..........9) How long to keep your records. The IRS usually audits income tax returns for 3 years, payroll tax returns for 4 years and the state usually audits sales tax records for 5 years.
........10) Deduct your business mileage. As of July, 2011 it is 55.5 cents per mile.
........11) Most times it is better not to have corporations own Real Estate property. LLCs are usually better for real estate ownership. When closing down corporations, real estate becomes taxable, not so for LLCs.
........12) At age 66 you can collect social security while still working full-time without wage limitations.
........13) Please pay attention to deadlines, file taxes on time, especially payroll. If your payroll taxes exceed $2,500 per quarter, then you must pay on line monthly to avoid penalties.
........14) Need cash flow, how about trying Bartering. And do not forget about networking!
Henry (CEO)
Friday, September 16, 2011
Save Time and Money with Professor Tax's Bookkeeping Services
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Don't Tax Your Brain!
Friday, September 09, 2011
Choosing which entity for your brand new business?
September 9th, 2011
.....Many times when I am visiting prospective clients, I get asked about how they should form the new business they are creating. "Should I be a sole proprietor or some other entity?" they would ask. The common choices are: 1) "C" Corporation; 2) "S" Corporation; 3) Limited Liability Company; 4) Partnership; 5) or Sole Proprietorship.
.....The easiest form is a sole proprietorship. It generally does not have many regulations and fees to get started. The tax information gets reported on your Form 1040 instead of filing a separate tax return. You don’t have to get a federal identification number if you have no employees. If you use your own name, you don’t have to file a DBA (doing business as). A simple sign and you could be in business very quickly.
.....If you file your return late (not a good idea but...), the Internal Revenue Service does not hit you with a late filing fee like they do with corporations and partnerships ($195 per month per partner or shareholder even if you owe NO money!). But if you owe money on a sole proprietor return (Form 1040) then there is a late filing and late paying fee based on the amount owed. At least this fine is more reasonable.
.....If you are creating a brand new business, I usually recommend that you start out as a sole proprietor first to see if the business will be successful. Too many businesses fail because they do not know the regulations, nor do they prepare bookkeeping reports on how their business is doing. A financial report usually has a Balance Sheet and a Profit and Loss statement.
.....The balance sheet shows a listing of the business assets you have and the liabilities (debts) you owe as of a specific date (usually last day of your current month). The profit and loss statement or P & L (also known as a Statement of Income) will show your total sales, cost of goods sold, and operating expenses for the full month or the totals for the year. Without these reports, it is dangerous to operate your business because you do not know if you are making any profits or wasting any money. Nor do you know what your potential tax liability would be.
.....If you create a corporation instead, you may have an attorney expense for setting up the corporation and filing fees to the state when you decide to close down your business. Generally, you will not have any expenses like this when you create your sole proprietorship. I believe that we should make operating a business simple in the beginning. It is already complicated enough to start a business without adding all the regulations and fees by creating a corporation or LLC.
.....I will continue to discuss the forms of business entities in a future blog, but for now, know that it is usually better to start your business with the simplest format.
.....Henry (CEO)
.....Many times when I am visiting prospective clients, I get asked about how they should form the new business they are creating. "Should I be a sole proprietor or some other entity?" they would ask. The common choices are: 1) "C" Corporation; 2) "S" Corporation; 3) Limited Liability Company; 4) Partnership; 5) or Sole Proprietorship.
.....The easiest form is a sole proprietorship. It generally does not have many regulations and fees to get started. The tax information gets reported on your Form 1040 instead of filing a separate tax return. You don’t have to get a federal identification number if you have no employees. If you use your own name, you don’t have to file a DBA (doing business as). A simple sign and you could be in business very quickly.
.....If you file your return late (not a good idea but...), the Internal Revenue Service does not hit you with a late filing fee like they do with corporations and partnerships ($195 per month per partner or shareholder even if you owe NO money!). But if you owe money on a sole proprietor return (Form 1040) then there is a late filing and late paying fee based on the amount owed. At least this fine is more reasonable.
.....If you are creating a brand new business, I usually recommend that you start out as a sole proprietor first to see if the business will be successful. Too many businesses fail because they do not know the regulations, nor do they prepare bookkeeping reports on how their business is doing. A financial report usually has a Balance Sheet and a Profit and Loss statement.
