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Business Trends

Accountant in Miami Avoids IT Meltdown

Just as many people rarely visit the doctor until they are sick or in pain, most Accountant in Miami have not made any major changes to its IT infrastructure — until one fateful day last tax season, when a system crash caused some lost data just as we were wrapping up tax season.

Too little, too late, some would say, but the Accountant in Miami VieraCPA managed to avoid major disaster weather-related problems through off-site hosting of its data and improved internal systems overall.

Accountant in Miami and its aging IT infrastructure, coupled with the real possibility of natural disasters due to its location in hurricane country, prompted the Accountant in Miami VieraCPA to begin a serious review on its current systems.

A WAKE-UP CALL

Prior to the incident in April 2012, the Accountant in Miami firm had decided that changes were needed to its systems, but with the firm and its clients still recovering from a recession, the investments were admittedly not made soon enough.

“What ultimately happened was we lost about 12 to 14 hours during the end of tax season, as well as some data,” explained Accountant in Miami VieraCPA. “We were backing up to tape before discs and the hardware went down. After that, we had a meeting and everyone decided we wanted a system as bullet-proof as you can make it. Everybody bought in, Accountant in Miami VieraCPA spearheaded and led it. When the recession hit, everyone decided to be more conservative, and at the time, it was basically if it wasn’t broke, don’t fix it. When this [incident] happened, times had gotten better and we were more confident in spending money, but we realized from this how vulnerable we really were.”

The IT department also realized that while some upgrades were being made at the time of the crash, prevention should have occurred sooner. Other issues also likely contributed, as Accountant in Miami recalled. “In 2008, we put in [storage area network] and virtual servers, and the consultant that did it for us recommended how we set it up and we expected at the time it would last three years before it would need more space. That was around when [the crash] hit,” he said. “We didn’t understand enough about how they were setting it up.”

Accountant in Miami agreed that while some investments were made to upgrade the system, there was limited understanding of what was really needed for the growth of the firm. “A year before things went down, we had discussed a way the system reserves space. We were looking at not only the space the data was taking up, but what VMware could do to replicate and reserve space,” she said. “We didn’t have the understanding of the space required to do all this, and when the time came to invest in more space, the firm decided to back off because it was fairly expensive and we were in a recession. Because there were no issues, we thought we could tackle it after tax season. Then the tape backup died and we didn’t have enough snapshots. I was doing manual backups until the early hours of the morning weeks before [the crash].”

The Accountant in Miami also now has document management, CRM and client portals in the cloud, but ultimately it would like all staff to be more mobile and able to work more virtually, with all necessary tools and files accessible from wherever they are.

 

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Business Trends

Engaging Your CPA in Miami

The more you engage your CPA in Miami with your company’s future, the better the overall company performance.

So, the picture of the CPA in Miami future has to be compelling. CPA in Miami have to persuade people that they want to play a part in making it a reality.

Nearly all of the CPA in Miami we know agree with the sentiment, but getting the partners engaged isn’t always easy. So, how do CPA in Miami go about engaging the partners and making sure they remain that way?

As a CPA in Miami we get our Miami CPAs pulling together. Both have value, but building a bridge is a lot more compelling to most people. The picture becomes even more compelling when it’s a bridge to somewhere people want to go. It’s the ultimate destination that people engage with. And the journey is a lot more enjoyable (even if you’re not actually that keen on parts of it) if the endpoint is exciting and has benefits you share in.

These last points are critical. CPA in Miami need to understand the benefits to the firm and themselves. And they need to know what the journey will entail (what we call the “how to”). All the professionals we know are highly analytical, and they need to know the detail of the journey before they’ll embark on the voyage. Just saying, “We want to be a top 10 CPA in Miami,” for example, won’t cut it.

So, given the nature of the people in the CPA in Miami — who, in addition to being highly analytical, always want to calibrate how they’re doing — there have to be distinct milestones so everyone can measure progress. That doesn’t mean that the firm can’t be opportunistic. The analogy of a journey is a good one. Sometimes the winds change or the train gets cancelled or there’s the opportunity to visit somewhere unexpected and you change your course. The destination doesn’t change — only how you get there.

SEEING VISIONS

When we talk about having a compelling vision, we don’t just mean one that’s well-crafted. We mean a vision with a clear destination, strategies for getting there (the “how to”), the way progress will be measured and the benefits to the partners going on the journey.

Let’s look at an example of what can happen when all the elements (vision, journey, milestones and a positive answer to “what’s in it for me”) aren’t in place.

The managing partner of a CPA in Miami knows explained how he had come back from Harvard Business School’s Leading Professional Service Firms Program with renewed energy and a determination to drive the firm forward. So he outlined his vision of moving the firm from its regional base to a leading national firm to his partners and talked briefly about what they needed to do to get there. But, to his abject disappointment, nothing happened.

Concerned about the lack of action, the managing partner visited all of the offices to talk through the plans and, during these visits, the partners’ concerns became apparent. While they really liked the idea of becoming a national firm, they felt that the only way to achieve it was through a merger, which they felt they would be on the wrong side of. As a result, the partners didn’t engage with the vision and returned to the thing they knew best: serving their clients.

