06 Aug 2023
0

How “Phoenix” Companies Abuse Bankruptcy Protection and Defraud Investors

Roger Rossmeisl, CPA
Fraud Briefs
How Phoenix Companies Abuse Bankruptcy Protection and Defraud Investors

According to S&P Global, there have been at least 230 corporate bankruptcy filings thus far in 2023 (through early June). That’s more than twice the number of filings over the same period in 2022. Such growing numbers represent bad news for the companies involved, obviously, but also potentially for their vendors, customers and other business partners. Although bankruptcy can be a valid business tool, it can also enable dishonest business owners to cheat their creditors and then launch a new business. Do whatever you can to steer your business clear of these “phoenix” companies. Driven into the ground Phoenix companies earn their name because they rise from the ashes of failed companies, often trading on the goodwill of the original businesses. Here’s how a phoenix company scheme might...

06 Aug 2023
0

The Best Way to Survive an IRS Audit is to Prepare

Roger Rossmeisl, CPA
Individual Tax Briefs
The Best Way to Survive an IRS Audit is to Prepare

The IRS recently released its audit statistics for the 2022 fiscal year and fewer taxpayers had their returns examined as compared with prior years. But even though a small percentage of returns are being chosen for audits these days, that will be little consolation if yours is one of them. Recent statistics Overall, just 0.49% of individual tax returns were audited in 2022. However, as in the past, those with higher incomes were audited at higher rates. For example, 8.5% of returns of taxpayers with adjusted gross incomes (AGIs) of $10 million or more were audited as of the end of FY 2022. However, audits are expected to be on the rise in coming months because the Biden administration has made it a priority to go after high-income...

06 Aug 2023
0

The Trust Fund Recovery Penalty: Who Can it be Personally Assessed Against?

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Trust Fund Recovery Penalty: Who Can it be Personally Assessed Against?

If you own or manage a business with employees, there’s a harsh tax penalty that you could be at risk for paying personally. The Trust Fund Recovery Penalty (TFRP) applies to Social Security and income taxes that are withheld by a business from its employees’ wages. Sweeping penalty The TFRP is dangerous because it applies to a broad range of actions and to a wide range of people involved in a business. Here are some answers to questions about the penalty: What actions are penalized? The TFRP applies to any willful failure to collect, or truthfully account for, and pay over taxes required to be withheld from employees’ wages. Why is it so harsh? Taxes are considered the government’s property. The IRS explains that Social Security and income taxes “are...

06 Aug 2023
0

How the Pros Use Public Data to Value Private Businesses

Roger Rossmeisl, CPA
Valuation Briefs
How the Pros Use Public Data to Value Private Businesses

Business valuation professionals often use public stock market data to value private businesses — even though there are critical differences between closely held and publicly traded companies. Here’s an overview of how valuators modify their analyses to take advantage of objective, market-based indicators of value. Recognizing key differences Public companies differ from private ones in the following five critical ways: Level of oversight, differing goals. The Securities and Exchange Commission requires public companies to file paperwork (such as annual 10-K forms) and comply with its rules and regulations (such as the Sarbanes-Oxley Act). Private businesses are generally exempt from these requirements, freeing them to focus less on earnings per share (a short-term performance metric) and more on long-term or non-financial goals. Additionally, private businesses commonly downplay...

06 Aug 2023
0

Are You Married and Not Earning Compensation? Your May be Able to Put Money in an IRA

Roger Rossmeisl, CPA
Individual Tax Briefs
Are Your Married and Not Earning Compensation? You May be Able to Put Money in an IRA

When one spouse in a married couple is not earning compensation, the couple may not be able to save as much as they need for a comfortable retirement. In general, an IRA contribution is allowed only if a taxpayer earns compensation. However, there’s an exception involving a “spousal” IRA. It allows contributions to be made for a spouse who is out of work or who stays home to care for children, elderly parents or for other reasons, as long as the couple files a joint tax return. For 2023, the amount that an eligible married couple can contribute to an IRA for a nonworking spouse is $6,500, which is the same limit that applies for the working spouse. Benefits of an IRA As you may know, IRAs offer...

06 Aug 2023
0

2023 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Roger Rossmeisl, CPA
Small Business Tax Briefs
2023 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2023. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. July 31  Report income tax withholding and FICA taxes for second quarter 2023 (Form 941) and pay any tax due. (See the exception below, under “August 10.”) File a 2022 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. August 10  Report income tax withholding and FICA taxes for second quarter 2023 (Form 941), if you deposited on time and in full all of the associated taxes due. September 15 If a...

04 Aug 2023
0

Minimizing Fraud Risk When Operating Abroad

Roger Rossmeisl, CPA
Fraud Briefs
Minimize Fraud Risk When Operating Abroad

Expanding operations into foreign countries can help U.S. businesses reduce labor and operating costs. It can also provide them with access to new markets and potentially higher profits. You may be attracted to a country by a plentiful labor supply, significant tax benefits or government incentives. But, beware: Some foreign business environments present serious fraud risks. Before you make the decision to cross borders, familiarize yourself with the country’s culture and laws. Threats everywhere Corruption is a business risk in every country, but in some countries, it’s omnipresent. For example, if you want to build a factory, you could encounter officials who expect gifts to “grease the wheels” or local politicians who are accustomed to excessive wining and dining in exchange for their cooperation. If you import...

04 Aug 2023
0

When Can Seniors Deduct Medicare Premiums on Their Tax Returns

Roger Rossmeisl, CPA
Individual Tax Briefs

If you’re age 65 and older and have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially for married couples with both spouses paying them. But there may be an advantage: You may qualify for a tax break for paying the premiums. Premiums count as medical expenses For purposes of claiming an itemized deduction for medical expenses on your tax return, you can combine premiums for Medicare health insurance with other qualifying medical expenses. These includes amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all their health care expenses. Coverage gaps include co-payments, coinsurance, deductibles and other costs. Medigap...

04 Aug 2023
0

Advantages and Disadvantages of Claiming Big First-Year Real Estate Depreciation Deductions

Roger Rossmeisl, CPA
Small Business Tax Briefs
Advantages and Disadvantages of Claiming Big First-Year Real Estate Depreciation Deductions

Your business may be able to claim big first-year depreciation tax deductions for eligible real estate expenditures rather than depreciate them over several years. But should you? It’s not as simple as it may seem. Qualified improvement property For qualifying assets placed in service in tax years beginning in 2023, the maximum allowable first-year Section 179 depreciation deduction is $1.16 million. Importantly, the Sec. 179 deduction can be claimed for real estate qualified improvement property (QIP), up to the maximum annual allowance. QIP includes any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building is placed in service. For Sec. 179 deduction purposes, QIP also includes HVAC systems, nonresidential building roofs, fire protection and alarm systems and security systems...

04 Aug 2023
0

Valuing Professional Practices

Roger Rossmeisl, CPA
Valuation Briefs
Valuing Professional Practices

There are many types of professional practices. Examples include medical, architecture, engineering, accounting, advertising, design and law. From a business valuation perspective, it’s important to recognize the common denominators these businesses share. Reliance on intangible assets Professional practices provide services rather than sell products (at least primarily). In addition, education, licensing and continuing education requirements may limit the individuals who can own and operate a professional practice. So, they tend to rely heavily on intangible assets, such as: Business and owner reputations, Client lists, Trained, assembled workforces, Procedural manuals, Noncompete agreements, and Professional licenses. Professional practices rarely report these intangibles on their balance sheets. Some valuation engagements — such as those related to a divorce or a business combination — may require valuators to identify and assign value...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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