.....The balance sheet shows a listing of the business assets you have and the liabilities (debts) you owe as of a specific date (usually last day of your current month). The profit and loss statement or P & L (also known as a Statement of Income) will show your total sales, cost of goods sold, and operating expenses for the full month or the totals for the year. Without these reports, it is dangerous to operate your business because you do not know if you are making any profits or wasting any money. Nor do you know what your potential tax liability would be.
.....If you create a corporation instead, you may have an attorney expense for setting up the corporation and filing fees to the state when you decide to close down your business. Generally, you will not have any expenses like this when you create your sole proprietorship. I believe that we should make operating a business simple in the beginning. It is already complicated enough to start a business without adding all the regulations and fees by creating a corporation or LLC.
.....I will continue to discuss the forms of business entities in a future blog, but for now, know that it is usually better to start your business with the simplest format.
.....Henry (CEO)
Thursday, August 18, 2011
Professor Tax Helping Small Businesses Across This Great Nation
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Thursday, August 04, 2011
Is the Great Recession over?
August 4th, 2011
.....The government has told us that the Recession is over. Oh really! Well maybe in some parts of the country. Here in Florida, the value of homes keeps going down. To give you an example, when I bought my home in 1995, I paid $14,000 more than the home I sold in Asheville, NC at that time. Well as of today, my house in Florida is worth $170,000 LESS than the home I sold in North Carolina
......What does this tell us about our economy. In Florida we had a big real estate boom some 5 years ago. North Carolina did not experience much of a boom. So houses in North Carolina have actually grown in value. My old house is worth more than 2½ times what I sold it for. Which means that I would have some $300,000 in equity if I still owned the home. During the peak of the boom in Florida, I had nearly $350,000 in equity. Without borrowing any money since then, my equity has now dropped to MINUS $60,000. And I make all my payments timely.
.....So in general terms, Florida is still in trouble, while the East is holding it’s own. Business owners in Florida without equity in their homes or other assets, will find it ALMOST IMPOSSIBLE to borrow money from the banks while those in North Carolina will have a better chance since they probably have equity in their home residence. I have found that in Pennsylvania, my clients also experience housing to be fairly stable. A client of mine in Chambersburg, PA purchased a home a few years ago and while the value did not go up, at least it is being appraised for the same value today as a few years ago.
.....The best area? Believe it or not, but things are doing much better in New Mexico and other western states. Exit Realty, a client of mine, in Alamogordo, NM told me that while Florida experienced a big realty boom years ago, people in New Mexico found real estate stable, there was no boom, therefore no crash. Again if you have equity in your home in New Mexico, your equity is safe. By the way, I really like New Mexico. Almost every time I visit the state, I get more clients. Wish I could say that for Florida where I actually live. So maybe, I need to spend more time in New Mexico!! I think so.
.....The point I am making, is that without EQUITY in your home, BANKS won’t loan you any money. So how does the economy improve, if you as a business owner cannot borrow money because your ASSETS do not have enough worth? Kind of scary.
.....So WHEN will the recession really end? When foreclosures are finally completed and housing values are based on real numbers, not artificially low numbers because banks sell foreclosed houses for nearly nothing and count that in the average sales price for your neighborhood. So here in Florida, that may still be years away. Let us hope that business can stay afloat until then.
.....Henry (CEO)
.....The government has told us that the Recession is over. Oh really! Well maybe in some parts of the country. Here in Florida, the value of homes keeps going down. To give you an example, when I bought my home in 1995, I paid $14,000 more than the home I sold in Asheville, NC at that time. Well as of today, my house in Florida is worth $170,000 LESS than the home I sold in North Carolina
......What does this tell us about our economy. In Florida we had a big real estate boom some 5 years ago. North Carolina did not experience much of a boom. So houses in North Carolina have actually grown in value. My old house is worth more than 2½ times what I sold it for. Which means that I would have some $300,000 in equity if I still owned the home. During the peak of the boom in Florida, I had nearly $350,000 in equity. Without borrowing any money since then, my equity has now dropped to MINUS $60,000. And I make all my payments timely.
.....So in general terms, Florida is still in trouble, while the East is holding it’s own. Business owners in Florida without equity in their homes or other assets, will find it ALMOST IMPOSSIBLE to borrow money from the banks while those in North Carolina will have a better chance since they probably have equity in their home residence. I have found that in Pennsylvania, my clients also experience housing to be fairly stable. A client of mine in Chambersburg, PA purchased a home a few years ago and while the value did not go up, at least it is being appraised for the same value today as a few years ago.
