Lester Bahr, Certified Public Accountant Blog
With the hectic pace of tax season now long past, it's just a matter of working through on all the tax returns still on extension. However, the Summer months are an especially ideal time to speak with your accountant about those special projects that have been pushed aside. This is the one time of the year when we as CPA's typically have more time to help and focus our attention on those client special projects.
As a business owner, you're trying to keep up with many different aspects of running the day to day operations of your business, doing the marketing, HR, etc. Often times I find the Summer months are an ideal time to review client's accounting systems to make improvements in efficiency, accuracy and one-source data entry, integration with apps, etc.
Improving your company bookkeeping procedures can certainly benefit your company with more useful reporting information, generated in much less time. These days more and more clients are using the cloud based QuickBooks Online. As such, much of my time is spent logged in to clients' online accounting working through these many improvements in their bookkeeping systems.
Working closely with your accountant throughout the year can improve your chances for business success simply because you have someone looking over your shoulder and alerting you to situations that you might not even have been aware of. Plus, by working with your accountant beyond just tax season, you can discover new growth opportunities, cost savings measures, budgeting analysis and cash flow improvements, plus many other benefits - all geared to help you prepare for the future and minimize inefficiencies.
Lester R. Bahr, CPA
There are many factors to consider when selecting a CPA to work with you. Remember, you are looking to establish a long term relationship with someone who is to be your trusted business advisor. For starters, make sure they are interested in your business and that they are comfortable working with your business size. Here are some questions to ask when selecting a CPA:
1. Does the CPA understand the type of business you operate?
2. Does the CPA have experience with your industry and serve other clients like you?
3. Does the CPA seem genuinely interested in helping your
business be more successful and can they contribute to that success? Look for
more than just a bookkeeper and tax preparer?
4. Is the CPA experienced with areas beyond core functions of accounting and taxes such as information systems, business forecasting, valuations.
Will the CPA be readily available to provide you with answers by telephone or email?
5. Does the personality of the CPA mesh with yours? You need to feel comfortable with this professional.
6. Do you feel confident that issues will be explained clearly so that you are able to make informed decisions? You don’t need a CPA who talks to you in technicalities. The last thing you want is to be left even more confused after a conversation with your accountant. Rather, you want someone who is a good communicator when it comes to explaining business matters that affect your growth and viability as a business.
7. Is the accountant technologically progressive? This is very important. Look for an accountant who fully uses technologies for paperless operations, secure client portals and other cloud based technologies. These tools will make your working relationship with the accountant much easier and efficient.
Remember, a good CPA can be a tremendous asset to your business. There will always be situations that arise from time to time where you need the experienced perspective of an accountant to assist you. This becomes even more critical to a smaller business. That’s because, unlike a larger business which can afford to have their own in-house accountant on the payroll, most smaller businesses do not have this luxury. Thus, finding and selecting a CPA you are comfortable working with is very important.
CPA's can be an invaluable source of knowledge in handling financial matters, funding, accounting systems, business records and taxation, etc. Also, it’s important to realize that CPA’s, because they work with many different businesses, really have their finger on the pulse of understanding all the issues that a business can face. After all, although you may think that your business situation is unique, you may be surprised to learn that it is not and that the CPA has already seen and solved problems just like yours for other businesses
past November I attended my usual two full day tax conference in preparation
for the upcoming tax filing season. As has frequently been a topic of top
priority, the course instructor asked of the participants: “How many tax
practitioners in the room have had clients who were victims of identity theft?”
Now, the first thing to mention about this is that probably more than five
years ago, this topic just wasn’t even something that routinely came up in CPE
classes. But now, it is a topic which has been elevated to top priority and
routinely comes up for discussion within the professional practitioner group I
am involved with.
Secondly, again going back over five years ago, I don’t
imagine that hardly any hands in the room size of about 200 tax professionals
would have gone up. But, in response to that question now, a very significant
number of hands shot up which demonstrated just how pervasive the problem has
become over the years.
IRS data too bears out just how much of a growing
problem this has become having reported that total taxpayer identity theft
cases have risen quite significantly over the past few years. However, that
being said, IRS has also made significant progress in combating the problem
through a number of initiatives which are beyond the scope of what I can cover
here in this short blog post.
So, how exactly does a taxpayer first realize
that their personal information may have been compromised? Well, there are six
most common ways that a taxpayer becomes aware of it:
First, the taxpayer attempts to file a return electronically but the IRS rejects the return, indicating that someone else has filed a return using the same identification number of the filer or of a dependent.
Second, the taxpayer receives an IRS notice that indicates more than one return has been filed for a single account.
