This guide is intended to sort through the complexities and confusion in finding an accounting or tax professional that is right for your particular lifestyle and financial situation.
Why do you need an accounting and/or tax professional?
Let's first look at your requirements. How complex is your financial situation? Are you looking for a service that just prepares your tax return? Do you want to save time? Save Money? Do you need someone to assist you as an advisor throughout the year? Is it important to have the same individual or firm prepare your tax returns from year to year, someone with whom you can build a long-term relationship?
Confused? Don't be. This guide will help you determine the kind of professional you need.
Tax laws and accounting requirements are constantly changing. It is imperative that practitioners continuously upgrade their skills and abilities. Choosing someone to handle your financial needs is no less important than selecting any other service provider such as your doctor. Some simple tips to keep in mind when making a selection are:
Talk to friends and those with whom you work about their experiences. Ask them for referrals. You can also contact national or state organizations for names of their members in your area. Chamber of Commerce activities and service club luncheons are often a good place to talk to others about who they use for their financial services.
Select two or three individuals you believe are best for your situation. Then interview each professional. Make sure you have good rapport with each other. Here are some questions you might ask, depending on your situation:
* What professional organizations do you belong to?
* What credentials to you have that demonstrate your proficiency in serving my needs?
* Do your professional organizations have a Code of Ethics and required standards?
* Where did you get your training?
* How do you keep up-to-date on law changes?
* How long have you been in practice?
* How many tax returns do you prepare each year? What part is Business? Individual? Corporate?
* What is your specialty?
* Are you the person who will do my return?
* Have you dealt with tax situations like mine?
* How do you double-check for accuracy?
* What is the turnaround time for a tax return like mine?
* How do you determine your fees?
* Can you be reached during the year for tax planning? Do you provide year-round tax advisory services?
Do you offer estate and trust planning?
* Do you do partnership or corporation returns?
* Do you offer tax planning for owners of closely held businesses?
You should now have the information you need to make an educated selection. Choose the one you think will do the best job for you. Hopefully, it will result in a long-term relationship.
Friday, November 27, 2009
Business Startups
Most people who deceide to start their own businesses have great ideas for their business. They may even be experts at what they do in their business. However, most people who start their own businesses fail to realize that they need a team of experts to back them and help them to get their business going. Most experts say that for the person who is starting their own business, they should have a board of directors behind them, and that this board should contain successful business owners, accountants, bankers, insurance, investment, and legal advisors.
Startup businesses often fail to consult with an accountant when starting their business because they feel the accountant is not practical for a startup business. Startup business owners often feel that accountants are too expensive to consult with when starting their business. While this may be true, it is often the best investment a startup business owner can make in his or her business.
There is a lot of off-the-shelf accounting software on the market that is relatively cheap to purchase, and - according to many advertisements for this software - very simple to setup (one such ad claims the software can be setup and running within 15 minutes). Although this type of advertising in not wrong, it is very misleading - especially for those people who do not have a background in accounting. Also, because there are so many different accountant packages available to choose from, many times, the startup business owner does not know which software is best for his or her specific business, and may purchase an accounting software package that will not work well for his or her business.
Many startup business owners purchase an accounting package and try to setup the software on their own, without consulting with a knowledgable accountant. This often leads to more problems and higher expenses for the startup business. Inaccurate aging reports for accounts receivable and accounts payable. Inventory not being correct. Profit and Loss statements not being correct. These are just a few of the problems I have seen.
An accountant knows how to properly setup an accounting program so that inventory, accounts payable, accounts receivable, payroll, sales tax, etc. are set up so that the business owner can run accurate reports. An accountant can also help the startup business owner to choose the best accounting software for the type of business that is being started.
Look at the following example of a startup business that chose not to consult with an accountant to help setup their accounting software.
ABN Company started their business on January 1. The owner, Jim, decided to purchase accounting software and setup the software himself. He proceeded to install the software and set it up. However, he did not setup the software correctly. He entered A/R and A/P balances for each customer and vendor without entering the individual invoices for each customer or vendor. He also did not setup his inventory items correctly so that they did not reflect the correct income and expense accounts. He made a mess of setting up the accounting software, but did not realize the error(s) until almost 7 months later.
Had Jim consulted with an accountant up front, he would have payed perhaps $2,500 to get his accounting software setup properly. Since Jim waited until 7 months after he had purchased and started using his accounting software, he was now looking at nearly $7,500 to correct the errors in his accounting software. In fact, it would be easier to start over from scratch (start a NEW company data file) and reenter everything (at a cost of nearly $6,000).
Had Jim waited until the following January or February to take the erroneous accounting information to an accountant to do his business taxes, it would have cost him even more. His business tax return would have cost him 4 or 5 times as much to have it prepared correctly, and the accountant most likely would not have corrected the data in the accounting data file.
As an accountant, I have worked with clients who have come to me when they first start their businesses. They may not like the upfront cost, but they realize it is an investment that will pay off in a relatively short period of time. I have also worked with clients who have setup their own accounting software without consulted an accountant to help them. I have had clients who have used their accounting software for several years, making erroneous entries the whole time. These clients have come to me to "fix" their accounting problems. I have told this type of client that the cost would be extremely cost prohibitive to "fix" their current accounting data file. t would be cheaper to start a NEW data file and reenter all the data rather than trying to fix a data file with so many errors in it.
If you want to do things right, and have a successful business where you know your accounting software will give you an accurate picture of your business, then you should check with an accountant before setting up your accounting software. You would not draw up legal documents without consulting a competent lawyer who is knowledgable about the type of legal documents you are wanting to use.