.....The best area? Believe it or not, but things are doing much better in New Mexico and other western states. Exit Realty, a client of mine, in Alamogordo, NM told me that while Florida experienced a big realty boom years ago, people in New Mexico found real estate stable, there was no boom, therefore no crash. Again if you have equity in your home in New Mexico, your equity is safe. By the way, I really like New Mexico. Almost every time I visit the state, I get more clients. Wish I could say that for Florida where I actually live. So maybe, I need to spend more time in New Mexico!! I think so.
.....The point I am making, is that without EQUITY in your home, BANKS won’t loan you any money. So how does the economy improve, if you as a business owner cannot borrow money because your ASSETS do not have enough worth? Kind of scary.
.....So WHEN will the recession really end? When foreclosures are finally completed and housing values are based on real numbers, not artificially low numbers because banks sell foreclosed houses for nearly nothing and count that in the average sales price for your neighborhood. So here in Florida, that may still be years away. Let us hope that business can stay afloat until then.
.....Henry (CEO)
Thursday, July 07, 2011
The Great Recession of the 21st Century (continued)
July 7th, 2011
.....The previous blog talked about how the owner handles this recession. But what about the employees...How do they handle the recession? Most employees do not think about the fact that the true employer is not your immediate supervisor but YOUR CUSTOMERS. Suppose you were to lose ALL your customers. Your boss would go out of business and you would lose your job. How smart is that?
.....We have a lot of competition for these customers. If we do not give great service, they can always find someone else cheaper, who gives just as much "lousy" service. The word "lousy" is sarcastic, but if you expect people to pay good money in a recession you had better be greater than your competition. Otherwise you are the loser.
.....Suppose your customer was your own mother. Would you not give her special service? Treat her as a queen? Why not imagine all your customers to be family...brothers, sisters, cousins. First of all the job would suddenly become more fun because you would start making new friends. If you think of them FIRST and you Second, I guarantee that your business will hold together. You will not only keep your customers but get new ones by referrals. Do you think your employer will notice you over the other employees? You bet the boss will notice. If there had to be layoffs, would you not agree that you have given yourself job security.
.....I run an accounting business. Do I notice which employee takes personal care of the clients over the other employees? Would I likely give more work and therefore more money to the better employees. The answer of course is obvious. Even with the Great Recession going on now for many years and many employees out of work for a long time, it is amazing how many working employees still have attitude problems with their customers. This recession is not going away any time soon, so I hope they wake up before they find themselves out of a job and replaced by a better employee.
.....My seminars will explain in more detail how to survive this on going recession. So if you would like me to conduct a Free seminar in your home town let me know. It does not matter how many people will attend. Even a small group will have the advantage of getting one on one consultation from me for FREE.
.....Henry (CEO)
.....The previous blog talked about how the owner handles this recession. But what about the employees...How do they handle the recession? Most employees do not think about the fact that the true employer is not your immediate supervisor but YOUR CUSTOMERS. Suppose you were to lose ALL your customers. Your boss would go out of business and you would lose your job. How smart is that?
.....We have a lot of competition for these customers. If we do not give great service, they can always find someone else cheaper, who gives just as much "lousy" service. The word "lousy" is sarcastic, but if you expect people to pay good money in a recession you had better be greater than your competition. Otherwise you are the loser.
.....Suppose your customer was your own mother. Would you not give her special service? Treat her as a queen? Why not imagine all your customers to be family...brothers, sisters, cousins. First of all the job would suddenly become more fun because you would start making new friends. If you think of them FIRST and you Second, I guarantee that your business will hold together. You will not only keep your customers but get new ones by referrals. Do you think your employer will notice you over the other employees? You bet the boss will notice. If there had to be layoffs, would you not agree that you have given yourself job security.
.....I run an accounting business. Do I notice which employee takes personal care of the clients over the other employees? Would I likely give more work and therefore more money to the better employees. The answer of course is obvious. Even with the Great Recession going on now for many years and many employees out of work for a long time, it is amazing how many working employees still have attitude problems with their customers. This recession is not going away any time soon, so I hope they wake up before they find themselves out of a job and replaced by a better employee.
.....My seminars will explain in more detail how to survive this on going recession. So if you would like me to conduct a Free seminar in your home town let me know. It does not matter how many people will attend. Even a small group will have the advantage of getting one on one consultation from me for FREE.
