Website

Do you realize that similar to any other business a CPA is in business too. I have to make decisions about vendors just like any other business. What I learn from my business experiences is one way I gain information to share with my clients. Purchasing a web site is an area where I have learned some important things to share with you.

What a user sees, hears, or buys (including shopping) at a given web site is the user experience. For example, the user goes to the website, looks through the inventory or searches it, drop the items they want in the shopping cart, and then check out using a credit card. What it takes to create that experience is usually multiple services or products.

There are two major categories of services and products related to having a web site on the internet. A web hosting service is a service that allows individuals and organizations to make their own website accessible via the Internet. Web Site development is the process of building the site that will be hosted. Within these two major categories there are many products that have different pricing and cost. For example, band width is a product and cost associated with hosting. A shopping cart is product and cost associated with Web site Development. There are many other possible products and potential cost and it is important that one gains a very thorough understanding of the potential cost associated with the products needed to produce the experience one desires for potential users of the site.

Some of the services that can be segregated services or products are:

Hosting- Bandwidth, Storage Space

Website Development – Shopping cart, inventory management, credit card processing, content management, email management.

Fees for these services can vary widely from vendor to vendor and the offers that one might receive simply can’t be taken at face value. For example, I recently received an offer for a web site for $44.95 per month. My first reaction was this is a good deal. After doing a little research on the offer all it was was a template with financial calculators built in and some daily feeds included with the ability to link in social sites such as Facebook, and Twitter. There was not option to sell anything. There was no communication tool to allow me to write articles for my clients like this one. There was no hosting included (it was available as an extra charge), there was no newsletters, there was no way to get my site online for $44.95. I could build a page for $44.95 and have some dynamic information that was written by others. That was the basic offer. An offer from a competitor was $70 but it included all of these things and much more. Things that would help me market my business and included search engine optimization (SEO) services for clients in my industry. For what was being offered the $70 was a much better deal. It is like the old joke about the car sales pitch where they priced the car without the doors and tires. You have a car but you can’t go anywhere in it.

When buying web services it is important that one understands what the offer is. My understanding on this just scratches the surface because their are so many variables for every customer. For example if one has inventory to put on a site and wants the ability to sell inventory with little vendor interaction with the customer then one would need a database with enough storage to store the inventory, a shopping cart ( to allow check out), and order management (for fulfillment processing) at a minimum.

To sum it all up, when buying a web site with the intent of establishing a web presence one has to know what they need before they can assess who has the best offer. I would much rather do business with the person that discloses the cost for the products that will meet my needs in total than one who seduces me into the deal without letting me know that I am buying a car without doors and tires.

Mileage – Make it Bullet Proof

A well kept mileage log is essential for maximizing your deductions and preparing your return to withstand the scrutiny of the IRS. Don’t fool yourself and think that the Federal or State taxing authorities are never going to ask you for a mileage log. If they audit your return, and you do not have a mileage log, you will lose your deductions. If you think it will be easier to put a log together “IF NECESSARY” you are just kidding yourself. I have personally witnessed the horror from people faced with the need for a mileage log when they don’t have one. It is usually a long time removed from the filing when the need arises (read audit occurs). By then people have no idea when and where they drove to accumulate the miles that are on their return. I constantly remind folks to keep up with this information because it is a good practice to do so and it is REQUIRED by the IRS.

The following is what is required for a well kept mileage log. Date, beginning and ending odometer reading, purpose of trip noted. That is all you need. The same standards apply to business, medical, and charitable mileage deductions. Office supply stores have small mileage log books that you can purchase. They are set up for ease of entry into the correct heading. You can also use a pocket calender and jot down your odometer reading and the purpose of the mileage. I supply these for my clients on an annual basis and they are free for the taking. Either method will work well and they will substantiate your miles so that you don’t panic when the dreaded audit notice arrives. Travel on and log away.

[ Link to audit notice: http://www.tmicpa.com/avoid_audits ]

UPDATE 12-06-2010: I have recently learned that if a taxpayer has unusually high mileage that it may be necessary to have some third party verification of your logged miles. Oil change records will work well and if you use a third party oil change service that computerizes records then you can easily get a record from them. If you use someone that does not maintain those records or tend to use multiple locations then you should maintain a record of the oil changes and associated receipts.

