Can I Deduct My Travel Expenses?

It's the time of year when I'll get this question...numerous times.  My firm has found itself working with several individual tax return clients who work in sales positions, and these guys are responsible for paying for travel and entertainment expenses out of their own pocket with no reimbursement in most cases.  They also have to drive their personal autos to make sales calls, which could lead them to deduct mileage expenses each year.  This is a very important deduction to those clients, and I advise them (or harass them...that could be more like it) annually about record-keeping and what is and is not deductible.  The rules are tricky and bear repeating.  You're welcome....

First of all, what is "travel?"

You're traveling away from home if your job duties require you to be away from the general area of your tax home substantially longer than a day's work, and you need to sleep or rest to meet the demands of your work while away from home.  Overnight business trips are the common example I see, or trade shows which keep you away from home for several days.  There are no travel expenses while you're driving around town making deliveries (except for mileage).

Which expenses can you deduct?

The list goes something like this....transportation, taxi cab fees, baggage and shipping, car (mileage or actual expenses, depending on the client and the circumstance), lodging and meals, cleaning (dry cleaning and laundry), telephone, tips, and of course, "other."  Other is where we get into trouble sometimes, but the definition is "other similar ordinary and necessary expenses related to your business travel."

When can you deduct meals?

You can deduct meals when it is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from  home, and/or the meal is business-related entertainment.  Remember that meals are 50% deductible in almost all cases.

Can you ever deduct a per diem instead of using actual expenses?

When your meals qualify for deduction as a business expense, you can either use the actual cost method (tallying up receipts) or the Standard Meal Allowance method.  The actual cost method is easy enough to understand, but the Standard Meal Allowance creates more questions.  Simply put, the Standard Meal Allowance option allows you to use a set amount for your daily meals and incidental expenses instead of keeping records of your actual costs.  The amount you deduct varies based on where and when you travel. IRS publishes M&IE rates (meals and incidental expense rates) and they change from year to year as they are indexed for inflation and such.  For example, in 2011, the M&IE rate for most small localities in the US was $46/day.

Do you need substantiation if you use the per diem?

You do not need receipts for the meals, but you MUST keep records to prove the time, place and business purpose of your travel where the meals occurred.

How do you keep track of your mileage?

I asked an IRS agent about this once....you need a mileage log.  Plain and simple.  You need a record of where you went, why you went there, and how far it was.  You need to keep your mileage even if you don't claim a mileage deduction on your tax return (you may claim actual expenses such as gas, maintenance, and depreciation).  The mileage deduction, when used properly, is a valuable deduction for those who qualify for it.  But, the bottom line is that without a mileage log, you'll lose the deduction under examination.  No questions.  And remember, traveling from home to your office is NEVER deductible as business travel.  The common mileage events take place in visiting clients or customers, or traveling to a business meeting away from your regular workplace.  We have mileage logs in our office, so if you ever need one, just say the word.

Lastly, when can you deduct entertainment expenses?

Entertainment is another of those fuzzy zones....when does entertainment actually occur?  Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client.  My sales clients use this one a lot.  For the entertainment expenses to qualify, the entertainment must have taken place in a business setting or else the main purpose of the entertainment was the active conduct of business, you actually did engage in business with the person during the entertainment period and you had a general expectation of getting income or some other business benefit.   This is the question I get....can I deduct a golf game with my biggest client?  If you discussed business and you expect something to come of it, then it would appear to qualify as entertainment expense.  BUT, entertainment expenses are 50% deductible, just like meals.

Those are the high points...I can tell you're excited.  But, not everything can be funny.  Sometimes we have to educate a little bit.  Seriously, though....there are so many scenarios and what-if's here just like in any other area of tax law, so each case should be assessed separately.  If you get bored, look at IRS Publication 463 (where I got most of this information) and see if you can find anything I didn't address here.  Or ask me and I'll do it for you.  Either way, make sure you keep records and pardon me if I ask a lot of questions when I prepare your taxes.  We need to get this right....

In defense of price

I recently read an article in the Wall Street Journal about Home Depot and how they planned to close all seven of their remaining big box stores in China after years and years of losses.  The article went on to quote that Mattel, Inc. was shutting down its Barbie flagship store and Best Buy closed its nine China outlets.  Why?

