Category Archives: cpa

The Turbo Tax Rap

“The Turbo Tax Rap”

Of the many tax rap songs on YouTube website I’ve listened to only a few (there are over 170); however, this one by far is the best I’ve heard. Let me know what you think. You can check them out yourself at YouTube

Death & Taxes

It’s tax time and YouTube is having a contest “The TAX RAP” sponsored by TurboTax with a prize of $25,000. Here is one of the videos “Death & Taxes” to enjoy while you are preparing your taxes or getting them ready for your accountant.

QuickBooks Service Discontinuation Plan

Computers love or hate em, sometimes they are frustrating!

QUICKBOOKS creates more business for itself from its own customers. Forcing them to upgrade their software.

As many QuickBooks users do not need the most current version to run their accounting and bookkeeping system. The only way that you are forced to upgrade is when the software company discontinues a specific version of a program and also eliminates the support of that software.

If you are currently using QuickBooks 2004 – QuickBooks Assisted Payroll, your next recent release from QuickBooks.

“On May 31, 2007, we are discontinuing QuickBooks Assisted Payroll for QuickBooks 2004.”

For more details click here

ADP Acquires Intuit Outsourced Payroll Business

I just received a release that ADP has acquired the outsourced payroll from For those of you that use Quickbooks payroll service, there will be a transition to ADP’s payroll service. I received this news release from my contact at Paychex. I’m sure that she expects there to be fallout from those who do not want to stay with ADP or are not happy with the transition and they will look to Paychex.

For more about the Acquisition ADP/INTUIT or INTUIT/ADP.

Quickbooks Solution to Internet Explorer 7

On November 19, 2006, I let you know about a problem with 2005 editions of Quickbooks after having installed Internet Explorer 7.

Quickbooks has come up with a patch to allow the 2005 edition to work.

QuickBooks Alert!

There is now an update from QuickBooks that will make QuickBooks 2005 compatible with Microsoft Internet Explorer 7. There is also an update for QuickBooks 2004 that will remove the Internet Explorer 7 warning message if your machine must run Internet Explorer 7

Please go to for the solution.

If you have a question regarding QuickBooks and would like to see it answered in this newsletter, please email us your inquiry at

If you need help in getting QuickBooks to work more effectively for you in YOUR business , email us your inquiry at or checkout the website at

Tax Credit for Federal Excise Tax

You’ve Just Hit the Jackpot!!!

A credit for overcharged federal telephone excise tax is available. The credit is for the federal excise tax on long distance charges during the period March 2003 through July 2006. You can either take the standard amounts set $30 single, $40 married and $10 extra for each of the first 2 children.

If you have all your invoices you can claim your actual telephone excise taxes paid. It requires the information be filed on form 8913. The form requires the amounts paid by quarter.

The credit is available for both businesses and individuals. The credit is refundable, you will receive the refund even if you have no federal income tax.

For more info check out the IRS website Telephone excise credit

Employee Theft – Embezzlement of Funds

This past week a friend of mine that is a business owner asked me what responsibility the outside accountant had in relation to a bookkeeper’s theft.

What is the accountant’s responsibility? Depending on what level of accounting is being prepared by the accountant; be it a tax return, a compilation, a review or an audited set of financial statements, determines how an accountant’s responsibility is determined.

An audit is the highest level of responsibility the accountant has regarding a set of financial statements. Based on the AICPA requirements auditor is required to brainstorm prior to the audit, to determine where in the books and records of the client is there potential risk of fraud. After the brainstorming the auditors must test any area that is a potential fraud risk. To see more click here: AntiFraud and Corporate Responsibility Center.

Just because the accountant tests for fraud doesn’t mean that he or she will find it. In testing, the auditor is reviewing random transactions. The chances of testing and finding fraud is very difficult, there can be collusion or the test data did not happen to be the ones where fraud occurred.

