7 Year Itch

This month marks 7 years since I took the leap of faith and hung a shingle on the door as a sole practitioner. After making several drastic career changes, I thought maybe I had burned out completely. However, I believe my DNA consists of debits and credits so I got back in the game. I started out of my house with two bookkeeping/tax clients that had followed me on my path. I was able to work around my boy’s schedules, volunteer, etc.

Then an opportunity came out of nowhere to move into a commercial space with rent at practically zero. Could not believe it. So I took the leap of faith again and moved out of my home. My original clients ended up finding me again so I was back on the path to becoming a workaholic again. It was ok though because I was having fun.

Then it was time to buy my own buiding because business kept growing and growing. Fast forward to this last year. God has blessed me beyond my wildest dreams. ALL of my work comes from referrals. My husband is in real estate and since that market basically crashed it would not be good right now had I given up my career. Honestly, on this side of it, I don’t think I would be the same without being able to help people with something that I love.

So having all this business you would think life would be perfect and that I would just hire more people. Well there is such a thing as being too busy and I have to remember that I one of the reasons I went on my own is that I did not want to have employees. Too much energy at this point in my life to train, supervise, etc. I would rather do the work myself. So I have 3 part-time employees that are para-professionals and it works out just fine. But something has been off this last year.

I pride myself on providing the highest quality accounting, audit and tax services that anyone could find in the market place at a reasonable fee. The part that has not been clicking this last year is always coming down to the wire with deadlines. Something always happens, things get moved around but it is more of a reactive scenerio instead of proactive.  I also realized there are things that I have been working on that I do not enjoy anymore. So two months ago I made a conscious decision to let go of clients based on the following criteria: too much risk, management with no integrity, work that cost more in headaches than they are worth, work that did not align with what I really enjoy doing. I even let go of a client who had been with me for 15 years. Hard decisions that cost me money. However, when I made the decision, I felt the weight of the world fall off my shoulder and I got excited about the new opportunities that would be coming my way. Plus this last month I have been able to get caught up with my current clients. There is no need to seek new clients if I am not giving everything I have to my current ones. In another month, I should be in the best shape with my workload since I started my firm.

Believe it or not, I have had 4 new audit proposals since I made this decision. I have turned away 3 of them because I don’t want to over commit at this point. It all comes down to being able to spend the time with my boys which was my original goal but the fear of never having work kept me from really deciding on what type of client’s that I like to work with. I love working with non-profit organizations because to me they are serving with a servant’s heart. Individual and small business taxes and accounting comes easy to me so I would also like to continue working on selected clients.

So by making these decisions I think I will survive the 7 year itch to do something different.  When my boys get out of school there is no telling what opportunities will be out there. I would love to become a mentor to other women in this profession so we will see. In 6 years my youngest will graduate so I guess by then I may have the 13 year itch.

The world will throw distractions in your way and we can all find things to be busy with. Life is short though and we should live each day with no regrets and doing something that we love. I am SO appreciative of my past and current clients and would not be where I am now without them. Just had to make some hard choices so everyone wins. 

I am still at the office at 9:00 on a Wednesday night though so time to go.

Lisa

The good, bad, and ugly of tax season 2012

It has been one week since the official end of tax season. Now that I have had some sleep and a few hours off, I thought it would be a great time to review the season. Overall, I have to say that this was probably the best tax season I have had in 20 years even after the rocky start in February.

So why was this the best season yet? I finally achieved somewhat of a balance this season. The balance was not necessarily a choice but based on several factors. The first involved me not being able to be at the office 24/7 this year. My husband had taken a job at Starbucks last fall. He worked a lot of nights and weekends so that left me having to be at home more than usual this time of year to hang out with my boys. It was a tough to do but the boys really enjoyed me being there for them. This caused me to be focused at the office and I learned to delegate my administrative tasks more. Plus, I also learned to say NO. If a client brought their stuff in within last 2 weeks I did not guarantee I would get it done. New clients calling at the deadline got an extension. Even client’s that have always brought information in last minute got extended if I could not get it done. I have to say that was probably the biggest difference. My stress level was way down this year. I barely worked more than 6 hours on the weekends until the end which never happens. Also didn’t work past 7 most nights which NEVER happened in the past. Also learned to let some clients go. I never said YOU’RE FIRED but gently explained reasons why I could not work on their returns. I will have to blog about this sometime else because lots of lessons learned.

Another huge help this year was that my mother in-law gave me one of the best Christmas gifts ever. She brought us home cooked meals 2x a week from January until the end of tax season. Can you believe that???? I rarely cook and I was so thankful that my family was able to eat decent food this time of year. I also have the best family that picks up the slack and great friends who are there for me at any time.

So now that I have highlighted the good parts of tax season time to point out things that were not so good. Getting asthmatic bronchitis in February caused a significant amount of down time. I am a wimp anyway when I get sick but this was something I had not experienced before. I had the worst cough ever that would not go away. After missing 4 days of work decided I had better to go the doctor. I was thinking the diagnosis was going to be a sinus infection. But oh no. I got a steroid shot, steroids, antibiotic and cough syrup and could not run for a week. Well had to cancel some appointments and one prospect didn’t even reschedule. Their loss because no way I was getting worse by pushing myself to exhaustion. So this caused a little lull mid-season.

I guess if you could say what was ugly about the season I would have to say that I was so alert this year and rested (note balance above) that I found a two errors on 2010 returns that I had made within the last 5 days of the season in the prior year. I have said so many times that you really don’t want your CPA working on your taxes that last week because we are normally EXHAUSTED and doing our best to get the returns out the door. Now some clients like this because I may not be as picky as I normally am. Well I consider any error to be downright ugly. Period. You cannot survive in this business if you make many errors. I felt better after talking to a couple of peers because the errors were minor in the entire scheme of things and they said that I was actually human. That made me feel a little better. After kicking myself I ended up making it right with the client and moving on. I apologized and acknowledged that yes things can get missed on 4.15 of any year. Too crazy of a time. So the ugly hopefully got pretty this year with me being more alert.

