Zinner & Co. Blog and Newsroom

Money: How Much is Enough?

Posted by Gary Sigman, CPA, M.Tax, PFS, AEP on Feb 25, 2017 12:44:42 PM

Financial planning is one of the most important (if not the most important) and concerning money topics that many folks share. How much should you have saved by a certain age? Should new parents start to save now for their newborn baby or is it ok to wait awhile? How much will you need in retirement for healthcare costs or everyday living? Money - How much is enough Zinner Cleveland CPAs.jpeg

What many keep quiet about during the day is what keeps them awake at night. According to a 2016 Gallup poll, not having enough money for retirement remains a top concern (64%) when it comes to financial woes and 37% of Americans worry about not having enough money to pay for their children’s college.

Related read: Can you borrow money from your IRA account...and should you? 

But, how much do YOU need? While there are many thoughts, theories, and percentages out there, the Zinner team offers customized financial reports to help folks plan and project budgets for retirement, education planning, and, increasing their net worth.

Senior Tax Manager Gary Sigman commented: “We work closely with our clients to provide a realistic view of both what is happening today with respect to income, investments, and expenses, and then look at the longer-term goals. We have the ability to utilize amounts based on various financial and / or tax scenarios, helping our clients plan for an effective financial future.”

If you would like to learn more about your best financial scenario, contact Gary Sigman, Senior Tax Manager, at gsigman@zinnerco.com or 216.831.0733. We're happy to help and ready to start the conversation. 

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Topics: Gary Sigman, financial planning, Retirement Planning & IRAs

Ohio tax changes on the horizon, sales tax to become even more significant

Posted by ZInner & Co. Tax Team on Feb 13, 2017 11:32:40 AM

Is your business maximizing available exemptions and incentives?

This article appears in Crains Cleveland Business 

By Steven A. Dimengo and Richard B. Fry III 
Buckingham, Doolittle & Burroughs, LLC.

February 12, 2017 - Gov. Kasich’s quest to lower the Ohio personal income tax rate continues in his latest proposed biennium budget, even in the face of Ohio’s tax revenue falling short of estimates.Erase taxes.jpg

If adopted, Ohio’s income tax rates would be reduced 17% and income tax brackets would be reduced from nine to five. Reduction of income tax rates has been a focus during Kasich’s terms, and his last proposed budget is no different.

To offset the income tax rate cuts, the governor wants to increase the state’s reliance on the consumption-based sales tax.

The proposed budget would:

  1. Increase Ohio’s sales tax rate from the current 5.75% to 6.25% (with additional local taxes of up to 2.25%); and
  2. Expand the sales tax base to include more services.

Additionally, Kasich proposes to increase taxes on cigarettes and other tobacco products, alcohol, and oil and gas producers.

What should business consumers do? Of course, all Ohio businesses need to make sure they are maximizing the advantage of all available exemptions and tax incentives.

OHIO SALES TAX EXEMPTIONS

Below is a summary of some core sales tax exemptions among the many available to Ohio businesses:

  • Manufacturing: Property primarily used to manufacture, process, assemble or refine property held for sale. The exemption is quite broad, commencing upon the “commitment” of raw materials and extending through completion of the product. In certain situations, activators can be structured to maximize the exemption.
  • Packaging: Available for manufacturers and retailers. It includes packaging materials that restrain the product, including pallets, strapping and shrink wrap when working together. The exemption also covers packaging and labeling equipment, including conveyors and software.
  • Transportation property: Available for most regulated businesses that transport other people’s property for consideration.
  • Warehouse/Distribution Centers: Available for property used to store or handle inventory for distribution outside Ohio.
  • Resale: Available for any property or services resold in the same form in which they had been received. This exemption is often underutilized, as ancillary products may be considered to be resold, such as credit card processing machines, dispensing equipment and bonus goods, even if a specific charge is not stated for such items.
  • Construction Contracts: Improvements and repairs to real property, although the contractor owes tax on its material purchases. Real property includes components that are common to all types of buildings, such as HVAC systems, water lines, fire suppression systems and electrical and communication lines. 
  • Oil and Gas Production: Property used in the exploration for or production of crude oil and natural gas. In addition to producers, this exemption is available for businesses providing certain services to the oil and gas industry.

EXPANSION OF SALES TAX ON SERVICES

Traditionally, sales tax was only charged on sales of goods -- tangible personal property.

However, to increase revenue, Ohio, like many states, began taxing services. Among the many taxable services, Ohio sales tax is imposed on automatic data processing, electronic information services, computer services, employment services, building maintenance and janitorial services, and landscaping services.

