Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Jul 8

    I recently read about a show on CNBC that was described as a cross between Shark Tank and Top Chef. (Seriously… Can’t you see that producer walking into a meeting with CNBC and pitching it exactly that way.) The show was called Restaurant Startup and I just had to check it out.

    The setup is that there are two teams of restaurant owners who approach the “sharks” with their concepts. In one episode there was a married couple who ran a Lebanese-themed deli in Oklahoma City that wanted to expand into a sit down restaurant, and the pair of good ol’ boys with a southern comfort food joint in Kingsport, Tennessee who wanted to open a second location in Knoxville. The sharks sample some dishes and quiz the competitors on their operations. They pick one and give them 36 hours and $7,500 to show off their food and their skills. After that “opening night,” they decide whether to invest their own money in the concept.

    Early in the show, the good ol’ boys serve the sharks some dishes prepared from the owner’s grandma’s recipe book. And the shrimp and grits did look mighty tasty. One shark asked the chef how much the owner currently charges for it in Kingsport, and learned it was $12. Then he asked how much the average check was, and learned it was just $13. “This is a $20 dish in Knoxville,” he said, pointing down at the grits. “You need a $35 average check to make it work there.”

    The chef did not want to hear that he had to raise prices, and much wailing and gnashing of teeth ensued. He objected that diners in his town wouldn’t pay that much for the food. His grandmother who came up with the recipe wouldn’t want him charging that much for the food. And he wanted everybody to be able to afford to eat at his restaurant and enjoy his grandmother’s great dishes.

    (Does any of this sound familiar? I can just hear some of you saying “my customers won’t pay any more!”)

    The sharks agreed that it would be a big jump to raise prices to those levels, but they insisted that the point of running a restaurant isn’t just to share grandma’s southern comfort. It is to make money—and making money, in this case, would require higher prices.

    The sharks chose the good ol’ boys for the test kitchen, and set them up with a local consultant to help walk them through the process. Once again, pricing came up. The owner said flat out “I don’t want to serve a $19 piece of fish.” The consultant explained the restaurant isn’t just serving a piece of fish, it’s serving an experience— then proceeded to show the owner how he could garnish and plate the fish to look like it’s worth the price he had to ask diners to pay.

    At that point you could almost see the light bulb go on over his head. He readily agreed to raise his prices, and the pop-up restaurant opened for business. Diners who filed in that night loved the food. Unfortunately for our good ol’ boys, service and management weren’t as good as they should have been and the sharks declined to fund the concept. It was a hard lesson for them to take home to Tennessee.

    And here’s our lesson for the day. If you’re like most small business owners I know, you at least profess to want to run your business to make money. You may think your customers won’t pay more— but you’re probably wrong. You may think that your mentor, or the person you bought your business from (who didn’t charge enough himself) would disapprove— but it’s your business, not theirs. And you may really want everyone in town to be able to enjoy your great product or service—but can you really make the kind of money you deserve if you price yourself into bankruptcy?

  • Apr 29

    Wesley Snipes, best known for his action roles in such films as Blade and Passenger 57, has gone on the offensive against the IRS. Snipes has petitioned the U. S. Tax Court to allow him to enter the IRS’s Fresh Start initiative to lower the amount of unpaid taxes that the IRS is assessing him. Mr. Snipes offered to pay $842,000, but the IRS is demanding the actor pay the full $17.5 million.

    Snipes’ current fight with the IRS is just about civil tax collections. Although convicted in 2008 on three misdemeanor counts of failing to pay his taxes for 1999, 2000, and 2001, he was acquitted of all felony charges. He had followed the advice of a tax protester organization that claimed income taxes were illegal, but ultimately acknowledged his errors.

    Mr. Snipes attempted to bargain with the Internal Revenue Service using an offer in compromise or installment agreement. He was trying to work it out with the IRS. He even paid off amounts for previous years. Mr. Snipes claims in court that the IRS is making arbitrary determinations, and abusing its discretion. After all, the whole purpose of the IRS offer in compromise program is to provide a resolution that is in the best interest of the taxpayer and the government. The idea is to resolve things and move on, keeping the taxpayer in compliance.

    However, as noted elsewhere in this newsletter, the IRS rarely gives up a tax debt if you have the resources or the ability to earn more money to pay the debt in full.

  • Apr 15

    The theft of your identity, especially personal information such as your name, Social Security number, address and children’s names, can be traumatic and frustrating. In this online era, it’s important to always be on guard.

