Mileage Rates Changed beginning July 1 2011

Posted by Bruce Mc on Jul 10, 2011 in Bookeeping, News Flash, Tax Planning | 0 comments

The IRS standard mileage rate for the final six months of 2011 was increased as a result of the recent increase in gasoline prices. The IRS usually only adjusts this rate annually in the fall.

This is the second time in the past 3 years however that they have done this.

The standard mileage rate was increased by 4.5 cents for business, medical and moving travel for the last six months of 2011. Charitable travel remained unchanged at 14 cents per mile as this rate is set by statue, not the IRS.

The standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rates for July 1, 2011 to December 31, 2011 are:

• Business: 55.5 cents per mile (Compared to first six months at 51 cents per mile).
• Medical: 23.5 cents per mile (Compared to first six months of 2011 at 19 cents per mile).
• Moving: 23.5 cents per mile (Compared to first six months of 2011 at 19 cents per mile).
• Charitable: Unchanged at 14 cents per mile.

Happy 235th

Posted by Bruce Mc on Jul 4, 2011 in History, Things forgotten | 0 comments

Why we celebrate today:

Historically, citizens of the world’s nations derived their rights from their ruler – a king, emperor or military dictator.

The colonists of the original thirteen colonies were weary. They’d been under the subjugation of Britain for years. They have had to live in fear of the British soldiers; they were under the rule of King George III. The Colonist had to abide by laws that had been enacted by that rule, and had to pay taxes; It was plain to see the British seemed to be getting richer, while the colonist were getting poorer.

Great Britain kept trying to make the colonists follow more rules and pay higher taxes. People started getting mad and began making plans to be able to make their own rules. They no longer wanted Great Britain to be able to tell them what to do, so they decided to tell Great Britain that they were becoming an independent country.

The Second Continental Congress met in Philadelphia, Pennsylvania and they appointed a committee to write a formal document that would tell Great Britain that the Americans had decided to govern themselves.

May 1776, Adams offered the resolution which set the wheels in motion toward the actual writing of the Declaration.

The committee asked Thomas Jefferson to write a draft of the document. Working on a portable desk of his own construction, in a room at Market and 7th Streets in Philadelphia, the 33 year-old Thomas Jefferson set on paper the grievances and aspirations of the 13 colonies –

Connecticut, Delaware, Georgia, Maryland, Massachusetts Bay, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Virginia.

1,337 words beginning with “When in the course of human events …”

He worked for days, in absolute secret, until he had written a document that he thought said everything important that the committee had discussed.

On June 28, 1776, the committee met to read Jefferson’s “fair” copy. They revised the document and declared their independence on July 2, 1776. They officially adopted it on July 4, 1776. That is why we call it “Independence Day.”

Congress ordered that all members must sign the Declaration of Independence and they all began signing the “official” copy on August 2, 1776.

56 men signed the document, pledging to support it with “our lives, our Fortunes and our sacred Honor.”

President John Hancock signed first and his signature was the largest. Putting down his pen, he quipped: “There. Now George the Third can read my name without spectacles, and may now double his reward of 500 pounds for my head. That is my defiance.”

In January of the next year, Congress sent signed copies to all of the states.

The Declaration declared a revolutionary new doctrine: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable rights that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”

It was a bold new concept that individual liberty was a birthright.

On July 4, 1777, the night sky of Philadelphia lit up with the blaze of bonfires. Candles illuminated the windows of houses and public buildings. Church bells rang out load, and cannons were shot from ships. The city was celebrating the first anniversary of the founding of the United States.

The Fourth of July soon became the main patriotic holiday of the entire country. Veterans of the Revolutionary War made a tradition of gathering on the Fourth to remember their victory. In towns and cities, the American flag flew; shops displayed red, white, and blue decorations; and people marched in parades that were followed by public readings of the Declaration of Independence.

In 1941, Congress declared July 4 a federal legal holiday.

The Declaration of Independence is more than just a piece of paper. It is a symbol of our country’s independence and commitment to certain ideas. The signers of the Declaration of Independence wanted the citizens of the United States to have a document that spelled out what was important to our leaders and citizens.

They wanted us to be able to look at the Declaration of Independence and immediately think of the goals we should always be working for, and about the people who have fought so hard to make these ideas possible.

The people who signed the Declaration risked being hanged for treason by the leaders in Great Britain. They had to be very brave to sign something that would be considered treason, a crime punishable by death!

So every time we look at the Declaration of Independence, we should think about all of the effort and ideas that went into the document, and about the courage it took for these people to stand up for what they knew was right — independence!

Our Independence.

Happy Birthday America.

I assembled this information from the question from my daughter, “why do we celebrate July 4^th?”

Tax collector bonds protect the public from fraudulent professionals

Posted by Bruce Mc on Jun 24, 2011 in Information, Opinions | 0 comments

Many people have heard that business professionals and elected officials need to be “bonded,” but few understand what the term really means. Government agencies establish surety bond regulations to keep fraudulent or otherwise unethical individuals from getting access to certain jobs.

Tax collecting officials are elected and/or hired to assess and collect taxes on behalf of different government agencies. Although they are expected to serve the public, some tax collectors choose to behave unethically. Tax collector bonds essentially function as a financial guarantee that tax collectors will perform their duties according to law.

So what’s a tax collector bond, anyway?