.....Henry (CEO)
Sunday, June 05, 2011
The Great Recession of the 21st Century
.....As you know, I want to do a seminar in person on the above subject. But in the meantime, what can we do to soften the effects of this recession? This first blog, we will discuss from the employer’s point of view (how to protect their company) and the next blog will go into details for the employees (how to protect their job). The two are deeply connected.
.....If the owner, or CEO, really care about their customers, the client will sense that you care and appreciate what you do for them. They will even forgive mistakes made and will stay loyal to your company. It is almost impossible to fail in business if you have the attitude that no matter what, the customer comes first. I have a client in Alamogordo, NM who thinks I am an "angel". That’s a lot to live up to, but if I try, this customer will use our services for life no matter how bad the recession is. Also, if you really care about your customers, you will do whatever you can to keep them successful too. By being a caring person, you also set a good example for your employees.
.....My son Daryl and I visit virtually every client we have on a regular basis (monthly or semi-monthly). By doing this, we stay in touch with our clients and if they have any concerns they will make them known to us in time for us to take care of any potential problem. We are less likely to lose clients that way and also more likely to get referrals from them so that in spite of the recession, we can still grow our business.
.....Regardless what the government tells you, it will be a long time before things get back to "normal". You must stay "hungry" and want to succeed, otherwise you will go by the wayside like many of your competitors.
.....So in conclusion, please treat your clients like family and they will do the same. Imagine how good it feels when a client wants you to have dinner with them or go out and socialize with them. I have many clients who do just that and it makes me feel really good. Our jobs would become more fun if we think of our customers as family members and they will treat you as part of their family (I promise).The photo above is of myself, my son Daryl, and my grandson Ethan.....Henry (CEO)
Wednesday, May 04, 2011
We have new plans for our Professor Tax Blog pages!
May 4th, 2011
.....We are now developing our facebook page at: www.facebook.com/professortaxusa. We will begin to use our blog page on a more regular basis. As of today we have 89 fans that like our Professor Tax USA page. It is a start and we hope to see that number grow. We intend to do Free Seminars wherever there is an interest in the United States. These seminars will cover many topics starting with Surviving this Recession, designed for business owners and even employees. Very soon, I will ask my Facebook Friends and their friends if they are interested in attending these Free Seminars and as soon as enough respond favorable, we will start (hopefully in the next month or so).
.....Also, I intend to have special blog pages as a testimony on behalf of our clients (with their permission) to talk about their company and what makes them special. I look forward to doing this in the very near future (30 to 60 days).
.....So tune in soon and see what is happening here at Professor Tax. Thanks. Henry (CEO)
.....We are now developing our facebook page at: www.facebook.com/professortaxusa. We will begin to use our blog page on a more regular basis. As of today we have 89 fans that like our Professor Tax USA page. It is a start and we hope to see that number grow. We intend to do Free Seminars wherever there is an interest in the United States. These seminars will cover many topics starting with Surviving this Recession, designed for business owners and even employees. Very soon, I will ask my Facebook Friends and their friends if they are interested in attending these Free Seminars and as soon as enough respond favorable, we will start (hopefully in the next month or so).
.....Also, I intend to have special blog pages as a testimony on behalf of our clients (with their permission) to talk about their company and what makes them special. I look forward to doing this in the very near future (30 to 60 days).
.....So tune in soon and see what is happening here at Professor Tax. Thanks. Henry (CEO)
Wednesday, February 16, 2011
Tax Deductions with Some of the Biggest Payouts
A $5,000 or $6,000 deduction for IRA contributions, a $4,000 deduction for college tuition and fees, a $1,000 child tax credit — these are hefty tax breaks for which a taxpayer may understandably yearn. But they’re small beans when compared with the tens of thousands of dollars in savings some reap through deductions and credits.
How about taking a $50,000 deduction for state and local taxes paid, a $37,000 deduction for medical expenses, a $28,000 deduction for mortgage interest, or a $21,000 deduction for charitable contritbutions.
Those are the average amounts claimed for each of those deductions in 2008 by taxpayers with adjusted gross income higher than $250,000, the group with the highest average claim for each of those deductions that year, said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and unit of Wolters Kluwer. (The average dollar amounts are rounded, and count only those taxpayers who claimed that particular deduction.)
Some tax breaks “basically don’t have any limit,” Luscombe said. For example, to take the medical-expense deduction your expenses must exceed 7.5% of your adjusted gross income.
