IRS and Electronic Business Records – QuickBooks and Peachtree Files

The Internal Revenue Service is entering the 21^stcentury. They are starting to request backup copies from small business accounting software such as QuickBooks and Peachtree when they decide to audit a business. This represents a pretty dramatic change in their auditing methodology and the amount of data that they have at their disposal.  While agents are not required to request a copy of the taxpayer’s original software, they are likely to do so if their examination covers more than a particular expense item.

Levin Swedler & Company │ Certified Public Accountants │ Akron, Ohio CPAs

Reviewing electronic accounting records permits the agent to view dated transactions and subsequent changes, including the user name of the person who made the entries.  This is a substantial increase in the amount of data previously available to an agent. There is some concern that adjustments made to the accounts in the accounting software could raise questions by the auditor.

Further, there is concern about how much data becomes available to the auditor. Traditionally a taxpayer would be required to provide an agent only the specific information requested by the agent. The requirement to provide the entire backup file will probably include periods not currently under audit and will undoubtedly include information that the agent would not have otherwise requested. At present the more popular small business accounting software does not permit single year backup files. Therefore, the file provided to the IRS would probably contain multiple periods with all the attending additional data.

There are additional concerns that accounting records may include “privileged” information (ie: employee or patient medical information or attorney/client information), which the taxpayer is not permitted to disclose to third parties, including the IRS.

At this point the IRS is learning how to use electronic records and has not yet developed standard operating procedures. However, we can be reasonably assured that those standard procedures are coming, and that those procedures will be designed to provide greater access to taxpayer’s data.

For additional information, please review the IRS’s Use of Electronic Accounting Software Records; Frequently Asked Questions and Answers, or contact Levin Swedler & Company – Certified Public Accountants.

Written by: Gary D. Levin, CPA, CVA

Season’s Greetings to One and All!

As we approach the end of 2011, I would like to take a moment to reflect on the year just ended and what I hope to expect in the coming year.

Levin Swedler & Company │ Certified Public Accountants │ Akron, Ohio CPAs

First, and most important, I would like to thank our clients, professional acquaintances, advisors, and team members for all of your support, cooperation and most importantly, your friendship over the last year.

The past few years have not been easy for many of you.  Coupled with all the goings on in the world at large and the constant bombardment of all the good, the bad, and the ugly from the news media, an aura of uncertainty and concern seemed to prevail.

Rest assured, when we work together to constructively resolve our issues, things will improve.  I truly believe, based on what we’ve seen with our clients, 2011 was a turning point in the business world for many.  Based on this and other positive factors domestically, I have an even better outlook for the year ahead.  Progress has been slow, but it has also been steady, and with your determination and a dash of luck that our government takes a lesson from your actions, the future is bright.

Before we say goodbye to 2011 and welcome the coming year, don’t forget to review your tax position prior to year end.  There are planning opportunities that can be utilized to minimize your tax liability between years.  Many of you should have already received our year end planning memo which should assist you with identifying key issues.  Please contact us with any questions.

For those of you who did not receive our year end memo, please feel free to contact us and we will respond promptly.

From all of us at Levin, Swedler & Company, Inc., we wish you and your families a holiday season of joy and happiness as well as a New Year of health, prosperity, and peace.

Written by: Steven J. Swedler, CPA

Retirement Plans – Participant Fee Disclosure Regulations

If your company sponsors a defined contribution retirement plan subject to ERISA (including a 401k plan) and plan participants have the ability to choose among investment options in their account, there are new disclosures you need to make to those participants starting in 2012.

Levin, Swedler & Company is an AICPA - Employee Benefit Plan Audit Quality Center Member

On October 20, 2010, the U.S. Department of Labor published final regulations known as the Participant Fee Disclosure Regulations.  These regulations are intended to ensure that participants with self-directed accounts are aware of their rights and responsibilities in managing their accounts and are provided sufficient information regarding the investment options available to them and the related fees and expenses.

The initial disclosure of general plan information must be made by May 31, 2012 (for calendar year plans); similar notices must then be provided annually thereafter.  In addition to the required annual disclosures, information must be furnished to participants on a quarterly basis regarding administrative and individual fees and expenses actually charged to their account for the preceding quarter, as well as the services and transactions to which those fees relate.  The initial deadline for these newly required quarterly disclosures is August 14, 2012 (for calendar year plans).

The plan administrator has a fiduciary duty to ensure that these disclosures are timely.  However, the plan administrator may rely reasonably and in good faith on information received from the plan’s investment advisor or other service providers.  If you are a plan administrator and have not yet heard from your investment advisor or other service providers about how they plan to assist your plan in satisfying the new regulations, we recommend you contact those service providers before the end of 2011.

Please contact Levin Swedler & Company -Certified Public Accountants if you need further assistance with these new disclosure requirements or any of the numerous other plan disclosures required by the DOL or IRS.

Written by: Todd M. Kennedy, CPA

Ohio Use Tax Amnesty Program

Ohio has started a use tax amnesty program that provides an excellent opportunity for taxpayers to satisfy their past consumer’s use tax liability.  The amnesty program begins October 1, 2011 and ends May 1, 2013. This program replaces an earlier program for use tax amnesty.

Consumers use tax due on purchases made on or after January 1, 2009 should be included in the amnesty application.  If an assessment has already been issued for any period, you are not eligible for the amnesty.

The advantages of applying for amnesty is that the Tax Commissioner will waive all unassessed use tax liability for any periods prior to January 1, 2009.  The use tax paid under amnesty will not be subject to interest or civil or criminal penalties.

