• Seven Workplace Rights Employees BELIEVE They Have . . . But Don't!

    20 September 2013 / Uncategorized / Comments Off on Seven Workplace Rights Employees BELIEVE They Have . . . But Don't!

    Most employees believe they already know the list of “rights” they possess, simply by being an employee.  After years of watching shows like Law & Order, CSI and COPS, they have absorbed lots of legal information, and not surprisingly, most of it is wrong.

    We at Widget thought we’d take a break from Tax and Accounting concepts and take a fun look at some of the laws that employees think they have…but don't.

    1. "I was wrongfully terminated."

      Maybe if you lived in Montana you'd have a point. Montana is the only state in the nation with a law saying you can only be fired for just cause. Otherwise, you live in an “at-will” state. That means you can be fired for any reason or no reason at all. They don't have to have a good reason. They don't even have to give a reason in most states. Boss in a bad mood? He or she can fire you. Period.

    2. "I have the right to see my personnel file."

      No federal law requires private employers to allow employees to inspect or copy their own personnel files. Only some states require employers to allow you to look at your file and even fewer require your employer to allow you to copy items in your file. Many times, the only way you'll find out what's in your file is if you subpoena it in unemployment or other proceedings.

    3. "I am entitled to my break right now."

      No federal law requires employers to offer any work breaks for anything, even meals. Some state laws do require work breaks, but it's not a majority. No federal law even requires bathroom breaks!!  Some states also offer protection for nursing moms taking breaks. Those employees taking “smoke breaks” or “coffee breaks” should tread carefully.

    4. "My boss makes me work in a hostile work environment."

      It's pretty much your boss's job to create a hostile work environment. A hostile environment is not illegal. Workplace harassment is not illegal. Bullying is not illegal in any state. Only hostile environment or harassment due to race, age, sex, religion, national origin, disability, color, taking Family and Medical Leave, whistle blowing, or some other legally-protected status is illegal.

    5. "I exercised my First Amendment Rights and told him how it was!"

      Only government employees have free speech protections, and those are very limited. Otherwise, you can be fired in most states for your speech (including political speech) in the workplace or outside the workplace. You can't be fired for objecting to something illegal, but be very careful to make sure you're protected before you speak out.

    6. "My boss invaded my right to privacy."

      Your boss can read your work e-mails and monitor your Internet usage at work. If your employer is going to listen into or record phone calls, there are some legal restrictions. You also have privacy rights in your medical information. There is no federal law protecting your social security number, but California and New York do offer limited protection against employers displaying your number.

    7. "I was discriminated against because my boss didn't like me."

      If your boss is discriminating against you for being you, that isn't illegal. Favoritism, nepotism, and being obnoxious are not illegal. Discrimination based on age, pregnancy, race, sex, religion, national origin, disability, color and genetic information are illegal. In some states, other categories such as sexual orientation, gender identity, marital status, and being a domestic violence victim are also protected.

  • Income from whatever source derived

    17 September 2013 / Uncategorized / Comments Off on Income from whatever source derived

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping and Tax, and today we're going to talk about income. What is income? Income is handled under the Internal Revenue Code under section 61, which simply states Income is from whatever source derived. Kinda confusing, but most of the Internal Revenue Code is. What that means is that whenever you are enriched, that's income. Here's some examples: Your W-2, your employer pays you for your hours that you worked that's income. Fairly obvious too. When you own a small business and you're doing services for people. They issue you 1099's, also pretty simple, pretty straightforward, let's talk about some items where income is not straightforward. How about bartering? I'm doing services for another business owner that is doing services for me, the services that I receive, the fair market value of those services, is reportable income to me under code section 61. I was enriched, so that kinda makes sense. What about if I buy a painting at a garage sale, and that painting has an evelope that has $5000 in it. Is that taxable income? Most of your probably said no but under code section 61 from whatever source derived. That $5000 needs to be reported on my tax return. Amazing isn't it? That is actually the Cessarini Case, it actually went to court, the IRS won. What about illegal activities? How about prostitution? What about drug dealing? Again, as silly as those examples sound, we go back to code section 61 from whatever source derived, so prostitution and drug dealing both taxable income under code section 61. That's how they got Al Capone he had all these illegal activities going on and he didn't report them on his tax return. That's tax evasion, Al Capone went to jail. Look at Wesley Snipes. Wesley Snipes didn't believe he needed to pay income tax on his income. He was jailed for it. Look at Richard Hatch. Richard Hatch won Survivor on national TV and didn't report the income on his tax return, and he went to jail. Code Section 61 very important, income from any source derived. That concludes today's Tuesday's Tidbits See you next Tuesday! Widget Bookkeeping and Tax, Know More Keep More

  • What expenses can I deduct?

