The IRS is not usually on anyone’s Christmas list. In my business income taxes, I frequently see businesses not be able to fully pay their payroll taxes. This normally stems from poor cash flow and easy access to this capital (Their employees withholding). The idea is always to borrow and pay back but the later many times does not occur. Additionally the shareholder or responsible party can be assessed these taxes personally making for a large IRS issue which can burden someone for a lifetime. Sometimes the solution is an offer in compromise or paying less than full value to the IRS. They will only agree to this if they feel there are no better options to get paid and the persons income and expenses, age, health etc. are taken into account in this process. Many times the amount needed to settle the debt may be borrowed from a family member or derived in some other manner as it may exceed their available cash reserves. The calculations are extensive and complicated. There are mounds of paperwork needed and a tax attorney is usually needed to prepare  submit, and negotiate this offer. IRS is under no obligation to accept and many times does reject these causing multiple submissions which can be expensive with no guarantees.

Our client behind this story was in the process of submitting his offer which actually sits with the IRS as I write. It has been with the IRS agent for several months waiting for its turn. This client owned shares of stock in a company that was acquired and the shareholders received a large payoff from this transaction this month. He had held this stock for several years receiving modest dividends. In fact I believe the company gave our client the shares for the years of service working along side them. This money from the sale and the original money set aside to fund the original offer will be enough to pay off the IRS freeing the taxpayer from years of scrutiny and fear. While he makes a good living he has no savings or home as we cannot have these things and owe Uncle Sam. While an offer in compromise can be effective there are drawbacks too. You are on 7 year probation where if you owe any taxes during this period they can put the compromised tax back on your account. This topic has dominated the clients life for the past seven years and what a fitting time to celebrate freedom from IRS during Christmas.

Am not sure exactly how he got in this situation as it was before my tenure but I have seen the story played out many times with different characters. This is the first time I have witnessed a full payoff. The amount exceeds half a million dollars so one can imagine the interest and penalties that continue to accrue on that large of a sum. We are now talking about brighter subjects like setting up a 401k and having him purchase a home. I do know insufficient accounting and bad advice are normally present when these situations occur. Many times skilled people rely on others to handle things while they slay the dragons before them on a daily basis. Not an excuse by any means but the reality we all need a team to run an organization and cannot handle all duties ourselves. The costs of these decisions have been immense but sometimes these are our best lessons the ones that hurt the most. This has been one of my highlights this Christmas season. I can see and feel the hope with the client being able to do the things many others do to plan and save for their future. He does have a late start and is behind from traditional financial planning models but looks forward to the challenge, a free man at last!

Let us educate you on ways to plan out your business tax / payroll tax strategies that would help eliminate long term financial problematic issues that may occur in the future. Visit us at www.gyldecauwer.com or Call us at: 909/948-9990.

We all think we are immortal and business owners seem to never think they will leave the business. I had a construction client pass away on the job. He was actually operating a piece of equipment when the time arrived. One of the sad parts beyond his families loss was there was no buy/sell agreement in place or contingency plan to fall back on. The contract he had was able to be assigned giving the family a small sum of money but nothing else occurred. All the goodwill and customers were left to the competition to fight over. Before this event the company was likely worth close to one million dollars using a multiple of EBIDA model. One could say not having a plan in place cost the family $900k. While he did not have an internal successor he could have formed an alliance or plan with a competitor or interested party to accomplish this. There is nothing that brings out the worst in people like money and splitting up the pie when clear instructions do not exist.

If a plan exists with clear instructions it takes a lot of chaos out of the equation. There are several ways to fund a buy/sell. Life insurance is one of the most popular funding methods. Earn outs are another method that allows the payout over time. In short you pay off the owner over several years out of the profits of the business. A business that has multiple owners should have extra incentive to accomplish this.  Having the spouse of the departed owner is likely not the desire of the remaining owner. A buy/sell plan will normally provide a valuation formula to allow the owners to determine the value of the business. Without this the owners will face conflict from all sides which takes time away from running the business.  Another option to transition a business is to sell to the employees thru a model called ESOP (employee stock ownership plan). Several companies use this model Southwest Airlines being one of recognizable ones.

There is a saying any plan is better than no plan. I have witnessed plans carried out that have worked well for both parties. A client started a business and left a key employee to run it. He later entered into an agreement to sell to the employee for a substantial sum while he was going another direction. In the end both parties got what they wanted from an agreement that allowed them to transition the ownership.