You will be required to pay all use tax due made on purchases on or after January 1, 2009. You will also be required to register for use tax and may be required to file returns on an ongoing basis.  Payment plans are available for amounts due that exceed $1,000.

An information release explaining the amnesty in detail and the steps to request amnesty is located at http://www.tax.ohio.gov/divisions/communications/information_releases/sales/st2001101.stm

General information,tutorials, and frequently asked questions can be found at http://tax.ohio.gov/divisions/sales_and_use/index_use.stm.

Levin Swedler and Company – Certified Public Accountants can help decide if you have purchases subject to use tax and help you through the amnesty process.

Written by: Kim Orians, CPA

Fixed Asset Management – Capitalizing Expenditures

Should my business expense or capitalize?  As with many regulations in taxation the answer is, “it depends.”  In March of 2008, the IRS proposed regulations that provide a de minimis rule that permits “small cost” items to be exempt from capitalization.  What is considered a small cost item is relative to each business.  According to the IRS definition of de minimis, small cost items would include items that have so little value (in comparison to the company in its entirety) that accounting for them would be unreasonable or administratively impractical.

Generally, the first step in determining what a business will consider a “small cost,” is to write a company policy that describes guidelines for classifying expenditures. While compiling a policy, a company should consider the type of property (tangible or intangible? is it an improvement?), the life of the property (greater than one year?), and also the cost of the property (is it material to the company’s bottom line?).

Since the IRS does not provide black and white guidelines for classifying expenditures, a company can substantiate their actions by implementing and consistently applying a capitalization policy.  Levin Swedler & Company – Certified Public Accountants can answer questions regarding fixed asset acquisitions, disposals, and depreciation classification, along with the rules under federal and state law related to the availability of bonus depreciation on newly capitalized assets.

Keep an eye out for my next blog post that will touch on specific frequently asked quentions regarding the capitalization of expenditures.

Written By: Matthew Migal

American Jobs Act of 2011

Levin Swedler & Company │ Certified Public Accountants │ Akron, Ohio CPAs

President Obama has challenged Congress to immediately pass the American Jobs Act of 2011.  This act is a $447 billion jobs package, which includes payroll tax cuts and tax credits to encourage hiring, along with extended 100 percent bonus depreciation, and would be paid for by limiting deductions for higher income taxpayers and changing the taxation of carried interest.  The offsets, however, would not take effect if the Joint Select Committee on Deficit Reduction achieves additional savings.  President Obama described the jobs package to Congress on September 8 and unveiled the legislative text on September 12.

Key points:

1. The 2011 employee-side payroll tax cut for Social Security’s Old Age, Survivors, and Disability Insurance (OASDI) to be expanded to drop from 4.2 percent for calendar year 2011 (down from 6.2 percent for calendar year 2010) to 3.1 percent for calendar year 2012.  The president’s proposal includes similar payroll tax relief for self-employed individuals for calendar year 2012.
2. Employer-side payroll cuts, were proposed to give businesses a similar payroll tax cut for wages paid up to $5 million, as well as a full payroll tax holiday to reward any business that experiences growth in its payroll, driven by new hires, increased wages  or both.
3. President Obama also proposed giving qualified employers a 100 percent payroll tax credit (called a “payroll increase credit”) in cases of payroll growth for wages up to $50 million.
4. A proposal for tax credits for hiring individuals deemed long-term unemployed, defined as those who have been looking for work more than six months,
5. President Obama has proposed to extend 100 percent bonus depreciation for one year through 2012.
6. The president has proposed to delay the effective date of three percent government withholding until after 2013.
7. President Obama has proposed to effectively limit the value of itemized deductions and certain other tax expenditures for higher income taxpayers to 28 percent starting in 2013.
8. Other proposals include those for carried interest, oil and gas incentives,
   corporate jets, and foreign tax credit safeguards.

GOP leaders in the House have told the White House they will schedule hearings on the American Jobs Act as soon as possible.  We will have to wait and see where the Act goes from here.

Click here to read more about the American Jobs Act of 2011.

Written by: Kim Orians, CPA

CPAs Counting the Miles – 2011 Akron Marathon

During the summer of 2011, Levin Swedler & Company went to work…… not on compilations or reviews, tax returns or just plain old number crunching for the fun of it.  But instead, they decided to train for the better half of the summer in preparation for an event people get excited about when the thought of strenuous leg pain and the gasping of air crosses their minds.  Yes, that could be an event none other than the Road Runner Akron Marathon on September 24, 2011.

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Let’s make one thing clear – It was not easy.  Counting those miles while training, just wasn’t quite the same as the counting performed in cozy computer chairs inside an air conditioned office.  However, it was evident on race day that both Team Levin, and Team Swedler now complete with the addition of a few close family members, and friends, were ready to run.  The athletes faced ridiculously high inclined hills, ran for miles with no end in sight, and even had to dodge the occassional big yellow chicken, or the professional juggler. Yet, despite the obstacles, both teams finished strong.

An estimated 11,000 runners participated in the Akron Marathon with an additional 3,000 volunteers and 2,000 children in the Kids Fun Run.  Proceeds from participants after covering race expenses were donated to a variety of charities, such as Stewart’s Caring Place, American Cancer Society, and Akron Children’s Hospital, among others. The race not only brought a group of CPAs together, but an entire city of people.

Levin Swedler & Company had a truly wonderful time at the Akron Marathon, and we can only hope this event will be held for years to come.

If you are interested in seeing more pictures check out runphotos.com, and search our relay teams by the following bib numbers: Team Levin – 8206  & Team Swedler – 8207.

Written by: Richard Boswell, CPA