    10 September 2013 / Uncategorized / Comments Off on What expenses can I deduct?

    Welcome to another edition of Tuesday's Tidbits where we make tax and accounting simple, I'm your host Charles D. Shapero, CPA and today we're going to talk about what expenses you can deduct as a business owner. Would you believe that the Internal Revenue Code that you cannot deduct any expenses. It's true, all deductions are a matter of whats called legislative grace. Luckily, the legislature has seen fit to pass code section 162, it's a very important code section for business owners because it allows us to deduct anything that's an ordinary and necessary expense to our business. Is a trip to Hawaii a necessary deduction? Maybe not for a dentist. But what a real estate investor who wants to go look at rental properties in Hawaii? Possibly. What about a travel agent that needs to be able to talk about travel to Hawaii, possibly. But when a taxpayer does that and he takes his whole family that's a mixture of business and personal. Can he deduct his airfare? More than likely. Can he deduct his wife and kids? More than likely....not. When your looking at what expenses can I deduct come down to the ordinary and necessary and kinda talk that through. Or you can feel free to give the experts at Widget Bookkeeping & Tax a call, we'll help you walk through it. This concludes todays Tuesday Tidbit. See you next Tuesday. Widget Bookkeeping & Tax, Know more, Keep More.

  • Reporting your Bartering Income

    03 September 2013 / Uncategorized / Comments Off on Reporting your Bartering Income

    Welcome to another edition of Tuesday's Tidbits where we make tax & accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax and today we're going to talk about bartering income. Small businesses such as ours, often trade services back and forth. The tricky part about bartering is...that there's no cash that trades hands, it's usually services for services. So how do we value those services? Do I have income? What's the amount? When I provide say a tax return for someone, I know what the market value is. Let's just say it's $350, I know that when I provide that service, that I'm looking to get $350 of services back from the person that I'm bartering with. That according to the internal revenue code is taxable income. A lot of people don't report it because there is no cah that trades hands, and that is... incorrect. But a lot of times you can report that bartering income without ever having any tax effect. Here's the example, I prepare a tax return for a videographer, that does videos for me. I report that income but that video is a business video, it's a legitimate, ordinary and necessary business expense it's deductible, so I have income for $350 I have an expense for $350, I have no income tax effect. The area where you run into an income tax effect is if I provide tax services for say massage therapy, $350 of income...oh massage therapy is not deductible. It's a personal expense, therefore I do report income. And that's the way the internal revenue code reads. A lot of people use an exchange, like ITEX or Florida Barter. And the way that works is I'll provide say tax or accounting services for somebody in the group, and I'll earn credits, those credits can be exchanged later for other services Typically, ITEX will issue you a 1099-B at the end of the year. so you can report all that barter income, it doesn't matter that you didn't use those credits, When you earn those credits, that's when income is recorded on barter income In QuickBooks, bartering can be set up like an ITEX account can be set up like a bank account. That way you can treat all earnings as deposits, you can use all expenses as checks in Quickbooks, and you can reconcile that account on a monthly basis. This concludes today's Tuesday's Tidbits, see you next Tuesday! Widget Bookkeeping & Tax Know More, Keep More

  • Keeping a mileage log

    27 August 2013 / Video Blog / Comments Off on Keeping a mileage log

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax and today we're going to talk about what goes in your mileage log. In order to prove your deduction to the IRS we have to be able to show the IRS a log of your business miles. What we can't prove, we lose. So in a business mileage log, it needs to have several columns, the one that I recommend. It has a date column, it has a destination column to let the IRS know where you went, it also has a business purpose column, so that we can tell the IRS why we incurred this business expense, very important because deductions are not deductions until we can prove it had a business purpose. There is also a column for expenses. So if we are paying tolls, as we're driving to places, we can make notes in the mileage log. Now we talked previously about how we should never pay cash for expenses, a lot of people pay cash for tolls. If you're doing that you're going to need to keep the receipt you get from the toll booth, and write the business purpose right on that receipt. What we'd recomend is to sign up with your states toll provider. For example in Florida, it's called SunPass, it's a little transponder that we put on our car that tracks our tolls as we go through the toll booths. So at the end of every month, we can download the amount of toll expenses we have and we can expense the business ones, and we can ignore the personal ones. Your mileage log is the only way to prove these deductions to the IRS and like I said previously what you can't prove, you lose. So no matter which method you're using: actual expenses or mileage, the mileage log is critical to surviving an audit. This concludes today's Tuesday Tidbits, see you next Tuesday! Widget Bookkeeping & Tax, Know More, Keep More!