All three companies failed to grasp the fact that the Chinese culture wasn't the same as the American culture when it came to accepting a "do-it-yourself" home improvement store, dolls for its children, and high-tech electronics.  The Chinese culture, respectively, wants "do-it-for-me" home improvement, books for its children and washing machines for its homes.  The Chinese population is more apartment based, so Home Depot wasn't selling a lot of lumber; Chinese parents want their kids reading books and learning, rather than playing with toys like dolls; and household appliances by and large are more important to them than MP3 players.  What one person values isn't necessarily what the other person values...

Where can we learn from this as service providers?  We have to ACTIVELY listen to our customers/clients and find out what they want and what they value.  Do you remember one of my first blog posts about value, and how the client determines the value?  Value is determined at the client-level, not ours.  So, it would stand to reason that we must listen to the client to determine WHAT THEY VALUE.  I read a quote in Inc. Magazine the other day which stated "People don't want to buy a quarter-inch drill.  They want a quarter-inch hole." This leads to the real point of my blog....

When we assess prices for our engagements, we do a strong analysis of the value proposition.  We want to offer more value to you, our clients, but this increase in value will cost more money as you receive it.  How do we do this?

• We are constantly learning new technologies, new ways of doing things, which will make your lives easier and in the end make us more effective for you. Can we speed up your cash flow by introducing you to Bill.com?  You bet, because we have tried it and it works when implemented correctly. More efficiency is a bonus, but not our end-game.
• We stay in touch with you...we don't want you to be "data rich and meaning poor."  Therefore, we try very hard to make sure you know what's going on and why.  We inform you of changes to the tax law, as we should, but we also introduce new ideas to those of you that engage us to do so...ideas about running your business better, assessing your profitability, examining your cash flow, and looking at your business alongside others in our area of the country for bench-marking.  That's valuable stuff!  Telling a business owner what the business can and cannot deduct is nice (data), but telling you how to structure your business to get more benefit from that deduction, or increase your revenue based on our experiences and our insight is where the real value is delivered (meaning).
• We push ourselves to refine our systems internally so that working with us is the easiest thing you do all day. It is our goal to produce a predictable result for you.  When we fail, we assess what happened and make changes....constantly.
• We poll you and ask you what you want.  It's amazing how similar the answers are. Then we make a way to provide it.

In the end, we strive to provide much more value in exchange for any price increase, and when we fail to do so, you hold our feet to the fire.  One of my best and worst days in the past year was the day I met with a long-time client and friend, and was informed that we hadn't performed as well in her eyes over the prior six months as we had done in the prior six years of her working with us.  She felt like a number and not a valued client.  I felt like dirt, but we learned from it.  I even sent her a thank-you note for having the conversation with me.  She could have just left, citing irreconcilable differences.  But she cared enough about our relationship to let me know that something was wrong and give me the chance to correct it.  Now, we are set to meet in late October to determine how we can deliver more value to her.

We LOVE providing value to you guys.  It's what gets us out of bed in the morning.  We have learned so much this past year, and we look forward to another year of working with you.  But, don't ever let the occasion pass by to let us know if we're not living up to what you expected.  There could have been a misunderstanding regarding what we were engaged to do (our fault for not well-defining the scope) or we could have just fallen down on the job (human error, but also our fault).  In the end, we need to know.  Thank you for being loyal clients and for letting us work alongside you.  Here's to a great 2013!

What's Your "By-When?"

"If Meghan sends me another *&^% e-mail asking me when I need the work I just left on her desk...."

How many times has this crossed my mind?  Mmmmm, lots.  But when prodded, what is the response I always get? "I didn't know when you expected it, so I did it when I got to it." How long do you think it has taken me to realize that I suck at providing a "by-when" date?  Too long, let me tell you.

I learned of this "by-when" date at a conference in Orlando that we recently attended.  I had never heard it described quite like this, but the presenter was talking about how effective communication could reduce conflict.  I live for reducing conflict. Meghan proceeded to pinch my arm when this particular concept came up...the "by-when" date.  Like the sensitive, in-touch-with-my-emotions guy that I am, I listened.

It's really simple, guys.  Let me share a secret with you so it won't take you as long as it did me to learn this valuable lesson. When you set up a project and hand it off to someone to complete/comment on/contribute to, make sure to tell them when you need it.  People have other things that they are working on, probably something that you gave them yesterday. Consequently, if you don't have a plan, someone else will plan for you. In other words, get in line.