In the above example, the vision initially appeared positive, but when subjected to the partners’ analytical thinking, the “how to” was clearly negative and the “what’s in it for me” decidedly negative.

There is no chance of the partners being engaged unless they are an active part of the process. There is no point in managing partners coming up with a vision on their own or with their executive team and expecting it to be taken up by the other partners without question. If the partners are going to engage with the vision, it’s critical that they have an opportunity to have their say about each of the elements.

Getting the influential partners onside. That means doing at the beginning of the process what the managing partner in the example did toward the end: actively solicit the partners’ opinion. In a small firm, that’s relatively easy, but scale brings major difficulties. Which brings us to one of our more obvious statements — managing partners shouldn’t try to do everything themselves. They need the help and support of the partners who can influence other partners’ behavior. Sometimes, that’s the partners in managerial positions, but more often than not, it’s the heavy-hitting client partners.

So, the MP’s first task is to get this group of influential partners onside. That means getting them all together (in as many groups as necessary and with the help of a facilitator who understands professional services firms) and getting their thoughts on the vision, the how to, the milestones and the benefits.

• Getting the remaining partners onside. The principle underpinning how to do this is exactly the same with the remaining partners as it was with the influential group. With scale, this means multiple groups in different locations, with the leadership of the individual groups split between the managing partner and members of the influential group. After all of the groups have taken place and the output been distilled, it’s critical that the MP and the influential partners get together to confirm the final story that will go out to the partnership for final confirmation.

• What should a compelling vision contain? While we still see some visions that talk about becoming the leading player in a state or region, we are also seeing a real recognition that a vision is a lot more than the statement we used to see firms use across accounting and the other professional services sectors. The accompanying box (“Big visions,” at right), for example, details the common ideas from the visions of the Big Four firms. As you can see, there are references to clients and people, the two markets that every professional firm operates in, and the ways that the firm endeavours to persuade people in both markets to choose their firm, rather than its competitors.

• The “how to” is as important as the vision statement, if not more so. With so many firms, not just the Big Four, trying to do broadly the same thing, the focus immediately switches to the “how to” and to what we all know — that success is an execution game. The successful firms are the ones that invest time and energy in getting their strategies right and making sure their people have the capability to deliver them.

When it comes to engaging the partners, the vision doesn’t have to provide the fine detail of each of the strategies. But it does need to provide the picture of what the firm wants to build. No partner wants to know every single detail, but each partner expects, and needs, to know the key moves the firm will be making and what the implications are on what they will be doing. So, if the firm is planning to invest heavily in geographic expansion or growing a new service line, the partners need to know the detail of the growth plans (including any direct involvement they may have) and what the investment means for their own plans.

• Measuring progress. Professionals CPA in Miami always want to calibrate how they are doing, so measuring progress on the journey is critical. There must be clarity about the points that the firm should reach at different times and how they will be measured. Progress against the targets should be shared across the partner group, together with the reasons the firm achieved the targets or failed to do so. If the firm failed to reach the target, then how it plans to achieve it in the future should be part of the sharing and subsequent discussion. Naturally, following the discussion, the revised plans should be confirmed back to the partners.

• What’s in it for me? Although the whole purpose of engaging the partners is to commit them to the firm’s future, they also have to see a personal upside in the final destination. That upside can take many forms, but it has to be spelled out. It’s also critical that the descriptions are honest. Smart people quickly stop trusting their leaders if they believe they are being lied to or the downsides are being glossed over.

If, for example, achieving scale is achievable only through a merger, the likely impact of the merger on partner earnings must be addressed. Again, smart people know that earnings may be flat, or even drop, in the short term. The key thing is that the upsides to both the firm and the partners make the initial sacrifice worthwhile.

 

 

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Accounting

Bookkeeping Services Miami Top Overtime Traps

Bookkeeping Services

Bookkeeping Services remind business owners who often look for ways to bootstrap or ask employees to go above and beyond. But overlooking overtime could land you in a heap of trouble, according to Bookkeeping Services VieraCPA.

Bookkeeping Services in Miami

Bookkeeping Services VieraCPA notes this is the age of expensive equity and debt financing for startup entrepreneurs and small-business owners. The prudent way for business owners to weather this storm is to stretch their company’s cash flow and operating assets in clever, cost-effective ways according to their Bookkeeping Services. Employee compensation is no exception.

According Bookkeeping Services VieraCPA the problem with bootstrapping compensation to employees is that it’s easy for business owners to fall out of compliance with federal and state payroll regulations. One of the most common areas of oversight is the failure to pay overtime wages to certain types of employees.

Bookkeeping Services – Plan ahead to avoid payroll surprise

Bookkeeping Services class employees as either “exempt” or “nonexempt” when it comes to receiving overtime pay for working above 40 hours in a single workweek. Nonexempt employees are generally non-salaried employees who have no direct managerial oversight of other employees or the discretion to make decisions on matters of significance to the organization. The minimum pay rate for overtime is 1.5 times regular pay.

Here’s the gotcha that often catches business owners off guard. Even if an eager, extra-hardworking nonexempt employee wants to work longer hours without pay, a company is still liable for the cash obligation. Former employees who later leave a company on unfriendly terms can seek overtime back pay and cause a nightmare of audit activity from payroll tax authorities.

