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EisnerAmper Blog

Private Business Services Blog - An Accounting & Advisory Resource

What you need to know before moving anything to the “CLOUD”.

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August 27, 2014

 

“The Cloud”.  You see it everywhere.  Everyone wants to be there.  People tell you that you need to be there.  But what is it?  Why is everyone talking about it?  What does it mean for your business?  What is a Public Cloud, a Private Cloud, a Hybrid Cloud?  If you are trying to understand all this before you move there, you are not alone.  Learn what is behind “The Cloud”, who the major players are, why you should consider moving there (or not), and more importantly, what you need to know before you choose your Cloud partners.  
What “The Cloud” really is

  • Why you should (or should not) consider moving anything there
  • What problems “The Cloud” will solve (or create) for you
  • What improvements/advantages does it offer
  • Who are the major Cloud vendors, why, and what they offer
  • What SaaS and multi-tenancy mean for you
  • What are Public, Private, and Hybrid Clouds
  • What are Virtual Desktops, Virtual Servers, Published Applications
  • What is the future of the PC, the tablet, the smartphone
  • What does all this mean for your existing technology investment
  • The emergent issues re: Privacy, Security, Reliability, Performance, Disaster Recovery
  • Why studies show a significant level of dissatisfaction with “The Cloud”
  • What are the hidden costs, unforeseen issues, problems
  • All the questions that you must ask before moving anything to “The Cloud” to ensure success

If the issues above have peaked your interest, consider joining me and Bill Blum of Alpine Business Systems, Inc. on September 23, 2014 for a webinar that will broadcast between Noon and 1PM Eastern.   Stay tune for event registration early September on our event page.

What Are My Chances of Being Audited?

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August 5, 2015

 

By Daniel Gibson, CPA
 
Gibson_New(1)This is probably one of the most frequently asked questions by taxpayers.  Your chances of getting audited depend on many factors.  Do you have only wage, interest, and capital gain income and take the standard deduction?  Your chances are probably less.  If you take a large charitable contribution deduction, have a Schedule C, or own rental property, then your chances are likely to be higher.  The same is true for business returns.

However, based upon new data from the IRS, the matrix for tax examinations over the past ten years has evolved.  From 2011 to 2013, the number and percentage of audited returns has decreased pretty much across the board.  For individuals with income of $200,000 or more, the number of audits did increase between 2012 and 2013, but the percentage of returns audited decreased.  On the other hand for that group, the number of correspondence audits decreased, but the number of field audits increased.  A field audit can be far more intrusive than a correspondence audit, which in some cases may be limited to a specific item such as charitable contributions. 

You should keep in mind that 2013 was the year of sequestration.  That put a crimp in many of the IRS programs.  Future comparisons could show an increase in the audit rate -- or not -- if Congress cuts the IRS's budget as the House is trying to do. 

While the numbers are interesting and give an idea of your overall chances of getting audited in a particular category, the IRS is more likely to pick your return because of a particular triggering item.  A trigger could be charitable contributions materially in excess of the average for returns at your income level, or claiming a substantial deduction for property contributions.  Property contributions beyond a certain amount require an appraisal, which are frequently challenged by the IRS.  There are a host of others. 

And while the IRS may be auditing a fewer percentage of returns, they're also auditing smarter.  They're focusing on issues more likely to produce results for the government.  States are also getting smarter; using computers to analyze data and entering into share agreements with the federal government.  You could escape an IRS audit only to be trapped by your home state, or a state in which you do business. 

Of course, none of the percentages matter if your return is picked.  Just understand that playing the audit lottery has become more dangerous.  If the IRS can assess the accuracy-related penalty, it will.  That'll add 20% to your tax assessment.  Interest and late-filing penalty assessments will also increase the total and it can add up quickly. 

Best advice?  If any government agents contact you, call a tax professional.

How to Deal with the IRS If You Are a Closely-Held Business

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July 31, 2014

By Daniel Gibson, CPA

 
Gibson_NewIf you have ever squared off with a Revenue Officer or Revenue Agent, you know how difficult it can be to resolve your tax issues.  Often our actions bring out the worst in a Revenue Officer or Agent.  Here are just a few points to keep in mind when things get “hot” with the IRS.
 
Keep in Touch with the IRS
If you're behind on taxes and want to stay in business, one crucial thing to remember is to keep in touch with the IRS.  The agency might leave you alone for a while, but you can bank on the IRS coming back around again -- probably at a most inopportune time.  Consequences for ignoring the IRS can be dire -- penalties and interest increase, easily doubling what you owe, and you may even lose your business!  The IRS’ collection power is enormous.  The IRS can seize assets and effectively close down operations.
 