    The IRS has teamed up with state revenue departments and the tax industry to make sure you understand the dangers to your personal and financial data. Taxes. Security. Together. Working in partnership with you, we can make a difference.

    Here are seven steps you can make part of your routine to protect your tax and financial information:

    1. Read your credit card and banking statements carefully and often– watch for even the smallest charge that appears suspicious. (Neither your credit card, nor bank– or the IRS—will send you emails asking for sensitive personal and financial information; such as asking you to update your account.)
    2. Review and respond to all notices and correspondence from the Internal Revenue Service. Warning signs of tax-related identity theft can include IRS notices about tax returns you did not file, income you did not receive, or employers you’ve never heard of or where you’ve never worked.
    3. Review each of your three credit reports at least once a year. Visit www.annualcreditreport.com to get your free reports.
    4. Review your annual Social Security income statement for excessive income reported. You can sign up for an electronic account at www.SSA.gov.
    5. Read your health insurance statements; look for claims you never filed or care you never received.
    6. Shred any documents with personal and financial information. Never toss documents with your personally identifiable information, especially your Social Security number, in the trash.
    7. If you receive any routine federal deposit such as Social Security Administration or Department of Veterans Affairs benefits, you probably receive those deposits electronically. You can use the same direct deposit process for your federal and state tax refund. IRS direct deposit is safe and secure and places your tax refund directly into the financial account of your choice.
  • Feb 19

    Like Bama’s win over Clemson – you expected it to happen, but they waited until the last minute to make it happen – Congress has once again extended the “extenders”- a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax saving laws which have been on the books for years, but which technically are temporary because they have a specific end date. This package of tax breaks has repeatedly been temporarily extended for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.”

    Most of the tax breaks expired at the end of 2014. Now, in legislation passed just before the Congressional Christmas break, the extenders have been revived and extended once again, but this time Congress has taken a new tack. Instead of just rolling the package of provisions over for a year or two, it actually made some of the provisions permanent and extended the remaining provisions for either two or five years, while making significant modifications to several of the provisions.

    Key tax breaks for individuals that were made permanent by the new law include:

    • Tax credits for low to middle income earners that were originally enacted as part of the 2009 stimulus package and were slated to expire at the end of 2017: (1) the American Opportunity Tax Credit, which provides up to $2,500 in partially refundable tax credits for post secondary education, (2) eased rules for qualifying for the refundable child credit, and (3) various earned income tax credit (EITC) changes;
    • the $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom; also modified, beginning in 2016, to index the $250 to inflation and include professional development expenses;
    • parity for the exclusions for employer-provided mass transit and parking benefits;
    • the option to take an itemized deduction for state and local general sales taxes instead of the itemized deduction permitted for state and local income taxes;
    • increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes; the new law also extends the enhanced deduction for certain farmers and ranchers; and,
    • the provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 ½ or older.

    Key tax breaks for individuals that were extended by the new law include:

    • the exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income; extended through 2016; the new law also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged in 2017, if the discharge is pursuant to a binding written agreement entered into in 2016;
    • the credit for energy-efficient improvements to principal residence extended through 2016;
    • the deduction for mortgage insurance premiums deductible as qualified residence interest; extended through 2016; and
    • the $4,000 above the line deduction for qualified tuition and related expenses; extended through 2016.

    Key tax breaks affecting businesses that were extended by the new law include:

    • The Work Opportunity Tax Credit was extended through 2019; the new law also modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 50% of the first $6,000 of wages;
    • 15 year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements were made permanent;
    • 50% bonus depreciation was extended for property placed in service during 2015 through 2019; the 50% rate is phased down to 40% for property placed in service during 2018 and 30% for property placed in service during 2019;
    • previously increased first-year depreciation cap on trucks and vans not weighing over 6,000 lbs. has been extended through 2017; the increased first year depreciation is lowered for 2018 and 2019 and disappears in 2020; and
    • increase in Section 179 elective business expensing (up to $500,000 annual write-off of eligible business property costs that is phased out as those cost exceed $2 million for the year) is made permanent; also made permanent is the allowance of expensing for computer software and qualified real property.

    Caution: This article contains a general overview of selected tax provisions contained in the PATH Act and does not address all tax provisions contained in the Act. Tax law is constantly changing due to new legislation, cases, regulations, and IRS rulings. Please contact us if you’re interested in a tax topic that is not discussed in this article.

