Tax help for members of the armed forces

The IRS provides some resources for members of the armed forces. If you are in the military, you may find the the following links helpful.

This is an IRS website page dedicated to providing information to members of the armed forces. http://www.irs.gov/newsroom/article/0,,id=97273,00.html

Also here are links to Publication 3, Armed Forces' Tax Guide. There is an online version and a PDF.
Online: http://www.irs.gov/publications/p3/index.html
PDF:    http://www.irs.gov/pub/irs-pdf/p3.pdf

If you would like a paper copy of the document, contact the IRS by telephone. 1-800-829-3676

Organize to save money on accounting fees!

Many people are surprised at how much it costs for their CPA to prepare their returns. Hiring an expert to do your taxes is a good idea, and most of the fees are money well spent. However, some habits may be costing you a lot of money, and they could lead to errors. What are these habits?

• Disorganization
• Sloppy bookkeeping
• Unresponsiveness

This is how those habits cost you and what you can do about them.

 

Disorganization

It is amazing how many people simply gather up any documents that they think might somehow be related to their income tax, stuff them in folders or large envelopes, and send them to their CPA. The CPA will review and make copies of everything. Many of the documents will turn out to be unnecessary. Even so, once their CPAs start going through the files, they find that many important items are not included. The CPA will then have to contact the client and ask for the missing documents. This adds to the expense of preparing the return because the accountant spends additional time and expense on the unnecessary items and them spends extra time tracking down the missing items.

A few common examples are listed below.

Housing related items

Taxpayers that own homes may be eligible to deduct mortgage interest, PMI, and property taxes. The only documents that the accountant needs are the mortgage interest statements from the holder of the mortgage and property tax receipts. It is generally not necessary to provide monthly statements for the mortgage or tax notices. Taxpayers should be sure to let their accountants know what they paid, and in instances where they may not have paid an item (such as delaying a property tax payment) what they have not paid.

Taxpayers that sold or purchased a home should generally provide the settlement statements to their accountants. This will help the accountant evaluate whether there are deductible expenses related to the transaction, and it will help confirm whether the taxpayer qualifies for gain exclusions. If the home was converted to or from rental use or vacation property, then it is especially important to provide this information.

Clients with home offices should keep additional records.

Bank and brokerage accounts

Clients with bank and brokerage accounts will often provide monthly, quarterly, and annual reports. Clients may, or may not, provide the relevant 1099s. The CPA will review all of the documents. If the 1099's are not provided, the CPA will contact the client and ask for them. It is especially important for clients that receive stock based compensation and clients that do a lot of trading to review their documents and make sure that the CPA has what he or she needs to complete the return, and that unnecessary information is not included in the file.

Business expenses

Unless your accountant set up and maintains your bookkeeping, he or she has no way of knowing the details of your expenses. Clients frequently bring folders and envelopes full of receipts to their CPA. All that is really necessary is a set of financial statements and a summary of expenses. The reason that this increases the cost of the return is that the accountant will have to organize the receipts, and this takes time. It is much less expensive to organize expenses than it is to pay the accountant to organize them for you.

Clients who use automobiles for business should keep records and provide them to their accountant.

Childcare expenses

Clients with children who pay for childcare should provide information about the care provider including the address, tax ID number and the amount paid. If the client used a flexible spending account, or if the employer provided a childcare benefit, then the client should provide that information as well.

Sloppy (or no) bookkeeping

Many business owners try to save money by limiting their record keeping. When the do decide to keep detailed records, they often consist of spreadsheets. Once the records get to complex for spreadsheets then business owners will buy a bookkeeping program. In the long run, none of this saves money. If the books are not well organized then the accountant may have to virtually redo them in order to prepare the tax return. This adds to the cost of the return, and it is more expensive than it would have been to have had the books properly prepared before bringing them to the CPA for tax filing.

Another thing that adds to the cost of preparing tax returns is when accounts are set up incorrectly. When accounts are set up correctly, then they can be configured in a way that makes it simple to produce reports in standard formats. These formats include tax reporting formats as well as formats designed to help manage a business.

A final problem for many taxpayers is failing to separate personal and business expenses. Ideally, business owners will have different bank accounts for business and personal use. If that is not possible, then at the very least, they should keep personal items out of their business records by flagging them appropriately so that they can be identified and excluded from reports.

Unresponsiveness

Many clients do not respond when their accountant tries to contact them. The reason the accountant is calling is either to find missing information or to clarify something that is not clear. When clients do not respond, their returns remain unfinished. Tax preparers have to set the return aside and wait for the additional information. When the client does respond, sometimes weeks later after several emails or telephone calls, the preparer will reopen the file and begin working on the return. Unfortunately, it will probably not be fresh in the preparer's mind, and it will take longer to complete than if the missing information had been available sooner. Unresponsiveness increases the cost of preparing your return because it is difficult to work with missing information and it takes longer to prepare the return. In addition, every one of those phone calls and emails take time.

Changing your habits

Now that you know about these three money saving bad habits, you can start changing your behavior.

Get organized!

Talk to your CPA or the professional that prepares your filing. He or she can tell you exactly what you need to do in order to simplify your tax filing and to make it less expensive to prepare your return. Take advantage of the checklists and organizers your accountant provides. Spend a little time reviewing your documents before you take them to your accountant.

Keep records throughout the year, and organize them so that they will be ready for your accountant. If you drive an automobile for work, get one of those auto record books and keep it. Keep your business and personal records separate.

Get help with your records.

It is worth your time to talk to your CPA or to a bookkeeper to learn how to set up your records. If you have a small business, seriously consider purchasing bookkeeping software such as QuickBooks or Peachtree. If you do, it is worth your while to ask your accountant or bookkeeper to help you set up your books. If you simply don't want to organize your own records, or if they are too complex, then hire a bookkeeper. The cost of paying a bookkeeper to do your books throughout the year will be less than the cost of asking your accountant to do it a month before your taxes are due.