When clients send me work, unless there is a specifically requested date, my first response is to get to it as quickly as I can and wrap it up as quickly as I can.  I also project how I would do things onto other people....smart, huh? When I would leave a folder on Meghan's desk, or send her a PDF with a project attached, I would always say "Can you please work on this for me?"  You can guess what comes a couple of hours later....

Jon - "Hey, did you get to the work I left on your desk?"
Meghan - "Not yet."
Jon - "Oh, but I set it on your desk this morning."
Meghan - "You didn't tell me when you wanted it done."
Jon - "Oh, I just figured you knew."
Meghan - "Because I read minds.  You are right, I'm out to single-handedly sabotage our livelihood."

And that is where the wheels came off the wagon....and Meghan stops talking to me.

But I have recently made a concerted effort to place those wheels back on the wagon.  I am working at my desk today, on a Sunday, organizing my work for the week. In order to streamline things I decided to do something a little different, involving a couple of post-it notes and dates. Thank you, 3M.

Do you use a by-when date for your team?  If you don't, I encourage you to track how many times this week you have someone ask you "When do you need this?" or how many times you sigh like an oppressed Russian when someone doesn't read your mind.  If you'd like to move past those wasted conversations and your own internal panic of things not being done, then put a little note on the work or send it via e-mail, and simply relay when you need it.  Nothing gets prioritized if everything is a priority.

As much as I love to talk to my wife, I don't want her to ever ask me when I need something done again.  And if I do my job correctly, she won't.

3.8% surtax... Real number scenarios (Part 2)

As promised, here are some real-world examples of when the new 3.8% surtax would apply to a tax return, and some examples of when it wouldn't apply at all.  I know I don't have to say this, but each tax situation is unique.  It will take some work to figure out if you are subject to the tax, so when we meet this summer during our mid-year planning sessions, we'll address the tax with you.  If you did not opt for a tax preparation package which offered mid-year meetings, you can always schedule an appointment for an advisory session.

Examples for your consideration:

1. A married couple filing jointly has $400,000 of adjusted gross income (or AGI):

• $240,000 of wages.  
• $160,000 of the income is composed of interest, dividends, and net gains from the sale of raw land.

Because they have $150,000 of investment income above the $250,000 threshold, they would owe an extra 3.8% on the $150,000 over the limit, or $5,700.

2.  A retired couple filing jointly has no wages, but does have taxable IRA payouts of $100,000; pension and social security payments totaling $60,000; dividends and taxable interest of $40,000; and $40,000 from the sale of two investments.  Total income = $240,000.

They owe nothing, because their income is below that $250,000 threshold.

3.  A single tax payer earns $60,000 of wages and nets a $180,000 windfall from the sale of a long-held investment. Total income = $240,000.

Because she has $40,000 of investment income above the $200,000 threshold she will owe $1,520 in tax ($40,000 x 3.8%).

4.  A single taxpayer has an income of $220,000, but it all comes from Social Security benefits and pension and regular IRA payouts.  

None of this income is subject to the 3.8% tax.

How would this 3.8% tax apply to the sale of a principal residence?

1.  It would apply if the net gain on the sale exceeds the $500,000 exclusion for joint filers (250,000 for single) and their income exceeds the adjusted gross income threshold.

So, if I have an adjusted gross income above the threshold that is then reduced by a large itemized deduction like medical expense or a charitable gift, what happens?

The tax applies.  AGI is calculated BEFORE itemized deductions.

What about trusts and estates?

Yep.

This tax applies to net investment income of more than $12,000 that isn't paid out to beneficiaries.

I hope this has been helpful.  Please let us know if you have specific questions on anything indicated here.  As we find more insightful analysis of the new law, we'll make sure to pass it along to you via our newsletter, this blog, our website and our Facebook page.

(These examples were adapted from The Wall Street Journal... for the education and good of all humanity.)

3.8% Tax on Investment Income, Say What?! (Part 1)

It's here, and the Supreme Court just made it official....get ready for two new taxes set to impact some of you beginning on Jan 1, 2013.  I am referring to the newly enacted 3.8% surtax on investment income and the 0.9% increase in the Medicare tax on wages and self-employment income.  In this blog, I will discuss the 3.8% surtax.


You hadn't heard about these?  Well, you're not alone.  Stay with me...


Are you a joint filer with an adjusted gross income above $250,000?
Are you a single filer with an adjusted gross income above $200,000?