  • Feb 5

    Have you ever thought: “What should I do if my 1099 is wrong?” Well, here are four steps to take if you are issued an incorrect Form 1099.

    1. Contact the issuer as soon as possible. Once you contact the issuer, explain to them that the 1099 was issued for the wrong amount. You should be able to prove to the issuer the correct amount that should have been reported. Then, ask the issuer to reissue the 1099 with the correct amount. Hopefully you can catch the issuer before they file the 1099s with the IRS. If so, the issuer can easily reissue the 1099 with no problem.
    2. Another great item to get as proof is a letter from the issuing company that states the original 1099 was issued in error, the original 1099 has been destroyed, and a new, corrected 1099, in the stated corrected amount, has been issued. This letter of proof could come in handy if the company did not take the proper steps in correcting the 1099 with the IRS.
    3. If the company has already issued your 1099 and sent it to the IRS, the company will need to issue a “corrected” 1099. The box on the top of the 1099 should be marked as “corrected.” If the original 1099 was previously sent to the IRS, make sure the “corrected” box is checked on your new 1099. If it is not marked “corrected,” the IRS will think you were issued two 1099s from the same company and add them together.
    4. What happens if the company will not correct the original erroneous 1099? You will need to address this on your return. You will need to report the amount reported on the 1099 you received on your return, and then explain the overstatement of the 1099 in a footnote or statement.

    Most importantly always pay attention when you receive a 1099 to make sure you were issued a correct 1099. It is easier to address the issue of an erroneous 1099 earlier than later.

  • Dec 21

    I know what it’s like to think that the lifestyle I want is out of reach. Just a few years ago, I would lie on my bed in my tiny 400-square-foot studio apartment and flip through magazines, wishing I could have the luxurious lifestyles I read about.

    Despite that negative, nagging voice in my head that reminded me I could barely afford rent, I’m now living a beautiful life I created for myself from scratch. Instead of moping around an apartment I can barely afford, I now have the means to travel and to inspire others. Last year I took a solo retreat to Maui, and this year I vacationed at an exclusive beach resort in Cabo San Lucas.

    How do I do it? By deciding not to settle for being average and thinking BIG. Changing your mindset can be a challenge, but the rewards are well worth the cost. Here’s how you get started…

    1. Eliminate negativity. This includes negative self-talk, too. Why would the universe bring you a better life if you don’t appreciate what you already have? Show gratitude for everything in your life now. The seemingly bad days happen for a reason, so whenever you find yourself thinking, “I can’t do this” or “that’s impossible,” reframe it as the opposite. “I can do that, that is possible…” you owe it to yourself to give yourself the love and support you need to succeed.
    1. Document your dreams. Earlier this year I wanted to manifest a new house, so I listed all the qualities in my dream home: a 3-car garage, workout room, walk-in closets. (Don’t censor yourself! Anything is possible, even if it seems silly now.) I also bought some real estate magazines, cut out pictures of homes I love, and created a collage. I’m constantly updating my “dream board,” which is now proudly displayed in my new house!
    1. Surround yourself only with supportive people. I only shared my house dream with my friends and family I knew would support my decision. (NOT those prone to phrases like “Are you crazy? Who do you think you are? Ms. Trump?”) Your true friends and family will be happy to share in your dream. If you don’t have anyone else to support you, then it’s time to make new friends-join a networking group or a mastermind.
    1. Decide, believe, and watch for clues. It’s not enough to make a decision to work towards your dreams. You must also truly believe in them! Don’t worry about HOW your dreams will manifest themselves. Watch for clues, and HOW will find you, perhaps in the form of a new business partner or a new client. But remember that the dream comes before the HOW.
    1. ACT on opportunities when they appear. Action involves risk. You might have to hire more people to help with a new client. You need time to research that prospective business partner. Or figure out how to hire that amazing new mentor. But it’s up to YOU to take action when the path is revealed the universe is supporting you, and each step will bring you closer to your dreams.

    Named the “Entrepreneurial Guru for Women” by Business News Daily, Ali Brown provides business coaching and advice to over 250,000 followers via AliBrown.com, her social media channels, and her Glambition® radio show. If you’re ready to jumpstart your marketing, make more money, and have more fun in your small business, get your free tips now at www.AliBrown.com. Copyright © 2009 Alexandria Brown International, Inc.