My primary reason for going out on my own was to be able to make my own schedule around my kids. There were several years were this was not possible because I had deadlines that had to be met & I would rarely turn away people. This year setting boundaries allowed me to still have another double digit growth year but it also allowed me to focus on what is truly important in life. I did not miss any baseball games this year. Made it to two out of town hockey tournaments. Trained for a 1/2 marathon with my 13yo. Only thing I missed that I had went back and forth on was a Disney band trip on 4.10-4.15. Now that I am on this side of it I made the right decision.

I am extremely blessed to be able to do what I love to do everyday. I thank God for allowing me to serve my client’s through another tax season and am ready to get back to my audits.

Lisa

Charitable Contributions

Not much time left to get your 2011 tax return filed by the due date. However, I know there are a lot of procrastinators out there because 56% of my clients are still in line bringing me their information. If you are wondering if the money or property you donated is deductible, here are some reminders from the IRS in the IRS Tax Tip 2012-57. As always, give me a call if you want to discuss further.

Lisa

 

Deducting Charitable Contributions: Eight Essentials
IRS Tax Tip 2012-57

Donations made to qualified organizations may help reduce the amount of tax you pay.

The IRS has eight essential tips to help ensure your contributions pay off on your tax return.

1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining the value of donations, refer to Publication 561, Determining the Value of Donated Property. All are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

AMT or the Alternative Minimum Tax

I have to admit that this is one tax that I hear the most complaints about from my clients. It is not enough that they are paying a significant amount in taxes so they get the privilege of paying even more taxes. In my opinion, it is time to do away with this tax. In summary, it is an additional tax to make sure you pay your fair share if you have certain deductions.

The IRS issued Tax Tip 2012-47 today regarding the AMT. Contact me if you would like to discuss further.

Lisa

Six Facts About the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2011.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes, plus any adjustments and preference items that apply to you, are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2011, Congress raised the AMT exemption amounts to the following levels

• $74,450 for a married couple filing a joint return and qualifying widows and widowers;
• $48,450 for singles and heads of household;
• $37,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,800 for 2011.

Use the AMT Assistant at www.irs.gov to determine whether you may be subject to the AMT. You can find more information about the Alternative Minimum Tax and how it affects you by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at www.irs.gov. You can also order the form by calling 800-TAX-FORM (800-829-3676).

Be educated about your retirement distributions

Occasionally, I get clients who are completely shocked when I give them their tax liability when they have received distributions from their retirement plan. As a general rule, if you are getting money out of a retirement plan, then the IRS wants their share. The IRS released the following information regarding distributions from retirement plans. If you would like to discuss further, please do not hesitate to contact me.

Lisa

Issue Number:    IRS Tax Tip 2012-34

Inside This Issue

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Early Distribution from Retirement Plans May Have a Tax Impact

Taxpayers may sometimes find themselves in situations when they need to withdraw money from their retirement plan early. What they may not realize is that that transaction may mean a tax impact when they file their return.

Here are 10 facts from the IRS about the tax implications of an early distribution from your retirement plan.

1. Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions.

2. Early distributions are usually subject to an additional 10 percent tax.

3. Early distributions must also be reported to the IRS.

4. Distributions you roll over to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.

5. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.

6. If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.

7. If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.

8. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.

9. There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home (up to $10,000), for certain medical or educational expenses, or if you are totally and permanently disabled.

10. For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions, see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Links:

• Publication 575, Pensions and Annuities (PDF 227K)
• Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)  
• Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax Favored Accounts   (PDF 72K)

Form 5329 Instructions (PDF 40K)

Taxable or Non-Taxable Income?

The IRS released its Tax Tip 2012-25 today regarding the determination if income is taxable or non-taxable. This is a great place to start if you have any of these items. However, please contact me if you have anything unusual so we can be 100% sure that the tax treatment is correct.

Lisa

Issue Number:    IRS Tax Tip 2012-25

Inside This Issue

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Taxable or Non-Taxable Income? 

Although most income you receive is taxable and must be reported on your federal income tax return, there are some instances when income may not be taxable.

The IRS offers the following list of items that do not have to be included as taxable income:

• Adoption expense reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers’ compensation benefits (some exceptions may apply; see Publication 525, Taxable and Nontaxable Income)
• Meals and lodging for the convenience of your employer
• Compensatory damages awarded for physical injury or physical sickness
• Welfare benefits
• Cash rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

• Life insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are generally not taxable unless the policy was turned over to you for a price.
• Scholarship or fellowship grant If you are a candidate for a degree, you can exclude from income amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify for the exclusion.
• Non-cash income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at the IRS.gov website or by calling the IRS at 800-TAX-FORM (800-829-3676).
Link:  IRS Publication 525, Taxable and Nontaxable Income

 

How important is your name to the IRS?

Life change is a part of life and if the change involves a new last name then there are steps that need to be taken in order to prevent any delays when the IRS processes your tax return. You should notify the Social Security Administration promptly after legally changing your name in order for their records to be updated and match the IRS records. The IRS issued Tax Tip 2012-23 as noted below. Please give me a call if you would like to discuss further.

Lisa

 

Five Tips for Recently Married or Divorced Taxpayers with a Name Change

If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. f you took your spouse’s last name — or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.

2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

I3. nforming the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you’ll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).
Link:

Form W-7A  Application for Taxpayer Identification Number for Pending U.S. Adoptions (ATIN)

You Tube Videos:

Changed Your Name after Marriage or Divorce? English | ASL