Electronic information services in particular have become a growing source of revenue for the state with the revolution of cloud-based services and services delivered electronically. However, “digital advertising services” were recently exempted from tax, which are services used to electronically display advertisements on the Internet about the business’ products, services, industry or brand.

Leased employees, or employment services, also often create significant issues during an audit.

Sales tax applies to providing personnel on a temporary basis, such as to supplement the workforce for seasonal fluctuations in one’s business or to replace an employee on medical leave. However, these transactions are nontaxable when personnel is provided under a one-year contract by which they are assigned for an indefinite duration -- the permanent assignment exemption. When claiming this exemption, it is important that the contract be written consistent with permanent assignment of the leased employees. 

Now, Kasich is proposing to expand Ohio’s sales tax to cable TV, elective cosmetic surgery, lobbying, and interior and landscape design services. The governor made similar proposals in the past to expand the sales tax to even more services, which the state legislator resisted. Ohio businesses, especially in these industries, should pay close attention to this year’s budget process.

INVESTOHIO

Investors in Ohio small businesses have a powerful tax incentive which is relatively unknown and significantly underutilized -- the InvestOhio personal income tax credit.

The InvestOhio credit is available to individuals investing in a business with less than $50 million in assets or less than $10 million in annual sales.

The business then has six months to use the invested capital to purchase new property to be used in Ohio or for compensation for new Ohio employees. The expenditures the business can use to qualify for the credit are extremely broad and include purchasing a new building, manufacturing machinery, equipment or even licensing intellectual property (e.g., patents, trademarks, etc.). The investor is entitled to a credit equal to 10% of the qualifying investment against his/her Ohio personal income taxes.

The InvestOhio credit is available to investors who are new to the business, as well as existing owners who are willing to contribute cash to the company. It is critical, however, that planning be done prior to the business making the qualifying purchase to ensure compliance with InvestOhio’s requirements.

MAXIMUM IMPACT – BE AWARE OF CRITICAL TAX EXEMPTIONS AND INCENTIVES

Ohio business owners and managers should be aware of the sales tax exemptions critical to their industry, as well as potential tax incentives.

The Ohio Department of Taxation assumes that every purchase is taxable, leaving the burden to the consumer to support exemption.

Thus, it is critical that sales tax exemptions are properly documented and the appropriate evidence is provided to the department during an audit.

An experienced adviser can help you navigate through the ever-changing tax landscape to minimize the tax base and maximize the return on your business.

Taxation and tax changes can be confusing and frustrating. We are here to help. If you have questions about taxation, let's talk! Contact us at info@zinnerco.com  or any of our professionals at 216.831.0733. We're ready to start the conversation and end the confusion.

Steven A. Dimengo is a partner at Buckingham, Doolittle & Burroughs LLP in Akron. Dimengo is the chair of the firm’s Taxation Practice Group and has more than 25 years of experience in Ohio sales and use tax planning and controversies. He can be reached at 330-258-6460 or sdimengo@bdblaw.com. Richard B. Fry III, also is a partner at Buckingham, Doolittle & Burroughs LLP in Akron. Fry serves as chair of the Ohio State Bar Association, Taxation Committee and has significant experience in Ohio tax planning and controversies. He can be reached at 330-258-6423 or rfry@bdblaw.com. Dimengo and Fry are co-authors of www.ohiostatetaxblog.com. 

Topics: Howard Kass, Taxes - Individual, income tax

Yes, You Can Be Paid Too Much . . . Or Too Little: Understanding Shareholder Compensation

Posted by Howard J. Kass, CPA, AEP®, CGMA, Partner on Feb 9, 2017 8:04:00 PM

Employees of closely held corporations, whether structured as a C corporation or an S corporation, who also serve as shareholders of that same corporation, may find themselves in a precarious position when it comes to determining their compensation.Passing money stock.jpg

Shareholder-employee compensation is one management area to which leadership teams should pay close attention. In the eyes of the IRS, providing unreasonably high or low compensation to a shareholder-employee can be a bright, red, fast-waving flag.

Why?

Since S corporations are taxed similarly to partnerships, (income is passed through to the shareholders, instead of the corporation paying tax on the income), and since S corporation income is not subject to Self-Employment (SE) tax, it is an obvious move for shareholder-employees to minimize their salary to reduce their Social Security Tax exposure and in turn, increase their non-salary distribution.

“We’ve been told the IRS takes a high interest in this area. This dance of the dollars via distribution versus salary favors the taxpayer, since the monies are not subject to FICA tax or self-employment tax. While such thinking is shrewd, the reality is, the IRS will attack such a move,” said Partner Howard J. Kass.