  • Dec 11

    Congress just changed the Social Security benefit rules. On October 30, Capitol Hill lawmakers approved a two-year federal budget deal. As part of that agreement, they authorized the most significant change to Social Security policy seen in this century, disallowing two popular strategies people have used to try and maximize retirement benefits.

    The file-and-suspend claiming strategy will soon be eliminated for married couples. It will be phased out within six months after the budget bill is signed into law by President Obama. The restricted application claiming tactic that has been so useful for divorcees will also sunset.

    This is aggravating news for people who have structured their retirement plans – and the very timing of their retirements – around these strategies.

    Until the phase-out period ends, couples can still file-and-suspend. The bottom line here is simply stated: if you have reached full retirement age (FRA) or will reach FRA in the next six months, your chance to file-and-suspend for full spousal benefits disappears in Spring of 2016.

    Spouses and children who currently get Social Security benefits based on the work record of a husband, wife, or parent who filed-and-suspended will still be able to receive those benefits.

    How exactly did the new federal budget deal get rid of these two claiming strategies? It made substantial revisions to Social Security’s rulebook.

    One, “deemed filing” will only be allowed after an individual’s full retirement age. Previously, it only applied before a person reached FRA. That effectively removes the restricted application claiming strategy, in which an individual could file for spousal benefits only at FRA while their own retirement benefit kept increasing.

    The restricted application claiming strategy will not disappear for everyone, however, because the language of the budget bill allows some seniors grandfather rights. Individuals who will be 62 or older as of December 31, 2015 will still have the option to file a restricted application for spousal benefits when they reach full retirement age (FRA) during the next four years.

    Widows and widowers can breathe a sigh of relief here, because deemed filing has no bearing on Social Security survivor benefits. A widowed person may still file a restricted application for survivor benefits while their own benefit accumulates delayed retirement credits.

    Two, the file-and-suspend option will soon only apply for individuals. A person will still be allowed to file for Social Security benefits and voluntarily suspend them to amass delayed retirement credits until age 70. This was actually the original definition of file-and-suspend.

    Married couples commonly use the file-and-suspend approach like so: the higher-earning spouse files for Social Security benefits at FRA, then suspends them, allowing the lower-earning spouse to take spousal benefits at his or her FRA while the higher-earning spouse stays in the workforce until 70. When the higher-earning spouse turns 70, he/she claims Social Security benefits made larger by delayed retirement credits while the other spouse trades spousal benefits for his/her own retirement benefits.

    No more. The new law says that beginning six months from now, no one may receive benefits based on anyone else’s work history while their own benefits are suspended. In addition, no one may “unsuspend” their suspended Social Security benefits to get a lump sum payment.

    To some lawmakers, file-and-suspend amounted to exploiting a loophole. Retirees disagreed, and a kind of cottage industry evolved around the strategy with articles, books, and seminars showing seniors how to generate larger retirement benefits. It was too good to last, perhaps. The White House has wanted to end the file-and-suspend option since 2014, when even Alicia Munnell, the director of the Center for Retirement Research at Boston College, wrote that “eliminating this option is an easy call … when to claim Social Security shouldn’t be a question of gamesmanship for those with the resources to figure out clever claiming strategies.”

    Gamesmanship or not, the employment of those strategies could make a significant financial difference for spouses. Lawrence Kotlikoff, the economist and PBS NewsHour columnist who has been a huge advocate of file-and-suspend, estimates that their absence could cause a middle-class retired couple to leave as much as $70,000 in Social Security income on the table.

    What should you do now? If you have been counting on using file-and-suspend or a restricted application strategy, it is time to review and maybe even reassess your retirement plan. Talk with a financial professional to discern how this affects your retirement planning picture.

  • Nov 30

    It’s likely you’ve been bombarded with investment advice from every direction. Whether it’s “financial experts” from the media or on a commercial, it seems everyone is offering an opinion regarding your financial future. Regardless of these “expert” opinions, as your advisor I understand your unique financial situation, and can offer a recommendation that will truly benefit you.

    First things first. In order to avoid some of the bumps and pot holes along the way, let me lead you through a conversation to zero in on your unique needs. This will allow me to create an investment strategy designed to meet those specific areas, rather than sifting through the latest trends and investment hype. I can achieve this level of personalization by considering your:

     

    • Investment goals
    • Comfort level
    • Expectations
    • Tax implications
    • Risk analysis
    • Income needs
    • Family dynamics
    • Time horizon

     

    Leveling the Investment Playing Field

    Providing a sound wealth management roadmap begins with understanding your cash flow. It’s impossible to make any sound investment recommendations without having a clear picture of how your money is being spent. While cash flow is a critical component to any plan, there’s also another telling indicator to review – debt. Gaining a pulse on how you managed debt will help me devise a plan that factors in your credit history and overall financial decision-making preferences.