What is your adjusted gross income (otherwise known as AGI)?
To find this out, look at the first page of your 1040.

This adusted gross income number includes interest, dividends, capital gains, wages and retirement income plus results from partnerships and small businesses.
**THIS NUMBER DOES NOT INCLUDE: Subtractions for itemized deductions like mortgage interest, charitable gifts, and personal exemptions.


Are you married, filing a joint return with your spouse, and do you see $250,000 or more on line 37 (or $200,000 or more if you're single)?  Listen up.


Starting January 1, 2013 (that is 5 and1/2 months, FYI) tax rates on long-term capital gains and dividends for these earners will jump from 15% to 18.8%... assuming Congress extends the current law.  If the current tax rates, also known as the Bush-Era Tax Rates, don't remain in place for next year, that number jumps substantially (the top rates would be 23.8% for long term capital gains and 43.4% for dividends....and that's not a typo).

This 3.8% tax applies only to investment income above the $250,000/$200,000 AGI threshold.  Things like wages and social security can raise your adjusted gross income, making the investment income more vulnerable to the tax.  In our next blog, we will cite examples to show you how you may be subject to the tax. 


So, your adjusted gross income is above the threshold...do you have any of this investment income on your tax return? 


Let's define "investment income"...

• Dividends
• Rents
• Royalties
• Interest (except municipal bond interest)
• Short and long term capital gains
• The taxable portion of annuity payments
• Taxable gain from the sale of a principal home above the $250,000/$500,000 exclusion
• A net gain from the sale of a second home
• Passive income from real estate 
• Investments in which a taxpayer doesn't materially participate, such as a partnership.

Income not subject to the 3.8% tax...

• Payouts from a regular or Roth IRA, 401K plan, or pension
• Social Security income
• Annuities that are part of a retirement plan.
• Life insurance proceeds
• Municipal bond interest
• Veteran's benefits
• Schedule C income from businesses
• Income from a business on which you are paying self-employment tax, such as a Subchapter S firm or a partnership.

This new tax is a game-changer for taxpayers with investment income and AGI in the "red zone."  I had a meeting with a client today who will be subject to an additional $1,000 in tax in 2013 because of this.  I am sure I'll see more of this as the year moves forward.  Now is the time to re-evaluate your investment allocation with your financial planner, in case your were wondering....

Examples to come in the next blog....stay tuned.

Inheritance? Try Again...

I read a great article in the Wall Street Journal today which stated that affluent investors put their heirs at the bottom of the priority list (a paltry 41% rank this as important) when ranking their financial concerns (Counting on an Inheritance? Count Again. - Wall Street Journal, Monday June 11, 2012, page R1).  The first....rising health-care costs at a whopping 79%.  This leads to a problem that I have recently seen, where children are paying for their parents' care.

I know that there is something noble about taking care of your parents.  After all, they (presumably) took care of you...gave you shelter and kept you healthy...maybe helped you with money when you needed it...maybe even paid for your college education.  There's nothing ignoble about planning for yourself, however.  It's what they'd want for you anyway.  While you're at it, ask them some questions now while they're in good health.

Clients sometimes tell me, "I need to save for my child's college, but I have nothing saved for myself." Here is the kicker....you can't borrow to save for retirement.  As much as you may hate it, you could borrow for your child's college education.  Think about it.  Throw in your parent's health care bills and now you have a financial disaster cocktail.  You have to plan for these things!

Pay thyself first - Save for yourself before you do anything else.  I had to see this in reality before I believed it.  I had a period in my life where I was saddled with a tremendous amount of debt, and I was afraid to save anything for myself.  But my financial planner convinced me that saving for myself was paramount....the debt would disappear if I had a disciplined plan for it.  And darn it, he was right!

For those of you in your 30's, ask your parents if they have long term care insurance.  It's not too late for them, if they're in the state of health that would allow them to be under-written (I don't know insurance law so ASK ABOUT IT).  Think about how little those monthly/annual premiums are in comparison to a year-long stay in a nursing facility, to say nothing of the peace of mind.  This is something I wish I had done 10 years ago, when someone mentioned it to me.  I'm sad to say I didn't.