In a C corporation scenario, the strategy reverses.  Unlike S corporations, C corporations pay tax on their own income.  In determining the amount of taxable income, salaries are a deductible expense, while dividend distributions are not.  This is the “double taxation” issue that C corporation owners try to avoid.

So, in this scenario, while shareholder compensation should theoretically be pushed as high as reasonably possible (while remaining somewhat aligned with industry standards) to reduce the corporation’s taxable income, understand that the IRS may disallow the portion of the company’s deduction it deems to be excessive and reclassify it as a dividend. The result?  A shareholder-employee would be required to report that excess salary as a taxable dividend on their tax return and the corporation would lose that excess as a tax deduction.

From the company standpoint, the rules allow a salary deduction for both a C corporation and an S corporation, but remember the amount of salary deducted must reflect “a reasonable allowance for salaries actually rendered” (IRC § 162(a)(1)) reflecting what would “ordinarily be paid for like services by like enterprises under like circumstances.”  source: www.journalofaccountancy.com/issues/2009/jun/20081250.html

The next and obvious question becomes how does the IRS determine “reasonable compensation”?

Reasonable compensation is defined (by Reg. 1.162-7(b)(3)) as the amount that would ordinarily be paid for like services by like organizations in like circumstances.

Tax courts have used two tests to determine the reasonableness of compensation. The 5 Factor test and the Independent Investor test.


The 5 Factor Test

  1. The employee’s role in the company
    What services is the employee performing for the company?  Relevant considerations include the position held by the employee, hours worked, and duties performed.
  2. An external comparison with other companies
    What do other comparable businesses pay for similar services paid to their employees in a like-titled position.  Are the types of compensation similar?
  3. The character and condition of the company
    The focus under this category may be on the company's size as indicated by its sales, net income, or capital value.

  4. Potential conflicts of interest 
    The primary issue within this category is whether some relationship exists between the taxpaying company and its employee that might permit the company to disguise nondeductible corporate distributions of income as salary expenditures.

  5. Internal consistency of compensation
    Are there variances among non-shareholder employees that would raise a flag? Does the manager, business developer, or the administrative professional receive a salary proportionate to that of the employee shareholder? Does this employee perform work beyond what is considered routine and typical? How does the nature, extent, and scope of the employees work constitute a higher wage than “reasonable” in comparison? 

The Independent Investor test

This test considers whether an inactive, independent investor would be willing to compensate the employee as he was compensated.

Now that we have dissected some of the tests for determination of reasonable compensation, we can go back to the question of how to determine if a shareholder-employee has in fact been under- or overpaid.  Is this a bulletproof process?  Absolutely not!  However, if one fastidiously builds the case for their compensation being reasonable, the chances for success in an IRS examination increase.

As you can see, setting an appropriate level of shareholder-employee compensation can be confusing and, if addressed improperly, could result in additional tax and penalties. 

If you have questions about shareholder-employee compensation, your business structure, or ways in which you can minimize your tax liability, contact me at hkass@zinnerco.com or any of our professionals at info@zinnerco.com or 216.831.0733. We’re ready to start the conversation and happy to help.

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Topics: Howard Kass, Taxes - Individual

Patience is a Virtue: Why you need to (still!) wait to receive your tax refund

Posted by Jonathan Elliott on Feb 8, 2017 9:53:20 AM

Cleveland CPA woman waiting by computer.jpgFor the taxpayers who went through the painstaking process of sifting through their shoebox full of receipts in the attempt to file their income tax return early, we have to offer you a gentle and friendly reminder that refunds stemming from returns claiming the Earned Income Tax Credit or the Additional Child Tax credit will be delayed until February 15. 

Some taxpayers may have heard rumors circulating about “hidden” ways to receive their refund faster or how to determine the date their refund will arrive. Yes, even in the world of tax accounting, one will hear gossip on the street. A few of the more prevalent rumors include calling the IRS, using the “Where’s My Refund” tool onIRS.gov, or contacting your accountant.

Related read: Why You Will Not Receive a Tax Refund Before February 15

While contacting the IRS may be useful to some, understand that IRS Agents or even the useful “Where’s My Refund” online tool cannot provide a release date for any refunds that have the Earned Income Tax credit or Additional Child Tax credit as those returns are on “refund hold” by the IRS.

