news & noteworthy
Alerts, Updates and Other
Tax and Accounting Tidbits for Business and Home
Presented electronically by Norman, Johnson & Co., PA Certified Public Accountants
Who You Gonna Call? – If your credit card bill arrives and you become aware
of a fraudulent charge what do you do? According to TrueCredit, a provider of consumer credit management services,
there are three initial steps.
1.
Call the credit
card company immediately to inform them of the fraud. The creditor should
reverse the charge and lock your account. Be sure that you record the dates,
times and names of those you speak with.
2.
Call the credit
reporting agencies to report the offense and ask them to place a 90-day fraud
alert on your credit report. You only need to contact one of the three: TransUnion at www.transunion.com, Equifax at www.equifax.com or
Experian at www.experian.com.
3.
File an ID theft
affidavit at the Federal Trade Commission website www.ftc.gov.
Tax Facts: Education – If you have a
child in college this year, you may be able to write off the portion of the
tuition attributable to health care as medical expense. You should insure that
the school’s tuition bill breaks down the cost to show the medical portion
separately. Furthermore, if your child attends a special school for medical
purposes – for instance deaf or blind impairment or learning disability – the
entire tuition cost is deductible as a medical expense.
Worthy Quote: “Your most
unhappy customers are your greatest source of learning.” – Bill Gates, in
his book Business @ The Speed of Thought.
Rule Number One – Keeping detailed records is tax rule number one. But
occasionally (I’m being generous) this doesn’t happen. As a back up we tell
clients to at least try to estimate the expenses and rely on other evidence to
support the figures. This is called the “Cohan rule” and it does allow people
to sometimes use estimates where details don’t exist. But – in a recent case
the IRS and Tax Court disallowed a nurse’s expenses even though she produced a
credible witness in court to back up her explanations. Rule number two – always
use rule number one.
Audit Roulette – Although IRS audit rates are still historically low
they are on the rise. The individual rate rose from 0.77% in 2004 to 0.93% last
year. Audits of small businesses organized as corporations jumped 145% in 2005.
Audits of high-income people ($100,000 or more) have doubled since 2001,
reaching the highest level in a decade.
Watching the Calendar: Automatic extensions of 1040 returns are due in
October this year. Bad news – no second extension.
Just in case it slipped your mind – Failing to file a federal tax return is a misdemeanor
with a maximum sentence of one year, although in egregious cases, a failure to
file may be elevated to a felony.
Retirement alphabet: IRA, SEP, SIMPLE, 401(k) – Sometimes it
seems like a jumble from alphabet soup. But each type of retirement plan is
suitable for different situations. As the name suggests, a SIMPLE, seems to be the current most popular small business plan. If
you would like a no charge presentation on retirement plans, give us call.
Court gives green light to deduct MBA
costs – You can deduct business
education that’s required for your job or maintains or improves your current
skills. But you can’t deduct costs that
qualify you for a new job. As a result, the courts traditionally have
turned down education deductions for graduate school degrees. In a new Tax
Court ruling, however, a sales rep was allowed a deduction for his MBA after
his boss said it would help his career. If the circumstances fit, maybe that
MBA is deductible.
Got a friend or associate that needs help
with accounting, taxes, or financial planning? We appreciate
your referrals. Invite your referral to call for a complimentary conference to
review their situation.
Jim
Norman and Gary Johnson
Norman, Johnson & Co., PA is a
Spartanburg, SC based CPA firm which was founded in 1990. The firm offers a wide range of audit,
accounting, tax, business consulting, and financial planning services for
individuals, businesses, governmental entities, and not-for-profit clients.
This newsletter is published
monthly on the first of each month and alerts and special topics as they are
deemed informative. Information contained in this newsletter is derived from
sources believed to be accurate. You
should discuss any legal, tax, or financial matters with the appropriate
professional before applying them to your specific situation.
If you would like to be removed
from this mailing list simply reply to jim@njcocpa.com with the word REMOVE in the subject line.
If
you would like to be added to this
mailer or would like to add a friend just send an e-mail to jim@njcocpa.com
with the address to be added.
Contact us at jim@njcocpa.com or (864) 573-8623.
Visit our website: Norman,
Johnson & Co. CPAs can be found at http://www.normanjohnsoncpa.com/.
Click here to return to
referring page or here to return
to the home page.