Ask TaxMama Issue 504 – A Chip off the Old Block

Happy Brithday Frank L. Baum - May 15, 1856
Happy Brithday Frank L. Baum - May 15, 1856

Dear Family,

This has been a very busy week handling all the registrations for the EA Exam Review class – and teaching the CSEA webinar on the topic. For those wanting the CD from that webinar, CSEA expects to have it available next week. Just call them to order Everything You Ever Wanted to Know about the EA Exam – 800/777-2732 . It was a lot of fun.

Today is a holiday I can really relate to – Happy National Chocolate Chip Cookie Day. Did you know they were first made in 1937 – and it only took Nestle 2 years to turn them into a product? Here’s more about the history – and a step-by-step receipe to make your own. (Or do it the easy way and buy ready-to-bake cookies. They are yummy!)

This has actually been sort of an odd week. We’ve been finishing up the site and having trouble getting the final part of the underlying code completed. The last fixes would have taken about 20 minutes. But the techie working on it was simply not doing it, not responding to e-mails, etc. It turned out that were actually very fortunate. Yesterday, we finally gave up and hired someone else. (In Croatia, no less!) Within 3 hours of our initial contact, they’d looked over the existing code and fixed the things Andrew has been itching to have done, provided documentation so he can do it himself in the future – AND make a list of many of the horrible coding errors performed by our original techie. Major stuff. Stuff that worked on the surface, but the underlying code was bloated and junky – you know, a lot like Microsoft’s various operating systems that just get bigger and bigger and bigger and more filled with careless errors. (Yes, every other release works better. Remember ME? Now, Vista? People just skip a release and the next one works. Oops, shouldn’t be commenting on that here!)

Anyway, why I am bringing this up – and why should you care?

Because. These are two phenomena I’ve seen over the years.

1) You have a problem, or you’re stuck, or you’re in trouble – and you simply don’t contact your clients (or customers or investors), waiting until you can resolve it yourself. Why? Perhaps you’re afraid of the negative reaction? Perhaps you’re afraid to admit to your mistake? Whatever.

The fact is, the clients’ negative reaction is rarely as bad as you imagine – IF you tell them about the problem or delay yourself, as soon as you learn of it. However, if they get put off and ignored and have to find out about the problem themselves, the reaction will be worse than even you could imagine.

So, if there’s something going on – just tell everyone who needs to know and face the music. People will be happy to cooperate with you and help you get through it.

2) If you really don’t have the skills to do something, don’t do it. Go learn the skills. Study. Read books. Go to classes (live or online). Go to discussion groups and forums and ask questions or read the threads on the topics you need to learn more about. There is SO much information available in schools, libraries and on the Internet. People will resent you for taking their money and wasting your time if you don’t. You will never build up a good reputation if you keep faking it. And yes, people do find out, sooner or later. (Even Bernie Madoff was exposed – though, in his case, he did a LOT of damage before the truth emerged. WOW! I cannot believe that. Can you?)

Speaking of education – bookkeeping is one of the professions where there are too many fakes. There are many excellent bookkeepers, but not enough of them go around. As a result, the industry has room for unregulated, inexperienced, uneducated charlatans. It infuriates me to see the garbage that has come across my desk over the years, prepared by ‘professionals’ earning $25 or $50 per hour, or more – who don’t understand the fundamental structure of the Chart of Accounts or Balance Sheet or Income Statement. They couldn’t distinguish a liability from an expense to save their lives. And they’ve never bothered to take even one accounting or bookkeeping course. It usually costs the small business more to get their records fixed than it did for the original bookkeeping. To say nothing of the tax liability surprises they discover when their tax returns are prepared. I’ve seen people end up with $10,000 or $20,000 worth of unexpected tax debt because of the major errors in their books.

Naturally, with the proliferation of software tools like QuickBooks, many small businesses are doing your own bookkeeping. Without accounting background or training, even the best software tool won’t help you if you don’t understand how to post checks and deposits properly. But wait! There’s help. I am going to teach you how to find those errors and never make them again. It won’t cost you a dime – but it could save you a fortune!

On May 20, 2009 at 1 pm PST, please join me at a webinar for the QuickBooks folks. There’s no charge. But space is limited, so please sign up now.

Topic: QuickBooks Basics – The Top 10 Things People Do Wrong

Also, IRS is offering a (no charge) phone forum on the same day (at various times)about “Proper Worker Classification” – register and pick the syllabus (PDF) here:

OK, now that we’re all behaving responsibly, do you think it’s time for the credit card companies to do the same thing? President Obama called upon Congress to send him a bill to curb abusive practices in the credit card industry. He wants to see this bill by Memorial Day. You can watch the progress of the Credit Card Accountability Responsibility and Disclosure Act of 2009, S.414. Don’t hold your breath. The Senate isn’t making this a major priority on their calendar just yet.

Speaking of the Senate, this past week, I’ve had two occasions to hear from Enrolled Agents who contacted their Senator or Representative to fix a problem. In one instance, a cemetary had previously buried someone (no one knew who)in the grave of a newly deceased gravesite owner. Not only wouldn’t the cemetary remove the unidentified body on their own – they wanted to charge the bereaved family as much as $12,000 to move the body and re-bury it – and it would take days to get to it. Heck, it was the cemetary’s error. Why should the family pay? After getting nowhere with the cemetary and being lied to about the owners and management…Rita Veen finally took it to the Secretary of State’s office and her State Senator. Amazingly, once she did that, the cemetary graciously removed their error and thet were able to inter the correct gentleman – within a couple of hours.

The point? (Other than what a bizarre world it is?)When you’re feeling frustrated, ripped-off, badly used, don’t forget to contact your state or federal legislators’ office(s). They have staff; they have contacts; they know their way around the system – and they have power.

More great news about the economy. The Social Security Administration released their annual report. In the current economic and employment climate, they are concerned about the viability of the SS program starting in 2016 when Baby Boomers start to retire. To fix the problem, the Trustees propose that Social Security contributions be raised to 14.4% of payroll, up from 12.4%. Your share, as an employee? And extra 1% in withholding. The alternative? An immediate reduction in benefits of 13 percent (or some combination of the reduction in benefits and increase in withholding).

Although the Medicare fund is in worse shape, the Trustees do not seem to make a recommendation to increase our contributions. Or maybe I missed it. Do you see it?

In IRS News this week, we learn that IRS is handling their levies and levy notices properly. Remember, levies are different from liens. A lien is just a public notice of your debt. A levy is when IRS grabs your assets towards paying that debt.

In honor of National Chocolate Chip Cookie Day, today’s Money Funny is all about chocolate math.

In TaxQuips this week, we learn about dealing with debt from retirement fund penalties; if placing a manufactured home on dad’s land allows you qualify for the first-time homebuyers credit; whether or not you can buy a home while you still owe IRS and your state money; and whether you can take a charitable contribution deduction for use of your rental home.

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04.30.2009 1st Quarterly Payroll Returns and Pay Taxes Due

04.30.2009 1st Quarterly Sales Tax Returns and Pay Taxes Due

05.15.2009 Employers Make monthly Payroll tax deposit

05.15.2009 Exempt organization must file e-postcards

06.15.2009 2nd 2009 Estimated Payment – all entities Due

06.15.2009 Employers Make monthly Payroll tax deposit

06.15.2009 Personal Tax Returns Due for US Taxpayers overseas Form 1040

06.15.2009 or File extensions for US Taxpayers overseas Form 4868



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