The tax deductions for long term care insurance premiums aren't large, folks.  They're generally limited (in the cases of individuals) to anywhere from $350-$4,370 per taxpayer depending on your age.  For example, if you're below 40, your deduction is limited to $350/taxpayer.  The deductions go up as you get older.  You add them to your other medical expenses and if they exceed 7.5% of your AGI (10% of your AGI in 2013, generally, since the health care law is going to stand for now), you can deduct them.

For my self-employed clients....the tax deduction for long term care premiums is a little more attractive.  It's too complicated for a blog, but I'd love to help you run the numbers and see if you're eligible for a bigger tax deduction.

Bottom line....tax deduction or not....it's a good idea to at least talk about this.

Have you heard of Long Term Care Insurance?

No one likes to think about being incapacitated or diagnosed with an illness that may limit their mobility or cause them to lose their mental faculties.  It scares me to death.  My family recently dealt with this in real-time with my uncle, who passed away recently at his home after a year with an inoperable brain tumor.  Emotions aside, this was a huge financial burden on his family since he was the breadwinner, and they used every cent of savings to pay for his in-home care. They had no long term care insurance. The more conversations I have with clients during our summer tax planning meetings, the more I hear that no one has long term care insurance.  I estimate that fewer than 10% of my clients have a policy.

After hearing the details of my uncle's struggles and his family's situation from my mother, I had a very REAL talk with my wife, Meghan, about the absence of long term care insurance in our financial plan.  Once we were done, we called our financial planner and did something about it.

What is long term care insurance?  It's an insurance policy that helps pay the cost of long term care beyond a predetermined period.  Long term care isn't typically covered by a health care policy.

Who needs long term care?  Those who cannot perform the daily activities of normal life are considered to be in need of long term care...we're talking about bathing, dressing, eating, transferring and walking.  My uncle, for example, couldn't get out of bed without assistance and as his condition worsened, he needed almost round the clock nursing care.

How hard is it to obtain?  You need to contact your insurance provider or financial planner and start the conversation.  It's just that simple.  If you don't have someone to call, please let me know and I'll provide the name of my financial planner.  He's awesome and I know he can help you.  We will all work together to figure out the best plan for you.

Is it complicated?  Well, it is insurance, so yes there are inherent complexities.  But don't let that stop you from talking to someone about it.

I know this isn't a "nice" conversation, but it's something that needs to take place within your family.  It's a little bit like discussing your will....it's not dinner conversation.  However, when I think of the choices here....allow my family to be burdened with my care expenses should something happen to me (at the average cost of about $7k/month) or have an insurance policy that would pay those expenses in the event something happened, it became a no-brainer.  And really, who has $7k/month just lying around?  Let me know if I can help you with this.

Next time, I'll discuss the tax issues surrounding long term care insurance premiums.

Friday's at Our CPA Firm

We recently decided to change our office hours.  After going to half-days on Friday's a few years ago, we have noticed a steady decline in traffic in our office on Friday's.  One afternoon, Meghan and I decided to close the office to traffic on Friday's but spend time, either in the office or remotely, brainstorming about things...implementing changes to how we currently do things...update our Facebook page, website, or blog...and also wrap up projects (what I refer to as "head-down" work) that are difficult to complete in a regular work week.  Basically, our Friday's have now become what our Saturday's were.

So, what have we been up to?

• We have started using a new project management software called Basecamp.  This software is web-based and allows us to track the flow of work in the office on larger client projects.  We are also in the process of adding a new team member who will work remotely for us from Austin, Texas, and this is a perfect way for him to update me on his progress on work.  And guess what?  We can even invite clients to see a "to-do" list and become actively involved in the work if the client is pulling together information for us.  One of the benefits of learning new technology is that we can then teach our clients how to use it for their businesses.  
• We have reviewed several anonymous client comments from our recently submitted survey, which has prompted us to try new ways of submitting your tax return organizers and electronic copies of tax returns.  We have some exciting new things to unveil as we move forward on that, so stay tuned...
• We have designed and begun sending out a newsletter via e-mail.  We have now discovered a way to embed the newsletter in the body of the e-mail, so you don't have to open a PDF.  This is sometimes tricky on smart-phones.  The next one will come to you in a new, more readily available format, thanks to Meghan's work.
• Our biggest benefit....we spend time planning the next week.  Of course, things happen to derail the best-laid plans, but at least we have a fighting change to stay on target if we actively plan to do so.  One of the most important things entrepreneurs need to learn is time management/resource allocation.  We have spent a tremendous amount of time refining how we do work for you, and it will continue to get better as we move forward.  We are excited about the changes we have made and we hope you are also!  There are more good things to come!

