ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Rick Moranis played Sigourney Weaver's accountant neighbor and admirer Louis Tully in the 1984 comedy classic "Ghostbusters." Possessed by a demonic ghost, Louis is transformed from a mild-mannered accountant into the "Keymaster" and needs the help of Bill Murray, Dan Aykroyd, Harold Ramis, Ernie Hudson and the rest of the ghost-busting crew (along with their Proton Packs). Moranis reprised the role in the 1989 sequel "Ghostbusters II" and hopefully will come out of retirement to appear in "Ghostbusters III," which is set to be released next year.

YOU MAY WANT TO UNWIND YOUR ROTH CONVERSION

Many taxpayers elected in 2010 to convert their regular IRA to a Roth and either pay the tax in 2010 or spread it out over 2011 and 2012. If you converted your Roth as long as you timely filed your income tax return or got an extension to October 15, 2011, you have until October 17th “unwind” the conversion and treat it as if it never happened.

The primary reason for considering this is the drop in stock prices from 2010 until now. By unwinding the conversion, you may be able to then redo the conversion and save substantial tax this year.

For example, let’s assume a taxpayer had $500,000 in his IRA on June 1, 2010 when he converted it into a ROTH. Now, let’s assume the value of the ROTH is only $300,000. By unwinding the ROTH conversion, the taxpayer does not pay tax on the difference between the $500,000 last June and the $300,000 value now. At the highest tax bracket including applicable state income taxes, the total tax savings could approach $100,000.

Remember, you only have until October 17, 2011 to unwind this conversion

TAXES ON THE CUTTING EDGE

Q. My 14-year-old son is cutting lawns this summer. Does he have to report this income?

A. Yes, if it exceeds $400. However, the income can be sheltered from federal income tax by the standard deduction. The normal standard deduction for 2011 is $5,800. However for dependents, the standard deduction is the lesser of: 1) Earned income plus $300, or 2) $5,800. In other words, he most likely will not owe federal or state taxes. That's the good news.

Here is the bad news. If your son’s net income is over $400 he will need to file a return and pay self-employment tax.

LONGTIME PARTNER

I have to take a few minutes and pay tribute to Bob Sylvester CPA who died September 23, 2011

Bob Sylvester was a former partner of mine and a close friend. Bob had been ill for some time and he was in hospice for the past few weeks. Bob and I go way back. In 1972, Bob gave me a chance and hired me as new junior accountant with the firm of Lindell, Sylvester Lindell. He was my mentor and taught me a lot about business. Eventually we became partners to form Kopsa, Swanson & Sylvester accounting firm. In 1999, Bob became sick and retired to enjoy his family. Much of the success that I have had is attributable to valuable lessons from Bob. He will be missed.

To read more about Bob's life: Robert Sylvester

HOBBY LOSSES - HOW TO DO IT RIGHT AND HOW TO DO IT WRONG

Horse breeding losses aren’t always hit by the hobby loss disallowance rules as a recent tax court case shows.

First how to do it right. A couple bought, bred and trained horses in addition to working regular jobs. They had a detailed business plan and adjusted it after consulting with experts. They used recognized horse farm accounting software, opened a separate bank account and set up a website for their breeding operations. After several years of red ink, they prudently realized they couldn’t make a go of it and shut down the business. This convinced the Court that they had a profit motive and their breeding operation was more than a hobby (Blackwell, TC Memo. 2011-188).

But another breeder wasn’t so lucky. Instead of getting his hands dirty, he let others do the work for him by investing in a tax shelter deal that was intended to create large up-front losses before the mares were sold at a profit. The Tax Court gave short shrift to his claimed breeding losses (Van Wickler, TC Memo. 2011-196).

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Charles Grodin plays Jonathan "The Duke" Mardukas, an accountant for the Mob who gets nabbed by bounty hunter Jack Walsh, played by Robert De Niro in the 1988 comedy-action hit "Midnight Run." To collect the $100,000 bounty on the Duke's head, De Niro needs to get him from New York to LA, but the Mafia and the FBI are both on their tails. Grodin made a bit of a mini-career out of playing accountants. In the 1993 flick "Dave," he appeared as CPA Murray Blum. In one scene, Murray the accountant helped President Dave Kovic, played by Kevin Kline, find an extra $650 million in the federal budget to open homeless shelters. We could use him in Washington now.

'BUREAUCRACY GONE WILD: OBAMA'S UNHELPFUL ADVICE TO A FARMER'

(Politico) -- Politico.com reports on the publication's unsuccessful attempt to get an answer to a simple question from a farmer. The story was written after an ag producer in Illinois told President Obama recently when he visited Illinois that he was concerned about, "more rules and regulations — including those concerning dust, noise and water runoff — that he heard would negatively affect his business."

