This Issue - February 2017

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Gary Leneway, CPA

ARE YOU READY FOR THE NEW TAX YEAR?

With the new year upon us, it’s a good time for your business (as well as you personally) to plan for the upcoming year and discard of some poor habits from the past. It’s a good time to look at strengthening record keeping while the books are starting off fresh for the new year. The CPAs at Fenner, Melstrom and Dooling, PLC would like to point out some good bookkeeping and other general business habits to pick up for the New Year.


Leverage Technology
Most people absolutely dread having to track all of their donations, expenses and mileage during the course of the year. Try using technology to lessen the burden of the record keeping. There are apps available that allow you to track these items in real time. You can now record and even take pictures of your business meal receipts while still at the table or update your trip log before you get out of the car based upon your GPS. The few seconds it takes to record these items in real time is negligible compared to the time it takes to gather these items at month/year end.


Record Keeping for Meals and Entertainment
The IRS does not require receipts for meals if the required documentation is recorded in a log and the cost is less than $75. If used properly, an IPhone or Android app could replace the need to save several receipts.

Travel, Meals and Entertainment expenses need to be documented with the following items:


• The amount of the expense
Time and place of the expense
The business purpose of the expense
• The business relationship between the taxpayer and any person(s) being entertained

 

Record Keeping for Travel
It’s a good idea to have traveling salespeople track their trips on a daily basis. This will assist the company in tracking the productivity of the employee, mileage reimbursement or auto expenses calculation and will help determine where the company might have some tax exposure.


Internal Controls
Do you have adequate procedures in place to stop or at least mitigate fraud? Recently, a Bloomfield Township woman was arrested with the embezzlement of over $1 Million from her employer over a 6 year period. By adding a few simple procedures, they might have caught this activity several years ago. The owner or someone not responsible for check preparation, should open the bank statement or go online and review the payees on cancelled checks. Owners can make inquiries about any unrecognized payees shown on a check. Sometimes even if a payee is known, it might be a good idea to raise awareness and to let the employees know that people are paying attention. Good internal controls will allow employees to work efficiently but also limit opportunity for theft or errors. A good philosophy is trust, but verify.


Yearly Reflection
Take time in the New Year to reflect upon any Life or Business changes that occurred during the previous year. Did your business grow or contract substantially? Is your industry changing? Did you have another child or grandchild during the year? Did you or your children get married or divorced? These are all items that might require a change in your current business or personal plans that should be thought about before it’s too late. By reviewing these and other items at least yearly, you hopefully reduce the possibility of items becoming severely out of date.

 

More Articles

Tax Alerts
Tax Briefing(s)

The change in administrations in Washington has generated a new focus on tax reform. The White House and lawmakers from both parties have discussed tax cuts, infrastructure spending, and more to encourage economic growth. However, the details of their plans have yet to be revealed. Tax reform legislation may be unveiled in February.


The 2017 tax filing season launched on January 23. The IRS predicted a few speedbumps for taxpayers, especially for taxpayers who file early in anticipation of early refunds. The agency expects to receive more than 150 million individual income tax returns. The vast majority of individual income tax returns will be filed electronically and the IRS has extra safeguards in place to protect taxpayers from cybercrime.


National Taxpayer Advocate Nina Olson, in a recent report to Congress, urged the IRS to change its culture from one that is enforcement-oriented to one that is service-oriented. Such a change, Olson provided, would create an environment that encourages taxpayer trust and confidence. In the report, Olson also highlighted key areas for tax simplification and the top-10 most litigated tax issues.


The IRS has rules that limit the deductibility of expenses and losses from a hobby or activity not engaged in for profit. If the IRS determines that an activity is not profit-driven, deductions from the activity are limited to the amount of income the activity generates. Losses from such activities cannot be used to offset other income, such as salary or investments.


The prudent businessperson is always cautious when he or she is offered a great bargain on real estate, equipment, a business interest, or some other property that just might be too good to be true. Even in connection with ordinary business transactions but especially when considering taking over a property or business that in a bargain because of some legal wrinkle, you should consider whether there might be some tax liability attached to the bargain that could come back to haunt you down the road.


As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important federal tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2017.


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