Choosing the Right Representative: A Re-post

Posted by Bruce Mc on Aug 5, 2010 in Re post, Things forgotten | 0 comments

Rob Teuber is an attorney with the law firm Weiss Berzowski Brady LLP and author of the tax law blog www.federaltaxlawforum.com.

I deside to repost this as it would seem the information has been forgotten.

Choosing the Right Representative to Help You with Your Federal Tax Problems.

When you or your business is faced with tax problems it is a good idea to consider hiring a professional to help you navigate through the complex tax laws and procedures.  The problem is often finding the representative that is right for you.  Questions you may have include: Should I hire an accountant or lawyer?  Do I need a local representative or does it matter where the person is based?  What is the lawyer’s/accountant’s reputation?

As a lawyer myself, I will answer these questions in typical lawyer fashion: “It depends.”

First and foremost, you should choose a representative that is right for you.  The personal relationship that you form with a representative is one of the most valuable criteria for hiring someone.  It is important that both the representative and client trust one another, be on the same page as to the desired resolution of the problems and agree on the way to approach the IRS.

Accountant or Lawyer.

Generally, both accountants and lawyers are permitted to practice before the IRS.  This means that either may help you in handling a tax audit, appeals of audit findings and tax collection matters.  However, subject to certain exceptions, only lawyers can represent a client in court.  Therefore, when making a decision on whom to hire, consider how far you are willing (or can afford) to push a case to get the resolution you are looking for.  In moving through the process, having a lawyer involved will increase the risk to the IRS that litigation will actually occur.  This may encourage a more favorable settlement.  Further, if you think you will need the protection of the “Attorney – Client Privilege” while pursuing your case, you may want a lawyer instead of an accountant.

Do You Need a Local Representative.

In days gone by (before the IRS Restructuring and Reform Act of 1998 ) most tax related issues were handled by local IRS offices.  The Restructuring Act, however, changed a lot of this by centralizing certain functions in different regions of the country.  As such, local representation is less relevant than it used to be.  Due to these landscape changes much of the work can easily be managed through conference calls and correspondence. 

Knowledge and Reputation.

Of course, when choosing a representative to help you with your tax problems, you want to be sure that he or she has both the knowledge and reputation that can help you.  Investigate the person to find out more about who you will be dealing with.  If you are reading this post, you are likely already using the internet as a tool to find out more. 

Most representatives will have a website.  While informative, don’t rest completely on the representations made on that website.  The website will list the accomplishments of the attorney/accountant and provide information on their skill set.  Start here to find out if the person can do for you what you need.  But don’t stop here.

Find out if the prospective representative has a blog.  If so, spend some time reading through the blog to see if you are impressed with their knowledge of the tax laws and procedures.  If so, this may be the right representative for you.

Use search engines to find out what you can about the representative’s reputation.  While you won’t find a website called “here is a list of representatives and what the IRS thinks of them,” you will be able to find out whether the representative has written scholarly articles in industry magazines or business journals.  This may be the best way to find out about one’s reputation.  If a reputable journal will publish their work, there is a greater likelihood that the author has a good reputation. 

Be mindful however, that specific and direct recommendations for a particular representative will likely be hard to come by.  Most people don’t want to broadcast to the world that they or their business has had tax troubles.

The Ultimate Goal.

Ultimately, the goal is to find someone that is right for you.  When doing so, consider the points made above.  At the end of the day, you want to be comfortable with your choice and have confidence that you have hired the right person for the job.

Rob Teuber is an attorney with the law firm Weiss Berzowski Brady LLP and author of the tax law blog www.federaltaxlawforum.com.

Reads from last week

Posted by Bruce Mc on Aug 1, 2010 in Opinions, Week in review | 1 comment

She’s back and moved Taking the leap

What did I miss?

Dealing with the gray 

I do so find accountant stereotypes amusing. This week’s episode of White Collar takes us back to the days when accountants wore visors. White Collar dig at accountants

 3 Types of Business Income

 Has to be my favorite this week – Debunking 5 Bush tax cut myths

 RTM = FTR a must read

 Where’s George?

 The tax credit program was a scam. Can we still have our tax credits?

 Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know. IRS Presents: Six Tax Tips for New Business Owners

IRS Presents: Five Facts about the Making Work Pay Tax Credit

The Tax Foundation launched a new calculator last week that helps users see how their taxes might rise in 2011. In a FoxNews piece about it, we explained that some families making $250,000 or less could see a tax increase under Obama’s budget proposal, which would be a violation of his famous campaign promise not to raise taxes on families with incomes of $250,000 or less. Here’s how that would happen. How Would President Obama’s Tax Plan Raise Tax Payments for a Couple Earning $250,000 or Less?

Tax Relief News: 1 in Every 75 Taxpayers Will Be Audited By the IRS In plain terms, an IRS audit is to ensure that your tax return is filed correctly — that you’re not claiming too many unwarranted deductions, and that you’re paying what you really owe Uncle Sam. It all starts with a number that the IRS computer assigns to your tax return known as the DIF score.

Remember those new reporting requirements for businesses that were tucked away inside the health care bill? “Unpopular” doesn’t even begin to describe the provision. Repeal, What Repeal? We’ve Got Egos to Stroke! Special Interest Groups to Pacify!

Recording Fixed Assets

AN INTERESTING ANSWER –

“Back on July 15th my TWTP post discussed “An Interesting Question” raised by a reader that concerned the possible New York State income tax liability of a New Jersey resident.

I ended the post with a request –

“And I would open the question to any of my tax pro readers who have experience with such a situation. You can let me know what you have to say either by submitting a comment or sending me an email at rdftaxpro@yahoo.com and I will include all responses in a future follow-up post.”

I received only one response.” . . .  You’ll have to read Roberts post to get the rest.

And if your missing it his WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION  & on Saturday’s  WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ gives more post from other tax bloggers.

And since I missed it. (I won’t miss it next year) THE NATP ANNUAL CONFERENCE IN AUSTIN – PART 1 and THE NATP ANNUAL CONFERENCE IN AUSTIN – PART II

401(k) Fee Disclosure Comes From DOL

Roth Conversions Not For Everybody 

What’s the Best Way to Save Money is and has always been living within your means. Saving money is important because unexpected emergencies creep upon you without warning.

The Key to Successful Budgeting – You as a person or a family are an economic unit that needs to operate like a business. To be financially sustainable as an economic entity you must manage your spending so that you spend less than your income every day, every week, every month and every year.

A recession is a time when tight financial control will help you make a saving despite the spiraling costs of goods and services. How to Save Money During a Recession

 Identity theft and other forms of theft are uncomfortable to think about, but they are real. Identity Theft By the Numbers – Facts and Trivia

Break Glass In Case Of Fire: Keeping Two Emergency Funds Most personal finance advisers suggest that we should have an emergency fund for those tough times. Dave Ramsey even includes this recommendation in his Baby Steps system for getting out of debt and becoming financially free.

Carnival of Money Stories #64 – No Debt Plan Edition

10 things

Posted by Bruce Mc on Jul 27, 2010 in Accounting, Bookeeping, Information, Opinions | 0 comments

Below is a list of 10 practices that you should run-through, and 10 practices you should avoid. In an effort to get this information out to my readers, I have taken this list and edited it to where from my outlook as owner of a small business accounting firm with our knowledge and experience makes a better working sense. Working on your business can be a challenging task if you are unprepared.  Please keep in mind that I have edited this for my readers, my clients, and my own commercialism. 