According to the story, the president, on day three of his Midwest bus tour, replied: "Contact USDA. Talk to them directly....my suspicion is, a lot of times, they're going to be able to answer your questions and it will turn out that some of your fears are unfounded." MJ Lee, a Politico.com reporter, writes that when he "decided to take the president's advice and call the USDA for an answer to the Atkinson town hall attendees question," he found himself "in a bureaucratic equivalent of hot potato — getting bounced from the feds to Illinois state agriculture officials to the state farm bureau." After more than four hours of phone calls spread over two days, "still no answer to the farmer's question."

Full Story

And these types of bureaucrats will soon be running our health care.

TALKING APPLE LINGO

Apple Store employees are trained to say things a certain way.

• "That's stupid" or "That wasn't smart."
They say: "That's not recommended."

• "Do you have any questions?"
They say: "What questions do you have?"

• "Unfortunately."
They say: "As it turns out...."

We say GREAT customer service training!!!

FOLLOW THE 3-DAY RULE ON YOUR 'TO-DO' LIST

If a task on your to-do list is more than three days old, the Harvard Business Review blog suggests you do one of these four things with it:

• Do it immediately: You’ll be amazed how many lingering items take on a few minutes.

• Schedule it: Pick a day to commit to finishing the task.

• Let it go: If you’re not willing to schedule it, it’s time to face reality that this isn’t a must-do.

• Add it to your someday/maybe list: You may never get to this list, but you’ll sleep better knowing you have it written down.

FEDERAL BUDGET VS. HOUSEHOLD BUDGET

This information has been running around the Internet. I thought it explains our predicament really well.

The Federal Budget

1) U.S. Tax revenue: $2,170,000,000,000
2) Fed budget $3,820,000,000,000
3) New Debt: $1,650,000,000,000
4) National debt: $14,271,000,000,000
5) Recent Budget cut: $38,500,000,000

Now remove 8 zeros and pretend it is a….

Household Budget:

1) Annual family income: $21,700
2) Money family spent: $38,200
3) New dept on credit card: $16,500
4) Outstanding balance on credit card: $142,710
5) Total budget cuts: $385

The family is not going to make it.

Now those are some numbers I can relate to!

MAJORITY OF ECONOMISTS SURVEYED SAY CUT FEDERAL SPENDING

From USA Today:
The majority of economists surveyed by the National Association for Business Economics believe the federal deficit should be reduced only or primarily through spending cuts.

The survey out on Monday found that 56% of NABE members feel that way, while 37% said they favor equal parts spending cuts and tax increases. The remaining 7% believe it should be done only or mostly through tax increases.

As for how to reduce the deficit, nearly 40% said the best way would be to contain Medicare and Medicaid costs.

Nearly a quarter recommended overhauling the tax system and simplifying tax rates and exemptions. About 15% said government should enact tough spending caps and cut discretionary spending.

See the full article below:
USA Today

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Cher won an Academy Award playing accountant Loretta Castorini in the 1987 romantic comedy "Moonstruck." She works as an accountant for several Brooklyn businesses, including her uncle's deli, and is engaged to be married to Danny Aiello, until she falls for his younger brother, played by Nicolas Cage. When the moon hits your eye like a big pizza pie, that's amore!

WATCH OUT, THE IRS MAY WANT YOUR QUICKBOOKS FILE

Recently, the courts have given the IRS the right to demand your software files. The IRS has gotten very aggressive in demanding the actual accounting software file, especially Quickbooks and other common software accounting programs. Before the advent of these software programs, providing a print out of the actual accounting data was usually sufficient for the IRS during an exam.

Now, with most agents being able to utilize these accounting software packages on their computers, they are demanding a backup of the whole accounting software, even if there are years in the accounting software that are not under exam. Also, any comments, memo or notes section of your software would be available for review by the IRS.

Just be careful what you write in your accounting software comments section. And remember, an IRS agent may be reading it in the future.

MY THOUGHTS ON THE PAYROLL TAX CUT IN OBAMAS NEW PLAN

President Obama will send his new jobs creation plan to Congress on Monday September 12th. He pitched it first in the Rose Garden surrounded by the kinds of folks that make for good press (vets and teachers, for example) and then send it to Congress for consideration.

I am not going to comment on all of the details of the plan at this time. First of all the press has given the details plenty of coverage and more importantly the specifics of the plan change and it goes through the legislative process. Outlining it early seems to confuse people when provisions that started out in the plan change. Once we see what the final bill, if any, looks like we will let you know.
I do want to give you my thoughts on the payroll break that is in the plan. Obama wants to extend the holiday and make the cut even deeper. The extension is a no-brainer.