In addition, while your accountant has accurately prepared and filed your tax return in a timely manner, he or she does not have the ability to give you your refund date. Although the IRS may approve your refund for processing and release by February 15th, understand it may be yet another week or two until you have the check in hand. According to the IRS website: “While the IRS will begin to issue EITC/ACTC refunds starting Feb. 15, you should not count on actually seeing your refund until the week of Feb. 27 -- if you chose direct deposit or a debit card and there are no processing issues with your tax return.” (https://www.irs.gov/individuals/refund-timing)

Income tax filing – and waiting, can be frustrating. We are here to help. If you have questions about your refund, tax obligation, or income tax preparation, let's talk! Contact me at jelliott@zinnerco.com or any of our professionals at 216.831.0733. We're ready to start the conversation and end the confusion.

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Topics: Taxes - Individual, Jonathan Elliott

7 Things to Give Your Accountant to Help You Get Your Tax Refund Faster

Posted by Eric James on Feb 4, 2017 9:52:43 AM

Tax season. For those due a refund, the focus is how to get their refund sooner. While many remain calm realizing it’s time to sift through their shoe box full of 2016 papers and gather needed receipts to get the process in motion, others experience a high level of stress stemming from confusion or uncertainty as to what they will need to help their accountant accurately prepare their income tax return. 
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What can you do to be one of the calm and peaceful taxpayers enjoying a speedy refund? Simple. Learn the seven things that your accountant needs to receive from you to prepare your taxes efficiently and, ultimately, help get your tax refund sooner.

For Individual Taxpayers

  1. Mortgage interest and property taxes

Your mortgage lender likely issued you an IRS Form 1098 at the beginning of the year that summarizes your mortgage interest and property tax payments you made throughout the previous year.  Your accountant should ask you for this form to claim the mortgage-interest deduction that is available to homeowners (there are limitations).  Your accountant will also refer to this to calculate part of your home-office deduction, if applicable.  If you carry more than one mortgage, be sure to provide Form 1098 for each as you can also potentially deduct interest paid on one other property as a second qualified residence.  This is also the case if you have both mortgage interest and home equity loan interest on your residence.

  1. Don’t forget your 1098-T!

The IRS rewards those who go to school by offering very generous education credits.  You can save up to $2,500 by using the American Opportunity Credit and up to $2,000 by using the Lifetime Learning Credit.  The education credit is applicable if the college or vocational school is:

  • Accredited and
  • Eligible to participate in a student aid program administered by the U.S. Department of Education.

The IRS realizes that this generosity has caused criminals to abuse the system by filing fraudulent tax returns claiming these credits to trigger larger refunds.  Consequently, with the passage of the Preferences Extension Act of 2015, the IRS added a new requirement that must be met in order to claim an education credit.  Starting with the 2016 tax year, you must have a 1098-T tuition statement in order to claim either of these credits.

For Business Owners:

  1. Company Financial Statements

Your company financial statements are the building blocks of your business. Financial statements include three main reports: a balance sheet, an income statement, and a cash flow statement.  If possible, bring a clean trial balance and general ledger (your accountant will thank you profusely!).  For tax purposes, the income statement and the trial balance are the documents most relied upon by your accountant as they contain all the activity for the year along with the ending assets and liabilities.

  1. Automobile Mileage and Expense Log (for those who are self-employed)

If you use your own vehicle for business purposes, you can claim a portion of the car’s upkeep expenses as a tax deduction against your business income.  The IRS allows you to calculate this one of two ways: either the actual expenses method or the simplified method. 

  • The simplified method allows you to apply an IRS-mandated mileage rate to the total business miles driven in the year. For the tax year 2016, the standard mileage rate is $0.54 per mile.
  • The actual expense method is one’s other choice for deducting the business-related cost of the use of a vehicle. Know first, you cannot use both the actual and simplified expense method. The actual expense method requires you to keep a detailed log of vehicle expenses, such as gasoline, oil, license fees, lease payments, tires, and deprecation. If you use your car personally at all, you will have to be careful in tracking your mileage, making certain that you separate your business use from your personal use. Yes, this means you (or your accountant) will need to allocate what percentage of total vehicle expenses were used for business purposes. While the actual method requires much more detail and recordkeeping, it also provides (typically) a greater deduction for the automobile expense. The IRS suggests if you are unsure which method is most advantageous, to calculate or project under both methods and take the larger deduction of the two.

    Understand, if the vehicle you are using is provided by your employer, you can only deduct unreimbursed expenses.

Regardless of which method you choose, you, the taxpayer, are still required to keep track of your business mileage in a vehicle log.  This can be as simple as jotting dates, descriptions, and miles into a blank notebook, or you can use vehicle log software to keep track of your mileage and automate the deduction.  This type of software can be especially helpful if you drive often to see clients or, if you work for Uber or Lyft as a side business, for example.