To minimize payroll surprises, Bookkeeping Services advise business owners to take care to classify their workers according to definitions of exempt and nonexempt employees under the Fair Labor Standards Act. The definitions are not always clear-cut. Some types of administrative, customer service, engineering, marketing and website workers may be entitled to overtime pay while others may not.

Closing overtime loopholes

Under the Fair Labor Standards Act, Bookkeeping Services VieraCPA advises business owners they can no longer simply give employees an impressive job title or put them “on salary” to avoid overtime pay obligations. Now, to qualify as an “exempt” employee, all of the Department of Labor’s qualifications for a specific type of job must be met. Key classification descriptions are available for software, administrative, professional and other jobs at the Department of Labor’s website.

Bookkeeping Services is frequently asked by cash-poor startup entrepreneurs or business owners seeking to turn around struggling operations if they can use common stock or stock options to sidestep minimum wage or overtime pay obligations. They argue that the stock is a form of compensation that may, over time, be worth far more than current cash payments.

That’s true, but if the Department of Labor or local payroll tax authorities find out about the non-cash payment, the business owner will still be held accountable for minimum wage and overtime payments to nonexempt employees. Further, officers and board members of companies can be personally liable for unpaid payroll tax obligations if a company is unable to meet its tax obligations.

Bookkeeping Services notes one last payroll documentation management tip. The Fair Labor Standards Act requires employers to keep payroll and other records for nonexempt employees for three years. The IRS requires employers to keep employment-related tax records for four years.

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Business Trends

Miami Accounting Service Flat Fee Business Model

Miami Accounting Service Flat Fee Business Model

Miami Accounting Service VieraCPA want you to think about a recent purchase. It could be as simple as a pair of jeans or as exciting as a car. Did you care what effort went into making the item…

How much labor went into growing the cotton or making the steel? How elaborate were the distribution channels, or how much mental energy went into the marketing campaigns? No, of course not! What you cared about was how much value you placed on owning the item compared to the price it took to acquire it and Miami Accounting Service Flat Fee Business Model uses the same approach to it’s services. If the value (in your mind) equaled or exceeded the price, then you were happy to make the purchase!

Miami Accounting Service

Miami Accounting Service VieraCPA points out that what you have just experienced is an illustration of the difference between effort based pricing and value based pricing. The hours, energy, and other expenses of production didn’t drive your acceptance of a “fair” price. Miami Accounting Service VieraCPA and the client are the judges of the fairness of the price and your willingness to pay it was governed by your perception of the product’s value. Given the choice, clients will respond to pricing of Miami Accounting Service in just the same way.

Goals: Increase Revenue and improve profitability

Miami Accounting Service VieraCPA is first and foremost a business. And, like any business, it must grow and prosper in order to service clients, provide a career for employees, and a financial reward for the owners. Properly managing the Miami Accounting Service means continually seeking ways to increase revenues and improve profitability. Pricing strategies must be designed to support these goals. One critical question firms must address is: which pricing strategy best supports growth and profitability? Is it a traditional effort based pricing structure which computes rates times hours? Or, is a better strategy based upon the client’s perception of value and willingness to pay a set price for it? In order to avoid competing on price for commoditized services in the face of a wider array of competitors, more and more firms are evaluating value pricing as a model for the future.

It’s not the goal of this article to justify the reasons for adopting a value pricing strategy or even to outline the specific steps to get started. That requires a more in-depth treatment of the topic than a brief article can provide. If you wish to explore the reasons and methods, please review

Keys to Success in Value Pricing and How to Manage Them

Virtually every Miami Accounting Service uses some form of time and billing software to track time and expenses. Traditionally, this has been used for billing purposes. The problem is, these kinds of “back-office” systems are typically disconnected from “front-office” engagement delivery and client management systems. This unnatural divide makes it hard to see the current margin on in-process engagements– work must be completed and “in the books” before final margin is known. While hindsight may be okay for hourly billing, value pricing requires more visibility & better control over work-in-process.

As you move to value pricing, this typically means a practice-management approach that connects front-office engagement delivery with back-office financial control. Key capabilities to look for include integration among multiple modules, which allow data sharing and all-around visibility for reporting. Capabilities like staff scheduling and job tracking for workflow control will make your management tasks easier. Some of the ways in which you can use your Practice Management solution to assist you in value pricing are outlined next.

Communications. In order to be successful in value pricing your Miami Accounting Service, you must have frequent and meaningful communications with your client. The client will tell you what he or she needs, but you must be listening and monitoring all the communications which go on between your firm, your staff, and the client’s business staff. A good Client Relationship Management (CRM) program is a must to monitor these contacts. Some firms will invest in a stand-alone product such as Microsoft CRM, while others will opt for one integrated into the Practice Management system. Either way, you will need a method of tracking all the emails, phone calls, and other conversations that any member of your firm has with any member of the client’s business. Mining those conversations may well reveal a need that you are well positioned to address.

Accurate Estimating. One of the frequently voiced objections to a value pricing strategy is the fear of underestimating the cost of the work, and thus reducing the profit from the job. Here again your Practice Management system should provide the answer. Assuming you have done some similar job in the past, either for this client or another, the ability to analyze data from across the firm and draw meaningful reports will give you the information you need to set the appropriate price.

