Category Archives: Business Accounting

Articles and tips related to business accounting by James E. George, CPA

Santa’s Tax Situation Doesn’t Look Good!

Santa’s Tax Situation Doesn’t Look Good!

It is Christmas! While the happiness that comes with the holiday is enjoyed by most of us, the IRS continues to do their job undeterred by the season and its traditions. We will now take a look at the situation involving the income tax audit of one Kris Kringle, also known as Santa Claus.

Santa employs many elves at the North Pole place of business where the toys are made for all the good girls and boys. With all those elves, Santa must make sure the proper employment forms are on file. Significant penalties could be assessed against Santa if his files don’t include the I-9 immigration form for the foreign elves. The New Hire form must be filed with the applicable states so they may track down any elves that are behind on their school loans or little elf support. Don’t forget the W-4 form must be completed for each elf on the payroll to assure the proper amount of withholding is taken from their toy making pay.

To deliver the toys to all the good girls and boys, Santa and his reindeer travel thousands of miles over the Christmas holidays. If he fails to adequately document his mileage, rooftop parking and tolls, he could lose valuable deductions and result in a significantly higher tax bill this year.

Santa is paid for the toys he delivers to stores. The toys he leaves at the houses for all the girls and boys are free! This calls into question the profit motive for the entire operation. How could Santa possibly expect to make a profit when he gives away such a high percentage of the products the elves make? Santa needs to document his business model in order for his toy making and delivery business not to be deemed a hobby and therefore any losses are not deductible.

What about all those elves? Do they qualify as Santa’s dependents? Each elf must complete a form outlining their sources of income and support outside of their North Pole toy making income. Santa must also track where each elf sleeps every night in order to establish custody. Without this key piece of information, he loses the right to claim many of the elves as dependents. This could result in a significant assessment to Santa and cause old Saint Nick to not be so jolly.

If Santa needs a good CPA, he can find one in Jefferson, Maryland.

New Tax Laws for 2019!

New Tax Laws for 2019!

This week I attended a two-day seminar on the new tax laws taking effect for 2019. The sheer number of changes is a little overwhelming. There are new reporting requirements for anyone who files Head of Household status. There is also an expanded due diligence checklist for any taxpayer that claims college expenses, the child… Continue Reading

Recording Donated Assets on your Books

Recording Donated Assets on your Books

Business owners record the cost of their physical assets on their books for a variety of reasons. The cost is important for income tax reasons since it is depreciated or deducted over a period of years. In Maryland, the assets of a business, and their costs or values, are reported annually on a Personal Property… Continue Reading

A Lack of Documentation can Cost You!

A Lack of Documentation can Cost You!

I met with a number of clients in the last couple of months who are very tech savvy and utilize a lot of the current technology available in running their businesses. Some deposit their customer checks by taking pictures of them with their phones. Others track their auto mileage by using the GPS app on… Continue Reading

Employing your child could be a win-win strategy

Employing your child could be a win-win strategy

I met with one of my higher income clients this morning to discuss tax saving ideas. She operates a business out of her home to keep the overhead low. This year her income has increased about 20 percent and it looks like the growth will continue for the foreseeable future. We discussed a number of… Continue Reading

The Balance Sheet: The Unappreciated Statement

The Balance Sheet: The Unappreciated Statement

I have prepared financial statements for business owners throughout my entire career. A standard set of financial statements can be a wealth of information when it comes to operating a successful business. Too often the value of these tools is unappreciated by the business owner. Many times, their attention goes straight to the bottom line… Continue Reading

Don’t be Afraid to Raise your Prices!

Don’t be Afraid to Raise your Prices!

This morning I met with a small contractor to review his year to date results of operations and compute the income tax he should submit by Sept. 15th. During the meeting he mentioned how busy he has been and that he is turning down offers to look at more work because he is already scheduled… Continue Reading

Tax-Related Telephone Scams

Tax-Related Telephone Scams

This week our area has been hit with an increased number of tax-related scam telephone calls. They are starting to sound much more realistic than similar scams in prior years. Usually the caller will identify themselves as a member of an enforcement division of either the IRS or Maryland State Police. They will inform you… Continue Reading

We can’t do it all…well

We can’t do it all…well

As business owners, we do our best to minimize our expenses while trying to maximize our revenues. Too often we become revenue-focused and pour the majority of our time and energy in to producing more revenue. This naturally leads to a decline in the aspects of our business that don’t directly produce the revenue. We… Continue Reading

IRS to Audit More Small Businesses!