It is also important to understand that if you are using more than one vehicle then you should maintain a mileage log for each vehicle. If you use the same log book to keep multiple vehicles you should clearly note which vehicle the mileage belongs.

Severe Weather

Alabama Department of Revenue

First Annual Sales Tax Holiday for Severe Weather Preparedness Items Set July 6 through July 8, 2012

The State Legislature passed and the Governor has signed Act No. 2012-256, creating an annual Severe Weather Preparedness Sales Tax Holiday by exempting certain “covered items” from the state sales and use tax during one weekend each year. The first Severe Weather Preparedness Sales Tax Holiday will be held July 6 through July 8, 2012, commencing at 12:01 a.m. on Friday, July 6, and ending at twelve midnight the following Sunday.

A provision in the new Severe Weather Preparedness Sales Tax Holiday law allows cities and counties to join the state and participate in the holiday by removing their own local sales and use taxes from the same items during the same weekend. The Department will compile a list of cities and counties that timely notify the Department of their decision to participate or not participate in the Severe Weather Preparedness Sales Tax Holiday. To provide guidance to both retailers and consumers, the city and county listing will be updated as notification is received by the Department and will be available at http://www.revenue.alabama.gov/salestax/WPSalesTaxHol.htm.

The following is a list of the “covered items” under this year’s Severe Weather Preparedness holiday:

Items below that have a sales price of $60 or less per item:

  • Batteries: AAA-cell batteries, AA-cell batteries, C-cell batteries, D-cell batteries, 6-volt batteries, 9-volt batteries. (NOTE: coin batteries, automobile batteries, and boat batteries are not exempt.)
  • Cellular phone battery
  • Cellular phone charger
  • Portable self-powered or battery-powered radio, two-way radio, weather-band radio or NOAA weather radio
  • Portable self-powered light source, including battery-powered flashlights, lanterns, or emergency glow sticks
  • Tarpaulin, plastic sheeting, plastic drop cloths, and other flexible, waterproof sheeting
  • Ground anchor system, such as bungee cords or rope, or tie-down kits
  • Duct tape
  • Plywood, window film or other materials specifically designed to protect window coverings
  • Non-electric food storage cooler or water storage container
  • Non-electric can opener
  • Artificial ice, blue ice, ice packs, reusable ice
  • Self-contained first aid kit
  • Fire extinguisher
  • Smoke detector
  • Carbon monoxide detector
  • Gas or diesel fuel tank or container

Items below that have a sales price of $1,000 or less:
Portable generators and power cords

Home buyer’s credit (problems)

We have seen several issues related to the new homebuyer’s credit.  The first problem that we experienced was legitimate credits denied without further substantial proof being submitted to the IRS.  The main reason this happened was due to rampant fraudulent claims.   The most recent issue is the systemic failure of the IRS to properly treat the $8,000 credit for those that purchased a home in early 2009.  This credit did not have to be repaid but the IRS has many of these in the system as repayable credits.

To get to a basic understanding of what we are now seeing let’s look at the history of the “New Home Buyer’s Credit”.

FIRST:  The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyer’s that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.  These were to be claimed on the 2008 tax return.

Second:  The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000
for purchases made in 2009 before Dec. 1. The Worker, Homeownership and Business Assistance Act of 2009 extended the deadline — taxpayers who had a binding contract to purchase a home before May 1, 2010, became eligible for the credit. Buyers must have closed on the home before July 1, 2010. That closing deadline was extended to Sept. 30, 2010 by the  Homebuyer Assistance and Improvement Act of 2010, enacted July 2, 2010.  This credit could be filed in 2008 or 2009 depending on the purchase date.

Problem 1:  There was rampant fraud associated with the new homebuyer’s credit.  As a result, the IRS tightened up substantially on their screening process and this caught many legitimate credits and delayed them until further documentation could be submitted.  Typically we would see new construction, or purchases of homes that the taxpayer had occupied on prior returns under a rental agreement get an extra scrutiny.  The IRS would send a laundry list of items they required and often we would have very few of the things they require because local building codes did not require things such occupational licenses.