An auditor’s report does not say that the financial statements are correct or perfect and has no errors. The auditor’s report states the financial statements “are presented fairly”. The CPA can not say every transaction has been handled correctly. To do that would mean that the auditors would have to review every transaction that the company had. The cost would be unbearable for a business.

As to the other type of financial statements there is even less responsibility to find fraud as the accountant is not testing transactions. However, if the accountant is suspicious that there is a problem, he or she must follow up and may not ignore the possibility just because it is not an audit engagement.

When looking at financial statements, comparing activity on a year to year and/or a year to budget based on dollars and percentages is important. Any large variances should be reviewed and discussed with management and the owners.

If one person controls all aspects of cash or any other valuable assets, procedures should be in place that requires other levels of management to review the work under the control of one person. Management must monitor the employee’s work, follow the procedures.

If there are internal controls with a separation of duties the only way fraud can occur is through collusion. When there is only one person in the bookkeeping department it is alot easier to commit fraud.

Therefore it is the resposibility of management or the owners to review the work of the bookkeepers and make certain to set up procedures to minimize the possibility of theft. This is especially true when there is a large amount of purchasing of material for cash.

Here is my friend’s case:

A part-time intrern was trying to reconcile the petty cash slips. When he found a variance, he went to the owner and not the bookkeeper. After speaking to his accountant and making copies of all the paperwork for this petty cash reconciliation the owner had the intern show the bookkeeper the discrepency the bookkeeper said she would take care of it. She changed a number to make the totals work; however, there was no backup to the change.

After seeing how the adjustment was made, the accountant reviewed the books and it was determined that she had embezzeled over $50,000 during the past few years.

Where does the responsibility lie?

Income Tax Payments Online


online taxes

As you may be aware, you can pay your income taxes by credit card (1); however, you are responsible for a 2.49% add on fee. You can pay by credit card by phone at (888) 729-1040 or on the web at for federal taxes or (800)-272-9829 or on the web at for federal, state or local property taxes.

There are 2 other ways in which to pay your taxes electronically. First is the Electronic Funds Withdrawal (EFW) (2) and the second is the Electronic Federal Tax Payment System (EFTPS) (3). These 2 ways have no fees as these are direct withdrawls from your bank accounts. To use the EFTPS you must register as an individual and/or a business separately with the IRS and wait for a pin number that can take about 2 weeks. The difference is that you can pay all federal personal and business taxes on line.

The EFW plan is set up when you e-file your tax return, you can authorize that the taxes are withdrawn from your checking or savings account. The EFW program is only available through your tax professional or tax software. The toll free number is (888) 353-4537 which can be called 24/7 for information regarding a payment or to cancel a scheduled payment (to cancel a payment you maust call by 8 p.m. 2 business days prior to the withdrawal date.

The EFTPS gives you more control as you set up the amounts for the following taxes:

Form 1040 – individual income tax return; (1), (2) (3)

Form 4868 – extension for individual income taxes;(1), (2) (3)

Form 1040-ES – estimated taxes for individuals (you can schedule up to 4 withdrawals on the due dates of the estimates, April 16, 2007 (April 17 2007 in Massachusetts and Maine), June 15 2007, September 17, 2007 and January 15, 2008; (1), (2) (3)

Form 1041 – income tax returns for estates and trusts;

Form 940 – unemployment taxes; (1), (2) (3)

Form 941 – quarterly employment taxes; (1), (2) (3)

Form 944 – employers annual federal tax return; (1), (2) (3)

Form 1120 – corporate income tax returns; (1) (3)

Form 1120S – “S” Corporation returns; (1) (3)

Form 1065 & 1065B – partnership & limited liability Companies returns (1) (3)

Form 7004 – extension for corporate returns; and, (1) (3)

Form 990-PF – income tax return for private foundations; (1) (3)

Most states have also added on-line payments to their system. You should check with your state’s department of revenue to set up their payment process. Links to all state’s department of revenue,,id=99021,00.html

Tax Deadlines

As we are counting down to December 31, 2006, the end of another tax year, it is time to see if there is anything that needs to be done in order to minimize your income taxes.