Provide Information to the IRS
For the most part, you should be cooperative and provide financial information to IRS when requested to do so.  You’ll probably want your accounting firm to review it before passing this information along.   However, when you feel the IRS is getting too intrusive, don’t hesitate to push back.  If the IRS wants it bad enough, they’ll issue a summons that will require you to come forth with the information.  At that point, you’ll definitely want to seek tax counsel before complying with the summons.
 
IRS Threats Are Usually Worse Than IRS Actions
Unless the issue relates to large unpaid payroll tax liabilities, the IRS is normally not interested in shutting down a business.  This can be somewhat comforting and allow you to continue working through the tax debt problems with the IRS.
 
Ask for a Payment Plan and/or Discount
In most cases, the IRS will allow taxpayers to enter into a monthly installment plan.  However, remember that penalties and interest will continue to accumulate on the balance, even if you enter into a plan.  With an explanation that fits into the IRS’ definition of reasonable cause, penalties can be reduced or eliminated.  However, accumulated interest and accumulating interest are usually non-negotiable.
 
Offer a Compromise
Requesting an offer-in-compromise is a lengthy, formal process in which the business fills out an IRS form, provides detailed information about its precarious financial situation, and requests that the IRS accept only a portion of what the business owes.  If the IRS believes that it is unlikely to collect more in the future -- so that accepting less now is in its best interest -- it will likely accept your offer in compromise.  Just remember, it has to be in the IRS’s best interest, not yours.
 
"Uncollectible" Status
If your business' financial situation is truly in the tank, you can request "uncollectible" status.  If the IRS agrees, it will leave you alone for a certain period of time.  However, they’ll periodically revisit your situation in the future.   You will still owe the tax and penalties (and interest will accumulate), but the IRS will not engage in collection efforts against you during the time you are in this status.
 
Consider Bankruptcy
Most people don’t care for the ‘B’ word, but you need to be ready to use it if your circumstances warrant it.  Rules are complicated, so engage a bankruptcy attorney long before you declare bankruptcy.
 
Guns and Badges
If you ever get a visit from IRS Special Agents who show you a badge and are carrying guns, politely ask them for their cards and tell them your attorney will get back to them shortly.  Never speak to them, provide them with information or allow them to roam around your business without the advice of legal counsel.  These agents are from the criminal investigation division of the IRS.  Their mission is to put taxpayers in jail.

Things to Remember When Communicating with the IRS

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July 21, 2014

By Daniel Gibson, CPA

Gibson_New(1)The Internal Revenue Service (IRS) sends millions of notices to taxpayers every year.  Some notices alert taxpayers of unpaid or underpaid tax amounts as determined by the IRS.  Others advise of overpaid amounts resulting in refunds or credits towards other liabilities.  Yet others warn of impending collection actions by the IRS (e.g., liens or levies) for past failures to pay taxes, or even failures to file returns.  Notices also alert taxpayers of rather simple and mundane corrections made by the IRS to filed tax returns to fix simple mathematical errors.  Some letters or notices request supporting documentation for routine information reported on a return.

The common and even understandable first reactions bring forth confusion, denial, distress or even outright panic.  Even worse, you might think that your tax professional did something wrong.  Yikes!

Instead of reacting this way, you are better served by calmly reviewing and trying to understand the notice, and then responding directly to the correspondence in a timely fashion or immediately contacting your professional preparer to obtain assistance.  To help you deal with these pieces of mail, here are some things you should know and consider with regard to IRS notices:

  1. First and most importantly, don’t ignore these notices.  As a general rule, never let a notice go unanswered. 
  2. When you receive a notice or letter from the IRS, immediately read it closely to see exactly what the notice or letter is saying or requesting.  Each letter and notice generally will offer specific instructions on what you are asked to do to satisfy the inquiry. 
  3. Don’t assume the worst.  You are not necessarily in trouble or do not necessarily owe more money when you receive a notice from the IRS.  As stated above, there are a number of reasons why the IRS might send you a notice.  Not all of them are catastrophic.   
  4. Don’t assume the notice is correct.  If you receive a correction notice, you should review the correspondence and compare it with the information on your return. 
  5. If you choose to handle the matter on your own without counsel or another authorized representative, you should send a written explanation of why you disagree with the notice and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice.  Always be mindful of time deadlines listed in the notice for filing your response.
  6. The IRS advises taxpayers that most correspondence can be handled without calling or visiting an IRS office, and this generally is true.  If you have questions, you can call the telephone number in the upper right-hand corner of the notice.
  7. Be aware of your rights as a taxpayer.  Some notices request a taxpayer to bring additional information or records to a local IRS office and may request that the taxpayer appear and answer questions.  Federal law requires that such notices be accompanied by IRS Publication 1 which includes a notice to the taxpayer of his or her rights to be represented before the IRS by an authorized representative. 
  8. Always keep copies of any and all correspondence you send to or receive from the IRS (especially for future reference to help a tax professional that you might later hire to take over the matter for you).  Furthermore, to protect you in case you receive contradictory or erroneous advice from an IRS representative, also keep a record of the names and identification numbers of every IRS agent you speak with on the phone with regard to the matter in the letter or notice.  All IRS personnel are required to give you their name and identification number, and generally will offer it at the beginning of every phone call.
  9. When sending documents to the IRS, never send originals.  Always send copies.
  10.  The IRS never makes initial contact with a taxpayer via e-mail.  Since these e-mails are always phony, you should never respond to them.  You should also not open any attachments, since they might contain malware.  Forward a suspicious e-mail to phishing@irs.gov.

