April 28, 2010 - New Incentives for Hiring and Retaining Workers

• The following is a set of tips for small businesses to decrease their chances of being audited by the IRS.
  

1.       Make your business a business, not a hobby.  If you are in your third year of business and reporting a third year of losses, that’s going to raise a red flag with the Internal Revenue Service.  Despite what you might think, the IRS isn’t evil, and if you show them the evidence, they’ll understand that you’re a loss-making small business – for a while.  If you’re in year 4 and still making a loss, expect a call from the IRS about when you plan to start earning money.

2.       Report your income accurately.  If a client pays you $3,250 for a service you provide, and you round that down to $3,000 while your client reports the actual number, that’s a red flag, too.  It tells the IRS that you’re not keeping accurate records – and they do cross-check that stuff.

 
3.       If you use a CPA or tax preparer, understand what they’re doing and why.  If you’re uncomfortable with something, ask them to explain it until you are comfortable, or they do it your way (as long as it’s legal.)  Why would you do that?  You do it because you’re responsible for the accuracy of your company’s tax return, even if someone else prepares it – and that means that you, not your preparer, will be liable for any additional taxes, interest charges, and penalties if you get audited.  If your tax preparer promises to save you a huge amount of money, don’t trust it.  The only way to save huge amounts is to cheat.

4.       Prepare to be audited from the first of the year to the last.  If you keep your receipts, journal your expenses and mileage as they are incurred, and keep accurate records of your income, you’ll be able to show that you’re not guessing at your numbers.  Show the IRS auditor that you can’t get the easy stuff right and you’re just inviting a more thorough examination of your finances.  Keeping good records of expenses as you incur them is “a must” for all businesses.

5.       Pay estimated taxes if you’re a sole proprietor or independent contractor.  Pay them on time, and keep them current.

6.       Don’t ignore notices from the IRS.  If the Feds are trying to get your attention, answer them while it’s still a polite cough. 

7.       Watch out for the “dirty dozen”.   The IRS publishes a “dirty dozen” (yes, it’s called that, you can Google it) list of the top 12 tax scams that they’re going to be looking for on tax returns.  Do yourself a favor – make sure you haven’t involved yourself in any of them.  If you have, be prepared to admit it and face the possibility of an audit and penalties.  You can’t get out of paying taxes.  No way, no how.

8.       Don’t borrow from withheld taxes.  Your business has employees, and you’ve been withholding taxes from their paychecks to pay the IRS.  It’s been a tight month and you have bills to pay, so you think you might just borrow from the withheld taxes and pay it back next month.  And then you do it again a month later.   And again.  Before you know it, you’ve borrowed all the taxes you were supposed to send to the Feds, and you’re still not earning enough to pay it back.  Do not borrow from the taxes your employees have been paying, no matter how tempting it may be.  It can get your business levied out of existence.

 
9       The IRS isn’t stupid.  It has a pretty good idea of what a reasonable range of dollars for your business’ taxable deductions should be.  If your company earned income in the lower end of the range and took tax deductions in the higher end of the range . . . then see item #1.  The IRS is happy for you to take business deductions, but if you have a yard service and you want to buy a crop sprayer plane to put down Weed-B-Gon on your clients’ yards, you’re probably going to get audited.

Fond du Lac, Wis – Huberty & Associates, S.C., a certified public accounting firm with offices in Fond du Lac, Ripon, Plymouth and Markesan, recently named Ann Freund as one of the company's owners. She joins two others as owners -- Wayne Huberty, founder of the company in 1981, and Gary Born, who oversees the Ripon and Markesan offices,

Freund joined Huberty & Associates in 2007 as a certified public accountant and senior manager with 17 years experience in the industry. She works closely with business owners, non-profit organizations and individual clients on tax planning, business problem-solving, estate and investment planning — with special expertise on tax-compliance issues.

"Ann brings another dimension to our firm," said Wayne Huberty. "Her administrative and tax expertise, especially as it relates to our high net worth clients, adds depth to our firm. It's great to have her assistance in leading our company to a higher level."

Freund earned a degree in Business Administration with an emphasis in accounting and administrative management from the University of Wisconsin, Oshkosh, followed by official certification as a CPA. She has lived in Fond du Lac with her husband Bill and their four children since 1975.

"I was impressed with how well the company serviced its clients when I came here two years ago, and I'm especially proud to be an owner now," Freund said, noting she is in touch with clients throughout the year. "Our firm prides itself in meeting with clients regularly, not just at tax time."

Freund is a member of several professional organizations in her field — the American Institute of Certified Public Accountants, the Wisconsin Institute of Certified Public Accountants and the American Woman's Society of Certified Public Accountants. She is also active as a member of the Fond du Lac Morning Rotary, is on the board of directors for the Women's Fund of the Fond du Lac Area Foundation and a member of the Fond du Lac Sailing Club and Yacht Club.