  • Deducting auto expenses

    20 August 2013 / Video Blog / Comments Off on Deducting auto expenses

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero CPA with Widget Bookkeeping and Tax, and today I want to talk to you about deducting auto expenses. When you're deducting auto expenses, there are two methods to deduct your auto you can use the standard mileage rate, with the IRS approved standard mileage, or you can deduct actual expenses. WIth the standard mileage rate, it's very easy, you simply track your business miles that you spend during a given year, multiple it by the standard mileage rate, which for 2013 is 56 and a half cents per mile and you have your auto deduction, what that includes is gas, oil, repairs, depreciation on the vehicle, and everything except tolls and parking. which you can add on to the standard mileage rate That's pretty simple, with the actual expense method, we have to save all our receipts for our our gas, our insurance, our repairs, plus we need to calculate depreciation on the purchase price of the vehicle, again we can deduct our tolls and our parking. In this method, the actual expense method, we have to track two sets of mileage personal and business. Why? Because all of that bucket of expenses needs to be split between this the personal portion of your gas, and this is the business portion of your gas This method, when you use actual expenses, people like it because they think they don't need to keep a mileage log, but it actually ends up being almost twice the amount of work. and in a lot of cases, it results in an inferior deduction. Standard mileage is a very nice deduction, now there's factors such as mileage rate and the age of the vehicle that come into play. But by and large, you should takl to your CPA to find out which method works for you. In next week's Tuesday Tidbits, we're goinna talk about what needs to go into your mileage log. This concludes today's tidbit, see you next Tuesday. Widget Bookkeeping & Tax, know more, keep more.

  • Simplify your accounting system

    13 August 2013 / Video Blog / Comments Off on Simplify your accounting system

    Welcome to another edition of Tuesday's Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax, and today I want to you talk to you about simplifying your accounting system. What I recommend to all my clients is that we do business out of one bank account and that we have one credit card set aside for business only use. I further recommend that we never pay cash for expenses Those three items taken together allow whoever's doing your accounting and your tax work to look in two places for all of your business expenses your bank account or your credit card. Because we never pay in any expenses in cash We don't have to worry about tracking cash, or worrying about that a cash receipt is going to get lost. destroyed, it's gonna fade. Have you ever had a thermal receipt turn totally black? That proves nothing about where that expense went. So if we never pay cash for expenses, we use once bank account and one credit card, nothing can fall through our accounting system cracks. Everything is accounted for, except for one thing, your auto mileage. For that we recommend that you keep an auto mileage log, in a later Tuesday Tidbits we will talk about how to account for auto expenses. I'd also recommend using online bill pay, automatic payments and quickbooks whenever possible, once you start training QuickBooks and you link it up to your bank account, and your credit cards, you can download that activity directly into QuickBooks All of these tips saves the business owner time so they can spend less time doing their accounting and more time running their business and bringing in profits. This concludes today's tidbit, thank you very much, see you next Tuesday! Widget Bookkeeping and Tax Know More, Keep More

  • Which accounting system should I use?

    06 August 2013 / Video Blog / Comments Off on Which accounting system should I use?

    Welcome to another edition of Tuesday Tidbits where we make accounting and tax simple. I'm your host Charles D. Shapero CPA from Widget Bookkeeping and Tax, and today we're going to talk about accounting systems and whether you choose Excel, Quicken or Quickbooks. That's a question we get a lot. I like Quicken, can I use that for my business? The answer is typically is no. Quicken is not robust enough, it's really a glorified checbook. It's something you can use for your personal finances, when you really need just loose information. What we need from our accounting system is we need is an income statement and balance sheet. Because if we ever have to go out for a loan that's what they're going to ask for. If we ever have to sell our business or we want to sell our business, they're going to want to see our financial statements, and Quicken is not robusst enough. It can't produce the reports necessary to satisfy those requirements. Neither can Excel, but at least Excel is better than having no accounting system. We have to be able to tell what your profit and loss is. For estimated tax purposes, for tax return purposes, for you to gauge how your business is going. So if you're using nothing at all, Excel is better than nothing because at least we can get some reliable information, Quicken is really almost worse than nothing, because you have to learn how to use it and then it's really not giving us the information that we desire. Bottom line Quickbooks is the best option for a starting business to set up their accounting system because it's robust enough to handle accounts receivable, accounts payable and all the reports we talked about. At Widget, we eat, drink and breathe Quickbooks We can help you install is, we can help you learn how to use it, and if you decide you don't want to do it, we can maintain it for you monthly. This concludes today's Tuesday Tidbit, see you next Tuesday. Widget Bookkeeping & Tax: Know More, Keep more