  1. Include complete financial information for all side businesses

Like many other Americans, you might have a side business you run to help make a little bit of extra money.  A “side business” can range anywhere from working as a DJ on the weekends, officiating basketball games, teaching fitness classes, doing freelance photography, and even working on cars.  Simply, whatever your case may be, the IRS requires that you report this income just like any other type of income. 

If a business pays you more than $600 for services as an independent contractor, they are required to issue you a 1099-MISC.  However, it is important to remember that not receiving a 1099-MISC for any portion of your income does not mean that the income is tax-free.  Make sure to keep precise track of all of your gross receipts as well as associated expenses related to the activity.  Do not forget to include information regarding any fixed asset acquisitions or dispositions as well.  No matter how big or small your side business, it can be very difficult and stressful to try to do a last minute scramble to find all of the tax information you need. 

Make sure that you keep track of the activity throughout the year.  Using software such as Excel or QuickBooks will help make your life easier.  Having all of the information ready for your accountant regarding your side businesses can help avoid many hang-ups that can prevent you from getting your taxes prepared quickly.

As I advise clients, your record keeping doesn’t have to be fancy or even automated, just complete.

  1. Home-office expenses

When you designate your home office or a portion of your living area as your sole place of business, or if you regularly meet clients or customers at your home, you may usually claim home-office expenses.

Home-office expenses include a percentage of your utilities, repairs and maintenance, home insurance, and mortgage interest or rent.  Your accountant will calculate your home-office deduction by dividing the square footage of your office space by the livable square footage of your house, or by dividing the number of rooms your home office occupies by the total number of rooms in the house.  Using either formula, your CPA will multiply your total home expenses by the home-office percentage.  Communicate with your accountant before meeting to ensure that you are providing what is needed and you are accurately calculating the area to be designated “home office.”

Much like the vehicle deductions, you can also use a simplified method to claim your home-office deduction.  The simplified method allows you to deduct $5 per square foot, up to 300 square feet of the portion of your home used for business.  Your accountant will advise the most beneficial route for your tax situation.

  1. Provide your accountant with your driver’s license number & Identity Protection PIN (IP PIN) if one was issued

While it may seem like an odd request for your accountant to request your driver’s license number, it is now a necessary step in the tax preparation process.  In an effort to combat stolen identity tax fraud, many states, including Ohio, now require you to provide your driver’s license number in order to e-file. For those who are married filing jointly, the driver’s license number for both the primary taxpayer and spouse must be provided.  If you do not have a driver’s license or state ID card, you will have the option to indicate this and e-file.  However, your return may not be processed as quickly.

At the federal level, the IRS developed a security measure called the Identity Protection PIN (IP PIN).  An IP PIN is a six-digit number that the IRS issues to a taxpayer who has previously been a victim of identity related tax fraud to help prevent criminals from using the taxpayer’s social security number to file fraudulent tax returns.  If you are issued an IP PIN, you must continue using an IP PIN to e-file returns indefinitely.  Unfortunately, once you receive an IP PIN there is no opting out.  The IRS will send you a new IP PIN through the mail every December in a document called “CP01A Notice”.  If you lose your CP01A notice, you can still retrieve your IP PIN at www.irs.gov.  If you try to e-file your return without this number, it will be rejected.  Also, if you paper-file your tax return either using an incorrect IP PIN or omitting the PIN altogether, your return will be processed through additional behind-the-scenes screenings to validate your identity, which will ultimately delay any refund you may be due.

Gain more insight from Eric: Read "Why Your Bag of Used Clothing Isn't Worth $1000"

Take the time to gather the required information.
Knowing what your accountant needs to prepare your tax return will help cut down on the exchange of questions and answers needed to finish your return and will help you achieve the peace of mind you desire, come tax season each year.  As a result, your accountant will be able to prepare your tax return more efficiently and in a timelier manner. If you are due a refund, this may also help you to receive your refund sooner. 

Finally, ensure you stay in communication with your CPA year round so that there are no surprises during tax season.

While some may think they should chat with the IRS if they encounter a problem or are seeking guidance, understand they are not familiar with your entire financial picture and, as IRS agents, will only advise on the matter as it pertains to your particular question. Further, with the ongoing budget cuts and staffing challenges at the IRS, anticipate long on-hold times, waiting for your call to be answered.

If you are in doubt over the documents or paperwork needed to help your accountant prepare your income tax return, or if you are facing uncertainty with any tax issues, contact me at ejames@zinnerco.com or 216.831.0733. Our full staff of tax professionals are happy to assist and ready to help you plan, prepare, and file your income tax return.