Disciplined Costing. One of the robust topics of discussion regarding value pricing is whether or not to keep timesheets. Some thought leaders and firms advocate doing away with them, since you have established the billing price through negotiation. Others argue for keeping them and recording time for cost accounting purposes. For those who opt to keep track of time on the job, your Practice Management software is designed to do just that.

Effective Control. Once the job is underway you will need a means of tracking progress, ensuring that the right resources are committed to the job, and that milestones are being met. Remember that it is important to use Change Orders to adjust the agreed upon price if additional work is added to the scope. Accounting Services in Miami use a variety of workflow tracking and resource allocation programs to accomplish these tasks, but you may find them available in your Practice Management software. Seamless integration between these workflow monitoring tasks, time entry for cost accounting, and staff availability will ease the burden of keeping your work on schedule, on time and on budget.

Efficient Invoicing. A properly written Value Pricing Agreement (your engagement letter for a value priced engagement) will specify the terms for payment. If the service is ongoing it’s common to use monthly or quarterly billing, or progress billing if the engagement is of shorter duration but still complex. Any good time and billing system will handle these tasks, but a far better solution is one that is fully integrated with your general ledger accounting. A system which will seamlessly issue invoices, post them to client records, accept payments using paperless electronic banking, and update your financials all while tracking the effort expended for cost accounting purposes will reduce your back office work and improve your profitability!

Obstacles to Overcome

There will inevitably be obstacles to overcome in shifting to a value pricing strategy. Some of them are real while others mostly perceived. Some may come from your clients, but many more will be voiced by reluctant factions within your own firm. Some will claim that you’ll be unable to price the job accurately, while others will highlight the risk of “scope creep” – more work added while the job is in progress. Or, they like the level of control they believe they get from closely managing hours billed. We have already examined many of these obstacles and how a fully integrated Practice Management solution can help overcome them.

A final challenge will likely be simple reluctance to change. Clients will often be the first to get on board because they see the value in knowing the costs and benefits of your service. It is a function of leadership to ensure that partners, managers, and staff within the firm buy in and support the value pricing strategy. Good leaders don’t let foot-draggers keep the firm from making progress.

Next Steps

Hopefully by now you have decided that at least some applications of value pricing might be good for your Accounting Services Miami firm and may be wondering if you are properly positioned to give it a try. What steps should you take now to get started?

A good starting place would be to review your management support software. Consider, for example:

  • Do you have the ability to accurately plan a value priced engagement?
  • Do you have full visibility into past client contacts, staff availability, and data analytics which will help you accurately forecast the cost of an engagement?
  • Do you have sufficient workflow control measures which will allow you to track progress and identify early if you are behind schedule or over budget.
  • Do you have seamless integration between invoicing, collection, and financial reporting?
  • Do you have the ability to produce clear and concise management reports that will aid in partner level decision making?

None of these items by themselves will ensure a successful entry into value pricing, but trying to do it without them will make the project much harder than it needs to be.

Getting started on value pricing probably sounds like a big step, and it is. But, if you want to raise revenues, improve profitability, and avoid the trap of competing on price consider another of the industry-leading firms who have joined the value pricing movement.

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Business Trends

Miami CPA Firm Spotlights Inequality of Tax Code

Miami CPA Firm Spotlights Inequality of Tax Code

Miami CPA Firm Gustavo A Viera CPA reflect on the Tax Code and how it has contributed to rising income inequality in recent decades as middle- and lower-income Americans have seen their incomes stagnate while the wealthiest have experienced staggering income growth, according to Miami CPA Firm VieraCPA.

Miami CPA Firm VieraCPA reports from the his headquarters in Palmetto Bay Florida, argues that deficit-financed tax cuts do not spur economic growth. Those who have received the largest income gains in the past three decades have also seen the largest tax cuts.

Since the last major tax reform in 1986, the number of loopholes, special preferences and the volume of the Tax Code have ballooned, resulting in a system widely considered to be inefficient, complex, and unfair, as well as an impediment to growth, Miami CPA Firm VieraCPA noted.

“Drawing a page from successful prior reform efforts, Miami CPA Firm advocates of comprehensive tax reform generally urge that we broaden the base and lower rates,” said the report. “However, the current economic context for tax reform is far more challenging than it was in 1986. Most immediately, the economy is still in the midst of a slow recovery with an unemployment rate that remains too high. Even with robust rates of job growth, it will take years to close the jobs gap. An important role of fiscal policy in the near term is to support recovery in the labor market.”

Miami CPA Firm VieraCPA acknowledge that while a larger number of families do not pay federal income taxes nowadays, it took issue with the idea that these households do not pay any form of taxes, as many suggest. “In fact, most Americans pay more in payroll taxes than in income taxes,” said Miami CPA Firm VieraCPA.

“Those who pay no federal taxes—on payroll or income—are disproportionately young (such as students who will pay taxes after they join the workforce) or old (such as retirees who paid taxes over their lifetimes), or temporarily out of work.”

Miami CPA Firm VieraCPA argues that cutting individual income tax rates would modestly increase the earnings of the typical American family, but substantially increase the federal budget deficit.

