Beware of e-Mail Scams about Electronic Federal Tax Payments

Consumers should be aware of a scam e-mail about an electronic federal tax payment the e-mail claims they tried to make or which specifies the Electronic Federal Tax Payment System (EFTPS). The e-mail states that tax payments made by the e-mail recipient through EFTPS have been rejected. The e-mail then directs recipients to a bogus link for a transaction report that, when clicked, downloads malicious software (malware) that infects the intended victim’s computer. The malware is designed to send back to the scammer personal and financial information already contained on the taxpayer's computer or obtained through capturing keystrokes. The scammer uses this personal and financial information to commit identity theft. To avoid malware, do not click on any links, open any attachments or reply to the sender for this or any other unsolicited e-mails you may receive about your tax account which claims to come from the IRS or EFTPS. If you responded to this scam and believe you may have become the victim of identity theft, find out what steps you can take. The IRS and the Financial Management Service (the Treasury bureau that owns EFTPS) do not communicate payment information through e-mail. A scam that tricks someone into revealing their personal and financial data is identity theft. A scam that attempts to do this through e-mail is known as phishing. Find out more about IRS-impersonation phishing scams and how to recognize and report them to the IRS. EFTPS is a tax payment system that allows individuals and businesses to pay federal taxes electronically via the Internet or phone. It is committed to taxpayer privacy and uses industry-leading security practices and technology to protect taxpayer data.

Pricing Your Products or Services

Putting together a pricing strategy

 
For many small businesses pricing products and services is more a matter of guesswork than logic. Mindful of competitor pricing, they make the mistake of simply undercutting to win business rather than carefully working out the price they need to charge – a price that not only covers the cost of doing business, but makes all the hard work worthwhile by returning a reasonable profit.

Straight price cutting in response to competition is a dangerous strategy, one that can ultimately cut your profits to the point where you might as well sell up. Far better to sit down and work out a pricing strategy that reflects the nature of your products and market, AND makes you money!

Covering costs

The first step in developing a pricing strategy is to work out your overheads. It’s really important to identify absolutely everything that costs you money, including rent, wages, utilities, software, and insurance. Don’t forget to include your own salary in this. Also include the cost of servicing capital assets (loan interest and depreciation charges), including any IT equipment and vehicles that you own.

Market research

Once you have identified the costs associated with running your business you can begin to think about how you want to price your product. To get a feel for the market, it’s a great idea to find out what your competitors charge, though it’s inadvisable to base your prices on this alone because they might be offering a different mix of product and associated services, and their overheads are also likely to be somewhat different.

Pricing strategies

Reaction pricing - lowering your price because the person up the road just lowered theirs - is not usually a workable long term solution. A price war means no-one makes money. And if you position yourself as the lowest cost option you run the risk of customers leaving you when another, even lower priced alternative, comes along. Keep in mind that if your customers perceive your price to be too low, it will make them just as suspicious as when they perceive your price to be too high.

Conversely, it’s important not to price yourself out of the market. So instead of just checking what price your competitors are selling at, evaluate the services they offer their customers and whether they market on the basis of any unique core differentiators. Then consider what you can offer. If you feel that what you can do is worth more than what your competitors offer, price your services accordingly. This is called a premium pricing strategy. For it to work, you need to be able to demonstrate your value to your customers in a convincing way and to get the message out among them.

Be prepared to negotiate your prices to win business. Negotiation involves a little planning but is a useful business tool when used properly. To ensure you’re still making money, you need to build in a premium to the initial price quoted and also determine a price floor under which you are not prepared to go.

Another pricing strategy that’s worth considering is straight discount-for-volume. Loss leaders are also an option, as are two-part pricing strategies. Peak pricing (when you charge a premium for made to order products or for work done at the last minute) is another pricing alternative you can look at.

Price increases

Take your time to do some homework on your product offering and selling points when determining your pricing strategy, because, once in place, it’s difficult to change without upsetting customers. If you are planning on raising prices, it’s a good idea to do it incrementally rather than wait for years and then slug clients with a massive price hike.

The best way to start considering pricing is to first step back and get some professional advice on how you can differentiate your product, improve your marketing and deliver great customer service. Then you’ll be able to consider a premium pricing strategy that cashes in on the things that make you different, rather than fighting it out on cost alone.

 
Copyright 2010 Bullseye Business Systems Pty Ltd. All rights reserved. Reprinted with permission from http://www.ranone.com

Homebuyer tax credit is extended

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Homebuyer tax credit is extended

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If you signed a contract before May 1 to buy a home, but

have been unable to close the deal, you still have time

to apply for the homebuyer tax credit. The deadline for

finalizing the paperwork on your new home has been

extended through September 30, 2010.

Here's what you need to know:

* The extension applies only if you already had a

  contract in place by April 30, 2010. The new deadline

  is available for first-time homebuyers and long-time

  residents.

* The maximum credit remains unchanged ($8,000 for

  first-time homebuyers and $6,500 for long-time

  residents), as do other rules for qualifying.

* You can claim the credit on your 2009 or 2010 federal

  income tax return. You'll have to complete Form 5405,

  First-Time Homebuyer Credit and Repayment of the Credit,

  and attach proof that you meet the requirements.

Not sure if you qualify? We can help. Please call for

more information.

Watch out for this new tax bill!

Watch out for this new tax bill! It passed Congress last week and will go to the Senate after the break. It's expected to pass there quickly as well.If you have an S Corporation, please pay special attention!
 
if the Bill, called the American Jobs and Close Tax Loopholes Act of 2010, passes the Senate, it will take affect January 1, 2011.