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Topics: Eric James

Together We’re Greater! Zinner employees take part in United Way activities

Posted by Zinner & Co. on Jan 31, 2017 12:23:55 PM

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From wacky tie day to a hilariously difficult spelling bee, CPAinting to “dress as a Partner,” the Zinner team shared wit and wisdom during the firm’s annual United Way of Greater Cleveland fundraising campaign.

Copy of 20170117_125930.jpg“We are fortunate that the Zinner staff are inherently caring, giving folks. As long-time supporters of the United Way and the people, programs, and organizations they serve, it was our pleasure to find meaningful ways to not only raise funds, but also raise awareness for the work they do,” said Sue Krantz, partner.

Check out some of the fun snapshots from our campaign activities.

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Topics: Firm news

These emails about QuickBooks software are actually a phishing scam!

Posted by Zinner & Co. on Jan 31, 2017 11:58:37 AM

What caught our eye today? This article by Emily Valla, special to the Idaho Statesman.

Scammers are always looking for new twists on common scams, especially when it comes to phishing emails. These emails are meant to trick you into clicking a link and either providing personal information or downloading viruses or malware.

The Better Business Bureau has learned that a new version of this con is circulating as an email alert supposedly about the accounting software QuickBooks. While anyone may receive this email, scammers are specifically targeting small businesses.

Here’s how this scheme works. You receive an email with the subject line “QuickBooks Support: Change Request.” The message is “confirming” that you changed your business name with Intuit, QuickBooks’ manufacturer. However, you never made such a request. You think it must be a mistake, but fortunately the email contains a link to cancel. Pause before you click that. Scammers know you didn’t make this request. The link is simply bait. It downloads malware to your device, which scammers use to capture passwords or hunt for sensitive information on your machine. This can lead to identity theft. Similar scams also impersonate personal-tax software or banks.

Always be wary of unexpected emails that contain links or attachments.
Here are some other ways to spot phishing messages:

▪ Check the reply email address. One easy way to spot an email scam is to look at the reply email. The address should be on a company domain, such as jsmith@company.com. Especially for major companies, be wary of generic addresses from free email providers.

▪ Check the destination of links. Hover over them to see where they lead. Be sure the link points to the correct domain (www.companyname.com), not a variation, such as companyname.othersite.com or almostcompanyname.com. Scammers can get creative, so
look closely.

▪ Consider how the organization normally contacts you. If an organization normally reaches you by mail, be suspicious if you suddenly start receiving emails or text messages without ever opting in to the new communications.

▪ Be cautious of generic emails. Scammers try to cast a wide net by including little or no specific information in their fake emails. Be especially wary of messages you have not subscribed to or companies you have never done business with in the past.

▪ Don’t believe what you see. Just because an email looks real doesn’t mean it is. Scammers can fake anything from a company logo to the “Sent” email address.

▪ Have a process in the office. Make sure employees know to not click links in unexpected emails. Tell them who they should ask if they seek to verify emails they’re uncertain about, and encourage them not to make “quick fixes” that could be costly.

As you can see, it is easy to fall for the trickery of unsavory scammers. Zinner and Co. is home to several QuickBooks ProAdvisors and professionals trained in cyber security. Learn how to reduce your risk. We are here for you and ready to start the conversation. Contact us at info@zinnerco.com or 216.831.0733. 

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Emily Valla, emily.valla@thebbb.org, is the Idaho marketplace director for the Better Business Bureau Northwest. To check a business or report a scam, go to www.bbb.org 

(This artile was originally published January 13, 2017 in the Idaho Statesman)

Topics: fraud, quickbooks

Why Your Bag of Used Clothing Isn’t Worth $1,000: The 2016 Noncash Charitable Contribution Fair Market Value Guide

Posted by Eric James on Jan 31, 2017 9:59:26 AM

Like many taxpayers, you may have recently (or routinely) donated a few bags of clothing and household items to a 501(c)(3) charitable organization.donation box stock.jpg The $125 designer jeans, a box of barely-used stuffed animals, and eclectic wall art were sought-after purchases that found their way to your home through your hard-earned dollars. Certainly, your goods were priceless treasures to you and you presumed the same for the lucky charity to which you would donate them. 

Come donation day, you eagerly greeted the worker at the donation center, cheerfully handed over your goods and, in return, received a blank receipt to use as tax documentation for your charitable donation. A quick final glance at your almost-departed “stuff” provided you with a mental assessment of the value of your donation. You hurriedly scribble $1,000 on the line indicating “value.” 

