Archive for the ‘Taxes’ Category

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Business Interruption & Comm’l Damages

In Accounting & Finances,Business,Insurance & Liability,Taxes on November 8, 2017 by Sufen Wang

How to Assess Business Interruption, Commercial Damages

Unfortunately, with all the flooding and fires raging across the country these past few months, there are business losses that need to be assessed, argued and settled. But how?

Let’s take a closer look at a little something called business interruption insurance. Investopedia defines this as “a form of insurance coverage that replaces business income lost as a result of an event that interrupts the operations of the business, such as fire or a natural disaster. Business interruption insurance is not sold as a separate policy, but is either added to a property/casualty policy or included in a comprehensive package policy.

That second part is important. Since it’s not a standalone policy that business owners have to beat around the bush to buy, businesses affected by the fires and floods likely already have this handy dandy coverage. While standard business insurance has things covered in terms of physical losses and damage – e.g. computers and office furniture destroyed in a fire – business interruption insurance is a safeguard against the losses that arise when a business can’t run due to this destruction.

The insurance covers lots of things that crop up when manmade or natural disasters interrupt an enterprise, including lost revenue, rent and other fixed expenses, and temporary location operating expenses. Nevertheless, there’s always some kind of fine print, so here are a few key things to keep in mind when it comes to business interruption claims:

  • The insurance contract ultimately has the last word, so any loss estimate needs to fall under the contract’s umbrella. For example, the policy may specify that losses will only be covered for a specific period, and so anything outside that time-frame is a no-go.
  • That being said, the time element wording in most policies is intentionally unclear, with the loss period often being defined as starting from the occurrence of the loss and continuing until the damaged property is replaced.
  • Don’t put the cart before the horse; that is, before the business interruption claim can be filed, the business property damage claim needs to be filed. Remember, the interruption of business is a consequence of damage to the physical property, so if there’s no claim of damage, a claim of the business being interrupted holds no weight.
  • That being said, some business interruption policies have an add-on provision that lets the business claim an interruption in operations if damage to their supplier causes a hiccup in product delivery.

Business interruption coverage claims usually take into account three categories of loss, which are then added together for a nice neat sum of the loss:

  • Actual losses (projected revenue for the loss period less saved expenses)
  • Continuing and non-continuing expenses (e.g. the business wants to continue to pay employees even while closed so that there’s staff available when the doors finally open again).
  • Expedited and extra expenses (i.e. the business wants to get back on its feet as soon as possible, but this expedited opening will likely incur extra costs, such as ordering supplies by air rather than the usual truck delivery.)

In some cases, a business may decide to hire a financial expert to calculate the losses relating to an interruption event in conjunction with the claim filed with the insurance company. This expert will take a long, hard look at things like the business’ income for the past several years, loss statements, and checking statements to carefully estimate losses due to the hitch in the operations. In addition to these more concrete numbers, they’ll also consider factors like the economic climate in the damaged business’ market during the loss period.

While juggling all of these figures, the expert will be taking pains to avoid double counting, just like in any other loss analysis. Double counting is a miscalculation where a business’ inventory gets “sold” twice. Since the business’ property/content coverage will most likely pay for the value of the lost inventory, any lost profits calculated from a business interruption should take into consideration this assumed payment for lost inventory.

As mentioned above, the expert will be looking at three categories of losses – actual lost profits, ongoing non-saved expenses, and extra & expedited expenses incurred from reopening – which they’ll total to get a nice neat sum of the loss. As such, a business interruption loss estimate conducted by a financial expert allows all of the business’ losses to be carefully considered. This is important because at the end of the day, the businesses damaged by these disasters are just looking to get back on the road to success.

Oh…one last word…insurance companies will send a year-end 1099-MISC Income on all non-property damages related reimbursement as income to the businesses.  So, beware of all labor-cost reimbursement from your Business Interruptions Claim, they are taxable as income to the business.

 

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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IRS Collection Debt Program

In Accounting & Finances,Business,Taxes on September 11, 2017 by Sufen Wang

IRS Rolls Out Debt Collection Program

Folks out there who think nothing bad happens when they don’t pay their taxes are in for a rude awakening. The IRS is rolling out a debt collection program that involves sending over individual tax debts to four private debt collection agencies. That’s right, the IRS is calling in backup, and it plans to ramp up the collection program into higher gear over the next two years, according to IRS Collection Policy Director Kristen E. Bailey.