10 things you should be doing 

1. Even if it’s likely you’re not going to be managing most of the financial aspects of your business, learn basic accounting concepts yourself, such as what a profit and loss statement is, what a balance sheet is, and what a cash flow statement is, just so that you’re in the know. As the owner, you need to know why and how things flow the way they do.
2. Hire a small business accountant who is going to be familiar with your industry to manage the financial assets of your business. If you are starting your own pluming business and your accountant doesn’t know how to turn a faucet on anything else about the plumbing industry, find one that does.
3. All Accountants will offer programs that can certainly help you do your job better, find out which ones work best for you, and then use them. Make an informed decision on the services you engage and the products you use.
4. Update cash flow control spreadsheets at least once a month, but preferably at least weekly.
5. You should have internal controls in place whereby you know that your business has received all of the income you have coming. If you don’t know how to do this yourself, hire someone who is a small business accounting professional to help you.
6. When you first start, your business, it is likely to be small; because of that, you can probably manage your own bookkeeping tasks (QuickBooks Pro and Premier Conveniently come in Download Versions and are Easily Upgradable. Buy Now and Save up to 20%!). (see number one in this list) Do this if you can so that you can learn how bookkeeping works, and how to manage the finances of your business (please note, as you grow, you may/will have to turn these tasks over to someone else later).
7. Prepare financial statements at monthly:
   1. Income statement
   2. Owner’s equity statement
   3. Balance sheet
   4. Statement of cash flows
8. Reconcile your bank account immediately when your monthly bank statement is received. Bank reconciliations are extremely important. Unfortunately, many small business owners do not realize this, because they do not even reconcile their own personal checking account. They just figure they can look on line for a balance and as long as there is money in the account, they are fine. The issue is, bank reconciliations are a must because they are the final way to be sure all entries are made into your books and that there are not any double entries.
9. Keep business and financial records separate, and don’t intermingle the two.
10. Outsource your payroll and payroll accounting to a payroll service provider. (On-line payroll service provider, this is a less expensive choice.) 

Top 10 “should not”

1. Don’t brag or over-inflate your numbers; be modest about your sales projections, and don’t underestimate what expenses are going to be.
2. Never put your personal and business assets together.
3. Don’t hand over control; make sure you retain the authority to assign all of your checks, and DON’T delegate this job to someone else.
4. Don’t touch money that’s been withheld for tax purposes like payroll or sales tax and use it for anything else — even if you’ve got an “emergency.”
5. Never pay an invoice without matching it to your purchase order.
6. Don’t have someone else do cash flow projections analysis for you.
7. Don’t hire a small business accountant and/or a lawyer to help you with financial matters, only to ignore their advice. They are trained and experience in what they do. Yes they make a mistake or two. You pay them good money; listen to what have to tell you.
8. Verbal agreements are fine, but get everything in writing, too — including purchases.
9. Never assign to others your relationship with your lending sources.
10. Don’t wait to establish credit resources when you need financing. Instead, do it well in advance.

Okay some good advice that has been around the internet awhile. Remember while you work in your business you will need to also work on your business.

The Income Statement (Profit & Loss) Part 1

Posted by Bruce Mc on Jul 13, 2010 in Accounting, Bookeeping, Income Statement, Information | 0 comments

The Income Statement is one of the three main financial statements. (The other two being the Balance Sheet and Cash Flow Statement.) The important thing to remember about an income statement is that it represents a period of time. As opposed to the balance sheet, which represents a single moment in time.

The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income. In QuickBooks it is the P & L.

This financial statement indicates changes in the financial position of the business for a particular period of time, i.e. month, quarter or year. The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company’s regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.

An Income Statement is related with the Balance Sheet in the terms of net result for the period, i.e. profit or loss for the period from this financial statement goes to the Balance Sheet as an increase or decrease in Retained Earnings (result not distributed to the shareholders as dividends).

The Items Included in

Considering the structure of Income Statement, it is important that this statement indicates not only net result for the period, but also fundamental parts, which make this result. So this statement will include the following:

Revenue:

amounts earned for the goods sold or services provided

Cost of Sales:

cost of goods sold or services provided. In case only goods are being sold, this items will be called Cost of Goods Sold. Here all the cost which are directly related to the revenues earned are included

Gross Profit:

difference between two mentioned items, which indicate how much business earns from the main operations

Operating Expenses:

this items consists of the expenses which cannot be directly related to the cost of goods sold or services provided. Examples can be salaries of accountants, administrative office space rent and other

Operating Profit:

difference between Gross Profit and Operating Expenses

Interest Expenses:

these expenses are shown separately to indicate financial costs the business incurs and whether it earns sufficient profit to be able to pay interest on time

Net Profit (Loss):

this is the net result for the period. If it is positive, we have a profit. If it is negative, we have a loss.

Important to notice, that the Income Statement is usually prepared on the accrual basis, i.e. income and related expenses are recognized despite the fact that cash was not yet paid or received, but based on the obligation from customers to pay for goods sold or services provided and based on the obligation of the business to pay its liabilities.

It is very important to format an income statement so that it is appropriate to the business being conducted.

Income statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits

It may look like this: