Tax Return Identity Theft – What Should You Do?
Mar 26, 2014
Recent reports of identity theft related to tax filings have been reported by local dentists. We would like to take a moment to remind you that the IRS uses your Social Security Number (SSN) to make sure your filing is accurate and complete, and that you get any refund you are due. An unexpected notice or letter from the IRS could alert you that someone else is using your SSN. However, the IRS does NOT contact taxpayers by sending an email, text or social media message that asks for personal or financial information. If you get an email that claims to be from the IRS, do not reply or click on any links. Instead, forward it to phishing@irs.gov.
If someone uses your SSN to file for a tax refund before you do, the IRS might think you already filed and got your refund. When you file your return later, IRS records will show the first filing and refund, and you’ll get a notice or letter from the IRS saying more than one return was filed for you.
If you think someone has used your SSN for a tax refund or the IRS sends you a notice or letter indicating a problem —contact the IRS Identity protection unit immediately, 1-800-908-4490. Specialists will work with you to get your tax return filed, get you any refund you are due, and protect your IRS account from identity thieves in the future. Make sure you take the following steps to minimize the effectss
- Complete IRS Form 14039, Identity Theft Affidavit, and attach it to a paper-filed tax returnto the IRS with a letter of explanation. You will also need to include with the Form 14039 the following:
- A clear and legible photocopy of your identification – a passport, driver’s license, social security card, or other US Federal/State government issued identification.
- Telephone # to best reach you (home, work, cell) and a best time to call
- Contact the Federal Trade Commission to report the identity theft at www.consumer.gov/idtheft, or call the hotline at 877-438-4338.
- Contact the Social Security Administration at 1-800-772-1213.
- Contact each of the three major credit bureaus:
- Equifax www.equifax.com 1-800-525-6285
- Experian www.experian.com 1-888-397-3742
- TransUnion www.transunion.com 1-800-680-7289
- Notify your personal financial institutions/banks.
- Consider filing a police report, but without a lot of information, the local police often won’t file a report.
Once the IRS receives the Identity Theft Affidavit they will begin their investigation. Please be aware there are significant processing delays with this unit. You must allow 204 days (6-8 months) for their investigation. There are over 1 million cases, so it is a long process! If no information has been provided after 204 days, then we suggest calling the specialized unit at 1-800-908-4490.
Categories: Healthcare & Dentistry
Ohio Bureau of Workers’ Compensation Agency Revamps Safety Intervention Grant Program
Mar 25, 2014
If you are an employer in Ohio and have not had an opportunity to review the BWC’s Safety Intervention Grant program, time is of the essence to do so.
The items available for the Safety Grant have changed – they now include items that would assist medical offices of all kinds in patient moving and patient care, as well as automatic transplanters for agriculture environments, and industrial applications like powered dolly equipment for stairs, wheeled carts, walk-behind loaders, and power equipment designed to turn valves.
The grant is a 3-to-1 matching grant, up to a maximum of $40,000 per eligibility cycle. To be eligible, you must be current on your BWC premiums, demonstrate a need for a safety intervention, and have active BWC coverage with four past payroll reports for private employers.
To get started, review the link on BWC’s website. Gather your information and schedule a visit by a BWC safety consultant before you complete the application – then you won’t be spinning your wheels. You will have to submit quarterly reports back to the BWC, but that is not unusual in the grant process.
Best practices, case studies and success stories are available at the BWC site as well.
For more information contact Sharon Trabbic, COO, at William Vaughan Company at 419-891-1040, and stay tuned on significant changes coming to the Ohio’s Workers’ Compensation program in 2015. William Vaughan Company will be hosting a free, informational seminar in the fall of 2014 to review the changes. As soon as a date is confirmed, we will send all our clients registration information.
By: Sharon Trabbic, COO
Categories: Uncategorized
Preventative Maintenance: Is It Broken Yet?
Mar 24, 2014
Have you heard the term “world class maintenance”? I am by no means an expert on the subject, but my understanding is that it refers to performing consistent preventative maintenance on machines and other equipment on a regular basis before a breakdown occurs to minimize or eliminate downtime.
When I first heard it, it made perfect sense. Anyone who works in manufacturing surely knows that unscheduled down time can be costly. I was speaking with someone the other day who works for an auto manufacturing plant, and they follow the WCM theory. I found it very interesting however when he started telling me about all of the overtime he worked two weeks ago because of a particular robot that kept going down.
The production line that he was working on was machining with two mirror lines both feeding into an end line washing station before heading to staging and assembly. The robot was in the washing component of the line. The purpose was to pick up the part after it had been machined and rotate it around for thorough washing. He proceeded to tell me that the motors on the robot had been replaced twice in the past few months and management did not want to stop the line to do so.
So my first reaction was why are we fixing the robot after the fact? If we were doing our preventative maintenance (PM) wouldn’t we have known there is a problem with the motor? Now I know you can’t catch everything in a preventative fashion because sometimes things break unexpectedly. But twice? The new motor breaks again and no one wonders what is going on? I do not have the knowledge, nor the skill to fix a machine of such nature. However, as I kept probing with questions I found out the Company had all of the parts to perform the PM for nearly a year, and did not do it. Anyone as intrigued as I was?
Here’s the cincher, the robot used to perform the washing function was NOT waterproof! Hence, the motor kept getting wet and burning out. This particular person had only been privy to the last two motor changes. Apparently there had been more. They were waiting on the robot to “die” before they replaced it with the one that had been “waterproofed”.