Shareholder Compensation...Rocket Science?

I am a part of a group of CPAs called THRIVEal, as most of you probably already know, and I have seen several conversations through LinkedIn this week with an accounting student.  This guy is asking questions that I never would have even thought to ask in college, like how to get ready to enter the job market and what to expect when working for a small firm versus a large firm.  I really just wanted to get a job and start working.  I didn't ask those hard questions, but I really should have.  I didn't know anything when I graduated, at least not about the real world of work.

I have also been receiving lots of questions from clients lately on how to structure compensation, as most of my clients are S-Corporations owned by one individual and are required by IRS to be on salary.  I get these questions because they have spoken to another fellow business owner who either wasn't paying himself/herself anything at all, or they've received a letter from IRS reminding them to be aware of the stiff penalties for not complying with the law.  Either way, they're scared or interested in finding an answer to the dilemma...to pay or not to pay?  They're asking the hard questions, too.

You must pay yourself.  Period.  How much?  Well, that's a little harder to say....

IRS requires that a shareholder's compensation be reasonable.  Compared to what?  Your friend's payroll?  Mine?  It has to be reasonable based on your particular business.  You can't take a $10,000 salary in a business where you're grossing $250,000 and then take $100,000 in dividends.  Conversely, you should not have to take a salary of $50,000 when you're grossing $60,000 and borrow money from yourself to pay your overhead.  It's something that takes a little work and some advisory.  Rocket science, it is not.  Necessary...it is.

How do we do this?  We sit down and determine the dollar amount that is reasonable based on your particular business.  We help you set up the payroll structure, frequency, and all those other little troublesome things like payroll tax deposits, quarterlies and annual filings.  Yeah, it's compliance and it's not sexy.  Again, it's necessary.  But think of how relieved you'll be when you know we're handling it for you....I feel better already.

Things I Learned During This Tax Season

It's done....for now.

Extensions still have to be done, but I like to relish the small victories such as the passing of a deadline, or the compliment of a client on how calm our office is today.  It's the great feeling of NOT having my hair on fire.  That's a new one for me, and I guess that's where my lessons will begin.

I learned that my wife, Meghan, is the most incredible COO (even though she hates terms) I have ever had the pleasure of working with.  She calls me on my BS, she learns new things like web-based applications very quickly and trouble shoots them for me, and our clients love her.  I can't operate the firm without her.  Period.

I also learned that Meghan's head explodes when she has to talk on the phone, scan and answer e-mail simultaneously.

I learned that Meghan's choice of jazz music for the front office was genius.  Clients like to sit and talk more, and they complimented her numerous times on the musical selection.

I learned that my clients like coffee in to-go cups and chocolate chip cookies, but no one helps themselves when they come in.  It's almost as though they don't want to bother us.  But, once we offer it, they partake.  It was great to have the goodies this year to offer.

I learned that challenging the status-quo is easier than I thought.

I learned that SC gives out debit cards for refunds if you don't elect for direct deposit, and everyone hates it.

I learned that taxpayers' identities can be stolen for fraudulent filings, and that IRS was immediately helpful in the situation.

I learned that in some pending divorce cases, Married Filing Separately is clearly the only way to stop a murder from occurring.

I learned that holding yourself out as the guy who works a million hours a week makes you look sort of foolish, and not at all like a tax god.  My clients like the fact that I'm not a zombie, and they also like the calmness.  Work less, make more money, look like you have your act together...because you do.

I learned that some states have the craziest rules that will force you to paper-file a tax return with them.  Then, I remembered how much I hate paper-filing anything.  Remembering to attach the W-2's was a killer.

I learned that offering more value is FUN!  For the clients that have been with me for 10 years to come in and thank me for doing more was a great feeling.  For our new Elite and Premier clients to have the "Wow" expression when they were told how we will work together all year on planning and advisory was also amazing.  See my lesson above about challenging the status-quo.

I learned that while most people think of a CPA for taxes, we are changing the perception....one client at a time.

I grew to love and admire the companies that we hired to clean our house and our office.  I may add them to my will.  Coming home to a clean house every other Thursday night = the best money I ever spent.

I was reminded yet again that we have the best clients in the world!  Thank you for allowing us the pleasure of assisting you!

