Father's Day, a CPA, and the Gift of Time

Father’s Day is upon us already, and as it does with every passing year it seems as if time is speeding up. And in the areas of financial management and planning, time is a critical element. More importantly however, is how a father teaches their children the importance of work, budgeting, bank account reconciliation, and saving some for a rainy day.

My father, armed with an eighth grade education, didn’t explain much in the way of money, only that if you don’t have any you’ve got to either work for it or go without. He still had to be a pretty money-savvy guy to lead a household with five kids without exterior assistance. He didn’t realize it, but he taught us to be rather frugal and gave us each a strong work ethic. This came in handy many times throughout my life, most of which when I worked full-time as a Journeyman Toolmaker while attending college full-time for my Bachelors in Accounting, then later when I earned my Certified Public Accountant designation – also while working full-time as a Staff Accountant.

He never was able to see me graduate college or earn my designation as he passed away from cancer in early 2003. Although his time had run out, the lessons I learned earlier in life gave me a mindset to keep tabs on my money, plan for the future, and know there are limitations on both funds and time. Use them wisely, and you’ll probably come out on top. If not you’ll more than likely struggle for everything, including the valuable time you want to spend with those you love.

The truth has been said, “One of the most important gifts you can give is your time”. Spend some of that time teaching your children the value of money management – a skill they will use throughout their whole life, passing the knowledge gained and wealth earned down to their children and beyond. If you aren’t sure how to reconcile a bank account or create a household budget, contact a professional to help guide you in the process. The money spent will be more than a wise investment – it will be worth its weight in time.

What A Fraudster Really Steals

Patricia K. Smith, Controller for Baierl Acura Auto Dealership in Cranberry, Pennsylvania, thought she could “earn the love” of her family and friends and “see what happiness really looked like” when she decided to systematically begin stealing from her employer. During the next 6 ½ years, she misappropriated over $10 million – averaging almost $30,000 per week.

While her rationale for the theft may be used to question her sanity, the damage caused by fraud of this magnitude permeates throughout other industries as well. Small business owners and national corporate boards alike begin to think, “What if this is happening to us, right now, from one of our employees?” and “Can we trust our Accounting Department?” Businesses can and do regularly take reasonable steps to ensure fraud prevention, implementing simple internal controls such as separation of duties and forbidding the sharing of passwords. But the sting remains for management that one of their most trusted employees was able to commit these acts with controls in place. Now, their focus is keyed upon the new hires, and emphasizing that “it won’t happen again.” What the thief has really stolen is the trust management had in their subordinates.

Management of course does not come out and blatantly say, “We don’t trust you”, but they show it in other ways, such as micromanagement. Taking managing to an extreme, they are critical of all expenditures, down to the cost of paper clips and where the stock of paper clips has gone. Cash inflow is scrutinized to ensure it is deposited before supporting staff know it exists. This places an extra burden upon remaining employees and new hires, taking time from regular duties to satisfy the resulting paranoia. Productivity is reduced, and morale sinks to new lows. The actions of one whom has not worked there in months or years is still damaging the company, only to end when management can trust again – or valued employees begin to quit for a less overbearing environment.

Once the waves of turmoil have receded, the company is usually intact but the overall cost of mistrust has affected possibly dozens of lives, and the goodwill and experience the company had built over years are lost due to one person’s selfish actions. If you are a business owner and suspect fraud, contact a forensic accountant to investigate. The fee to determine a finding of non-fraud can be far less than the damage of suspicion or monetary loss.

(Credit for certain facts for this post: http://triblive.com/home/1549777-74/smith-leniency-million-judge-attorney-company-federal-herself-miller-baierl)

April Showers, May Flowers – 2012 Tax Planning

As the old saying goes, “April showers bring May flowers”. While this can be true regarding the weather, the “April showers” can be considered the tax filing deadline for individuals, which this year falls on April 17^th. Normally if you owe Uncle Sam every year, you dread the thought. But now is also a good time to think about next year’s tax burden. You can do several things now in order to decrease the amount you might pay next year – and maybe even turn it into a refund.

One item you might want to address is the number of exemptions you list on your W-4 Form. If you claim two, three, or higher, you could cause your employer to fail withholding enough taxes from each paycheck. When it’s time to file your taxes each year, you end up having to make up this difference in one lump sum. By decreasing the number of exemptions on your W-4 now, you will allow more taxes withheld from each paycheck and not have such a high lump sum payment. You can even claim zero, which will allow the maximum amount of taxes to be withheld. Ask your employer for your original W-4 Form to review, and make any necessary changes.

Estimated tax payments can be troublesome to pay if you have royalty income such as gas or oil wells. Income from these sources may vary significantly from year to year, even into the tens of thousands of dollars. This could cause the following year estimated payments to be much higher than necessary, when your income may have decreased. In this case, calculating your tax each quarter could save you from the stress of making excessive tax payments.

If you’re expecting or received a refund, congratulations! But how have you used your refund? Did you invest it in stocks or bonds, pay off Christmas credit card bills, or pay down the principle on loans you have? Using your refund wisely can save you from paying additional interest on loans, credit cards, and your mortgage.

While “Tax Day” can be the ultimate April shower, these simple tips might help bring more May flowers to your finances.

The Mobile CPA

http://www.themobilecpa.net

“Injured at the Joint”: Federal Income Tax Return Form 8379 – Injured Spouse Allocation

A few short years ago, you married the love of your life and more than likely, your bank accounts, loans and mortgage, autos, and tax returns are now in both spouses’ names, being “jointly” owned. In general, this means you both accept the rights, responsibilities, risks and rewards that come with marriage. Unfortunately, some couples have endured the stress caused by prior obligations of one or both spouses. Debts such as child support or alimony in arrears, student loans, or back IRS and State taxes owed are reasons the federal or state tax refund you thought was coming this year may be fully garnished to pay down these obligations. And be aware that your federal tax refund can and will be confiscated to pay any state obligations.

In order to stave off at least part of the garnishment, you may file IRS Form 8379 – Injured Spouse Allocation if all three of the following conditions apply:

 1) The injured spouse is not required to pay the past due amount,

 2) The injured spouse reported income, such as wages, taxable interest, etc., on the joint return, and

 3) The injured spouse made payments, such as federal income tax withheld or estimated payments, or claimed the Earned Income Credit or other refundable credit on the joint return.

There is an exception however, in that if the main home of the injured spouse was in a community property state, the spouse may file IRS Form 8379 if only the first condition applies. You can determine if you reside in a community property state by referring to the instructions to IRS Form 8379. 

(Source: http://thetaxlibrary.com/thetaxbook-federal-2011/page-15-11?search=8379)

If eligible to file the Injured Spouse Allocation form, send it along with your federal income tax return whether e-filing or paper-filing. Be sure to write “Injured Spouse” in the top left-hand corner of the tax return. Here in Pennsylvania, taxpayers must paper file the PA State Form 8379 to the Tax Advocacy Office – not where one sends their tax return - prior to either paper- or e-filing a state income tax return. Check with your tax professional to determine the proper procedures in your state, so your tax return doesn’t become injured as well.

The Mobile CPA

http://www.themobilecpa.net

Here All Year!

Many clients see their CPAs at tax time, when the main focus is on completing and filing their tax return.
As a result, they may not take the opportunity to ask questions about long-term tax planning or about
other important financial concerns. The good news is that we are available to you all year, and we have expertise in a broad range of financial areas. We’re ready when you are to take some time reviewing your financial situation, helping you understand your options and make the best decisions. We’re also here in an emergency to help address unexpected financial concerns. So, give us a call to discuss your important financial issues whenever they arise.

The Mobile CPA