    By evaluating how you spend your money each month, I may be able to identify opportunities for improving your cash flow. This may include simple tax strategies and debt management solutions such as refining, debt consolidation, or changing tax withholdings. You may discover there’s more money to invest toward your financial goals than you originally thought.

    Establishing a Comprehensive Plan

    One thing is for sure – life is filled with a series of unexpected events. That’s why it’s important to help you consider potential risks when devising a financial plan. Even the most well-intentioned plans can crumble in a second when faced with a sudden death, disability, or long-term care need. Part of providing you with a comprehensive plan means knowing the possibilities that could threaten your financial future.

    Learning more about your situation enables me to identify potential risks and establish plans that will meet your needs now, and into the future. While you may believe your current insurance policy will provide ample security, it may not be enough. By taking a closer look, I will be able to provide you with insights as to whether your current plan is appropriate or needs modifications. This approach will be invaluable in protecting your most important asset – your family.

  • Oct 15

    It didn’t take long for her business to fold.

    She was 22 years old, passionate, excited and a first time business owner.

    Why was she forced to close the doors?

    Not the reason you might expect: lack of sales.

    She went out of business because she didn’t keep good records. Records for taxes, budgeting, and cash flow.

    Depending on your personal experience, it may or may not surprise you that poor recordkeeping is one of the top reasons for business failure.

    Taking care of billing, tracking your expenses, taxes, and other financial housekeeping can seem overwhelming, stressful, or just plain boring for new business owners.

    Even for those who’ve been in business a while it is often one of their least favorite things to do. So it’s easy to coast along thinking everything is hunky dory – that’s a technical term – until WHAM! All of a sudden you discover sales are down by 20 percent and expenses are up by 15.

    Getting and keeping your financial house in order makes things not only less stressful, but can help ensure that you don’t overspend and that you have enough money for your savings, investments and retirement.

    Here are five tips for getting your financial house in order.

     

    1. Get some advice. I know, I know, it sounds self serving but, if you’ve never been in business for yourself, or if you struggle with managing your finances, get some advice. It could be the smartest investment you make in your business, and one that could prove crucial to your survival.
    2. Create a budget. Yes, I know it’s not exciting or sexy. You want to get out there and sell, do, or make whatever you started your business to do. But, IT IS NECESSARY! Be very conservative. Plan for the worst case scenario, not the best.
    3. Track everything. Keeping track of income, expenses, invoices, past due customers, estimated taxes, payroll, etc. can feel daunting at times; however, not doing it can lead to financial ruin or legal hot water. There are plenty of financial tools out there. The QuickBooks you’re already using can be used as a dashboard if you keep it up to date.
    4. Put aside money with every deposit. Put aside a portion of every deposit you make for savings, taxes, and charitable contributions. There are more reasons than I have room to address for why you should save for a rainy day. Included are some real psychological benefits for doing so.
    5. Plan for your retirement. When you are a small business owner, there is no one else to fund your retirement. Even if you’re 22 years old and passionate when you start, that’s not necessarily going to provide you retirement funds when you’re 72. Setting up a retirement plan can also shelter some of your business profits. Start with an IRA then graduate to a SIMPLE plan or Keogh.

     

    Integrate these tips into your business and you’ll find it easier to get and keep your financial house in order; therefore making your business less stressful.

  • Aug 7

    Taxpayers born before July 1, 1945 must generally receive payments from the individual retirement arrangements (IRAs) and workplace retirement plans by December 31.

    Known as required minimum distributions (RMDs), these payments must normally be received by the end of the year. However, there is a special rule which allows first-year recipients, those who reached 70 ½ during 2015 to wait until April 1, 2016 to receive their first RMD. Meaning, if you were born after June 30, 1944 and before July 1, 1945, you are eligible for this special rule which allows you to defer your first payment.

    Note: If you defer your first payment until 2016, you will still be required to take your 2016 RMD in 2016, so you will receive two payments in one year.

    The required distribution rules apply to traditional IRAs, but not Roth IRAs. They also apply to various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

    The RMD for 2015 is based on the taxpayer’s life expectancy on December 31, 2015, and their account balance on December 31, 2014.