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Tax

CPA Firm in Miami Reasonable Salary for S Corporation Owners

CPA Firm in Miami Reasonable Salary for S Corporation Owners

Besides its single level of taxation as a pass through entity, CPA Firm in Miami  remind clients that the advantage of an S corporation over a C corporation is that a shareholder’s share of the corporation’s net income is not considered self-employment earnings and therefore is not subject to self-employment tax (13.3% in 2011 and 2012). CPA Firm in Miami VieraCPA notes the stark contrast to that of a general partner, LLC member, or sole proprietor, for whom net earnings from self-employment include any trade or business income and a partner’s distributive share of income from a trade or business carried on by the partnership according to CPA Firm in Miami , Gustavo A Viera.

However, if the S corporation shareholder (let’s say an CPA Firm in Miami ) provides services to the S corporation, he or she must receive an adequate or reasonable amount of compensation for these services. The S corporation may deduct the compensation expense and must pay the employer share of employment taxes: 6.2% Social Security tax and 1.45% Medicare tax. The shareholder-employee (i.e. CPA Firm in Miami ) is responsible for 4.2% Social Security tax (in 2011 and 2012) and 1.45% Medicare tax. The S corporation is also responsible for Federal Unemployment Tax Act (FUTA) taxes. Minimizing these taxes provides an incentive to keep the S corporation shareholder’s wages low and to characterize most of the pass through income as distributions.

The U.S. Government Accountability Office reported in 2009 on employment tax noncompliance among S corporation shareholders. The IRS has been pursuing this perceived abuse of inadequate compensation in favor of dividend distributions to shareholder-employees and has won a number of cases, according to CPA Firm in Miami VieraCPA.

According to CPA Firm in Miami VieraCPA, the IRS has the authority to reclassify dividends, distributions, or payments to the shareholder-employee, including loan repayments, as compensation if it deems compensation inadequate or unreasonable. The courts have held that the question of reasonable compensation is one of fact, determined on a case-by-case basis. The IRS has posted on its website three major sources of gross receipts it will consider when determining reasonable compensation: the services provided by the shareholder, the services of non-shareholder employees, and the capital and equipment of the corporation.

IRS fact sheet FS-2008-25, Wage Compensation for S Corporation Officers line an CPA Firm in Miami with Sub S status, lists the following factors in determining reasonable compensation: training and experience, duties and responsibilities, time and effort devoted to the business, dividend history, payments to non-shareholder employees, timing and manner of paying bonuses to key people, what comparable businesses pay for similar services, compensation agreements, and the use of a formula to determine compensation. Sources of information on comparable compensation for services include the U.S. Department of Labor’s Bureau of Labor Statistics, employment agencies, and a market analysis. The key in defending a claimed compensation amount is to document all research to support the amount.

Shareholders who are officers of a corporation who do not perform any services or perform only minor services in that capacity and who do not receive or are not entitled to receive direct or indirect compensation are not considered employees of the corporation. Thus, since most shareholder-officers of closely held corporations do provide more than minor services to the corporation, they most likely are considered employees. If a shareholder is an officer who is considered an employee, CPA Firm in Miami point to Section 530 of the Revenue Act of 1978, P.L. 95-600, does not apply as a safe harbor for re-characterizing the shareholder’s compensation because, under Sec. 3121(d)(1), corporate officers are statutory employees.

The S corporation entity form provides planning opportunities to avoid payroll taxes or self-employment taxes on distributions that are instead a return on capital and assets. With the increase in Medicare tax of an additional 0.9% for high-wage earners scheduled to begin in 2013, this may represent a larger opportunity. The key in defending against a possible audit and re-characterization of dividends is to document all research and analysis of the determination of the shareholder-employee salary.

 

Categories
Tax

Small Business Accountants 5 Simple Rules to Follow When Amending Your Tax Return

Small Business Accountants Miami

Your Small Business Accountants advices you that you forgot to report some income on your 1040 or just got a corrected Form 1099 or K-1 in the mail. What should you do? Small Business Accountants provide 5 tips for amending your tax returns.

1. Amended returns aren’t mandatory, according to Small Business Accountants VieraCPA. You might be surprised to find you are not obligated to file an amended return, even though Small Business Accountants tax advisers may tell you it’s a good idea—that’s because the IRS will probably send you a bill based on the revised Form 1099 or K-1 once IRS computers match that form against your Form 1040 according to Small Business Accountants VieraCPA.

Small Business Accountants VieraCPA note amended returns are not mandatory even if something happens after you file that makes it clear your original return contains mistakes. Ask if the return you filed was accurate to your best knowledge when you filed it. If it was, you are probably safe in not filing an amendment.

Conversely, if you knew your return was inaccurate when you filed it, Small Business Accountants VieraCPA warns you should amend it to make it accurate without delay. The IRS rarely brings up an originally filed return in civil audits or criminal prosecutions once the taxpayer attempts to correct it by filing an amended return. But to take advantage of this rule, you need to be proactive, and you need to make the correction before the IRS finds your error according to Small Business Accountants VieraCPA.

2. You can’t cherry-pick what you correct states Small Business Accountants VieraCPA. You don’t have to file an amended return, but if you do, you must correct everything. You can’t cherry-pick and only make corrections that get you money back and not those that increase your tax liability. If you amend, you must correct all errors, not just the ones in your favor. See Beware Amending Tax Returns by Small Business Accountants VieraCPA.

