Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Nov 27

    Whenever you fix or replace something in your business or rental property you have to decide, for tax purposes, whether you have made a repair or an improvement. What difference does it make? Because you can deduct the cost of a repair, but you must capitalize the cost of an improvement and recover that cost through depreciation. On your commercial building or rental property that could be as many as 39 years.

    For example, if you classify a $1,000 expenditure as a repair, you get to deduct the entire $1,000 in the year you spend it. If you classify the expenditure as an improvement, you’ll likely have to depreciate it over 39 years and the most you’ll get to deduct in depreciation this year is $25.

    HUGE Difference!

    The difference between a repair and an improvement has, historically, been difficult to determine. Often we relied on various subjective interpretations and court cases for guidance. In an effort to clarify matters, the IRS has issued over 200 pages of complex regulations explaining how to tell the difference. The IRS estimates the new regulations will affect about 4 million businesses.

    The new regulations make significant changes that can benefit most taxpayers if applied correctly. The changes include new and revised safe harbors, as well as new relief provisions for small business. The regulations will provide simplification and reduce controversy by allowing taxpayers to follow their financial accounting “book” policies in some areas.

    Significant provisions of the new regulations include:

    Materials and supplies. The threshold for deducting materials and supplies was increased from $100 to $200 and generally applies to items expected to be consumed in 12 months or less, or that have an economically useful life of 12 months or less.

    de minimis safe harbor.  The new regulations allow a taxpayer with an “applicable financial statement” to deduct up to $5,000 of the cost of an item of property per invoice (or per item substantiated by an invoice). Taxpayers must have a written policy in place at the beginning of the tax year that specifies a per-item dollar amount (up to the ceiling) that will be expensed for financial accounting purposes. Taxpayers without an “applicable financial statement” may expense up to $500 per invoice/item.

    Routine maintenance and improvements.  The new regulations contain controversial “unit of property” rules that apply the rules for real property to eight separate building systems. However, the rules do extend the routine maintenance safe harbor to real property and provide a new safe harbor for small taxpayers. The real property safe harbor for small taxpayers allows expensing of amounts paid for repairs, maintenance and improvements when the total costs during the year do not exceed $10,000 or two percent of the unadjusted basis of the building.

  • Nov 15

    Identity theft is on the rise. Even though measures are being taken by the IRS and legislators, not all identity theft can be prevented, but an ounce of prevention is still worth a pound of cure.

    In January 2012, Marsha Elmore, an Alabama tax return preparer, was sentenced to 184 months in prison for filing false claims, wire fraud, and aggravated identity theft. Elmore admitted to stealing tax refunds by filing false tax returns using stolen identities, including names, social security numbers, and dates of birth. She was ordered to pay over $1 million in restitution to the IRS.

    Take the following preventative measures to decrease your chances of becoming the next identity theft victim. It will be easier to put these precautions into place than to face the consequences and headaches of having your identity stolen.

     

    • Arrange to have your social security number masked where possible (such as insurance cards);
    • Watch your credit reports from the major credit bureau sources- such as Equifax, Experian, and TransUnion;
    • Resist giving businesses your social security number, or other personal information;
    • If you receive any information from the IRS make sure to forward it to us, your CPA, as soon as possible.  If you receive an email, from what appears to be the IRS, do not open any attachments or click on any links.  This is a phishing email and someone could be trying to steal your identity.  Remember, the IRS will NOT contact you by email;
    • Safeguard social security numbers in a secure place and do not discard any documents with social security numbers or personal information before taking the time to shred the documents;
    • File all tax returns, personal information, and documents in a locked safe or filing cabinet; and
    • Protect your personal computer by using firewalls, anti-spam, or anti-virus software.

     

  • Nov 1

    Most of us believe we have a great product or service. (For those of you who don’t, I’d suggest that it is time to fix it or move on.) But the humbling realization is that it’s not enough. Without a marketing strategy, the quality of your product or service may go unrecognized. Building a better mousetrap doesn’t ensure they will come. But this isn’t about catchy slogans or tag lines. This is about where your focus is before you even start marketing.

     

    What keeps your customers up at night?

    Great marketing starts with understanding your customer/client/patient. Get in the minds of your customers. What are they struggling with? How might you be able to help? The best thing you can do is to first find out what bothers your customers. What itch are you trying to scratch – what problem are you trying to solve? It makes much more sense to figure this out first, then, if you have to, go develop the product/service that solves that problem than to create a product and go looking for a problem to solve.

    Not sure what those problems are? Try asking a few simple questions of your customers with a quick survey using free online services like SurveyMonkey or Google Docs. The answers may just provide the essential insight into what your customers are thinking about.

     

    What are your customers’ needs?

    Don’t get too complex here about needs, start with the basics. Psychologist Abraham Maslow’s “Hierarchy of Needs” suggests that the primary (and the most impulsive) needs are physiological – like breathing, food, water, sleep – and above that, comes safety, then love and a sense of belonging, then self-esteem, and finally “self-actualization.” His point was that our greatest concern is for our basic needs first.

    This would suggest, and some “experts’ would argue, that this means, for example, if your product is both food and social, that the benefits of fulfilling hunger will always trump those of love and belonging. But this is only true if your customer is focused on food for survival, not pleasure. No restaurant can survive catering to the starving market, because typically that customer does not have the ability to pay.

     

    Can you solve all your customers’ needs at once?

    NO! This is where a lot of companies get into trouble. A great marketing campaign is focused on ONE specific need, ONE specific problem you are trying to solve for your customers. Now it is true that different customers buy for different reasons and you want to try to cover some of those bases, but stay focused on one need at a time.

    If you try to solve too many needs at once, your customer won’t know what your product or service is really all about.