10:25 AM Mon, Oct 06, 2008 | Permalink
Riverside certified public accountant Michelle C. Herting is trying to stave off panic in her business clients, what with Washington and Wall Street unable to prevent financial blahs.
She said in an e-mail that while the markets are out of control, small business owners can control their responses to recent events.
She sent a letter to her clients spelling out what she considers key steps to take to ensure business survival.
? Decide whether or not to move financial assets.
? Make sure that there is adequate cash flow to remain in business and to continue to grow.
? Decide where and how to cut costs.
? Increase marketing efforts and/or add supplemental profit centers and/or diversify. In some cases, a complete change of business or industry might be appropriate.
Small businesses face tougher lending market
08:32 PM PDT on Monday, July 14, 2008
Small business owners now know, or will soon find out, that getting financing for expansion or continuing operations has toughened.
Business lenders have responded to the collapse of the subprime residential market by tightening the rules they follow to make loans, which is keeping businesses from expanding or making new moves, local lenders and accountants say.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said there are jobs that aren't being created in the Inland region because businesses can't finance their growth.
"Nobody is in an expansion mood right now," he said.
Businesses have been snared in the effort by lenders to get themselves back on solid footing after losses on residential loans.
Bill Kroll, president of the American Bankers Association's Total Business Solutions division, said lenders are looking to minimize their risk. As a result, they are asking for more information than whether a borrower can repay the loan and in some cases will want to know if the borrower's customers are on firm footing.
Stephen H. Wacknitz, chief executive, president and chairman of Temecula Valley Bancorp, said the bank is still lending money but is stricter than in recent years.
"We certainly are requiring more equity in this kind of climate," he said. "If it's a spec loan, it certainly has to have cash equity and excellent loan-to-value; and it's got to make sense."
Pacific Western Bank in Rancho Mirage is looking for borrowers built to survive in a down economy, said bank president Bill Powers.
The industry's tightening standards is a move long overdue among lenders, he said.
"The ability to pay is a very simple equation," he said "It's either there or it isn't."
Powers said less credit is available because lenders are spending a lot of energy pursuing debts, which leaves less time to seek new business.
Riverside certified public accountant Michelle C. Herting said she is encouraging her clients to be proactive in financing by obtaining lines of credit -- even if they remain unused.
Herting said lenders are less likely to take away a line of credit that has already been approved than to deny a loan request.
Maintaining good relationships and credit with vendors and having good credit-granting procedures and pricing can reduce the amount of financing that small businesses require, Herting said.
"It is amazing to me how many new clients do not have terms with their vendors and will grant credit to almost anyone," she said. "This is a recipe for terrible cash flow."
Kyser said the businesses that end up growing will be the ones that best adapt to the new tighter lending guidelines. He said those include a demand for more collateral, smaller approved amounts and shorter loan terms.
"You have to ... be ready to live within those parameters," he said.
Inland accountants say millions in refunds on the line
07:28 PM PDT on Wednesday, April 9, 2008
(The Press Enterprise is published in Riverside and has a circulation of 189,000 readers. mch)
Taxpayers are on the verge of forfeiting about $1.2 billion to the U.S. Treasury, by missing a deadline to file 2004 tax returns that would net refunds.
Tuesday is the last chance for about 1.3 million taxpayers to ask the Internal Revenue Service for money it owes them.
In California, 149,500 taxpayers have left more than $134 million on the table, with the median amount owed at $507.
The IRS gives taxpayers three years from the date the return would have originally been due.
IRS spokesman Raphael Tulino said there are several reasons taxpayers didn't file 2004 returns, including that they weren't required to because their income was below the filing threshold...
Michelle Herting, a Riverside CPA, said Tuesday is also the deadline for revising 2004 tax returns that have already been filed.
Herting said taxpayers sometimes discover errors on the original return that cost them money, either by causing more tax than necessary, or causing a smaller refund.
She said when she gets a new client, she looks over the three previous years' returns and sometimes finds mistakes.
Tulino said low-income taxpayers who didn't file 2004 returns not only missed out on the refund of any taxes withheld from their paychecks, but they also may have been eligible for the Earned Income Tax Credit.
Generally, unmarried individuals qualified for the credit if, in 2004, they earned less than $34,458 and had more than one qualifying child living with them, earned less than $30,338 with one qualifying child, or earned less than $11,490 and had no qualifying child.
Limits are slightly higher for married individuals filing jointly.
Tulino said numerous individuals who haven't filed for years are doing so now to receive an economic stimulus payment Congress approved in January.
