Are You an Audit Target?
Oct 14, 2014
Each year there are individuals who are targeted for IRS audits based on minor decisions they may have made during the year. One goal during tax season, besides being on time, should be to completely avoid the IRS in an ethical manner. There are multiple ways that individuals may intentionally or unintentionally raise red flags, which makes them susceptible to an IRS audit. While there are a number actions that may call for an IRS audit, here are some of the more common red flags:
Charitable donations. Who would have thought being generous could land you in hot water? The truth is, usually, it won’t. However, people who are audited in regards to charitable donations are the ones who over exaggerate the value of their donations, generally when dealing with non-cash items. Avoid the headache of dealing with the IRS and be realistic when it comes to pricing your donations. Also, remember to keep all of your charity receipts just to be safe.
Reported income. Failing to report income seems like an obvious red flag to most people, but you would be surprised to find out how many people honestly forget to report certain income. If you are an individual with multiple brokerage statements, it may be a good idea to create a checklist to keep on hand, ensuring each form of income is reported. Being organized will keep you safe and less stressed come tax time.
Being a millionaire. While the red flags associated with charitable donations and reporting income are ones that you may be able to avoid, there is one red flag that may be waving regardless of your action. Once you become a millionaire, your chance of being audited increases exponentially. While the current audit rate is at 1% on average, the rate climbs all the way up to 9% if you make $1 million. Just to give you an idea of how much the risk of being audited grows in relation to what you earn, people who bring in more than $10 million have a 27% percent chance of an audit. Let’s hope these individuals are reporting all of their income as well, because this percent does not have a limit!
Overall, there are some red flags that individuals will be able to avoid and some that should be expected. The goal should be to eliminate as many red flags as possible while being remaining. Make sure you keep donation receipts, record realistic values on donations and report all of your income. Hopefully, you will be on your way to a headache free tax season!
By: Jason Wenner, Staff Accountant
Categories: Uncategorized
October 15 Deadline Upon Us
Oct 10, 2014
October 15, the deadline to file extended individual tax returns is fast approaching. This is a great time for a reminder that the extension applies to the filing due date, and it is not an extension of the due date to pay. Penalty and interest are still charged to an account if the resulting tax liability is not fully paid on April 15.
The terms “penalty and interest” sound gruesome enough on their own. Now throw in the fact that they’re showing up on an IRS notice, and it might be enough to make some taxpayers’ bones quiver.
But what if you don’t have the cash to pay the entire bill at once? The IRS will allow individuals to set up an installment plan, but that cost you too. Penalty and interest are still due, and on top of that there is a one time set up fee that can cost over $100. As scary as a large tax liability can be, surely one wouldn’t want to make it worse by adding to it. Well don’t fret, we have a viable solution: pay it down with a credit card and owe the bank instead of the IRS.
By: Anthony Mifsud, Staff Accountant
Categories: Uncategorized
Tips For Financial Planning Before Year-End
Oct 09, 2014
Now that the fall season is upon us, what a great time to review your finances before year-end, in order to be well-prepared when 2015 begins.
Develop a budget for now and for next year. Perhaps you have some financial goals you would like to achieve in 2015. Think about what changes you need to make in order to achieve those goals.
Review your health insurance. Open enrollment for health benefits is provided in October and November by many employers. It is important to review your health benefits information since your employer may have made changes due to health care reform regulations.
Increase your retirement contributions. If you’re not already saving for retirement, start now! If you are saving, determine if you need to save more and, increase your contribution to your investment accounts.
Review the balance in your flexible spending account (FSA). If you don’t use your FSA before the end of the year, you’ll lose out on the funds you have remaining. Now is the time to purchase new glasses, have dental work performed, or manage other qualified healthcare needs.
Make charitable contributions. Fall is also the time to clean out summer clothing you don’t need and donate it to charity. You may also want to clean out your basement and garage and take good condition items to your church or local charity. You will be helping others and also will get a tax deduction for 2014.
Review your home, auto, and life insurance coverage. In addition to your health insurance, now is the time to take a look at any changes you may need to make to your personal insurance coverage, which should be reviewed annually. If you have had any significant life changes or have any additional assets , you may need to purchase additional coverage.
Plan for vacations and holidays. It’s not too early to start saving for next year’s vacation. If you begin saving now, you will be able to put money away without having to come up with a large amount when the vacation comes. Now is also the perfect time to put a little extra away to cover the money you may want for your holiday spending.
Meet with your trusted financial advisors. This time of year is a great time to meet with our firm to prepare for year-end and to start tax planning for 2015. It’s also the perfect time to review your financial status and discuss strategies to achieve your financial success.
Categories: Healthcare & Dentistry
Reporting Useful Costing Data
Oct 08, 2014
I was having lunch a couple days ago with a controller from a manufacturing company. He was talking about the new ERP software system that was implemented and how well it had been working. He explained that several variances are broken-out which are useful, however he is not able to get actual results. He said his boss, the president of the company, wants actual results.
The more we delved into the topic, the more apparent it was that the president did not understand the variances. It appeared the standards seemed to be reasonable, and for the most part, they were able to calculate variances based on the differences for the categories they needed, but he still did not understand.
Sometimes users of various reports become accustom to viewing a report one way, in this particular case, actual. This sort of routine can hinder your team from seeing a new perspective, especially when the new information could be deemed even more valuable than the prior information reported.
Take the time to talk with those employees who review report results to confirm they are getting the information they need. Also make sure they recognize that different information is not wrong, it may even be more correct. It is your job to educate them on what they are seeing and how and why it is useful to them.
The main issue in this situation is that since the president is wanting to see actual results and the controller is not able to explain to the president the variances and the information he does have, he is doing what almost everyone I come in contact with does: works outside the system. In the end, he has created an Excel spreadsheet that helps him determine the actual results!
Do not work outside your system! Remember 88% of all Excel spreadsheets have errors! Use the software you have to create meaningful reports and educate your staff on how to read those results to get the maximum benefit.
Categories: Cost Accounting
Special Per Diem Rates for 2014-2015 Travel Expenses Issued
Oct 07, 2014
The IRS has released its annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2014 and 2015. IRS Notice 2014-57 includes rates for incidental-expenses-only deduction, special meals and incidental expenses in the transportation industry, and high-low substantiation method.
Rates for special meals and incidental expenses in the transportation industry are $59 for travel anywhere in the continental United States and $65 for travel outside of the continental United States. Regardless of whether you are traveling inside or outside of the continental United States, the per diem rate for incidental expense-only deduction will be $5 per day. The per diem rates for the high-low substantiation method have increased from $251 to $259 for travel to any high-cost locality and $172 for travel to any other locality in the continental United States. Out of the $259 high rate and $172 low rate, the amounts treated as paid for meals is $65 for travel to any high-cost locality and $52 to any other locality within the continental United States. A list of high-cost localities with a per diem rate of $216 can also be found in Notice 2014-57.
These new per diem rates went into effect on October 1, 2014 and are intended for any employee traveling away from home on or after that date.
By: Rachel Mossing, Accountant
Categories: Uncategorized