Huberty & Associates, S.C. is a firm of certified public accountants and consultants who specialize in tax planning and preparation as well as estate, finanical, college and investment planning, business problem-solving and computer consulting. Located at 145 S. Marr Street, Fond du Lac, the public accounting firm also has offices in Ripon, Plymouth and Markesan. To learn more about the services offered, call (920) 923-8400 or visit online at www.hubertyandassociates.com.

Huberty & Associates, S.C., founded in 1981 by Wayne Huberty, grew by 80.7 percent in the past three years. The company increased revenue from $1.6 million in 2005 to $2.9 million in 2008, according to the national publication.

Huberty is among 14 Northeast Wisconsin companies to receive the honor. Only private U.S. companies with a revenue of at least $200,000 in 2005 and $2 million in 2008 qualified for the award.

"This award shows that all the efforts and hard work of our team has paid off," said Wayne Huberty, a certified public accountant who started the company in 1981 with a staff of six that has grown to 31 employees in four communities.

The 2009 Inc. 5000 list serves as a unique report card on the U.S. economy. Despite the ongoing recession, revenue among the companies on the list actually increased to $214 billion, up $29 billion from last year, with a median three-year growth rate of 126 percent.

"It is an honor to get on this national list and it's exciting for our staff," Huberty said, noting that the initial contact from Inc. Magazine alerted him to the fact his firm might qualify. "They invited me to apply, and I had to submit considerable paperwork to prove our growth," Huberty said.

To qualify for Inc. Magazine's 5000 list, a company had to be in business at least five years. "Most of the companies on the list were fairly young — just past the start-up mode," Huberty said. "We've been around 28 years, so to have growth after that period of time I think is impressive. It says good things about our staff and the hands-on approach we take with our clients throughout the year-- not just during the tax season."

In January, 2008 Huberty & Associates, S.C. was also honored when Forbes magazine named their company "one of the most reliable CPA firms in the Midwest."

February marks an important date in Tax Return Filing Season. Following are 10 things to consider when preparing your 2009 U.S. Individual Income Tax Return and for early 2010 planning:

1. Consider whether you can contribute to an IRA (Traditional or Roth). You have until April 15, 2010 to fund an IRA for 2009. Additionally, if you are self-employed, consider funding a SEP. You have until April 15, 2010 or the extended due date of your return, to fund you SEP contribution.
2. Claim Credits for certain Home improvements placed in service in 2009 and 2010. The Residential Energy Property Credit is equal to 30% of the costs of qualifying property, including exterior windows and skylights, storm windows and doors, metal and asphalt roofs, central air conditioning, etc. The aggregate credit for any taxpayer cannot exceed $1,500. Additional credits are available for qualified residential energy-efficient improvements such as solar energy systems (water heating and electricity), and geothermal heat pumps, etc. Generally, the credit is equal to 30% of the cost with no limit on the credit amount.
3. If you are a first-time home buyer, you are allowed a refundable tax credit equal to the lesser of $8,000 ($4,000 married filing separately) or 10% of the home’s purchase price. The Worker, Homeownership and Business Assistance Act of 2009 (ACT) extends the credit for qualified taxpayers purchasing principal residences on or before April 30, 2010 (and close by June 30, 2010). Additionally, beginning November 11, 2009, the ACT authorizes the credit for long time homeowners buying a new principal residence. The long-time resident exception limits the credit to $6,500 ($3,250 for married filing separately). Both credits are phased out for higher income taxpayers as well as meeting other qualifications.
4. Required minimum distributions (RMDs) were waived in 2009 for IRAs and defined contribution plans including profit sharing and 401(k) plans. If you turned 70 in 2009, you do not have to take your 2009 RMD, which would have been required no later than April 1, 2010. Please note that a 2010 RMD will be required under the current rules and relevant time period.
5. Don’t overlook that a 0% tax rate may apply to adjusted net capital gains and qualified dividends that would otherwise be taxed at a rate below 25%. The amount of benefit available depends on your filing status and the character of your other income.
6. Check your filing status to make sure that you are filing your tax return and optimizing your filing status. If you are a surviving spouse, for example, you can claim status as a qualifying widow(er) for two taxable years following the year of death of your spouse if you maintain a home for a dependent child. If you are married, check to see if you should file married filing separately.
7. You may be eligible to increase your standard deduction. For 2009, individuals who don’t itemize their deductions and pay real estate taxes may increase their standard deduction by a maximum of $500 ($1,000 for a married couple filing jointly).
8. Remember that filing an extension does not extend the time to pay your tax. If you don’t pay at least 90% of your actual tax liability by the original due date of your return, you will be subject to late payment penalties and interest. If you have paid in at least 90% of your actual tax liability, interest will be charged on the unpaid balance from the original due date.
9. You can choose to deduct the actual sales tax paid during the year or a predetermined amount based on IRS tables. In addition to the table amounts, you can deduct additional actual sales tax paid for large ticket items such as automobiles, boats, mobile homes, leased vehicles and airplanes. The 2009 American Recovery and Reinvestment Act allows taxpayers to elect to deduct, as an additional component of the standard or itemized deduction, sales taxes paid on a qualified motor vehicle up to the first $49,500 of cost. There are other limitations with respect to the availability of this deduction.