A tax collector bond is a specific type of surety bond, which is a risk mitigation tool that acts as a legally binding contract. Each tax collector bond that’s executed involves three entities:

• The principal is the tax collector who purchases the bond as a financial guarantee of work to be done.
• The surety is the insurance company or specialty surety agency that issues the bond as a financial guarantee of the tax collector’s ability to complete duties appropriately.
• The obligee is the entity that requires the principal to purchase a bond as a way to deter fraud and potential financial loss.

When a bonded tax collector breaks governing laws, the bond’s obligee or other harmed party can make a claim on the bond to recover what was lost as a result of the tax collector’s negligence.

How do tax collector bonds offer protection?

Tax collector bonds provide an array of protection that varies depending on a bond’s technical language. They generally guarantee that tax collectors and their affiliates will manage money appropriately and perform related duties legally and ethically. Tax collector bonds also cover liability in the case of uncollected taxes. With the help of tax collector bonds, citizens are assured that the local government is making an effort to provide the public with ethical tax collection services.

How do Missouri tax collector bonds work?

The Taxation Division of the Missouri Department of Revenue regulates tax collectors in the state. As such, the division requires the state’s tax collectors to provide a surety bond known as “Bond of the Collector/Ex-Officio Collector or Revenue” before they can begin fulfilling their tax collecting duties.

The bond’s penal sum will vary depending on the monetary amount of taxes that a tax collector will collect for a specific jurisdiction. So if a county tax collector is responsible for collecting $500,000 in county taxes, the collector must maintain $500,000 in bond coverage. However, the bond’s language clarifies that the penal sum may not exceed $750,000; otherwise tax collectors would have trouble finding surety providers to issue such large bonds. Furthermore, tax money that’s collected typically decreases significantly as the fiscal year progresses, in which case the bond amount can also be decreased.

As taxpayers, we all want to know that our taxpayer dollars are allocated appropriately rather than being mishandled by corrupt officials. Fortunately, tax collector bonds help do just that by protecting against potentially unruly tax collectors.

This article was provided by SuretyBonds.com, a nationwide surety bond producer. Because the surety industry is often misunderstood, SuretyBonds.com provides educational resources to the general public to help them understand the benefits provided by surety bonds.

Financial Tool for Business Owners

Posted by Bruce Mc on Jun 17, 2011 in Bookeeping, Information | 0 comments

If there were a tool that helped you create crystal-clear plans . . . that provided you with continual feedback on how well your plan was working . . . that told you exactly what’s working and what isn’t, allowing you to consistently make smart business decisions to keep your business on track for success – wouldn’t you want to take advantage of it?

Well, there is such a tool. It’s called the Budget vs. Actual report.

Clarifying Your Plan

Clarity is power. The clearer you are with your business goals, the more likely you are to achieve them.

Creating a budget forces you to drill down in to the details of your goals. It prods you to think about how one business decision affects all other aspects of the company’s operations.

Example: Say you want to grow your sales by 15% this year. Does that mean you need to hire another salesperson? When will the business start to see new sales from this person? Do you need to set up an office for them? New phone line? Buy them a computer? Do you need to do more advertising? How much more will you spend? When will you see the return on your advertising expenditure?

You see, a budget is really a planning tool that makes you clarify your dreams. And planning is the first step in making your dreams real.

Navigating the Ship

Once you’ve clarified your goals, you start making business decisions to help you reach your desired outcome. Some of those decisions will be great and give you better than expected results. And some decisions will give you poor results.

This is where the Budget vs Actual shines.

When you compare your budgeted sales and expenses to your actual results, you see exactly how far you are off your plan. Sometimes you need to adjust your plan (budget) and sometimes you need to focus more attention to the areas of your business that are not performing as well as you planned.

Either way, you are gleaning valuable insights into your business.

It’s like sailing a boat. You are off-course most of the time – but having a clear goal and making many adjustments helps you reach your destination.

Just Do It

Nike knows the power of the phrase “Just Do It.” We often know what we need to do but don’t take the necessary action.

It may seem like a huge hassle to create a budget and then create a Budget vs. Actual report every month. But as with any new skill, although it’s hard at first, it does get easier.

Let us help you. We can guide you through the budgeting process. We can ask you questions that help you gain clarity.

You’ll feel energized after it’s done. You may even have fun.

Employee or Independent Contractor

Posted by Bruce Mc on Jun 10, 2011 in Employee, Independent contractor, Information | 0 comments

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers’ compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

The Difference Between Employees and Independent Contractors

Independent Contractors are individuals who contract with a business to perform a specific project or set of projects. You, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Sam Smith, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. He is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will receive $6,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. Sam Smith is an independent contractor.

Employees provide work in an ongoing, structured basis. In general, anyone who performs services for you is your employee if you can control what will be done and how it will be done. A worker is still considered an employee even when you give them freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Sally Jones is a salesperson employed on a full-time basis by Rob Robinson, an auto dealer. She works 6 days a week, and is on duty in Rob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Rob. Rob also pays the cost of health insurance and group term life insurance for Sally. Sally Jones is an employee of Rob Robinson.

Independent Contractor Qualification Checklist

The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is, though their means of categorizing workers as independent contractors are similar.

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS. The IRS considers the following:

1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.
2. What training the employer gives the worker. Independent contractors generally do not receive training from an employer.
3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.
4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.
5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.
6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.
7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.
8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.
9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.
10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.
11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

Minimize the Risk of Misclassification

If you misclassify an employee as an independent contractor, you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or federal authority. At a minimum, you should:

• Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.
• Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

If you have any questions about how to classify your employees, please give us a call. We can help guide you in the right direction in the eyes of the IRS.