Third, the taxpayer receives an IRS bill for additional tax due, an unknown refund offset, or other collection action.
Fourth, the IRS asks for confirmation of information on a return that was not filed by the taxpayer. (Many tax refund fraud cases will initiate with this type of notice.)
Fifth, a notice is received that reflects wages earned from an employer the taxpayer has never worked for.
Sixth, some kind of compliance action has been taken against the taxpayer for a period for which the taxpayer never filed a return nor received a refund.
Once you as a taxpayer become aware of a suspected compromise of your information, there is a very specific sequence of events you must follow as recommended by IRS which can be found on their website. I will not go through them here as it is beyond the scope of what I can cover in this short blog post on the subject.
There are a number of ways how thieves can steal your information including looking through trash for confidential information; the outright theft of records; pretexting to impersonate a taxpayer or financial professional; hacking/DMS attacks on networks containing confidential client information; malvertising which by social engineering methods can trick the unsuspecting person to disclose confidential information; and scareware which is a malicious computer program designed to trick a user into buying and downloading unnecessary and potentially dangerous software, such as fake antivirus protection.
Every taxpayer needs to be diligent in protecting their confidential information as it exists in and among their home records and computer systems. Similarly, you should only work with tax professionals you can trust and you should inquire as to what their procedures are for the storage, protection and use of your personal tax information. For example, in my practice I make available to clients a detailed listing of my practices and technology procedures in place to safeguard my clients’ confidential information. I also monitor on a regular basis all of the IRS issued security alerts to be on watch for.
this year some filing due dates for business tax returns have changed:
calendar year Tax Form 1065 (used for partnerships and multi-member LLC’s) will
now be due on 03/15/17 whereas previously, these returns weren’t due until
The calendar year Form 1120 (for C Corporations only) is now not due until 04/15/17 whereas previously it was due on 3/15.Form 1120S (for S Corporations) due date has not changed. It will remain due on 3/15/17.
that the due date for the extended returns of calendar year Forms 1120, 1120-S,
and 1065 will continue to be 09/15/17.
As such, many practitioners are predicting higher levels of extensions for Form 1065. However, you should not assume there will be an increased risk of audit for a tax return just because it’s been extended. There is no measurably increased risk of audit incurred from filing an extension. Conversely, nor is it less likely that the return will be examined because it was extended. The bottom line is that we as accountants simply cannot be expected to complete every businesses tax return within two and half months following the close of the year – not even close! There are many reasons why we even deliberately choose to extend the return. One such reason is to give the business a longer time period in which to fund a company retirement plan. But, there are many other reasons why filing a tax return extension is also preferable
For those of your who live here in PA but work in NJ there was some good news a couple weeks ago when NJ Governor Chris Christie announced that he will not end the income tax reciprocity agreement between NJ and PA after all. With our region being so close to NJ I know there are a number of residents here in Allentown, Bethlehem, Easton area who commute over into NJ for their employment.
This issue all started earlier this year when Governor Christie said that he would end the 38 year old agreement with PA that allowed PA residents to pay income taxes in the state in which they live, rather than where they work effective in 2017.
Under this reciprocity, New Jersey doesn't collect income taxes from people living in Pennsylvania who work in New Jersey. In return, Pennsylvania also doesn't collect income taxes from people living in New Jersey and working in Pennsylvania.Rather, PA residents report and pay tax on income earned in NJ on a PA tax return; similarly, NJ residents report and pay tax on income earned in PA on a NJ tax return.
Had this reciprocity agreement been terminated, higher income PA residents who work in NJ would have paid higher tax. That's because PA' income tax rate is a flat 3.07% while NJ has a graduated income tax which can go as high as 8.97% Conversely, lower to middle-income NJ residents who work in PA would also not have liked this either in that they would have paid more since tax rates in NJ start as low as 1.4%, or about half of the PA flat tax rate.
The tax agreement allows for either state to unilaterally withdraw by providing 120 days' written notice prior to January 1 of the tax year. That means Christie's initial decision did not require approval from the NJ legislature. But, for now anyhow, there won't be any discontinuance of the PA and NJ reciprocity agreement.
As a tax practitioner, I would also point out that had this reciprocity agreement been terminated means that any PA resident working in NJ would have had their tax preparation process complicated as well in that they would have needed to also have a NJ non-resident tax return prepared, and then claim credit for NJ taxes paid on their resident PA tax return. So anyway, that situation has now been avoided.
I hope everyone has a good upcoming week. As for me, I am off to Asia for a couple weeks, so I'll be writing next week's blog post from Singapore.
Lester R. Bahr, CPA