3. Some errors don’t merit amending. Math errors are not a reason to amend, since the IRS will correct math errors on your return. Likewise, Small Business Accountants VieraCPA recommend you usually shouldn’t file an amended return if you discover you omitted a Form W-2, forgot to attach schedules, or other glitches of that sort. The IRS can process your return without them or will request them if needed.

Small Business Accountants VieraCPA remind you certain parts of your original return can’t be changed by an amended return. For example, you can change your filing status on an amended return from married filing separate to joint, or from qualifying widow(er) to head of household status. However, you cannot change from married filing joint to married filing separate after the due date for the original return (usually April 15) has passed.

4. Timing counts. You must file a Form 1040X, Amended U.S. Individual Income Tax Return, within three years from the date your Small Business Accountants VieraCPA filed your original return or within two years from the date you paid the tax, whichever is later. This either/or test can give you extra time, but it is safer to amend within three years of your original return so there’s no dispute.

How soon is too soon to amend? You can file an amended tax return right on the heels of your original return if you like. However, Small Business Accountant Firm VieraCPA warns  if you are filing to claim an additional refund, you should wait until after you have received your original refund before filing Form 1040X. You may cash the first check while waiting for any additional refund.

5. Only paper will do. Amended returns are only filed on paper, so even if you filed your original return electronically, you’ll have to amend on paper. Amended returns are prepared on Form 1040X. You must use this form whether you previously filed Form 1040, 1040A or 1040EZ. Label the top of the 1040X very clearly with the tax year you are amending. See Small Business Accountants Instruction 1040X.

 

 

Categories
Tax

Small Business Accountants Miami 11 Tax Audit Red Flags

Sometimes your Small Business Accountants are to blame for an audit.

If Small Business Accountants promises unusually high refunds without asking to see proper documentation for deductions and credits, don’t be fooled, said Gustavo Viera Small Business Accountants and managing partner at VieraCPA.

Small Business Accountants VieraCPA remind you you’re legally responsible for the information on your return no matter what a Small Business Accountants VieraCPA tells you, so make sure to look over your return before it’s sent to the IRS.

” Small Business Accountants VieraCPA can promise you the world, but then when they deduct a bunch of stuff they shouldn’t, you’re going to be the one stuck with an audit,” said Viera. Also, you’ll be required to repay any money you receive fraudulently.

This year, all Small Business Accountants VieraCPA and paid TAX Preparers are required to have a Tax Preparer Tax Identification Number (PTIN) so customers can verify that they are legitimate. Ask Small Business Accountants VieraCPA to see their PTIN before signing up for help, and be wary if your preparer doesn’t put a PTIN on your return when submitting it to the IRS, said Viera.

You make stupid mistakes

Small Business Accountants VieraCPA know whether you accidentally omitted information or you slipped up when doing subtraction, making errors on your tax return will cause the IRS to take a second look.

“The No. 1 mistake is not putting down the right Social Security numbers, and the second is not doing the right math,” said Gustavo A Viera CPA.

It may be worth hiring a Small Business Accountants VieraCPA to handle your return or walk you through the process.

“In tough economic times, people may be getting away from Small Business Accountants

Professionals,” said Viera. “And as more and more people do their taxes on their own, there will be more mistakes — both in terms of math errors and the deductions that are taken.”

Take the time to double-check everything if you’re filling out your own return, and if you decide to use tax software to file, make sure you understand how to use it, Viera advised.

You have a big mouth

You may think you’re a hot shot for pulling a fast one on the IRS. But when the friend you entrusted with your secret snitches on you in exchange for a fat check, you’re going to be in big trouble.

“Most cases start the old-fashioned way,” said Viera a Small Business Accountants who represent taxpayers whose returns were flagged by the IRS. “You blab about it to a friend, colleague, spouse or girlfriend, and one of them turns you in.”

Small Business Accountants VieraCPA warns even your closest pals may be tempted to tattle, since the IRS offers whistleblowers a reward of up to 30% of any additional tax or penalties it collects from tax cheaters.

And with the popularity of social media, it’s now much easier to publish private information publicly. So if you did something you think was questionable, don’t post it all over Facebook.

You’re extremely charitable

It’s great to be charitable, but don’t exaggerate the amount of money or items you’re donating according to Small Business Accountants VieraCPA.

When giving small items to Goodwill or thrift stores, report the estimated resale value, not the original value. And make sure you keep track of when donations are made and hold on to receipts. It also doesn’t hurt to take photos of the donated items for your records.

“Be realistic and try to be as specific as possible,” said Small Business Accountants VieraCPA. “Generally, if a donation is under $250, it’s not a big deal, but if it’s over $250 you should have supporting documentation.”

If your charitable donations are unusually high relative to your income, the IRS is likely to give your return more scrutiny as well, said Viera a Small Business Accountants.

“If you have $20,000 of income and report $10,000 in charitable contributions, that’s going to raise eyebrows,” said Small Business Accounting CPA Viera.

You didn’t file your taxes

Talk about raising red flags: If you’re required to file a return and you don’t, the IRS will hunt you down.

The agency has ways to identify people who have filed returns in the past but stopped filing, as well as people who have never filed a return. Once you’re identified as a nonfiler, the IRS will want to know how much tax you owe and what you’re hiding, said Viera, Small Business Accountants.

To avoid a confrontation with the tax man, it’s better to simply file — no matter how much you’re dreading the deed, Viera said.

“Many taxpayers get overwhelmed particularly if they owe money they can’t pay, and they stick their heads in the sand,” said Small Business Accountant VieraCPA.

But late payment penalties kick in as soon as the filing deadline passes, so if you don’t file and get caught, you could end up having to pay a lot more than your original tax bill. If you’re worried about not being able to pay your tax bill, there are installment plans available. Just ask the IRS what your best option is.

Of course, if you want to delay the pain a little longer, you can always file an extension. And if your income is below a certain level — which varies widely depending on your filing status and age — you’re not required to file a return at all. But even if you don’t have to file, make sure you’re not missing out on any deductions or credits that could actually put a little extra money in your pocket.

“Many times people build up an irrational fear over filing their taxes and in fact are due a refund,” said Small Business Accountants VieraCPA.

You own a business

The IRS tends to look extra closely at taxpayers reporting businesses on Schedule C forms because there’s more room for fudging.

“The IRS primarily targets small businesses, especially sole proprietorships, and cash industries like pizza parlors and coin-operated Laundromats with opportunities to hide income and skim profits,” said Small Business Accountants VieraCPA.

If you own a business, report every single bit of income you’ve received. If you’re still worried about being audited, you may even want to reorganize your business as a corporation or partnership (which means you’re not required to file a Schedule C) instead of a sole proprietorship, said Viera.

And if you’re flagged for an audit, the IRS will be skeptical of any business that looks like it’s actually a hobby, especially if you are deducting a loss on your return.

You’ve been audited before

Sometimes getting flagged for an audit comes down to having a bad reputation with the IRS.

If you’ve been audited in the past, you’re on the agency’s audit hit list for at least a few years, said Small Business Accountants VieraCPA. And while there’s nothing you can do to avoid being scrutinized, you should play it extremely safe to avoid getting another audit.

“If you get audited once, you have a very good chance of being audited again,” said VieraCPA. “For the following three years or so, you should be very careful about the aggressiveness or risk you take on subsequent returns, because the IRS is going to be monitoring you.”

You have a home office

Deducting a home office can always be a red flag, because many taxpayers consider any part of the house where they do work to be an office — even if they do other things, like watch TV or cook, in that same area.

To qualify for a home office deduction, you must use the office exclusively for work and it must be your primary place of business — not one of several offices. If this is the case, make sure you document expenses like housekeeping, alarm systems and other items you plan to claim — down to the share of utilities you use in just the office itself — in case the IRS decides to check it out.

And even if you think it’s legitimate, don’t go overboard. VieraCPA had a client, for example, who ran a business breeding and raising high-end cats. Since the taxpayer had cats sprawled out in every room of the house, she thought it would be okay to deduct 90% of her house as a home office. While VieraCPA agreed that the business took up a significant portion of the client’s home, he advised lowering the percentage to about 40% so that it was less likely to raise red flags.

You’re rich

Being rich isn’t always a good thing. Your chances of being audited increase dramatically the more income you report.

While the IRS audits only 1% of taxpayers overall, those odds rose to 7% for people with income between $1 million and $5 million last year. About 21% of taxpayers with income between $5 million and $10 million were audited, and 30% of people making $10 million or more were dealt audits.

If you have a lot of income to report, make sure you get a savvy preparer so at least you’ll have everything documented should the IRS come knocking.

“The rich is where the new focus is, and it’s because of one reason — it’s generating extra income for the IRS,” said Small Business Accountants VieraCPA. “And because upper income filers tend to have a lot more complicated returns, that makes it easier for the IRS to go after them.”

You have foreign assets

Foreign bank accounts have been a huge focus for the IRS in recent years.

In an effort to reel in taxpayers with illegal overseas accounts, the agency has launched initiatives that waive certain penalties for taxpayers who come clean. This year, the IRS introduced a program that gives taxpayers a reduction in penalties — and no jail time — if they fess up to any undisclosed overseas accounts for an indefinite window of time.

The agency also introduced a new form and filing requirements for reporting foreign assets this year. In addition to reporting any foreign bank accounts holding more than $10,000, you now also have to report any foreign assets — including pension funds and foreign stocks — totaling more than $50,000. Failing to report such assets will result in a $10,000 penalty, and any underpayments of tax on them will be subject to an additional penalty of 40% of the amount owed.

If the IRS has any hunch that you are not reporting an offshore account, you’re in serious trouble. “The safety people thought they may have had offshore isn’t so safe anymore,” Small Business Accountants Miami VieraCPA. “It’s time to come in from the cold.”

You guess on investments

Before this year, brokers were only required to provide the IRS with the date you sold a stock and how much money you earned from that investment.

The IRS had to rely on taxpayers to correctly list the date they bought a stock and how much they paid on their Schedule D capital gains and losses statement.

So if you put down the wrong date or purchase price — whether innocently or on purpose — you could end up paying less tax.