Impact on Individuals

Making the cuts a bit larger is an interesting suggestion. Clearly, taxpayers like it when taxes get cut. But let’s keep this in perspective. It’s not a huge benefit for most taxpayers (a family making $40,000 would keep an extra $440 over the span of the year – or about $8/week). But most concerning, these are cuts to payroll taxes which are out of the Social Security fund. The Social Security fund is in enough trouble already and now they are putting less money in. That is hard for me to understand. How are we going to make that up later? Oh I know… Thanks kids and grandkids. Constantly banking on the idea that we’ll make up extra funds later is how we’ve gotten ourselves into the pickle we’re in now.

Impact on Business

Obama also wants to cut payroll taxes for businesses by 50%, to 3.1%, on the first $5 million in wages. As a business owner, I love this idea. But as a tax professional, I worry about it – for the same reasons articulated above. And I will say that while the cuts might make me happy because it’s less money out of my pocket, it wouldn’t make my business likely to hire new employees. Temporary fixes like that rarely benefit small businesses, in my opinion, because the long term consequences of a new hire are so uncertain. With the added responsibilities under the new health care law, for example, a temporary cut in payroll taxes won’t encourage small businesses to hire. I think they’re still going to be looking to cut employees – and take on cheaper, benefit-free independent contractors – rather than make new hires for employers. But maybe that’s just me.

In contrast, another business tax break in Obama’s plan that I do think has legs is the tax credit for hiring workers who have been out of a job for at least six months. The break is a $4,000 tax credit – not bad. Remember that tax credits are a dollar for dollar reduction in taxes which can be fairly significant, depending on your tax rate.

In terms of comparison of the two employer-side tax breaks, the tax credit for new hires is equal to the suggested “payroll tax cut” for employers paying nearly $130,000 in wages. In other words, you would pay $130,000 in wages as an employer under the new scheme before you would “save” as much as the amount of the credit. However, the payroll tax cut puts more in your pocket as you go while a tax credit generally gives you more of a benefit come tax time.

“Back to School” Tax Planning Beats an Apple for the Teacher!

September is halfway over, and school is back in session. If you have kids, you’ve probably already met the teachers. You may have even watched a football game or two.

It’s probably been a long time since you’ve sat in a classroom yourself. But school is never out if you’re looking to make the most of your money in today’s challenging economy.

What classes would you take to keep more of your income in your pocket? Try these:

• Math 1040: Where are tax rates headed?
• History 2008: Lessons from last year’s mistakes?
• Social Studies 463: Write off meals and entertainment
• Chemistry 162: Is there a “secret formula” for paying less?
• Anatomy 213: What’s the best strategy for healthcare benefits?

If you want to keep the most of what you make, you can’t wait ‘til finals for answers. You need to study now. Putting tax-wise ideas and strategies in place today could help avoid an ugly surprise when “Report Cards” come due April 15!

Email us today for your free tax analysis. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how “back to school” tax planning can save thousands more tomorrow. We guarantee you’ll leave with valuable new lessons, or we’ll donate $50 to your local school. Email now to schedule your Analysis.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Jack Nicholson plays a philandering CPA tax attorney coming to terms with his troubled relationships with women in "Carnal Knowledge." The 1971 movie co-stars Art Garfunkel as Nicholson's best friend in one of his few dramatic roles, along with Ann-Margret (right) and Candice Bergen as the women in their lives.

1099-K FORMS FROM CREDIT & DEBIT CARDS

The new payment card reporting rule is prompting revisions to the tax forms. For 2011, credit and debit card companies will begin to issue 1099-K forms on payments to merchants, and third-party networks such as PayPal will give 1099-Ks to payees with over 200 sales transactions and over $20,000 in annual sales volume.

These amounts will be reported on a separate line on Schedule C and Forms 1065, 1120 and 1120S. This way, the Service will be able to match the amounts shown on the 1099-K with what’s reported on a return, making discrepancies easier to spot. The IRS is hoping that this should reduce underreporting of gross receipts by sellers of goods and services.

$3.5 TRILLION TAX HIKE INCLUDED IN THE RECENT DEBT LEGISLATION

(Tax Foundation) -- TaxFoundation.org reports, "One of the least reported facts about the 11th hour debt limit deal between the White House and Congressional leaders is that it assumes that on January 1, 2013, virtually every working American will begin paying much higher taxes than they are today." According to the Tax Foundation, "baked into the deal is a $3.5 trillion tax increase, yet plan supporters say it does not raise taxes" since the "current law” (baseline) assumes that all of the Bush-era tax laws expire as scheduled at the stroke of midnight on December 31, 2012.

This means that all income tax rates will go up across the board, the child credit will fall from $1,000 to $500 and the marriage penalty will return. The analysis notes that meanwhile, federal spending is expected to total nearly $46 trillion over the next ten years.

If Congress should decide to not let the Bush/Obama tax laws expire, then there is an additional $3.5 trillion overdraft in the works.

This is just like if you were working on your family budget and because of past debts, you were close to bankruptcy. In order to make the budget balance, you budget that in six months you and your spouse were going to both get a second job and earn an additional $25,000. But six months later, you decide that you can’t handle working another part-time job and so, you default.