“That puts a floor on it, but as far as a top number, the more medical expenses you have, the higher the deduction,” Luscombe said. (Some deductions discussed here are restricted or disallowed under the alternative minimum tax.)
For taxpayers with adjusted gross income of $30,000 to $50,000 in 2008, the average deduction for state and local taxes was about $3,800; for medical expenses, $6,000; mortgage interest, $9,000; charitable contributions, $2,200, according to CCH.
For taxpayers with AGI of $50,000 to $100,000, the average deduction for state and local taxes was about $6,000; medical expenses, $7,000; mortgage interest, $10,600; charitable contributions, $2,700.
The mortgage-interest deduction is limited by the value of your home — generally speaking, you can claim it for interest paid on mortgage indebtedness up to $1 million, plus another $100,000 of home-equity debt. See this IRS page for more on the mortgage-interest deduction.
Meanwhile, some credits don’t have an upper limit, Luscombe said. The residential energy-efficient property credit for installing solar, wind or geothermal systems is worth 30% of the amount spent — whatever that amount is.
But don’t confuse that credit with the one for home energy-efficient upgrades, such as new windows and doors. That credit was worth up to $1,500 in 2010 but lawmakers reduced it for 2011, in the Tax Relief Act passed in December.
Other credits have a top limit, but it’s hefty: The adoption tax credit is worth up to $13,170 in 2010, up from $12,150, and it’s now refundable. Read more about the adoption credit on IRS.gov.
Almost Half of Taxpayers Don’t Owe Federal Income Tax
Taxpayers may enjoy the bounty, but these deductions and credits — plus other tax breaks that never show up on our returns, including those we get through 401(k), Roth IRA and 529 plans — all add up to a lot of money the U.S. government is not collecting.
While the definition of what should be counted as a so-called “tax expenditure” varies, “by any measure, the revenue losses from tax expenditures are large,” according to a Tax Policy Center report, co-authored by Eric Toder.
“Adding up all the tax expenditure estimates in the 2010 federal budget, we calculate a sum of about $1.1 trillion in fiscal year 2012, or about 6.7% of projected gross domestic product.” Read the report.
That’s a lot of tax breaks.
“Our tax system is such that for 2010 we estimate 45% of American households will pay no income tax, because of the combination of credits and deductions and so forth,” said Roberton Williams, a senior fellow at the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution in Washington.
And that includes high-income people, he said. For instance, recent IRS statistics showed that about 2,000 people with income of $1 million or more don’t pay income tax, Williams said. “A part of it is that money is earned overseas and is subject to foreign taxes; a part of it is they have a lot of money in tax-exempt bonds so they don’t pay tax on that income,” he said.
“For one reason or another these very, very wealthy people have set up their financial situation in such a way that they avoid U.S. federal income taxes entirely.”
Keep in mind that some of the largest tax expenditures don’t show up on your tax return. For instance, the value of employer-provided health insurance isn’t counted as income for most taxpayers.
Few Deductions Available to Some Taxpayers
Still, for his clients — most of whom are high-net-worth retirees who’ve paid off their home mortgage — deductions can be hard to tap, said Rial Moulton, a certified financial planner and certified public accountant in Spokane, Wash.
For a married couple filing jointly, the standard deduction in 2010 is $11,400, and it’s $5,700 for a single filer. “To think about itemizing, you have to have [deductions that total] more than that,” Moulton said. “For most people in our area, if you have your house paid off, it’s hard to get above that number unless you have significant health-care costs.”
Meanwhile, for taxpayers at a lower income level, one of the most valuable deductions is the earned income tax credit, worth as much as $5,666 for those with three qualifying children in 2010. For a family with three children to be eligible, AGI can’t exceed $43,352 for head-of-household filers and $48,362 for married-filing-jointly filers. Read this IRS page for more information.
There’s also a saver’s credit, worth up to $2,000 for married-filing-jointly couples and up to $1,000 for single filers, but that maximum credit phases out as income rises. And the maximum adjusted-gross-income limit to get any of the credit is $55,500 for married-filing-jointly filers and $27,750 for single filers. See this IRS page for more information.
Andrea Coombes is MarketWatch's personal finance editor, based in San Francisco.
How about taking a $50,000 deduction for state and local taxes paid, a $37,000 deduction for medical expenses, a $28,000 deduction for mortgage interest, or a $21,000 deduction for charitable contritbutions.