But now, the IRS is getting this additional data straight from brokers. If the information on your return doesn’t match, you’re in trouble. Be sure to locate your exact buy dates and prices, advised Small Business Accountants VieraCPA. Otherwise the IRS will quickly scoop you up for an audit.

 

Categories
Tax

Virtual Tax Audits via Your PC Coming Soon

The only thing worse than tax preparation is the dreaded process of getting a Tax Audits and it could soon take place over a computer screen

The only thing worse than tax preparation in Miami is the dreaded process of getting a Tax Audits and it could soon take place over a computer screen in the comfort of your living room. Better hire a CPA to sit on the couch next to you.

Virtual Tax Audits

CPA’s advises clients in what could be an indication of things to come. Income tax preparation VieraCPA states the IRS launched a pilot program at the end of last year that allows taxpayers to use two-way video conferencing for assistance with tax questions and problems. Tax preparation business having been using this for consultation purposes for year, the IRS has caught on.

The Taxpayer Advocate Service, an independent watchdog arm of the IRS, is already calling for the agency to expand to virtual audits notes VieraCPA a Income tax preparation. The IRS says it needs to evaluate the success of the pilot program before making a decision.

Income tax preparation CPA’s notes theVirtual Tax Audits pilot program is currently being tested in 12 locations, where taxpayers needing assistance can log into a computer enabled with video-conferencing. They can then talk to an IRS agent who pops up on the screen to discuss whatever issues they’re having — whether it’s tax preparation or help with a tax form or a question about a refund.

TAS is also piloting a virtual assistance program. And VieraCPA stated that the tax preparation business and Certified Tax Preparer that this technology has the potential to “radically transform” the current audit process — eventually allowing taxpayers and tax preparers to use their personal computers to video conference with an IRS examiner.

To schedule an Virtual Tax Audits with an Income tax preparation or its client, the IRS would send a taxpayer a sign-in code so they could then log in to the meeting from a home or office computer. Documents could be transmitted by simply scanning them with a computer’s built-in camera notes Tax preparation business or a Certified Tax Preparer.

This could one day replace the need for correspondence audits, which are the letters the IRS currently sends taxpayers in the mail asking questions or requesting more information and their Income tax preparation Miami responding.

To save costs, the IRS has become increasingly reliant on correspondence audits instead of summoning taxpayers for in-person meetings says VieraCPA an Income tax preparation. But TAS says that these Virtual Tax Audits receive fewer responses and that many of the taxpayers dealt with these audits don’t understand how they work, default on payments and get hit with penalties.

Plus, with correspondence audits a specific representative typically isn’t assigned to a case, leaving many taxpayers without a point person to ask questions or to contact with concerns.

Virtual audits could eliminate the confusing paperwork and recreate a face-to-face meeting via computer. Tax preparation business or a Certified Tax Preparer Miami agree it would be easier to explain complex situations.

Doing this would also help taxpayers better understand why they are being audited and what additional information is needed, said Viera. It would also help the IRS obtain the accurate information it needs and help the agency view taxpayers as more than just tax returns.

The IRS’s virtual assistance pilot program is scheduled to continue through the 2012 filing season and end in May. Office locations include Colorado Springs, Colo., Fresno, Calif. and Utica, N.Y.

Once the program is completed, the IRS will evaluate its performance. So far, it said the pilot has allowed it “to maximize our current resources, by expanding hours of service in remote locations and balancing the workload in high-traffic areas.” But it wouldn’t say whether it is considering using this same technology for audits.

“The initial focus of Virtual Tax Audits delivery is on taxpayer service. We’re still in the middle of the pilot and still assessing the results,” the IRS said in a statement. “It’s premature to speculate about future steps.”

Categories
Accounting

Miami CPAs What is Cost Accounting 101?

Miami CPAs What is Cost Accounting?

Cost Accounting is the branch of accounting which directly pertains to the overall cost of running and managing a business. The concepts and formula involved in this branch of accounting are based on standard accounting practices.

Cost Accounting takes into consideration the expenses and the cash flow of an organization to analyze the cost of running it. Many CPA Firms mistakenly believe that cost accounting itself is an all-inclusive branch of accounts whereas that really isn’t the case. It is just the branch which deals with the cost of the business functions.

Basic objectives for which cost accounting is utilized:

Measuring Company Resources:

Miami Accounting and CPA Firm find it helps provide data for the resources of the company being utilized. Identification of production costs related to a particular event and the creation of its data is the primary purpose of cost accounting. Also, it helps in identifying the cost of production through the three business cycles.

Marketing Strategies and Product Development:

Miami accounting CPA Firm marketing strategies and product development plans are also addressed by using cost accounting. When it comes to product development, cost accounting can measure the cost of the product and determine whether it is right for the business or not. Similarly, cost accounting can also determine whether the marketing budget for the product is appropriate or not. Through cost accounting techniques, CPA Firm can measure the effectiveness of the marketing plan can also be reckoned.

Cost accounting plays an important role in making the right decisions for the company. The techniques involved to reach this stage usually compare the total cost of the product to the anticipated benefits.

Those handling cost accounting should keep in mind that the sole purpose of this branch of accounting is to manage costs and provide data for further consideration. Cost accounting itself is not responsible for making marketing plans or the creating action strategies.