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Volume 3 | Issue 7
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July 2011
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Dear
Mark,
What
do earthquakes in New Zealand and Japan and a tsunami in Japan have
in common with the US economy? Large US based businesses
have huge supply chains and a global customer base.The result in
global events can have a direct, although delayed, effect on large,
global US companies.The media has jumped on these events with
"the sky is falling" news updates, especially in early June
regarding an increase in unemployment and a slower economic recovery.
Combine
the aforementioned events with the ending of QE2 (second round of
quantitative easing by the US Federal Reserve) and fear has increased
as the economy slows a little and unemployment risings for large
businesses. However, small businesses have different business drivers
which affect them! What you hear on the evening news and read in the
newspaper is generally the economy for large corporations.
We
are seeing a boring, but steady recovery with our small business
clients. One exception are the small businesses which seemed to never
witness the great recession (for large businesses, more of a
depression for small businesses) have been going through a soft
patch. Although we continue to see revenue increase during the 2nd
quarter, gross and net profit margins are still under a lot of
pressure.
It's
time to think strategically and implement solutions,
Be
smart and efficient,
Mark
Wyssbrod, CPA
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IRS Audit Update:
Your QuickBooks Data is Under
Review
 The Internal Revenue Service (IRS) has continued to
step up its audits and scrutiny of small businesses. At first, I
asked myself, why would the IRS spend so much time and effort going
after the small fish? The last several years I have heard how the IRS
is ramping up and targeting the small guy. Why not spend more time
auditing larger corporations which make more profit?
In 2003 and 2004 the IRS found out the backbone to the
US tax revenue was either very aggressive or a bunch of cheaters,
depending on how you view it. The number of aggressive positions
increased from 12% in 2003 to 16% in 2004 as the economy improved and
tax regulations became more favorable. If small businesses were
aggressive in the good times, what do you think they did during the
more challenging period (2006 to 2011)? No wonder the IRS is stepping
up audit enforcement. And as a result the IRS announced in 2007
the hiring of MBA graduates to become auditors. Now these smart
people have experience and understand the two most popular accounting
software programs for small business, QuickBooks & Peachtree
Accounting. A part of the audit request is a copy of your
accounting data and program. This makes you wonder if the person
auditing your tax return is smarter than the preparer. This is one
of many reasons our firm takes out time and provides high quality
standards.
Some differences between small and large business
mindsets when it comes to taxes:
- Large
corporations hire very intelligent attorneys and tax experts in
order to reduce taxes; small business usually hires the cheapest
- Solution: Hire the best value
with the highest quality standard at the best price you can
afford - this is why our firm works hard for you!
- Large
corporations using experts make the most of the tax code; small
business believe only the sections of the tax code they want to
believe in, which means they heard it from a friend of a friend
instead of an expert navigating the tax code for them.
- Solution: Hire a professional
which keeps up to date with the tax code and changes.
This is why we go to continuing education classes and send
these updates to you
- Large
corporations are multi-national and can transfer profits; small
business is local or regional.
- Solution: You must make the
most of tax code - this is why we emphasize year-end tax
planning!
- Large
corporations already have to pass an audit and have internal
controls to prevent fraud; small businesses usually do not have
to hire an auditor and have minimal internal controls.
- Solution: Please in a
better internal control system than you currently have - trust
can be taken advantage of and you don't know it's been violated
until it's too late!
We provide high quality standards so if you receive an
IRS notice you can sleep at night. If you would like to discuss
how you can improve your audit risks please call us!
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Deadline Reminder
Important
Dates to Remember
 July 15 -
Extension For Certain Trusts- August 15 - Second Extension For Non-profits
- September 15 - Corporate, Partnership & Trust
Extended Due Date
- September 15 - 3rd Quarter Estimated Tax
PaymentsOctober 1 - SIMPLE IRA Set up deadline
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Black Swan Events
Bet
You Didn't See These Coming!
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 Only white swans existed, until a black
swan flew in. Black swan events are events which were
unforeseen. Unforeseen events are not taken into consideration
in forecasting models. How accurate can models predict if Black
Swan events happen on a regular basis? Below is the most recent
example of a a Black Swan event that caught many off
guard:
- Friday, June 10, 2011 - Positive attitudes
which the stock market thought could never end turned into 6
straight losing weeks ending June 10, 2011
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IRS
Circular 230 disclosure: To ensure compliance with requirements
imposed by the IRS, we inform you that any U.S. federal tax advice
contained in this communication (including any attachments) is not
intended or written to be used, and cannot be used, for the purpose
of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any transaction
or matter addressed herein
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Financial
Ratio Of The Month - Accounts Receivable Days
Accounts
Receivable Days (ARD) reflects the average length of time between
sales and receipt of payment. It is different than Accounts
Receivable Aging Summary which indicates the time an invoice is
outstanding.
ARD
= (Accounts Receivable / Sales) x 365
ARD can be a barometer
of your overall liquidity. The lower the ratio the better!
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Contact Information
11770
Haynes Bridge Road
Suite
205
Alpharetta,
Georgia 30009
phone:
(770)
664-8583
fax:
(678)
762-9413
www.pro-active-cpa.com
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