These examples show the right and wrong ways to conduct our business transition plans. We owe it to our families to handle our affairs so they do not have to. This will protect the value of the business and allow a smooth transition to occur.

Better late than never!

Let us educate you and help you put a buy/sell agreement in place or contingency plan together to fall back on. You never know what could happen. Visit us at www.gyldecauwer.com or Call us at: 909/948-9990.

Outside of trained tax professionals and do it yourselfers who really knows what is on their return? I say in reality not many.  Often I see people that do not really know, and when they are audited are somewhat or very surprised what was put on the return.  There is very little regulation on who prepares a tax return in today’s world.  There are likely many more untrained preparers versus CPA’s or enrolled agents doing taxes today.  If we are expecting the preparer to make the right calls we need to make sure they have the credentials to start with.  Today I saw an individual who their preparer got a cease order to stop preparing tax returns.  I have seen worse but it appears they overstated basis for depreciation and improvements to the properties.  This caused thousands of dollars a year in excess deductions.  Luckily while they did indeed overstate deductions they also missed things too.  There was no mileage taken for the properties and the taxpayer had four rentals and was involved with repairs and projects throughout the year with several.  This can help minimize the impact.  While I do not really recommend this the taxpayer is choosing to represent himself the first go round as he actually has support for most audit items outside of the basis.  We will get involved if the meeting does not go well or other issues arise.  I have seen many questionable deductions in my day and most of the taxpayers were very unaware.  For example one million dollars of goodwill that did not exist, deducting S Corp losses to the tune of hundreds of thousands of dollars where no basis exists, deducting rent paid to a shareholder on the corporate return while the shareholder failed to report the rental income on his return etc.  The odds are fairly good we will not be audited but my feelings are, prepare for the worst and hope for the best. Fortunately there is a statute of limitations limiting the exposure as long as the error is not considered fraud where no limitation exists.  Areas on returns that draw the attention of the IRS: First time rentals, Large losses on Schedule C or E, Matching of mortgage interest, high expense to income ratios (how did this person live on this) Schedule C itself makes you four times as likely to be audited and as the income rises so does the likelihood of audit.  Some people will pay an IRS notice even if not correct, thinking they do not make mistakes which is not true. We see many notices that just need an explanation. Sometimes there are several potential places to report income that may not be readily apparent to the IRS.  If you could send a notice and a certain percentage get paid even if not correct you would likely be tempted to try it.  The higher caliber professional we choose the less we should have to worry about what gets put on our return, and we should also expect a professional to explain to us what is there and how it impacts you.  The discussion of risk/reward on deductions and strategy are equally important as the numbers that show up on the return.

GYL Decauwer has highly trained professional CPA’s on board to help you make the most out of your personal and business tax returns. Visit us at www.gyldecauwer.com or Call us at: 909/948-9990.

The penalties for not reporting foreign bank accounts can be severe; while a single civil penalty may not exceed $10,000, cumulative penalties can even exceed the value of the foreign bank account.  United States taxpayers who have an interest in or signing authority on a foreign bank account, brokerage account, mutual fund, or other financial account may have a reporting requirement to the Internal Revenue Service under the Bank Secrecy Act.  If the total value of these accounts is $10,000 or more, each taxpayer is required to file a Report of Foreign Bank and Financial Accounts, form TD F 90-22.1.  These forms are to be filed separately from your income tax filing and due by June 30 each year for the preceding calendar year.

Additionally, IRS efforts to obtain foreign bank account information have increased in recent years. Some Swiss banks have agreed to disclose the account information to the Internal Revenue Service.  This action comes after the Swiss Federal Tax Administration received a request from the IRS and pressure from the Justice Department.  Information was requested for the calendar years of 2002 through 2010.  In 1996, a tax treaty was entered into by Switzerland and the United States of America.  Credit Suisse, Clariden Leu, and UBS have all agreed to provide the requested information.  UBS disclosed 4,450 clients in 2009 and paid fines of $780 million.  Other banks under investigation are Julius Baer and Basler Kantinalbank.

Let us show you how to minimize these penalties.  Visit us at www.gyldecauwer.com or Call us at: 909/948-9990

There are many opportunities in business and life to make choices about doing the right thing. Today a major university is facing scrutiny from a developing scandal that touches on this point. It appears not enough effort was expended to do this. Protecting the image and business seemed to win out over doing the right thing. Getting greedy or being lax in business can cause major consequences. Making these decisions inside our companies and lives are no different. The impact can be lifelong.  We all need boundaries and common sense to prevail over indecision or not taking a stand. Each day we are faced with many choices. Think long term and do the right thing and you have made your contribution and can rest at peace. Not all decisions are right but doing things right always is.