Read more articles by Eric James

Who’s to disagree? It is a matter of practice that the fair market value of your noncash donation is not provided when the organization issues your donation receipt.  Come tax time, this can make completing Form 8283 (Noncash Charitable Contributions) confusing and open to interpretation. 

What can you do? Having a reliable basis for determining the fair market value of your clothing and household items will help you accurately plan and document your charitable giving.

Download our easy-to-read “2016 Noncash Charitable Contribution Fair Market Value Guide.” You will find value ranges for a pretty comprehensive listing, from artwork to vests. Be aware that the values provided in this guide are meant to represent average values.  Some of the items you have donated may be high-end brand name items that may have a higher fair market value than the one shown in the guide.  Conversely, you also need to consider the possibility that your donated goods may fall into the lower end of the range, too.  Moreover, do not forget that the goods you donate must be in good used condition to result in any deduction, at all.

If you have questions about the contents of this guide or if you have made or are considering making donations of real property, vehicles, boats, or intellectual works, contact me at ejames@zinnerco.com or any of our professionals at 216.831.0733. We’re happy to help and ready to start the conversation.

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Topics: Taxes - Individual, Eric James

My CPA Says, “Extend.” What Does That Mean to Me?

Posted by Gary Sigman, CPA, M.Tax, PFS, AEP on Jan 30, 2017 1:00:31 PM

Each year, some taxpayers find themselves scrambling to find their income tax return paperwork, a year's worth of receipts, and ultimately becomes stressed in the attempt to file their tax return by April 18. Others know and understand that simply filing a tax extension can earn them time, reduce their stress, and possibly, incur a lower tax bill.

A tax extension is free, easy and automatic.  Just submit Form 4868 electronically or on paper by the April 18 filing deadline. Tax extension image.jpg

“We explain to clients the many advantages of filing an extension. Not only do they gain six more months to file their return, but they also have the ability to review their options and understand their return a little better. This helps plan strategically not only for the current tax year, but this extra time also enables us to potentially project a client’s tax position for the following year as well. By having the ability to look at two years at once, we can provide the client with an optimal strategy to reduce their tax obligations,” said Senior Tax Manager Gary Sigman, CPA, M.Tax, PFS, AEP.

You'll also avoid failure-to-file penalties, which can add up to 25% of the tax due. If you file an extension but miss the extended deadline, you will be subject to this penalty. Keep in mind that filing an extension when you owe taxes only gives you more time to file, not more time to pay – your payment is still due at the April deadline.

What does filing an extension do? 

  • An extension is a form filed with the IRS to request additional time to file your federal tax return. The extension period is six months, which extends the due date for submitting your final returns from April 15 to Oct. 15*. In some states, filing an extension with the IRS will automatically extend the time to complete a state income tax return.
  • Filing an extension grants you additional time to submit your complete and accurate return, but you still need to estimate whether you will owe any taxes and pay that estimated balance by April 18.
  • Extending your return allows you and your CPA more time to prepare your tax return to ensure filing of an accurate tax return. In many cases, you may still be waiting for additional information (e.g., Schedule K-1, corrected 1099s, etc.) to complete your return.

Why does my CPA suggest we extend my tax return?
If your CPA has recommended that you file an extension, it may be due to many reasons, such as:
  • The volume of data or complexity of certain transactions (e.g., sale of a rental property) on your return requires additional time.
  • The amount of time remaining in filing season is limited for the CPA to complete client returns by April 15* due to late information received from numerous clients.
  • Many CPAs have a “cutoff” or deadline for clients submitting their tax information so they can plan their workload to ensure all client returns and extensions are completed by April 15*.

Am I more likely to be audited if I extend?

  • Extending will NOT increase your likelihood of being audited by the IRS.
  • It is better to file an extension rather than to file a return that is incomplete or that you have not had time to review carefully before signing.

What are the primary benefits of extending my tax return?

  • It provides for additional time to file returns without penalty when you are waiting for missing information or tax documents (such as corrected 1099s). Just remember that an extension provides additional time to file, but not additional time to pay. Penalties may be assessed if sufficient payment is not remitted with the extension.
  • You may qualify for additional retirement planning opportunities or additional time to fund certain types of retirement plans (e.g., SEP IRA).
  • It is often less expensive (and easier) to file an extension rather than rushing now, then possibly needing to amend your return later.

Should I do anything differently if I am filing an extension or “going on extension”?