IRS to Audit More Small Businesses!

The 2018 IRS Forum was a valuable source of information regarding the upcoming tax filing season. Among the many tidbits I gleaned were issues of IRS concern relating to small businesses. The IRS has announced they are going to scrutinize such things as: personal use of the business assets such as cell phones and laptops,… Continue Reading

Many New Tax Law Changes are Just Around the Corner!

Many New Tax Law Changes are Just Around the Corner!

Last week I spent three fantastic days at the IRS Nationwide Tax Forum! Many new tax laws and changes to the tax forms are slated for the next filing season. The amount of new information, procedural changes and tax form modifications discussed was at times, overwhelming. The increasing number and types of new tax scams… Continue Reading

New Tax Warning to Employees

New Tax Warning to Employees

Employees beware! The new withholding tax tables that have been published may cause your employers to under withhold the federal tax from your paychecks. If your employer utilizes these new tables, they are doing nothing wrong. However, the tables incorporate the tax cuts under the new law by lowering the withholding amounts. While this gives… Continue Reading

Hired Guns

Hired Guns

When you operate a seasonal business, your workload is concentrated into a few months out of the year. The very nature of this beast makes it difficult to assemble a talented workforce. Most experienced employees desire year-round income. This limits the business to finding seasonal help. Every year we experience a backlog at the review… Continue Reading

Good Employees Make a Big Difference!

Good Employees Make a Big Difference!

Most small businesses don’t have employees. The owners perform all the duties of the business. However, that type of business model restricts growth. If you want a business to grow, the owner must be willing to delegate most non-essential functions to an employee. A good employee who competently handles the clerical and administrative functions can… Continue Reading

Employees’ Business Expenses Must be Documented

Employees’ Business Expenses Must be Documented

A deduction is available for money an employee spends to perform their duties in the course of their employment if they are unreimbursed by their employer. This includes mileage, licenses, union dues, education and out of pocket expenses. The expenses must be incurred as a condition of employment or utilized in the performance of the… Continue Reading

Business Tip: Customers Don’t Want Equal Treatment

Business Tip: Customers Don’t Want Equal Treatment

The advice we give our clients is personalized to their situation and circumstances. No two clients are the same. We may recommend one course of action for you and the opposite for your neighbor. The key is to listen to your client. Learn their goals and question any limitations to achieving them. Customers don’t want… Continue Reading

Beware of Tax-Related Identity Theft Scams

Beware of Tax-Related Identity Theft Scams

Deceitful communications come via phone, email, postal mail, and sometimes even a knock on your door. It’s important to know that the IRS does occasionally contact taxpayers, but when they do, it’s most often by mail. Sometimes the IRS needs to verify a taxpayer’s identity and will do so by sending a Letter 5071C. This… Continue Reading

Do You Need to File a Form 1099 Misc?

Do You Need to File a Form 1099 Misc?

A Form 1099 Misc should be filed for every unincorporated vendor or contractor who you paid $600 or more during the calendar year 2017. The amounts to be reported are for services only. If you paid someone for products and services, only the labor charges are to be reported in box 7 of Form 1099… Continue Reading

Due Date for Payroll Reporting

Due Date for Payroll Reporting

The due date for filing your form W2’s with the Social Security Administration is January 31, 2018.  Extensions to file these forms are much more difficult to get this year.  The IRS is only granting extensions in cases of extreme hardship or uncontrollable circumstances.  The penalties for failure to file the forms on time have… Continue Reading

Biggest Audit Risks for Business Owners

Biggest Audit Risks for Business Owners

The Schedule C for an unincorporated business and the Schedule F for farming activities are the forms MOST AUDITED by the IRS! The IRS has published the following list of issues they scrutinize when auditing the Schedule C and the Schedule F: Lack of record keeping for automobile use – no mileage logs. Personal phone… Continue Reading