Wednesday's tax tip Vol. 14 - Taxes Avoidance Programs

When I was a college kid, I was studying for a tax course where I worked when a maintenance guy came in and told me "you know it's unconstitutional to pay income taxes". After spending an hour talking in circles about the tax code, he finally confessed to me that he spend 90 days in jail for tax evasion.

So when I get questions about various tax avoidance programs (or schemes as the IRS calls them), I always fall back on this question "is it worth going to jail to pursue this program".

The IRS has recently released a list of various tax schemes that people pursue and why they are illegal. If you find the need to pursue one of these, don't call me, because I don't want my name associated with these at all.

And always remember, it may be unconstitutional but if you end up in jail is it worth the price.

Personal Financial Tip Vol. 10 - Home employees

Let's assume you need a roof replaced. You talk to a few companies and pick one.

The roofers start the job and one accidentally falls off of your roof and is seriously injured. Who is responsible for his injuries and his care; you or the contractor?

Typically, the employer would be responsible for all expenses related to the employee's injuries and lost wages for the period of time he was off. These expenses are normally covered by workers compensation.

However, let's assume that the contractor had no worker's compensation. In this case, the home owner may be responsible for all expenses related to the injury. This could be covered by your homeowner's policy, but not always.

Whenever someone does work on your property ask them for a copy of a current worker's comp certificate. If they tell you they are fully insured, that does not relieve you of any potential liability.

Having a current copy of a worker's comp certificate, shows that you have done the due diligence necessary to relieve your self of liability.

Getting a copy of the worker's comp certificate will also tell you something about the reputation of the company you are dealing with. A company operating without worker's comp coverage is also the kind of company that would do shoddy work on your job to cut costs.

Business Tip Vol. 8 - Employees v. Contractors

You are hiring an employee. Is that person an independent contractor or an employee?

Maybe, one of the most confused topics among both employers and employees.

The IRS has a publication dedicated to the whole issue. After you read it, you may still not understand how to classify an employee.

My advice in general.... Ask three questions

Does the person provide their own tools to perform a job?

Does your supervision simply involve the results of the services contracted? Meaning, do you care more that the job gets done over how it's done.

Does that person have the ability to provide the same service to your competition?

If you answer yes to all these, you probably have a contractor. If you answer no to anyone of these, you may or may not have an employee.

Many times I will usually challenge the business owner with this question. Does the service provider perceive himself as an employee or a contractor?

If you still have questions regarding this issue, please email me at gtvcpa@yahoo.com.

Wednesday's tax tip Vol. 14 - State of Ohio refund

The state of Ohio recently issued a press release indicating that all refunds for tax returns filed before April 15th would be issued prior to June 23.

I would give you refund about four or five days after that for mail. If you haven't received your refund by then, we should call the hotline.

Wednesday's tax tip Vol. 13 - State of Ohio Refunds

If you have been waiting for a refund from the state of Ohio... You're not alone.

It's taking in excess of twelve weeks for taxpayer's to receive their refunds.

If you are concerned about your refund check out the state of Ohio website (just click the link below)

https://www.tax.state.oh.us/webz/wmr/wheres_my_refund.html

Or you can call the state's hotline at 1-800-282-1784.

Personal Financial Tip Vol. 9 - Personal Equity

Last Friday, I did a post regarding equity (or capital) as it relates to business activity.

But what is your personal net worth? As an exercise, on the left hand side of a spreadsheet make a list of everything you own, savings accounts, retirement accounts (401k's, IRA's, etc.), mutual funds, cars, real estate and their approximate values.

On the right hand side of the sheet, list everything you owe; mortgages, car notes credit cards, etc.

What's your net worth? More importantly, what is ratio of everything you own v. everything you owe.

It's my opinion that a financially "healthy" family will have at least $2 of assets for every one dollar of liability. If you find that your ratio is less than that, budget your monthly income to make it a reality.

Business Tip Vol. 7 - Capital

I believe one of these largest causes of business failures is lack of capital.

Most entrepreneurs enter into business without enough capital to cover their business up to stabilization, weather downturns, and allow for expansion.

Notice that no where in that did I mention financial capital specifically. Granted financial capital is a must but have you considered emotional and trust capital as well.

Many times, you may need to attract "trust" capital via help from trade creditors, banks, and customers. Are your relationships such that you can go to these groups in a time of difficulty?

In addition, owning a business is stressful. Do you have enough emotional capital with loved ones to get their support in difficult times?

When looking at a financial balance sheet, a well capitalized business will have at least two dollars of capital for every dollar of liability. Do you have the same ratio from a trust and emotional standpoint? You might find that subjective capital ratio more important than the financial one.

Wednesday's tax tip Vol. 12 - Sale of Securities

If you own a stock or mutual fund, you need to keep track of the cost basis (what you paid for it) in order to compute an accurate capital gain.

My recommendation is to keep the statements that show any transaction related to that security.

For instance, if you purchase a stock like GE or P&G, where you purchase shares on a monthly basis keep the statements showing each of those purchases. If you reinvest the dividends for more shares, keep those statements. If you sell, keep those statements.

While it seems like a lot of paper (and it is), you'll find that you'll be able to calculate that gain in a much easier fashion. For some securities, the year end statement will report all transactions for the entire year which means you'll be able to shred all the other documents for that year.

Many times computing cost basis becomes a calculated guess and since it's a guess it may or may not work out in the best interest of the taxpayer.

If you are still not comfortable with the statements you need to keep please email me at gtvcpa@yahoo.com