Return your calls! Respond to email!

When the CPA calls or emails, assume it is important and respond! If you do not return your calls or answer your email, then one contact becomes two or three or more. Your CPA will be able to complete your return faster and for less cost if you respond when he or she tries to contact you.

Green Building Myths

We’ve all heard the arguments over sustainable building and renewable energy. Let’s take a look at three of them.

Sustainable building is too expensive.
There is nothing inherently expensive about sustainable building. At its simplest, sustainable building uses common sense design principles such as considering the sun and prevailing winds when deciding where to build or using design principles that provide shading or natural ventilation.

Green houses look funny.
Some of them do, but most green houses look like every other house on the block. If you want to build a dome or an underground house, go right ahead. However, many of green building concepts being “discovered” today have actually been around for a long time. Deep wrap around porches, dog trot style homes, and two story houses with windows at the top of the stairway are timeless designs in the south that embody “modern principles” such as shading, natural ventilation, and “chimney effects.” Northern homes have used enclosed entries for years. The “airlock” concept is nothing new. The only difference between many green homes and other homes is size of the utility bill!

Solar power, wind power, and rainwater collection is too expensive.
Yes. Those things do cost money. However, green building is not about finding ways for people to become miniature utility companies. In fact, before you even consider producing electricity or harvesting rainwater, you should figure out how to avoid wasting the electricity and water you already use. With that said, alternative power sources are becoming less expensive, and electricity from coal, oil, natural gas, and nuclear sources is becoming more expensive. Rain has been a water source for hundreds of years, and in some places as aquifers are pumped down, rain is more reliable than a well.

Lessons from the Gym – Making Resolutions

I go to the gym fairly regularly. I belong to a popular chain that has several facilities here in the Austin area. Some of the locations are new. Some have been around with various names and owners for decades. Gyms are great places to think about how to manage a business. There are a lot of business models in the fitness industry, and in the gyms I frequent, there are many types of customers. This is a series of short articles reviewing business concepts and practices. I might have thought about them while I was on the treadmill or doing push-ups, but I expect you will discover, as I did, that they apply in the boardroom and at the cash register.

This is the end of January. It could be any year, but 2012 is unusual in some respects. The economic recession continues to linger; international economies are paying the price for years of profligate spending by governments and individuals; millions of people are unable to find work. People dependent on their savings are earning a pittance in interest because the central banks are holding interest rates down. To make matters worse, the Mayan calendar ends in 2012, and opinion is divided on whether this means life on earth will end or life will go on.

Did you make any New Year’s Resolutions? Judging by the strangers in the gym, a lot of people resolved to get in shape this year. Gym regulars refer to the newbies as “resolutioners.” The gyms start getting crowded during the first three weeks of the year, and they will stay crowded until the end of February. I work out in the morning before work, so they phenomenon is not as pronounced, but during the lunch hour and after working hours, the gyms can be packed. A friend recently commented that the gym is like an ant farm after work. By March, however, there is space in the parking lot, exercise classes are back to their normal sizes, and there is no competition for equipment.

According to Market Research World only 27 percent of people with gym membership in the UK go to the gym regularly. I recall reading a much smaller number for the US in the annual report of a publicly traded fitness company several years ago. (Interestingly, there is a new membership model that charges people more when they do not go to the gym.)

How does this apply to your business?
You may not realize it, but you make similar resolutions in your business routinely. This will be the year that you will increase sales, or this will be the year you plan to reduce expenses. How can you avoid the fate of the resolutioners that start strong in January, and abandon their fitness goals by March? The first step is to take your goal setting seriously. Many people make resolutions because it is the thing to do in December. Unfortunately, failure also seems to be the thing to do. Why? Simply naming a desire is not sufficient. Achieving a goal means naming the goal, and the date you want accomplish the goal. The resolutioners that joined the gym without goals wasted their money.

Fortunately, some people are going to succeed, and it is not difficult to figure out who they might be. They are the ones with specific goals. One good example is a friend of mine, who is starting a program with Weight Watchers. He has a goal and a plan to accomplish the goal. His goal is to lose a specific amount of weight by a certain date. His plan is to be more diligent in his exercise and to follow the Weight Watchers program. Sadly, many of the new people in the gym have no goals. Instead they have vague desires to get in better shape or to look better.

Consider the following statements.

• I will get in better shape.
• I will lose weight.
• I will start running.

These statements do not define goals. Compare them to these statements.

• I will lose 10 pounds by May.
• I will be able to run two miles by April.

The first set of statements is really nothing more than a list of desires. The last two statements express the same desires, and add a specific measurable objective and a deadline. Notice that the specific measurable objectives also lend themselves to being broken down into interim goals. Losing 10 pounds by May means losing two and a half pounds a month. Running two miles by April may mean running a mile by the end of February. Beginning with well-defined goals helps you develop a plan to accomplish your goals.

 

 

What about your goals? Did you begin the year resolving to increase revenue and decrease expenses? If you hope to do that, then restate your goals more specifically so that you are more likely to achieve your desire. How much do you want to increase revenue and by when do you want to increase it? How much do you want to decrease expenses? How will you begin? If you want to increase revenue will you do it by increasing volume or price? Will you expand share in existing markets? Will you explore new markets? How will you reduce expenses? Is your goal to reduce overhead? Do you want to reduce your cost of goods or the cost of selling? Be specific when you set your goal. If your goals are specific, measurable, and time bound you are more likely to achieve them.

Good luck with your resolutions, and happy New Year!