Soultion 1:  You simply have to be diligent, document, and get them the best documentation you can get.  Do not rely on any advice provided by the IRS unless they are willing to put it in writing.  We have had a great deal of success in resolving these issues.

PROBLEM 2:  Credits for 2009 purchases claimed on a 2008 return are in the IRS system to begin repayment with the 2010 filing year.  THESE CREDITS DO NOT HAVE TO BE REPAID.  Apparently the IRS has a systemic problem (your problem not theirs if you are in this group of taxpayers) that treats all 2008 returns as credits to be repaid and they are sending out notices and refusing 2010 returns that do no include the repayments.

TO MAKE THINGS WORSE:  We are getting various erroneous advice from the IRS telephone support about the proper process to correct their error.  Answers range from “Amend the 2008 return” to “We have corrected here” (without requesting documentation).

Solution 2:  Our best response to date has been to get a human on the phone that will then request the original information to provide proof of purchase date and then that person has made the correction.  It takes approximately 2 weeks for the system to update which will allow the taxpayer to file a correct 2010 return excluding repayment of the credit.  If you are in this group of people all you can do is take the action to have your credit properly adjusted by the IRS and then wait so that you can submit a correct 2010 tax return that does not begin repayment of the credit.

If you have a first time homebuyer’s credit issue, and need help in resolving your problems, we have been very effective in getting them resolved.  So, give us a call and have an advocate go to work on your behalf.

Avoid audits

RECORD NUMBER OF AUDITS EXPECTED IN 2004…….. AND IT HAPPENED!!!! AGAIN and AGAIN!!

You May be Next!

Mark W. Everson, IRS Commissioner, stated on November 18, 2004, that audit rates are up for 2004, bringing in a new record of $43.1 billion for Enforcement Revenue. That is an increase of $5.5 billion from last year. The IRS selects returns for audit using several different methods. While the selection criteria used to select returns for audit is top secret, past experience tells us what characteristics will often result in selection. MORE BAD NEWS FOR THE 2006 SEASON! An even higher number of returns were audited in 2005 and the IRS continues to make no bones that the trend is for more audits in the future. For some specific numbers check out this article. Look folks, this makes perfectly good sense as a business matter. The only revenue generating people at the IRS are AUDITORS. My first and best advice is:
Never Go to an Audit Alone!

Of course a great way to avoid an audit is to make sure a qualified preparer handles your tax return. Using T&M means you have a CPA firm handling your return that has extremely few clients suffer the dreaded IRS audit, and we even offer AUDIT PROTECTION to qualified clients, should you run upon such bad luck. Read on, and learn more! I have a Special Report to send you “8 Secrets to Reduce You Chances of Receiving that Dreaded Audit”. To receive you report click here and submit your email address. Don’t worry! We never share you email information with others.

If you can avoid an audit, you should. But, if it happens anyway, you should be prepared. We offer IRS Pass to qualified clients. IRS Pass Silver gives you $2500 coverage for potential taxes, penalties, and fees resulting from an audit. Additionally, we will handle correspondence and documents should you be contacted by the IRS regarding an audit. With IRS Pass Gold, you receive $5000 coverage for potential taxes, penalties, and fees as well as personal representation in the event of an audit so you never have to worry about paying an accountant to accompany you during the audit process. WE GO FOR YOU, not WITH YOU, AS YOUR PERSONAL REPRESENTATIVE. You do not have to worry about what to do and how to work the IRS into your hectic schedule. A CPA will be there for you.

Will You be Alone if You Are Audited?
[ Link to Audit Pass; http://www.tmicpa.com/audit_pass ]

Many taxpayers think their preparer automatically offers free consultation or even representation in the event of an audit. This would be the exception rather than the rule. If you think your CPA offers this service, ask him today. Chances are, you risk a fairly painful expense should the IRS ever decide to look over your returns carefully in an audit. A CPA can make that much less painful and almost always help you avoid potentially damaging mistakes.
Don’t be alone! Call (256) 739-3195 today to see if you qualify for IRS Pass.
Of course there are details regarding the IRS Pass service, and you should understand them completely before using the service. The agreement is less than two pages and you can read it in our offce as well as ask us any questions before you sign up for the service. Make sure you know your options before it’s too late. Come by or call our office today at (256) 739-3195.