IS EMPLOYEE THEFT DEDUCTIBLE?

Q. We found out that one of our office workers stole about $500 from petty cash. Can we deduct the loss?

A: Yes. As with personal theft loss, the amount of the loss is generally treated as a deductible casualty and theft loss, reduced by the amount of any insurance reimbursements. But you could run into a problem if the IRS ever challenges your claim. Keep copies of police reports and other supporting documentation.

BACK TO SCHOOL TAX TIPS

I sent my youngest child, Ryan off to his first day of high school and my oldest son, James is celebrating his 16th wedding anniversary. I bet not many people can say that. With school starting, I have had several calls regarding tax strategies. I recently posted a blog about college credits and deductions. If you have a child in post- secondary or you or your spouse are headed back to school, you should check out that blog. Here is some other information about education:

1. School uniforms are not deductible, no matter how ugly they are. The IRS does not allow deductions for school uniforms, even if required, for public or private schools.

2. The cost of private school is not deductible. This includes both traditional private and parochial schools, though exceptions apply in some circumstances such as for special needs children and when it serves as child care.

3. The cost of private kindergarten – and some upper grades for students up to the age of 13 – may be deductible. Okay, I know I just said that the cost of private school is not deductible. And that’s generally true for tuition costs. However, if you can separate the educational costs of your program from any child care component, you may be able to deduct the child care piece. Clearly, this is easier for younger children since many programs are already separated out for you (half day kindergarten, for example, is often supplemented by a child care program in the afternoons).

4. Expenses for before-or after-school care of a child in kindergarten or a higher grade may be deductible as long as the costs qualify. Generally, qualifying costs for child care are limited to the care for your own children under the age of 13, qualifying as your dependents, for care while you work or while you are looking for work. Some cost limitations and other restrictions may apply.

5. You must subtract the cost of goods received when you contribute to band and sports fundraisers. Yes, I’m talking about the popcorn, Christmas wrapping and scented candles. Inevitably you feel obligated into buying stuff. In my case, I don’t feel comfortable asking friends and neighbors to buy stuff, so I just buy more. I now have enough Christmas wrapping to last me for the rest of my life and if food becomes scarce, the Kopsa family will be living on popcorn (if the microwave still works). There is no, or little to no tax deduction since the IRS requires you to subtract the value of anything you receive in return for a charitable donation.
Better solution: Just write a check directly to the school. In this case, the school gets to keep the entire amount and you take the full donation…unless, of course, you need more scented candles.

6. You may not deduct moving expenses for heading to college. I get asked this question quite a bit, but the answer is still no, year after year. The IRS doesn’t consider going to school a job.

7. The earnings in 529 plans are not taxable for federal purposes. A 529 plan is an education savings plan which takes its name from section 529 of the Internal Revenue Code. Investments in these plans grow tax-free and withdrawals are never federally taxable so long as you use them for eligible college expenses, which includes most costs associated with college such as tuition and room and board. The plans vary from state to state and there are entire web sites and publications devoted to them.

If you have any school-related questions, send them to me. Remember that you can email them, ask me on twitter or post a question on Facebook.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Edmund O'Brien plays accountant Frank Bigelow in the fast-paced 1950 film noir crime drama "D.O.A." The movie opens with Bigelow entering a police station to report his own homicide and then in flashback traces how he came to learn that he had been poisoned by a former client who needed him to notarize an incriminating document. The movie was later remade in 1988 with Dennis Quaid playing O'Brien's role, but in the remake Quaid is a college professor. O'Brien is shown here with Laurette Luez, who plays his client's mistress Marla Rakubian.

TAX DEDUCTIONS AND FUNERALS

A week ago, I attended a memorial service for one of my dear clients. This person lived a full life and died of natural causes. This person had passed away earlier this year, but they just held the memorial service last week. As I drove home from the service, I thought of our previous conversations and her intellect and knowledge of the world after living and teaching in Egypt for some time with all her travels.

As I drove on, my thoughts normally turned to…what else,...taxes. It was twenty-four miles to the memorial service and another twenty-four back home. I wondered how many times people miss these short drives and deducting it for tax purposes. Let's look at the calculation:

Twenty-four miles times 55 1/2 cents, (which is the new allowable mileage rate) means, that I get a tax deduction of $26.64. When I take into consideration my federal, state and social security bracket, this $26 saves me right at $11 in income taxes. Eleven bucks in my pocket because I'm paying fewer taxes. I never stop there. I always try to think of how much money I would have to earn to have the tax saving in my pocket. Given that it takes me about $18 before tax dollars to have $11, this is a deal.

I say over and over again, "It's not the big items that cause the tax savings, it's the little items that add up."

The message: Don’t forget to deduct all of your miles,…even the short trips.