  • No, you still should give your CPA whatever information you have as early as possible or as soon as it becomes available.
  • Expect to pay any anticipated taxes owed by April 18. You still need to submit all available tax information to your CPA promptly so he/she can determine if you will have a balance due or if you can expect a refund.
  • If you are required to make quarterly estimated tax payments, your first quarter estimated tax payment is due April 18. Your CPA may recommend that you pay the balance due for last year and your first quarter estimated tax payment for this year with your extension.
  • If you are anticipating a large refund, chances are your CPA will likely try to get your extended return done as soon as possible once all tax information is available. Your CPA may also want to discuss tax planning opportunities with you so that in future years, you don’t give the IRS an interest-free loan all year!

Is there anything I can do to avoid filing an extension if I know I am missing some

information now?

  • If you already know you will be waiting until the last minute for one or two documents, you may be able to minimize the chance of having to file an extension by providing all other available documents to your CPA as soon as you receive them. By doing so, your CPA can prepare a draft return for you to review and discuss in advance. He or she may be able to add the missing piece of data or last-minute information and still be able to complete your returns by April 15* (depending on their workload).

I heard about changes to due dates beginning with 2016 tax returns filed in 2017. Will that affect me?

  • Changes in due dates relate to partnership and some business (C corporation) returns, not individual tax returns.
  • If you have a partnership interest, the completion of your individual tax return maybe affected. One purpose in changing the due dates was to allow for completion of these returns in order to have the information available to be included in an individual’s tax return. In this instance, your chances of having to file an extension for your individual return may actually be alleviated. 

Tax planning is essential to builidng a succesful business foundation and changes in due dates can create confusion and, if not addressed in a timely manner, costly. If you have any questions about due date changes, tax planning, or compliance, contact me at gsigman@zinnerco.com or any of the professionals here at 216.831.0733. We are happy to help and ready to start the conversation.

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*Information courtesy of the American Institute of CPAs

Topics: Gary Sigman, income tax

Bad Phish: Don’t Get Caught in the Net of the Latest Scam

Posted by Mike Jaworske on Jan 29, 2017 8:02:00 AM

Do you remember when you were in school and the teacher would give each student a worksheet to “spot the difference” between two side-by-side detailed scenes?  You would look carefully at each of the two images, trying to spot subtle details, such as an extra button on a shirt or a missing shoe on a person. Maybe it was the number of petals on a daisy or a cone of ice cream missing the cherry on top. The directions would indicate there would be six differences, but try as hard as you did, (and even when you asked a classmate for help) you could still only find four or five differences, and were convinced there was never a sixth.

Unnerving!Bad phish stock.jpg

Today, the business-equivalent of spot-the-difference comes by way of email phishing.
Phishing is the attempt to obtain sensitive information (including your identifying information) such as credit card numbers or passwords to gain access into your electronic records or steal your identity.

Can you spot which of these images is the imposter? 
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Fake_Phising E-mail 1-1.jpg

If you said the one on the top, you are correct.
If you said the one on the bottom, you are also correct.

Two of the more recent phishing scams target unsuspecting folks such as you and me through email. Not only during tax season, but also throughout the year, scammers are becoming more and more savvy both in their visual and written attempts to trap consumers. As companies are working to stay ahead of thieves with data security and multiple layers of password protection, it is no wonder many consumers are feeling confused and vulnerable. So, what can you do to avoid unknowingly falling into a phishing scheme?

Read more articles about IT security on Mike Jaworske's blog page

  • Communicate with the company you are dealing with and confirm by phone their method of doing business. If you receive a communication by email asking for your sensitive information or for you to click on a link that takes you to a website asking you to enter your personal information, be wary. Knowing what you should be expecting from those with whom you do business and how they will be communicating with you will help you stay alert to bogus mail and false documents.
  • Don’t click! Oftentimes, we click on a link trusting its navigation and, while it looks authentic, like it’s from a governmental entity or “official” agency, it is a bogus site. Spyware, malware, or other Trojans can easily infect your system(s) and wreak designed havoc.
  • If you didn’t initiate the contact….don’t go there. Whether “there” means opening a document, visiting a website, or filling out a form with information as simple as your name and email address; thieves will begin with the basics and work for more over time.
Just because the ocean is big, with many hungry sharks and schools of bad fish, doesn’t mean you have to fall prey. Doing business online is here and, fortunately, there are ways to increase your security to avoid being caught in the net of corruption.

If you are a business leader seeking advice to help your company improve its IT infrastructure to better serve your clients or, if you are an individual with questions about IT security or tax return identity theft, contact me at mjaworske@zinnerco.com or any of our professionals at 216.831.0733. We’re happy to start theconversation and ready to help direct you to the tools and resources you need to reduce the risk of identity and document theft.  

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Topics: identity theft, fraud, Mike Jaworske

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