He said he's instructing them to consider filing 2004 through 2006 returns as well.
Checks for taxpayers seeking 2004 refunds will be held up if they have not filed tax returns for 2005 or 2006, the IRS says.
Also, refunds will be applied to any amounts still owed to the IRS, and may be used to satisfy unpaid child support or past-due student loans or other federal debts.
Tax forms and instructions are available on the Forms and Publications page of the IRS Web site at www.irs.gov or by calling 1-800-829-3676
Information about the Earned Income Tax Credit and how to claim it is also available online, and taxpayers who need help can call the toll-free IRS help line at 1-800-829-1040.
Choice on preparer depends on taxpayer's situation
07:10 PM PDT on Wednesday, April 2, 2008
A person who does his own taxes doesn't necessarily have a fool for a client, but taxpayers who feel foolish about handling that task have several choices when it comes to paying others to prepare returns.
The type of preparer chosen depends on the individual taxpayer's needs, Internal Revenue Service spokesman Raphael Tulino said.
Paid tax preparers generally fall into four categories: certified public accountants, enrolled agents, tax attorneys, and other preparers, including commercial preparation firms and national chains whose employees are trained to handle tax returns but may not be certified by state or federal authorities.
Enrolled agents are registered at the federal level and gain that certification by either passing a federal licensing exam or demonstrating sufficient experience in handling tax matters. They must earn recertification every three years, the IRS says.
Only enrolled agents, tax attorneys and CPAs may represent a taxpayer before the IRS, said Michelle Herting, a Riverside CPA.
Tulino said fewer than half of all U.S. taxpayers prepare their own tax returns. He said for at least the past six years, about 60 percent of all taxpayers have paid others to prepare their returns.
According to the National Taxpayers Union, an organization that lobbies at the state and federal levels on tax issues, it takes the average taxpayer more than 26 hours to complete the standard Form 1040.
The so-called "short form," 1040EZ now takes almost four hours, up from 90 minutes in 1989.
Tulino said, however, that self-preparation has gotten easier, with the wider availability of e-filing, either with retail software or online through commercial preparers.
He said about 15 percent more taxpayers who filed their own returns did so electronically this year than last.
He said a trained preparer or trusted relative will do for many simple returns, and a CPA or enrolled agent will meet the needs of the taxpayer who owns a small business or rental property.
IRS audit no reason to panic, Inland tax preparers say
07:14 PM PST on Wednesday, March 5, 2008
By RODD CAYTON
The Internal Revenue Service is auditing more tax returns than in the recent past, but Inland tax preparers say that taxpayers and business owners have no need to panic and can get through an audit without much difficulty.
Certified public accountant Michelle Herting, of Riverside, and enrolled agent Deborah St. Martin, of Oak Valley Tax in Beaumont, said that when the notice of an impending audit comes, the first thing to do is to find representation...
"Most people think they can throw together a box of junk and let the auditor sort it out," Herting said. "Auditors won't like that..."
"If they see that things are organized, and you're a compliant taxpayer, they generally won't increase the scope of the audit," Herting said...
The IRS reported that in fiscal year 2007, audits of individual returns increased 7 percent to 1.38 million. Audits of individuals with incomes of $1 million or more increased 84 percent to 31,382.
One out of 11 individuals with incomes of $1 million or more faced an audit in 2007, the agency says.
In the business arena, the IRS made 103,509 audits, compared to about 88,700 for fiscal year 2006.
The IRS says its enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and about $34.1 billion in 2002.
Not all tax preparers can represent clients in audits, Herting said. Only licensed attorneys, CPAs and enrolled agents can appear before the IRS, she said.
Economic stimulus has small-business benefits
03:13 PM PST on Sunday, March 2, 2008
By RODD CAYTON
Much of the attention regarding the federal economic stimulus has focused on individual taxpayers, but the legislation also contains some provisions aimed at benefiting businesses.
Several Inland tax preparers say the business incentives should help. There are two primary ones:
A 50-percent depreciation allowance for 2008 purchases
An increase in the small-business expensing limitation
Depreciation is an income-tax deduction that allows a business to address the cost of acquiring, for instance, equipment used in manufacturing, and the declining value of such equipment through wear and tear or obsolescence.
The expensing limitation has been raised to $250,000 from $128,000. That means a company that needs new equipment can list the amount spent to acquire it as an expense, the preparers said. Expensing equipment in the year it's put into service is an alternative to depreciating it over several years.