I can tell you that this individual spent almost three full days including overtime working on the second breakdown. Did anyone look at this? Does it really make sense when we have the replacement robot to keep repairing the old one? The cost of new motors that are going to knowingly fail, the downtime on the line, the wages and overtime of the maintenance crew, all for what? I asked him why and this was the answer I received: “we don’t stop. Management does not want to stop the line for anything and to schedule a shutdown of the line to replace the robot is failure because we are unable to produce anything.”
Can someone please explain? In my world, we would have saved more money by scheduling the down time and replacing the robot one time as opposed to the numerous times spent trying to repair it, knowing that it would not work. This one seems obvious to me. Better decision making will result in better costs. Matter of fact, just being logical will result in better costs!
Categories: Cost Accounting
Tax Blueprint for the Construction Industry
Mar 20, 2014
In an effort to help collect more of the taxes owed to Uncle Sam, the IRS is providing information to educate the construction industry. “Contractors, subcontractors, as well as individual workers need to be aware of everything that counts as income and proper accounting methods so they pay their fair share of taxes,” the tax agency stated in a Fact Sheet. “They also need to be aware of all deductible expenses so they don’t overpay their taxes.”
The IRS continues to zero in on what it calls the “tax gap” — the amount between the taxes that are voluntarily paid and the amount the tax agency believes is actually due.
To this end, the IRS has issued a series of documents to provide better understanding of the tax code. One example is specifically directed at the construction industry.
The tax agency emphasizes instances where taxpayers failed to report, or under-reported, income from construction activities. This applies to individual workers as well as contractors and subcontractors. Following are the highlights:
Accounting Methods
Generally, income and expenses are based on either the cash method or the accrual method of accounting. “Either method must clearly reflect a consistent treatment of income and expenses from year to year,” the IRS notes.
Many construction businesses use two different tax accounting methods: one for long-term contracts and an overall method for all other items, which is often the accrual method.
1. Accrual accounting: This method requires reporting income in the year earned and expenses in the year incurred. The purpose of an accrual method of accounting is to match income and expenses in the correct year.
Two commonly-used accrual methods are used in the construction industry:
- Under the “completed contract method,” all income and expenses from a contract are reported when the project is completed and accepted by the customer.
- With the “percentage of completion method,” income is reported proportionate to the costs incurred to date as compared to total estimated costs for the contract.
2. Cash accounting: As the name implies, cash receipts are reported as income when received and expenses are reported when paid. For this purpose, “receipt” occurs when a contractor has unrestricted access to income. Contractors who are able to receive money in one year, but chose to defer receipt, must include the cash as income in the earlier year.
Note that a C corporation, or a partnership with a C corporation as a partner with average annual gross receipts exceeding $5 million, may not be allowed to use the cash accounting method.
Deductible Expenses
It is well-established that a construction business can deduct its “ordinary and necessary” business expenses. An “ordinary” expense is one that is common and accepted in the construction business. A “necessary” expense is one that is helpful and appropriate for the construction business. Note: The expense does not have to be indispensable to be considered necessary.
Several common business expenses that may be deducted in the year they are incurred are:
- Utilities;
- Car and truck expenses;
- Advertising;
- Employee salaries;
- Trade association dues;
- Rent expense;
- Supplies;
- Continuing education;
- Small tools expected to last one year or less;
- Steel toe work boots; and
- Business licenses.
On the other hand, expenses for business assets that are expected to last more than a year must be capitalized and depreciated over their useful lives. Some examples of these assets include:
- Cement mixers;
- Compressors;
- Ladders;
- Other heavy machinery; and
- Buildings and real property.
Be aware that personal expenses such as clothing that can be worn off the job site, fines and penalties, and the non-business use of vehicles or computers, can’t be deducted. Other expenses, including certain meal and entertainment expenses, may be deductible in part or only if certain conditions are met.
Reminder: The burden is on you to comply with the prevailing tax laws and regulations. If you have any questions regarding your responsibilities, consult with your tax adviser.
Categories: Construction & Real Estate
Profit Does Not = Cash
Mar 20, 2014
Recently, I was talking with one of my new business tax return clients and she commented to me that she realized she had a tax profit this year but it did not seem to have much to do with her cash. We have scheduled a meeting to discuss this with her further. I am sure many of you have had this same issue. What answer would you give?
There are many different ways to determine what your “profit” is for the year. There is GAAP reporting that would calculate profit a certain way, accounting for accruals, prepaids, depreciation over longer periods than tax, etc. Then there is tax reporting that may be similar to GAAP, but most certainly would have accelerated depreciation methods. Tax may also be on a cash basis where the accruals and prepaids, receivables, and payables would need to be reversed. Then of course there is management profit, which may still be a different number. Which number is right is only relevant for what you are trying to do. If you are doing a tax return, then you need to determine your taxable profit, or loss. If you are having an audited financial statement then GAAP basis profit, or loss, would be necessary. Neither of these may be the best methods to look at to make management decisions.
Many things effect our profit. In a manufacturing environment, you may be costing your product ineffectively which is effecting your bottom line. You may also have excessive inventory at the end of the year that you are unable to expense and have not sold, which again effects your bottom line and cash. You still spent the money to build the inventory, you just have not sold it to recognize profit, or the full expense.
Other simple reasons exist as well. If you are a company with a large amount of debt the principle payments of that debt is not an expense but it most certainly takes cash. If you pay a lot of your debt, you may still have a high profit, because the cash was not left for deductible expenses. Also you may be a cash basis taxpayer where your receivables have dramatically decreased from the prior year, which will add income to your bottom line, etc.
It is important to realize what your goal is and what rules you should be following for that goal, and understanding income does not necessarily equal cash flow.
Categories: Cost Accounting