Leadership...a new definition

Leadership is defined by Webster's as "the act of leading a group of people or organization."  This sounds sort of vague to me.  How about you?  I was always taught in school not to define a word by using the same word or a root of the word.  Looks like someone wasn't listening....

I look at our state and federal government agencies (or at least the ones that I deal with on a regular basis), and I listen to my clients speak about their trepidation when talking to/dealing with/listening to agents from these offices.  I listen to the rhetoric and the yammering about elections and primaries and candidates.  I watch as people complain and pass the buck continually.  Somewhere, sometime the yammering and the blaming has to stop and someone has to lead.

If you are a business owner, how do you feel about your leadership qualities?  For myself, I suck at it.  I have worked on those qualities and identified some glaring short-falls of my own, and I'm getting better.  Why is this so hard?

Because taking ultimate responsibility for the livelihoods of others is hard for some people.  Even harder still is learning to lead a group of people, whether it's an office or a second grade class. As some of you know, we used to have an office in Greenwood.  What a colossal failure that was!  Why?  Because I couldn't lead...I couldn't lead in my own office, let alone in an office 50 miles away.  Now, this office is run by my wife and me, and we work together as a team.  That was where I found my answer.

I can lead a team as long as we're all rowing in the same direction (how often does this happen, really?).  I have the vision, I have the stamina, and I have the wherewithal to make it work.  And darn it, people like me. But, it's nearly impossible to lead when there is no defined vision and there are people continually pulling the entire operation to one side or the other, away from the vision.  Now, Meghan and I work together on a common goal - be loyal to our "why" and serve our clients as best we can within the framework of our "why."  It has made all the difference in the world!

How do you get better at leading?  Define your "why"....why are you here, why do you do what you do?  Then rally everyone around your "why"...your clients/customers, your team, your family, your hamster.  If you get this far, you'll have accomplished what a lot of business owners can't do.  And I can almost guarantee you'll see a difference in your quality of life and your bottom line as a result of it.  Give it a shot....

Leadership would then be defined as "the act or quality of someone who has discovered his/her "why" and has communicated it to the team."  See, I didn't use the root word or the actual word in my definition.

Coaching...Not Just for Overpaid Football Players

I don't know about you, but the first time I heard the term "coaching" as applied to a business relationship, I squinted my eyes a little bit and thought "Who would do that?"  I guess that was at the beginning of my career in public accounting, 18 years ago.  Then, I immediately thought, "Even if I wanted to, how could I spare the time?"

Over the years I have worked with some wonderful clients and colleagues who call themselves Business Coaches or Life Coaches, and I was able to see first-hand just how the process worked.  It wasn't all new-age and ambiguous...it worked, it revealed things about a client's business and personality that led to revelations, and it was so worth the time and expense to take part.  People raved about it. They actually scheduled these sessions like meetings, made them a priority, and benefited. But I still hadn't been involved in a coaching session....

Until this past summer.  I joined a coaching course with my "CPA-Brother", Jason Blumer, and I had the opportunity to experience it first hand.  I made the time a priority, completed the coursework, and became very intentional about it. This coaching course was comprised of several CPA's from all over the country, and we participated via the internet and our computers/headsets/microphones....we were able to see each other during the sessions, we shared ideas and goals, and we all uncovered things about our respective careers that led to improvements in our lives.  Not just work, but our personal lives as well.  And I was inspired....

So inspired, that I have prepared an agenda for a coaching course of my own, one that will be offered to my business clients in the coming weeks.  I am VERY excited about the sessions, as I believe they will add value to my clients so they can, in turn, add value to their clients....and so on.  We will cover a broad range of topics, including defining success, determining who you want in your team, how to use technology to make your life easier, how to interpret your numbers and judge performance by tracking key performance indicators...it will be enlightening and thought-provoking, to say the least.  No homework, no accounting-speak, no tax law discussions....just talking among other professionals and learning.

I have come to realize that my profession really is a "pay it forward" proposition.  I genuinely enjoy sharing what I know with my clients, so they can experience a richer quality of life, and then they can pass it on.  Look for the announcement about the sessions, and please contact me if you're interested.  It will be well-worth the time and expense, I promise you. I would love to have you join us!

Our Annual Tax Season Information Letter....