If you would like to contact me regarding the above article, please feel free to contact me at mastertype@mabspc.com.
Startup businesses often fail to consult with an accountant when starting their business because they feel the accountant is not practical for a startup business. Startup business owners often feel that accountants are too expensive to consult with when starting their business. While this may be true, it is often the best investment a startup business owner can make in his or her business.
There is a lot of off-the-shelf accounting software on the market that is relatively cheap to purchase, and - according to many advertisements for this software - very simple to setup (one such ad claims the software can be setup and running within 15 minutes). Although this type of advertising in not wrong, it is very misleading - especially for those people who do not have a background in accounting. Also, because there are so many different accountant packages available to choose from, many times, the startup business owner does not know which software is best for his or her specific business, and may purchase an accounting software package that will not work well for his or her business.
Many startup business owners purchase an accounting package and try to setup the software on their own, without consulting with a knowledgable accountant. This often leads to more problems and higher expenses for the startup business. Inaccurate aging reports for accounts receivable and accounts payable. Inventory not being correct. Profit and Loss statements not being correct. These are just a few of the problems I have seen.
An accountant knows how to properly setup an accounting program so that inventory, accounts payable, accounts receivable, payroll, sales tax, etc. are set up so that the business owner can run accurate reports. An accountant can also help the startup business owner to choose the best accounting software for the type of business that is being started.
Look at the following example of a startup business that chose not to consult with an accountant to help setup their accounting software.
ABN Company started their business on January 1. The owner, Jim, decided to purchase accounting software and setup the software himself. He proceeded to install the software and set it up. However, he did not setup the software correctly. He entered A/R and A/P balances for each customer and vendor without entering the individual invoices for each customer or vendor. He also did not setup his inventory items correctly so that they did not reflect the correct income and expense accounts. He made a mess of setting up the accounting software, but did not realize the error(s) until almost 7 months later.
Had Jim consulted with an accountant up front, he would have payed perhaps $2,500 to get his accounting software setup properly. Since Jim waited until 7 months after he had purchased and started using his accounting software, he was now looking at nearly $7,500 to correct the errors in his accounting software. In fact, it would be easier to start over from scratch (start a NEW company data file) and reenter everything (at a cost of nearly $6,000).
Had Jim waited until the following January or February to take the erroneous accounting information to an accountant to do his business taxes, it would have cost him even more. His business tax return would have cost him 4 or 5 times as much to have it prepared correctly, and the accountant most likely would not have corrected the data in the accounting data file.
As an accountant, I have worked with clients who have come to me when they first start their businesses. They may not like the upfront cost, but they realize it is an investment that will pay off in a relatively short period of time. I have also worked with clients who have setup their own accounting software without consulted an accountant to help them. I have had clients who have used their accounting software for several years, making erroneous entries the whole time. These clients have come to me to "fix" their accounting problems. I have told this type of client that the cost would be extremely cost prohibitive to "fix" their current accounting data file. t would be cheaper to start a NEW data file and reenter all the data rather than trying to fix a data file with so many errors in it.
If you want to do things right, and have a successful business where you know your accounting software will give you an accurate picture of your business, then you should check with an accountant before setting up your accounting software. You would not draw up legal documents without consulting a competent lawyer who is knowledgable about the type of legal documents you are wanting to use.
If you would like to contact me regarding the above article, please feel free to contact me at mastertype@mabspc.com.
Tuesday, November 3, 2009
Guidance on Required Minimum Distribution (RMD) Waiver for 2009
The Worker Retiree and Employment Recovery Act of 2009 (WRERA) waived required minimim distributions (RMDs) for 2009 from defined contribution (DC) plans and individual retirement arrangements (IRAs). Notice 2009-82 provides 2 sample plan amendments that individually designed or pre-approved plan sponsors may adopt or use to amend their plans to either:
• cease making 2009 RMDs unless a participant or beneficiary elects otherwise; or
• continue making 2009 RMDs unless a participant or beneficiary elects otherwise.
The IRS has granted transitional relief for plans for the period January 1, 2009 to November 30, 2009; therefore, if a plan's operation conflicts with the adopted sample amendment during this period, the IRS will not consider it an operational failure.
Individuals may roll over any amount they receive from a DC plan, or an IRA, in 2009, that would have been an RMD for 2009 but for WRERA, if it meets the definition of an eligible rollover distribution (ERD). For plan participants and IRS owners who have already received their 2009 RMDs, but the 60-day rollover period has expired, the IRS has extended the rollover period for these additional distributions until November 30, 2009. However, because of the special one-rollover-per-year rule for IRAs, which was not changed by WRERA, an IRA owner may be able to make only one rollover if his or her 2009 RMDs were paid in installments.
• cease making 2009 RMDs unless a participant or beneficiary elects otherwise; or
• continue making 2009 RMDs unless a participant or beneficiary elects otherwise.
The IRS has granted transitional relief for plans for the period January 1, 2009 to November 30, 2009; therefore, if a plan's operation conflicts with the adopted sample amendment during this period, the IRS will not consider it an operational failure.
Individuals may roll over any amount they receive from a DC plan, or an IRA, in 2009, that would have been an RMD for 2009 but for WRERA, if it meets the definition of an eligible rollover distribution (ERD). For plan participants and IRS owners who have already received their 2009 RMDs, but the 60-day rollover period has expired, the IRS has extended the rollover period for these additional distributions until November 30, 2009. However, because of the special one-rollover-per-year rule for IRAs, which was not changed by WRERA, an IRA owner may be able to make only one rollover if his or her 2009 RMDs were paid in installments.
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