Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Jul 24

    Q.     Are demand drafts safe?

    A.     A demand draft is a remotely created check, tele-check, check by phone or fax, or an e-check. It is created by a merchant with a buyer’s account number on it, but without the buyer’s original signature.

    Check drafting is creating a valid legal copy of the customer’s check, on the customer’s behalf. Because it is created by a merchant, no signature is required. Instead a signature disclaimer or facsimile is entered in the signature blank. Know these important points:

    • A check draft is typically for deposit only,
    • Demand drafts are frequently used to purchase items over the phone from telemarketers,
    • The checks also allow consumers to pay monthly bills by having them debited automatically out of their accounts rather than having to write a check each month,
    • Demand drafts entail a large potential for fraud. Banks report that demand draft fraud is becoming more common,
    • Under current guidelines, a consumer has 90 days from the time the check is deposited to dispute the transaction.

    Bank draft scams have been around for decades. Because it is possible to remotely create a check that doesn’t require your signature, scam artists have figured out a way to exploit the system. The best way to determine whether you have been a victim of a bank draft scam is to balance your checkbook regularly, looking for any unauthorized withdrawals from your account.

  • Jul 10

    Many business taxpayers overlook legitimate business deductions, resulting in an overstatement of their tax liability. Some of the more commonly missed deductions include business expenses paid out of personal funds, expenses related to a home office, and the use of personal telecommunication devices for business purposes.

    General Business Expenses
    Generally, a deduction is allowed for all ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business. Business owners who use their personal funds for business expenses, such as office supplies, often fail to deduct this as a qualifying expense.

    A trade or business expense is deductible as such only if it is “ordinary and necessary.” An “ordinary” expense is generally one that is normal, customary, or usual for a business under the facts and circumstances of the situation. A “necessary” expense is one that is appropriate and helpful for the trade or business. A final requirement is that this expense must be reasonable.

    One of the more commonly overlooked general business expenses is the business use of personal telephones, cellular telephones, and Internet connections. If you carefully document how much these devices are used for personal and business use, the business portion may be deductible.

    Home Office Deductions
    If you use part of your home as a home office, you may be entitled to deduct expenses related to your home office based on the square footage the home-office occupies. Related expenses include mortgage interest, property taxes, utilities, insurance, and repairs.

    To qualify for the deduction, the portion of the home that is used for the home office must be used regularly and exclusively as your principal place of business. To be your principal place of business your home office should be the place where, in the normal course of business, you meet with patients, clients, or customers.

    Meals and Entertainment Expenses
    Business owners will frequently use their personal funds to pay for meals and entertainment expenses. These expenses qualify as a business deduction, subject to certain limitations. To be deductible as business expenses, entertainment expenses must have a proximate relation to your trade or business and be reasonably expected to benefit the trade or business.

    Deductions for business meal expenses are subject to the same business connection requirements as entertainment expenses. However, the deduction will be denied if the meals are lavish or extravagant or if you or an employee are not present when the food or beverage is served. The deduction is allowable when the customer’s spouse, your spouse or both are present at the meals, provided the general conditions for deductibility are otherwise present. The cost of entertaining business associates and customers at home is also deductible. However, in the case of business meal entertaining at home, you must be able to clearly show that the expenditure was commercially rather than socially motivated.

    Substantiation
    Regardless of the type of cost you are trying to deduct as a business expense, you must be able to substantiate each expense and how it relates to your trade or business. The importance of keeping accurate and appropriate records cannot be over emphasized.