If you:

• Have an S Corporation,
• Are involved in professional services if substantially all of the activities of such trade or business involve providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services, and
• Have three or fewer shareholders whose 'reputation and expertise' is used in the business.

You will have to pay self-employment tax (15.3%) on any distributions received from the S Corporation.

There are more questions than answers right now. For example:

• What is the definition of professional services?
• What is the brightline definition of "reputation and expertise" ?
• How will this apply to LLCs that are manager-managed? 

Stay tuned. We'll keep you posted. 

Obamacare and the "Rat Tax" - a 1099 NIGHTMARE!

Another Obamacare Surprise... "The Rat Tax"

Why is this provision being coined "The Rat Tax" ? Because it requires companies to "Rat" to the IRS on the companies they do business with. Beginning in 2012, under the new law, businesses will be required to issue form 1099 to every business,  for virtually all purchases.

Changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year.

In a recent summary, tax information firm RIA [1] notes the types of transactions covered by the new 1099 rules:

The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee. Thus, Congress says that for payments made after 2011, the term “payments” includes gross proceeds paid in consideration for property or services.

Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity, within in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys $601 of office supplies from Staples, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small business owner pays his material suppliers, he will have to send a 1099 to the supplier and IRS.

Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.

This is a huge new imposition on American business, costing the private economy much more than any additional tax that the IRS might collect as a result. What the HECK does this have to do with HEALTHCARE!

In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold federal income tax on your payments.

This will most certainly become an administrative and bureaucratic nightmare. No doubt it will waste huge amounts of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. Just the thing our struggling economy needs. If your not irate yet, what will it take?

Highlights of New IRS "Authority"

A client has graciously sent this to my attention. The House, Ways and Means Committe report outlining some of the new "Authority" the healthcare bill grants to the IRS. This is a must read. Do you believe it? Yes, right here in America!  I don't want to believe it!! But it's true.


***Highlights of New IRS Authority***

• IRS agents verify if you have “acceptable” health care coverage
• IRS has the authority to fine you up to $2,250 or 2 percent of your income (whichever is greater) for failure to prove that you have purchased “minimum essential coverage”
• IRS can confiscate your tax refund 
• IRS audits are likely to increase  
• IRS will need up to $10 billion to administer the new health care program this decade
• IRS may need to hire as many as 16,500 additional auditors, agents and other employees to investigate and collect billions in new taxes from Americans
• Nearly half of all these new individual mandate taxes will be paid by Americans earning less than 300 percent of poverty ($66,150 for a family of four

Get a copy of the complete report here http://bit.ly/dqzbXL

"A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicity."
  Thomas Jefferson, First Inaugural Address.

Is your contractor really an employee? Beware! IRS Announces Extensive Employment Tax Audits;

QUICK SUMMARY: Over the past few months, the IRS has provided insights into some of the new, so called "initiatives"( I prefer the word "TARGETS) it will focus on during 2010 and beyond. In connection with these "initiatives", the IRS has been hiring and training many new agents. So, be sure you keep detailed and accurate records, report your employees as employees and not as independent contractors and be prepared to support any position you take on your employment tax returns.  


Care to see where you stand and what your exposure may be? The easiest thing to do is give us a call. But, if you'd like some "light" reading drop me an email at thomas@abbelamarco.com. I'll send you a copy of the IRS's own training manual for auditing this issue. But be warned - it's some nasty reading!

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As you can imagine, with the economy still reeling and tax collections dropping like a stone, the importance of the governments’ oversight of our system of taxes becomes ever more critical.
From both the federal and state levels we continue to read about new and improved compliance measures being put in place. Take one of the recent announcements at the end of 2009 from the IRS as an example.
The IRS has announced it will conduct intensive employment tax audits under its National Research Program (NRP) starting in 2010. This is a multi-year program with random audits scheduled to begin in February 2010. The IRS has said it will audit U.S. companies under this program. The NRP is a study and data collection project that helps the IRS update its noncompliance estimates and update its computer-based audit programs. “Normal” audits do not yield as valuable compliance data as random audits because the IRS, in normal audits, is intentionally targeting the taxpayers they believe have noncompliance problems. NRP audits on the other hand, are random to allow the IRS to statistically measure the total amount of noncompliance in a specific area. The IRS then uses this data to update its computers and estimates of the tax gap—the difference between total taxes owed and the amount actually paid by taxpayers.
The NRP audits are also much more intense and less targeted than a typical audit. The NRP audits allow the IRS to identify where the compliance problems lie in a specific population and to better target tax returns for audit in the future.
The goal of the employment tax audit program is to gather information in five categories:

1. Worker classification
2. Fringe benefits
3. Non-filers
4. Reimbursed expenses, and
5. Officer/owner compensation

Various government agencies have recommended that the NRP be implemented for employment taxes to study and access the impact of worker misclassification on the employment tax gap, which has become a high priority of the government.  And why shouldn’t it be. At stake with worker classification issues are tremendous potential uncollected taxes for Social Security, Medicare and income taxes since much of the miss-classification is what makes up the underground — and off the tax rolls — economy.
The administration has been quiet thus far on the issue of worker classification, but Obama was a supporter of reform efforts while in the Senate. If Congress enacts a health care reform bill with a “pay-or-play” provision for employers, it could put even more pressure on the worker classification rules.