Those are the average amounts claimed for each of those deductions in 2008 by taxpayers with adjusted gross income higher than $250,000, the group with the highest average claim for each of those deductions that year, said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and unit of Wolters Kluwer. (The average dollar amounts are rounded, and count only those taxpayers who claimed that particular deduction.)
Some tax breaks “basically don’t have any limit,” Luscombe said. For example, to take the medical-expense deduction your expenses must exceed 7.5% of your adjusted gross income.
“That puts a floor on it, but as far as a top number, the more medical expenses you have, the higher the deduction,” Luscombe said. (Some deductions discussed here are restricted or disallowed under the alternative minimum tax.)
For taxpayers with adjusted gross income of $30,000 to $50,000 in 2008, the average deduction for state and local taxes was about $3,800; for medical expenses, $6,000; mortgage interest, $9,000; charitable contributions, $2,200, according to CCH.
For taxpayers with AGI of $50,000 to $100,000, the average deduction for state and local taxes was about $6,000; medical expenses, $7,000; mortgage interest, $10,600; charitable contributions, $2,700.
The mortgage-interest deduction is limited by the value of your home — generally speaking, you can claim it for interest paid on mortgage indebtedness up to $1 million, plus another $100,000 of home-equity debt. See this IRS page for more on the mortgage-interest deduction.
Meanwhile, some credits don’t have an upper limit, Luscombe said. The residential energy-efficient property credit for installing solar, wind or geothermal systems is worth 30% of the amount spent — whatever that amount is.
But don’t confuse that credit with the one for home energy-efficient upgrades, such as new windows and doors. That credit was worth up to $1,500 in 2010 but lawmakers reduced it for 2011, in the Tax Relief Act passed in December.
Other credits have a top limit, but it’s hefty: The adoption tax credit is worth up to $13,170 in 2010, up from $12,150, and it’s now refundable. Read more about the adoption credit on IRS.gov.
Almost Half of Taxpayers Don’t Owe Federal Income Tax
Taxpayers may enjoy the bounty, but these deductions and credits — plus other tax breaks that never show up on our returns, including those we get through 401(k), Roth IRA and 529 plans — all add up to a lot of money the U.S. government is not collecting.
While the definition of what should be counted as a so-called “tax expenditure” varies, “by any measure, the revenue losses from tax expenditures are large,” according to a Tax Policy Center report, co-authored by Eric Toder.
“Adding up all the tax expenditure estimates in the 2010 federal budget, we calculate a sum of about $1.1 trillion in fiscal year 2012, or about 6.7% of projected gross domestic product.” Read the report.
That’s a lot of tax breaks.
“Our tax system is such that for 2010 we estimate 45% of American households will pay no income tax, because of the combination of credits and deductions and so forth,” said Roberton Williams, a senior fellow at the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution in Washington.
And that includes high-income people, he said. For instance, recent IRS statistics showed that about 2,000 people with income of $1 million or more don’t pay income tax, Williams said. “A part of it is that money is earned overseas and is subject to foreign taxes; a part of it is they have a lot of money in tax-exempt bonds so they don’t pay tax on that income,” he said.
“For one reason or another these very, very wealthy people have set up their financial situation in such a way that they avoid U.S. federal income taxes entirely.”
Keep in mind that some of the largest tax expenditures don’t show up on your tax return. For instance, the value of employer-provided health insurance isn’t counted as income for most taxpayers.
Few Deductions Available to Some Taxpayers
Still, for his clients — most of whom are high-net-worth retirees who’ve paid off their home mortgage — deductions can be hard to tap, said Rial Moulton, a certified financial planner and certified public accountant in Spokane, Wash.
For a married couple filing jointly, the standard deduction in 2010 is $11,400, and it’s $5,700 for a single filer. “To think about itemizing, you have to have [deductions that total] more than that,” Moulton said. “For most people in our area, if you have your house paid off, it’s hard to get above that number unless you have significant health-care costs.”
Meanwhile, for taxpayers at a lower income level, one of the most valuable deductions is the earned income tax credit, worth as much as $5,666 for those with three qualifying children in 2010. For a family with three children to be eligible, AGI can’t exceed $43,352 for head-of-household filers and $48,362 for married-filing-jointly filers. Read this IRS page for more information.
There’s also a saver’s credit, worth up to $2,000 for married-filing-jointly couples and up to $1,000 for single filers, but that maximum credit phases out as income rises. And the maximum adjusted-gross-income limit to get any of the credit is $55,500 for married-filing-jointly filers and $27,750 for single filers. See this IRS page for more information.