Michelle Herting, a certified public accountant in Riverside, said the incentives will help capital-intensive businesses that need to buy new equipment. She also said equipment purchases will have to clear another hurdle thrown up by the current economic malaise: difficulty in securing credit.
"How are (businesses) going to pay for these purchases if they can't get any money from the bank?" she asked...
Ultimately, the stimulus' impact on the health of small businesses could circle back to the rebate checks that individuals will get, Herting said.
Here's what experts say to do now for tax day
09:00 PM PST on Sunday, December 9, 2007
While the minds of many are on holiday shopping, perhaps it might be a good idea to think about taxes and the best way for a business or an individual to address its potential tax burden for 2007.
Riverside certified public accountant Michelle Herting says there are a number of items individuals and businesses should observe before the year ends, if they haven't already...
The deal: Generally, taxes are billed in installments, and that's how most people pay them. But the tax can be paid all at once, if it provides a greater benefit for the current year.
Paying the property-tax installment that's due in April could be a deduction if the taxpayer is itemizing, McCulloch said. However, legislation that would change the Alternative Minimum Tax is still being mulled over by Congress, and taxpayers may not know this year
whether they'll be subject to it.
Key Step: Examining last year's tax documents. If you were subject to the Alternative Minimum Tax last year, you probably will be again this year.
Don't forget: If it doesn't make sense to pay the property taxes this year, they'll still be due come April.
Required minimum distributions:
The deal: If you're 70 ½ years old or older, make sure that the minimum distribution amount is withdrawn from your IRA or other qualified plans to avoid the 50 percent penalty for underwithdrawals. Tax law allows taxpayers to save money for retirement without paying taxes on their deposits, but starting at age 70 ½ , the taxpayer is
required to withdraw some of the money each year.
Key Step: A financial adviser can inform the taxpayer of his or her required distribution and help transfer money into investment accounts or make deductible contributions to charity.
Don't Forget: The minimum distribution is based on the total balance in all a taxpayer's retirement accounts, Atchley said. He or she can
take a distribution of the required amount from just one account, as long as it reaches the minimum. Your first distribution isn't due until
April 1 of the year after you turn 70 ½ . However, if you want that long, you'll have to take two distributions that calendar year, she said.
Review estimated tax payments:
The deal: Ensure that your year-to-date estimated tax payments are sufficient to meet the safe harbor payment amounts needed to avoid underpayment penalties.
By the end of the year, businesses, the self-employed, and some individuals who itemize should have paid their estimated 2007 taxes. That means 100 percent of last year's taxes for most, Atchley said.
Key Step: Tax planning should be done with your tax professional throughout the year. A December meeting is an opportunity to catch
up if the estimated payments haven't been made as they should have been, McCulloch said. If you've gotten a recent windfall, pay off the additional estimated taxes now.
Don't forget: If you have an unusually high income, your safe harbor amount is 110 percent of last year's taxes. This is especially important for taxpayers with windfall income from bonuses or property sales.
Profits from stock sales
The deal: If you have net profits from the sale of stocks or other capital assets, consider selling holdings that will generate losses tooffset those gains
Profits from stock sales
The details: Profits from the sale of stocks or capital assets are subject to capital-gains taxes. Taxpayers owe 5 percent to 28 percent of
those profits, excluding $250,000 or $500,000 for a personal residence.
Key Step: Reviewing your portfolio for stocks that can be sold at a loss. Losses can exceed the gains by up to $3,000, McCulloch said.
Don't forget: Sell stock at a loss only if you think the stock has no future.
"Income taxes are not the only factor in managing a portfolio," said Atchley. "Sometimes it's in the client's best interest from the
standpoint of the investment ... to make a decision to pay some tax."
McCulloch said the deduction goes away if the taxpayer sells a stock at a loss and buys it again within 30 days.
The deal: Before the year's end, business owners can buy and put into service equipment needed for the business and write off the
entire cost of the equipment in 2007.
The details: Writing off the cost of newly purchased equipment is a substitute for taking depreciation on it in future tax years.
Key Step: Assessing the business' needs and buying equipment. There are some limitations, and
the purchase can be made on credit.
The tactic can be used for a tax deduction of up to $125,000, under what McCulloch calls "convoluted rules."
Don't forget: The equipment must be in place at the business by the end of the year.
"You can't go on the Internet on Dec. 29 and buy a computer, and it gets delivered on Jan. 6," McCulloch said.
The Deal: If you have been planning to contribute used clothing and household goods to a charity, doing so before the year ends can
increase your itemized deductions.