2011/2012 Tax Season Information Letter

Ah, tax season….it’s here again!  We have 105 days to produce a tremendous amount of work and value for all of you, and it’s always exciting to make plans and get started! As most of you already know, we have enacted many wonderful changes this past year, which will hopefully make our lives (yours and ours) easier moving forward.  This is what you can look forward to in the coming days and weeks:

• Our preferred method of contact with our clients is via e-mail, DocuSign and Dropbox (see next paragraph).  If these are not YOUR preferred methods for contact, you need to make that known to us as soon as possible.  That saves us from bothering you with numerous reminder e-mails and removes our frustration when you don’t respond to us.  Please be sure to add our e-mails to your contacts so that our messages to you aren’t placed in your Spam folders.  This is very important!

• We utilize Dropbox, an online file sharing and delivery program, for sending sensitive information such as copies of tax returns, anything containing a social security number or Federal ID number, and of course banking information. EVERYONE now has a Dropbox folder with our firm, and an instructional e-mail will be sent in the coming days regarding access to that folder.  We encourage you to set up your password and ID immediately upon receiving our invitation to join Dropbox, as you will find the following information in your personalized Dropbox folder: A 2012 calendar highlighting important dates, your organizer for gathering 2011 tax return data, a more detailed explanation of your tax return pricing option and other helpful information.  As we place information in the folder, you will be notified via e-mail to check it online.

• PLEASE, please, please make a point of signing the individual tax return engagement letter. In order to comply with my regulatory bodies, I must have a signed engagement letter from each client.  No tax returns will be e-filed until we have a signed copy, either through DocuSign or by hand, in our files for this year.  The engagement letters will be sent out in the coming days via DocuSign and by paper for those who prefer it.

• Due to the increase in tax returns for this filing season, I will be implementing a schedule for returning phone calls and e-mails.  Since this is the first year I have attempted this, I don’t have the exact hours just yet, but I plan to return e-mails and phone calls in the morning and late afternoon, leaving time in the middle of the day to conduct meetings and work at my desk.  More to come on this….

• To remain informed about changes and to stay in contact with us, please make sure to friend us on Facebook, visit our newly re-designed website and check out our blog (the links to all are included in our e-mail signatures).

Jonathan I. Godwin, CPA

Organizers vs. Checklists for 2011 Returns....

2011 INDIVIDUAL TAX RETURNS

ORGANIZERS vs. CHECKLISTS

For the preparation of the 2011 individual tax returns, we searched for a different method of gathering data for the majority of our clients.  Let’s face it, those organizers are huge, full of questions, and the cold, hard truth is that NO ONE USED THEM.  So, in an effort to make your data-gathering easier and waste less time and paper on our side, we have decided to utilize a Client Checklist this year.  The Client Checklist is two or three pages, lists the documents you provided last year, gives a brief explanation of the document and why we need it, and is just easier to follow.

Some of you are still receiving organizers due to information that is on your tax return.  For instance, for those of you who are actively self-employed or own rental properties, the organizer is better because it has schedules where you can input the amounts that we need in order to complete your returns.

THE BEST WAY TO USE THE CHECKLIST

If you aren’t coming in to meet with Meghan or me this season, then simply place your documents behind the checklist pages in the order they’re presented on the checklist.  It’s just that simple.  If you have documents for 2011 but you didn’t have them for 2010, then place them at the back of your information packet and makes notes on them for us.  And by all means, PLEASE UPDATE YOUR CONTACT INFORMATION (E-MAIL, PHONES, ADDRESSES, ANY WAY WE CAN CONTACT YOU).

If you are coming in to meet with Meghan (which we highly advise if at all possible) then please bring the checklist back along with your documents, and we’ll order them properly as well as scan then before you leave.  The agenda for those client meetings has already been sent to you in various forms over the past weeks.

THE BEST WAY TO USE THE ORGANIZER

No, not to line the birdcage….Please review the pages and PAPER CLIP the documents to the pages where they belong.  Feel free to write in the information on the pages if you wish (for instance, listing interest income or dividend income) but please also attach the original documents for my review if at all possible.  And by all means, PLEASE UPDATE YOUR CONTACT INFORMATION (E-MAIL, PHONES, ADDRESSES, ANY WAY WE CAN CONTACT YOU).

For those of you returning this information to me digitally through Adobe Pro, it’s great if you can attach sticky notes for questions or information I need to see.  Some of you did this last year, and it was extremely helpful.