  • Using an Accounting System

    30 July 2013 / Video Blog / Comments Off on Using an Accounting System

    Welcome to another edition of Tuesday Tidbits where we make accounting and tax simple. I'm your host Charles D. Shapero CPA, with Widget Bookkeeping & Tax. Today we're going to talk about why you should be using an accounting system. An accounting system really is used by a business owner to see how your business is performing. Am I on pace with my goals? If you have a goal to reach $100 grand in revenue this year, how do you know if you're reaching it? If you're comparing this year to last year, without an accounting system, that is impossible. With an accounting system in place, like Quickbooks or even Excel for that matter, you can look at this year's performance compare it to last years and say 25%, I'm meeting my goals, that's fantastic. OR, the other conversation, wow, I'm about even with last year, I really wanted to grow 25% I better run out and do some more marketing or I need to hire some staff to take away some of this work so I can focus on billable type events, that's what a business owner should use your accounting system for. What your CPA wants to use your accounting system for is that we have a tax return to prepare at the end of the year. How are we going to prepare that return without numbers that we can trust? Not only that, but the IRS requires that we make 4 payments to them during the year. Your estimated tax payments. Every quarter I call my clients and ask them, what's your profit looking like this quarter? We need to look and see if you're going to be able to make a bigger estimated tax payment, a smaller one or if you just want to make the ones we talked about at the beginning of the year. Without using an accounting system we have no idea we have no idea what your business performance is, and we have no idea if you're paying the IRS more or not as much as you should. So accounting systems are valuable for both the business owner and your CPA. And that my friends concludes this Tuesdays Tidbit, see you next Tuesday. Widget Bookkeeping & Tax Know More, Keep More!


    26 July 2013 / Uncategorized / Comments Off on REASONABLE SALARY?

    Payroll tax collection continues to vex the Internal Revenue Service despite several court cases that have resulted in rulings favorable for the IRS regarding unreasonably low compensation. A recent high profile case was David E. Watson, P.C. v. United States on which the Eighth Circuit ruled in 2012. Watson was an indirect partner in a CPA firm, practicing through an S corporation that paid him $24,000 of W-2 salary per year and between $175,000 and $203,000 in S corporation distributions. The court adjusted his payroll compensation to $93,000.

    It isn’t hard to see why shareholders of S corporations attempt to justify wage levels below what the IRS considers “reasonable compensation” (assuming the understated compensation is below the FICA wage base). Both the S corporation and employee save the 7.65% FICA and Medicare taxes on the wages not reported.  Combined, for small business owners, it's a savings of 15.3%!

    Another recent case is Herbert v. Commissioner. Herbert received between $24,000 and $29,000 of W-2 wages for the years 2004 through 2006. In 2007, he received $2,400 of W-2 wages. Although the Tax Court noted that the corporation lost money or earned very little income in each of the years, and the corporation closed down in 2009, the Court increased the taxable W-2 compensation for 2007. The IRS wanted to reclassify all of the draws from the S corporation for 2007 as additional wages (i.e., an additional $52,600). Ultimately, the judge averaged the petitioner’s wages for 2002 through 2006 to arrive at $30,445 as a reasonable wage.

    It didn’t help matters that Mr. Herbert used the draws to pay corporate expenses personally. He lost, misplaced or never kept receipts for many corporate expenses he paid with cash. The Court accepted Herbert’s testimony that he in fact paid significant corporate expenses with cash using funds received from the corporation. Nonetheless, the judge also believed that W-2 wages of $2,400 were too low.

    The result? Herbert was found to have under-reported his wages, even though the amount of cash drawn out of the corporation covered corporate expenses. Had he had maintained a better set of books, paid all of the corporate expenses with corporate (rather than what became to be personal) funds, he wouldn’t have had distributions from the corporation to himself.

    Although the wages were quite low, the fact of the matter is the business was failing. There wasn’t an adequate cash flow to pay wages and expenses. By shuffling funds and taking money personally, Mr. Herbert created a payroll tax liability where such liability shouldn’t have existed.

    Payroll tax reduction or avoidance is, perhaps, a major reason for the popularity of S corporation status for an operating entity, even though the formation of an LLC under state law provides similar liability protection for the sole proprietor. The IRS projects that 4.6 million Forms 1120-S will be filed for 2012, compared to 3.6 million Forms 1065 (partnership).

    As part of its tax reform efforts, Congress is evaluating the continuing treatment of the bottom-line S corporation as not subject to payroll taxes or self-employment tax.

    If you have any questions on S corporations and what should be considered "Reasonable Compensation" please contact the experts at Widget.  We can help!

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