Contact us and we can show you how to get on the right path. To learn more, visit www.gyldecauwer.com or Call us at 909/948-9990

I was recently in a room full of owners and CEOS.  The topic of what is proper to post on Facebook came up.  All these smart guys had no clue.  Some could not understand some clients posting a sunset or locations of where they are. This did not resonate well with the executives.  A speaker I heard recently who labeled himself the Visibility Coach said his followers increased greatly after he started including personal information in his posting!  We post weekly which seems like the right amount for us, as being fresh weekly is not easy, I must say.  I wonder who the folks are that comment on our postings in this viral world we reside in?  Will we ever do business or is this a reasonable expectation to have from a stranger?  We are told we need to be active in Social Media but how much, how often, what to say, etc.? It seems to be a mystery to many.  In the mean time we keep tweeting, facebooking and linking in, trying to crack the code.
To learn more, visit www.gyldecauwer.com or Tel: 909/948-9990

When too good to be true actually is! Recently a firm was indicted in the Inland Empire for tax fraud; by receiving $250 million in illegal tax refunds.  I have seen taxpayers with false deductions, but to a much lesser degree.  I myself lost $10k in an investment scheme years ago and knew better, but got a little lazy and greedy!  Nothing wrong with taking a calculated risk, but with this said it is hard to short cut investment success.  I recently discussed a risky investment with a client investing in a restaurant.  After much discussion, it seemed to be worth the risk as it has established success and the investor now has a big upside.  Our client is smart and is willing to take the risk for the upside potential.  We can help you assess what may be worth the risk, and what may not.  Let us show you how.  To learn more, visit www.gyldecauwer.com or Tel: 909/948-9990

Everyone today is trying to get a bigger piece of the pie in this economy. Some are turning to Mergers and Acquisitions. We have a client who did this with a company of similar size. The results of this merger increased sales exponentially due to synergy and complimentary skill. We have another client who started a business and left it to a manager while he pursued other opportunities. After several years he sold the business to his manager for several hundred thousand dollars a true win/win for both parties. We also have used this methodology ourselves with success with minimal costs of acquisition. Don’t rule this out when trying to increase sales the advantages maybe greater than you think.

Let us show you the advantages. To learn more, at www.gyldecauwer.com or Tel: 909/948-9990

Many times in life and business we stop doing the things we should.  Life and career take over.  Balance and developing good habits seems to be an elusive target for most.  One example is lifting weights.  Many people start at a young age and leave it as youth vanishes. It is actually more important to lift weights as we get older as this naturally replaces the testosterone we lose as we age.

What business tasks have we fallen away from that are vital to our success? Regular review of AR, prospecting for new business or markets, a review of the appearance of our office (it might of looked fresh 20 years ago), etc.   We must work on our business in addition to working in it. What are you doing to accomplish this? Who challenges you or keeps you accountable? Do you have a way to compare your business to others?  There are several ways to make this happen; Coaching, Associations, Business groups, etc.

A bad plan is better than none so get started! Learn more, at www.gyldecauwer.com or Tel: 909/948-9990

Periodically we are asked this by clients. Very rarely is the answer “do it yourself”.  Like any game, we must know the rules and how to play it.

We have assisted several clients after an attempt at self-representation. Many of these are returns we did not prepare. Everyone likes their guy or gal until the heat is on.  This is not to say never do it yourself, just usually. We should all have an idea as to what is at stake on the return. A meeting with the preparer or another trained eye can usually determine areas of exposure. The trap is one wrong answer and Pandora’s box could be opened causing expansion of the audit. One big advantage of having a representative is truly saying,  “I do not know and we will get back to you”. Intimidation is another issue. Not knowing the rules or how to argue them leaves someone at a disadvantage. Go to an IRS office sometime and notice many people in it do not have representation and it likely does not work well for most of them.  We know when the IRS is unreasonable and needs to be stood up too, whereas you probably do not. We buy insurance hoping to never use it; audit representation could be the insurance to avoid the big claim. Better safe than sorry! Learn more, at www.gyldecauwerblog.com or Tel: 909/948-9990