If you have a business and you want to set up a retirement plan certain plans must be set up before December 31, 2006. They include pension and profit sharing plans as well as profit sharing 401(k) plans. A SEP-IRA checlklist

If you don’t set up one of these plans you can set up and fund a Simplified Employee Pension SEP-IRA before the due date of your return (including extensions).

The SEP-IRA has different vesting requirements that a pension or profit sharing plan. The pension and profit sharing plan has several vesting schedules with the longest vesting schedule being 5 years from entering the plan (6 years from date of hire). The SEP-IRA has an immediate vesting, where your employee does not lose a share of the retirement contribution if he or she leaves after the plan is funded, usually 2 years.

The radio is constantly playing advertisements for donations of cars, boats and other items of value. Remember that only donations completed by December 31, 2006 will provide a deduction for 2006. Also, if the vehicle is sold by the not-for-profit organization your deduction is limited to the amount of the vehicle proceeds. If the vehicle is kept and used by the not-for-profit organization (not sold) then you can deduct the value of the car. The values can be obtaind from Kelly Blue Book (KBB), Edmunds, or National Automobile Dealers Association (NADA).

Buying equipment before December 31, 2006. It is only a good idea if you really need the equipment now or early next year and you know what specifically want to buy.
If you buy equipment to reduce taxes, it not only reduces the tax; however, it also reduces cash or puts you in debt for 100% of the cost.

An example, if you are in the 40% tax bracket and buy a piece of equipment with a cost of $10,000.00, you will save $4,000.00 in taxes or the equipment only cost $6,000.00 ($10,000.00-$4,000.00). However, if you didn’t buy the equipment you would have $6,000.00 in your pocket ($10,000.00-$4,000.00).

The only reason to ever buy equipment is if you need it.

Bunching of deductions, if you are planning to give charitable contributions in early 2007, paying them in 2006 reduces your income taxes by 1 year.

Tax Planning – 4th Quarter Estimates – Federal & State

Tax planning is an important tool that some CPA’s use. Although April 16th (17th for those states that celebrate Patriot’s Day (Massachusetts and Maine) is approximately 4 and 1/2 months away, estimating your 2006 income taxes can save money and cash flow or give you as much time as possible before taxes are due.

On several instances calculations can determine that there is enough tax payments made during the first 3 quarterly estimate payments to cover your entire tax. When this occurs you don’t have to make the 4th estimated tax payment. This helps your cash flow.

Sometimes the calculation shows that you will owe alot of money, the earlier you know how much you will owe the longer you will have time to put the funds together.

Although the 4th Quarterly estimated tax payments are due by January 15th, it may save Federal income taxes to prepay your state estimated tax payment, either the original amount or an adjusted amount based on the tax planning. The reason It may save income tax is two-fold. First you must itemize deductions in preparing your tax return. Second, there is an add on tax called the Alternative Minimum Tax (AMT) that disallows taxes and miscellaneous itemized deductions as well as having additional adjustments that have the potential to create the add on AMT tax.

It is important to note that each year more and more people become subjected to the AMT tax.

The AMT was originally added to the Internal Revenue Code in 1969, going into effect in 1970. The AMT was to create a tax on income even when the regular income tax was either $0.00 or very low. It was originally set up to make certain that the wealthy paid some taxes.

In a brief issued by the Congressional Budget Office (No. 4, April 15, 2004),[3] the conclusion was clear:

Over the coming decade, a growing number of taxpayers will become liable for the AMT. In 2010, if nothing is changed, one in five taxpayers will have AMT liability and nearly every married taxpayer with income between $100,000 and $500,000 will owe the alternative tax. Rather than affecting only high-income taxpayers who would otherwise pay no tax, the AMT has extended its reach to many upper-middle-income households. As an increasing number of taxpayers incur the AMT, pressures to reduce or eliminate the tax are likely to grow.