Andrea Coombes is MarketWatch's personal finance editor, based in San Francisco.
Sunday, January 09, 2011
Just in, the I.R.S. plans on stiff penalties for late filing of Corporations & Partnerships
.....
Link: http://www.irs.gov/formspubs/article/0,,id=210604,00.html
.....January 9th, 2011
.....The Internal Revenue Service has raised their penalties from $89.00 a month for up to one year per partner or shareholder to $195.00 a month for all 2010 corporations and partnerships that file late beyond extensions properly filed. That means the fine could be nearly $2,400 just for one stockholder.
.....Most corporations file extensions, but if you are in the habit of filing when you feel like it, that means LATE, then consider being a single member LLC instead and closing down your corporation or partnership. So far the IRS in not accessing late filing penalties for single owned LLCs, because it is filed with the Form 1040, on Schedule C.
.....In a few months all these returns will be due. Please be ready to file on time. If you must file an extension, then be ready to file long before the extensions expire.
.....See link above from the IRS website. Henry (CEO)
Link: http://www.irs.gov/formspubs/article/0,,id=210604,00.html
.....January 9th, 2011
.....The Internal Revenue Service has raised their penalties from $89.00 a month for up to one year per partner or shareholder to $195.00 a month for all 2010 corporations and partnerships that file late beyond extensions properly filed. That means the fine could be nearly $2,400 just for one stockholder.
.....Most corporations file extensions, but if you are in the habit of filing when you feel like it, that means LATE, then consider being a single member LLC instead and closing down your corporation or partnership. So far the IRS in not accessing late filing penalties for single owned LLCs, because it is filed with the Form 1040, on Schedule C.
.....In a few months all these returns will be due. Please be ready to file on time. If you must file an extension, then be ready to file long before the extensions expire.
.....See link above from the IRS website. Henry (CEO)
Sunday, October 31, 2010
Future Seminars are coming to a town near you.
October 31, 2010.
We are planning to have seminars on "How to survive the Great Recession". Look for them coming to a town near you. See copy of postcard above (you can enlarge by clicking the photo).
We are getting excited about doing our first seminar. We have an eight (8) page booklet that we will hand out to the participants.
I personally will be doing the teaching in a classroom style that is scheduled for one hour.
The idea of creating seminars actually comes from two sources:
1)...A client in Ruidoso, New Mexico, Mark-Anthony Mills, of Christian Construction, stated that the small business owner really needs to hear what we have to offer for solutions to this current recession.
2)...Also, my employee, Sharon Follett has been suggesting that I create seminars to help overcome the recession. Sharon is designing all of our seminars. She has recently been promoted to National Marketing Director. Congratulations!
We will try to help as many business owners as possible across the country. The seminars are FREE. Please bring another business associate with you when you come to one of our seminars. Thanks. Henry (CEO)
Thursday, May 27, 2010
It's been 2 years and the economy is still in trouble.
May 27, 2010
It's been over two years since my last blog. The economy is still in trouble.
I have done surveys of all my clients across the U.S.A. The 2008 tax returns when compared with 2007 showed that 60% of the owners showed a decrease in sales with their business. A followup survey showed 2009 tax returns compared to 2008 tax returns with a 76% drop in sales.
Home prices are still going down and gas prices are going up.
I have done surveys of all my clients across the U.S.A. The 2008 tax returns when compared with 2007 showed that 60% of the owners showed a decrease in sales with their business. A followup survey showed 2009 tax returns compared to 2008 tax returns with a 76% drop in sales.
Home prices are still going down and gas prices are going up.
I have seen some clients during the first quarter of 2010 showing increases in sales over the first quarter of 2009. I will do another survey to see how business is doing for our clients after the second quarter has ended. Maybe we will see some improvement. I can only hope. I will post the latest 2010 survey as soon as possible. Pictured above a place I can relax, my backyard. Henry (CEO)
Friday, April 04, 2008
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)
Saturday, December 15, 2007
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)
Friday, June 15, 2007
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)
Thursday, January 04, 2007
"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)
Tuesday, November 28, 2006
"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)
Friday, November 10, 2006
"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)
Wednesday, July 19, 2006
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)
Thursday, April 27, 2006
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)
Sunday, January 15, 2006
"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)
Saturday, December 10, 2005
"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)
Monday, December 05, 2005
"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)
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