What is a Sales Tax and What is a Use Tax?

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January  22, 2014

Gibson_New(1)By Daniel Gibson, CPA

Understanding the nature of a sales tax is critical to establishing an effective program to administer the tax. So, what is it?

Sales Tax: The sales  tax on the sale of tangible personal property and certain taxable services.

If you sell tangible personal property to someone else, that sale is presumed to be taxable unless it is specifically excluded/exempted by statute. On the other hand, if you sell a service to someone, that sale is presumed to be non-taxable unless that service is specifically included by statute.

The presumption of taxability is also important in another sense. Have you ever heard the term "innocent until proven guilty?" Unfortunately, that is not the way it works in connection with the sales tax. When you make a sale of tangible personal property or a taxable service, the sale is presumed to be taxable, which means the burden of proof to show that it is not a taxable transaction falls on you.

Use Tax:  A use tax is a tax on the storing, using, consuming, and sometimes distributing tangible personal property or providing a taxable service. In other words, you will be subject to the use tax in the state where that event occurs.

A use tax is considered a compensating tax or complementary tax. This means the use tax is assessed and due on the property or taxable service when the sales tax has not been paid. For example, have you ever bought something from a mail order company and they did not charge you tax on the item. Did you self-access (this makes sense as access, but it also makes sense (to me) as assess—is access correct? and pay the use tax due on that item? You see, you bought an item and did not pay sales tax to the seller, but you stored, used, or consumed that item in your state. The purchase is now subject to your state's use tax.  As a general rule, all states that have sales tax have a use tax.

If you want to learn more about this topic, please take part in a webinar titled Golden Rules of Sales and Use Tax featuring Andria Siciliano and myself on February 11 at Noon E.T. 

The New Net Investment Income Tax

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December 12, 2013

By Daniel Gibson, CPA

Gibson_NewI suppose the last thing you want to think about as we head into the Christmas season is taxes.  But you may want to start planning so that you are not surprised by a higher tax bill as a result of the Affordable Care Act tax provisions that kicked in last January. As usual, nothing is as simple as it should be. Let’s focus strictly on the new investment income tax, which affects taxpayers whose modified adjusted gross income exceeds $200,000 (single filers) or $250,000 (joint filers).    

What is Net Investment Income? It consists of investment income (interest, dividends, gains from investments, rental income, income from passive activities, etc.) which is reduced by certain expenses, such as investment interest expense, investment advisory and brokerage fees. A tax of 3.8% will be assessed on the lesser of net investment income or portion of modified gross income that exceeds the $200,000 and $250,000 thresholds stated above.

There has been no shortage of confusion and misinformation regarding this new tax, and with 2013 rapidly coming to a close and the filing season soon to follow, the time to separate fact from fiction regarding the new tax is now. Plan to attend our upcoming webinar “Explaining the 3.8% Net Investment Income Tax,” scheduled for January 10, 2014 at Noon EST, presented by Ami Avraham and myself.

New Lease Accounting Proposal

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Bergamo_Phil1November 14, 2013

By Phil Bergamo, CPA

The Financial Accounting Standards Board (FASB) is finalizing a new accounting standard update that will greatly change the way lessees and lessors account for leases under generally accepted accounting principles.   The new lease accounting will require that CPAs and other accounting professionals re-learn the fundamentals of accounting for leases, including recognition, measurement, presentation and disclosure. 

Some highlights of the proposal:

  • Eliminates the current operating lease model and replaces it with a right-of-use model which
  • Requires the lessee to record an asset that represents the lessee’s right to use the underlying asset and a liability for the lessee’s obligation to make payments to the lessor. 
    • Initial recognition of the liability is measured as the discounted present value of the lease payments over the lease term.
    • Initial recognition of the right-of-use asset includes the initial carrying amount of the lease liability plus any initial indirect direct costs incurred by the lessee. 
  • Subsequent to the date of commencement of a lease, the lessee measures its right-of-use asset at amortized cost, amortizing the asset on a systematic basis and the liability is reduced as payments on the lease are made.

On November 21st at 12:00pm, the professionals of EisnerAmper will be presenting a one-hour webinar on this topic titled “Overview of Proposed Accounting for Lease Standards from FASB.”

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