February 2012
Your Taxes
Worker classification becoming major tax administration issue
Between the recent voluntary classification settlement program introduced by the Internal Revenue Service, a memorandum of understanding between the IRS and the Department of Labor to share employment tax data, and the president's proposed economicgrowth plan, misclassification of workers and independent contractors has been receiving a lot of attention in Washington.
Handling IRS requests for accounting software backup data
Internal Revenue Service agents have begun requesting backup files from taxpayers' accounting software during examinations. DGK Group understands the scope of the IRS's authority to make these requests and how to help you provide the necessary data, but not more information than is required.
Companies reap tax benefits from granting stock options
The stock market rebound highlights the generous tax break that companies can receive for granting stock options to executives. Tax law allows companies to claim deductions for the options at current market value, which can be higher than the value when they were granted. Options granted to executives during the market crash of 2008 could cost the government tens of billions of dollars in corporate tax revenue over the next 10 years.
November 2011
Reducing Audit Fees
As audit fees increase due to the increasing complexity being required by regulation, becoming easier to audit is one way for small and midsize companies to climb out of the cost quagmire.
As the year end approaches, contact us to discuss how we may assist you in your audit preparation by streamlining the process and reducing the complexity by improving accuracy, transparency, accountability, and auditability.
October 2011
Avoid the "Trusted Bookkeeper" Syndrome
The key for any business owner to avoid the "trusted bookkeeper" syndrome is to have a strong system of internal controls in place. All business owners should understand that the purpose of internal controls is to foster reliable financial reporting, safeguard assets, and promote ethical conduct.
Ensuring the segregation of duties in the cash receipts and cash disbursements area is a critical internal control that no organization should overlook. Controls must also exist over the maintenance of vendor lists, especially the entry of new vendors, to decrease the likelihood that fictitious vendors are created and subsequently paid.
Restricting access to the accounting systems via passwords and user activity logs as well as ensuring that the person responsible for recording vendor transactions cannot also edit or manipulate vendor lists is an important control that should be in place in every organization.
September 2011
How Can Entrepreneurs Impress Their Bank?
A thorough business plan can be important and includes financial information showing how money flows in and out of your company. You can calculate your cash needs more precisely if you know your operation inside out and you maintain accurate financial statements.
About 25 percent of businesses with fewer than 500 employees keep financial statements, according to the Federal Reserve Board's Survey of Small Business Finances. For the rest, owners need to crunch a lot of numbers to arrive at the right loan amount.
With your financial information, explain to the banks why a loan of a specific amount will either help your business catch up to industry peers or drive your already-superior numbers higher.
Develop a solid relationship with a bank that targets entrepreneurs. Even if it cannot issue a loan, its lending officers might connect you with angel investors, grant opportunities and funding programs sponsored by universities, private foundations and government.
Consider hiring a certified public accounting firm to assist you in developing realistic financial figures.
Call us to see how we may assist you in preparing meaningful financial projections and statements.
July 2011
Tax considerations for early-stage and emerging growth companies
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From the beginning owners should consider the tax ramifications of forming a C corporation, S corporation, limited liability corporation (LLC), partnership, or other form of legal entity. Each entity has its own set of tax benefits and limitations that may affect the growth and strategic objectives of the company.
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Accounting methods vary based on the growth stage of a company. An early-stage company may use a cash basis financial statement for managing the business, and an accrual basis financial statement for banks and investors. Tax returns may use either method, within certain limitations. Accounting for transaction costs, deferred revenue, and depreciation are a few areas to consider.
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Research & development tax credits can be significant deductible expenses. Tax credits are available for certain research activities however a thorough analysis of the creditable activities are required by the IRS guidelines.
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Forms of compensation and benefits such as salaries, commissions, bonuses, equity compensation such as unrestricted and restircted stock, stock options, employee stock purchase plans, qualified pension plans, and profit sharing all have an impact on taxes.
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State and local tax issues must be considered. There can be tax incentives and credits such as enterprise zones and other tax minimization strategies around location of activities and intercompany transactions. The issue of nexus, regarding sales and use taxes is something that needs to be reviewed.
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Mergers, acquisitions, joint ventures, and other transactions need to be analyzed to maximize deductions of goodwill and intangible assets acquired in a tranaction. Companies should also plan for the best tax treatment in the purchase or sale of assets for stock.
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Net operating losses (NOL) and other tax credits carry forwards into future years can be impacted by changes in a company's ownership structure. Limitations may restric the amont of NOL than can be utilized and potentially elimanate the benefit of a bonus depreciation deduction.
These are some of the tax considerations DGK Group can assist you with in making the right decisions and planning for the future.
Call us at 215-682-9047 and learn more about us at www.dgkgrouppc.com
May 2011
PA State Sales Tax
Filing Requirements Change in June 2011
Pennsylvania Department of Revenue has revised the frequency requirements for sales tax filing. Businesses are required to file returns and remit payments on a semimonthly basis effective June 1, 2011. Some businesses that reported sales, use, and hotel occupancy tax of $25,000 or more are now required to make monthly pre-payments.
Additional information about the sales and use tax change can be found on the Online Customer Service Center at www.revenue.state.pa.us OR CALL US AT 215-682-9047
March 2011
Multistate Companies to be impacted by changes in state tax apportionments
18 states have moved or are moving from an income-tax model based on a company's sales, payroll, and property to one solely on sales.
States now using different methods can result in have to pay taxes on more than 100% of income.
An out-of-state company that just sells into a state will see its taxable income rise there. The company may no longer receive a benefit for its employment and property ownership in another state.
February 2011
Repair and Maintenance Costs
Taxpayers are generally allowed to deduct the cost of making incidental repairs to their property used in carrying on any trade or business. However, to be deductible currently, a repair cost must not be subject to capitalization. Specifically, no deduction is allowed for any amount paid for new buildings or for permanent improvements that increase the value of the property or any amount spent restoring property or in making good the exhaustion of property for which a depreciation allowance has been made.
Whether a cost qualifies as a deductible repair cost is a factual determination for which the burden of proof rests with the taxpayer. Taxpayers are required to keep sufficient contemporaneous records to support their determination that an expense qualifies as a deductible repair and maintenance cost.