The details: The Internal Revenue Service has made changes over the last couple of years in how strictly it peruses charitablecontribution
deductions, Atchley said. The agency wants more proof of the value of donations.
Key Steps: Figuring out which charities will be helped, and appraising big-ticket items. Receipts should be collected. Under new rules, the
items must generally be in good condition, or in better condition than what used to be allowed, and your contributions must be
Don't Forget: Used vehicle contributions are still allowed, but the deduction is generally limited to the amount that the charity gets from
the sale of the vehicle.
Compiled by Rodd Cayton
Inland CPAs alter filers to boons, hits in state tax
10:00 PM PST on Saturday, March 3, 2007
By LOU HIRSH
The last-minute tax-filing rush of 2007 hasn't gotten fully under way yet. But Inland certified public accountants note there are several changes in California's tax laws that consumers and business owners should be aware of as this year's April filing deadline for the 2006
tax year draws near.
Some are tied to federal tax law changes, and in many cases they could save filers considerable money. In some instances, filing requirements have been changed, and in others, filers will be paying more because of new laws. In still other instances, experts say filers aren't taking advantage of credits and deductions that were in effect well before the 2006 tax
According to the California Franchise Tax Board, these are among state income tax-related changes taking effect starting with the 2006 tax year that will impact many consumers' filings in the coming weeks (For more information, go to the state board's Web site,(www.ftb.ca.gov):
Direct deposit of refunds. Starting with the 2006 tax year, taxpayers can request that refunds be electronically deposited into more than one checking or savings account.
Heroes earned retirement opportunities act. California conforms to the Federal Heroes Earned Retirement Opportunities Act, allowing members of the armed forces serving in a combat zone to make contributions to individual retirement plans even if the compensation on which the contribution is based is excluded from gross income.
Michelle Herting, who runs her own Riverside CPA firm, said the state renter's credit
can especially benefit those who are 62 and older, or are permanently disabled.
Capital gains distributed from mutual funds. Beginning with the 2006 tax year, taxpayers can report capital gains distributions from mutual funds on Form 540 2EZ, if the amount reportable during the taxable year for federal and state purposes is the same.
San Bernardino wildfires. For tax treatment information for victims of the San Bernardino-area wildfires of July 2006, get FTB publication 1034, "How to Claim a State Tax Deduction for Your Disaster Loss."
Professionals like Robert Boseant, a CPA with the accounting and financial consulting firm Peterson Slater & Osborne in La Quinta, are
reminding clients this season of certain state credits and deductions that have been on the books for some time but remain little-used.
He pointed, for instance, to the state's renter's credit of $120 for a married couple with no more than $61,588 in income; and $60 for a
single person with no more than $30,794 in income.
Equity for Renters
California enacted the renter's credit to partially offset the tax exemption on up to $7,000 in property value given to homeowners who
meet the income requirement. But Boseant said relatively few take advantage of the credit.
"A lot of people just forget about it," Boseant said. "Incomes continue to rise, and as people make more they tend to forget about the
Michelle Herting, who runs her own Riverside CPA firm, said those credits can especially benefit those who are 62 and older, or are permanently disabled. California law allows homeowners in that group, who make less than $40,811, to take a $472.60 credit against
property taxes. Renters who meet income limits in that age group can get a $347.50 credit.
Boseant said some higher-income filers will have to watch for the impact of a 1 percent excise tax that went into effect for the 2006 tax year, after California voters in 2004 passed a statewide ballot measure to fund mental health programs.
The tax applies to any amounts over $1 million in income. For instance, on an annual income of $1.2 million, the 1 percent would be
taxed against $200,000 of income, amounting to a payment of $2,000 on tax returns being filed this season.
"I'm starting to get some calls about that," Boseant said, referring to his clients.
Herting said other changes now in effect will have consumer implications in the current tax season. For example, based on a law that went into effect in 2005, employer-provided health insurance benefits for registered domestic partners are no longer taxed as income by
Also, starting this year, non-CPAs who prepare taxes for other people must be registered with the California Tax Education Council. "You
can go to their Web site ( www.ctec.org) to see who's registered," said Herting. "It's a big deal, because there are a lot of people out
there preparing taxes."
Also, California now requires tax preparation services to fully disclose all details relating to refund anticipation loans, including interest
Starting with 2006 tax year filings, Herting added, business owners who start up a pension plan can get a $500 tax credit for each of the
first three years the plan remains in place.
Federal law allows a deduction for businesses up to $108,000 for new equipment purchased and put into use during 2006, and the state
deduction is now $25,000.