The agency is starting off with individual tax debt cases that are 2 – 4 years late and that have an average liability of less than $50,000. In contrast to audits, where the IRS seems to spring more often for the big fish, this time it seems like even the little guys can expect phone calls from collectors sometime soon – at reasonable hours, of course. In fact, it’s probably more important than ever to know what private debt collectors can and can’t do, in case you’ve got some past due tax bills sitting on your desk.  For example, private collectors don’t have enforcement powers, so they can’t issue liens.

So far since April, the IRS has assigned about 400 cases across the board to these four collectors. In 2018, the agency has plans to pass along double-whammy cases where an individual taxpayer not only owes taxes, but also has a minimum of one unfiled return. Then in 2019 things will get even more serious with the agency handing over business cases to the private collectors.

Bailey did clear up what effect the new tax debt collection program will have on Americans currently living abroad: zilch. The four companies participating in the program are restricted to operating in the U.S. states and territories, so anyone who’s enjoying mimosas in another country can sleep peacefully knowing they won’t be badgered by collectors. However, this only works if the IRS has the overseas taxpayer’s most current foreign address.

The bottom line is that, although many of us have tried, ignoring a bill doesn’t make it magically go away. In fact, it usually comes back with a vengeance: interest, late fees, hassle, headaches, and more. If you can’t pay your taxes on time, don’t just sweep the problem under the rug. Instead, find out what your options are before it gets sent to collections – and the IRS’s taxpayer advocate service is a great place to start.

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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IRS – Picking Up the Phone!

In Accounting & Finances,Business,Taxes on August 21, 2017 by Sufen Wang

They’ve Answered the Call: The IRS Puts Up Respectable Stats for the 2017 Filing Season

With basketball playoffs in full swing, fans are packing sports arenas to cheer and weep as their favorite players rack up incredible stats…take, for example, Lebron James hitting his 17th playoff triple-double or Russell Westbrook recording 3 straight playoff triple-doubles.

Meanwhile, in the hushed halls of a stoic building at 1111 Constitution Ave in Washington, D.C., keyboards were a-clacking and mice were a-clicking as the Internal Revenue Service rounded off a tax season filled with equally impressive stats.

The IRS’s customer service game was on-point in the 2017 filing season – at least in comparison with past years plagued by clogged call lines and unresponsiveness. Back in March, the IRS’s John Dalrymple swore that things were looking brighter, and he was right: the agency managed a 75% telephone response rate for this full filing season. Now that’s a pretty good rebound, considering that the 2015 percentage was 37 percent – that’s right, 37 percent – and it puts the level of service slightly above last year’s stats.

What’s been behind the boost? Well, just like athletes who need adequate support and resources to train and succeed in the big game, the IRS needs to have enough money to get the job done. The agency received an additional $290 million for the fiscal year ending on Oct. 31, 2016. With a continuing budget resolution in operation this year, the IRS still has access to the additional appropriation, with the bottom line being better customer service.

On the defensive end, the IRS put out even more impressive numbers. According to an interim 2017 filing season report released by TIGTA, as of March 4 the IRS had stopped a whopping 95 percent of fake tax refunds, preventing $961 million from getting dished out illegally. The IRS had also spotted and confirmed 14,068 fraudulent tax returns involving identity theft as of March 2.

Taxpayers are lucky the agency has its guard up, considering the slew of identity theft tax refund schemes lurking around, including the recent W-2 scam that targeted unsuspecting HR personnel. It will be interesting to review TIGTA’s analysis of the IRS’s record for the complete season, which will be released in September of this year.

In the meantime, even though there weren’t any literal slam dunks, half-court swishes, or breakaway layups during the 2017 tax filing season, let’s give the IRS a small cheer for its respectable performance on the court this time around. After all, how well the IRS is working directly reflects on the taxpayer filing experience.

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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W-2 Corporate Email Scam

In Accounting & Finances,Business,Taxes on June 17, 2017 by Sufen Wang

W-2 Corporate Email Scam Still Rampant in 2017

Just because tax season is over doesn’t mean scammers are taking a vacation. In fact, according to IRS Return Integrity Compliance Services Acting Director Tamara Powell, the W-2 scammers never left and are still victimizing HR and payroll departments across America.

The W-2 scam first reared its head in 2016, and after a brief hiatus, returned with a vengeance at the beginning of 2017. As a result, the number of organizations that fell prey to this insidious email scam that involves identity thieves posing as company bigwigs jumped big time this year – and the thieves are showing no signs of stopping. Basically, if it ain’t broke, cybercriminals are going to keep using it.

It’s worthwhile to recap how the scam works, so everyone knows what to look out for: via e-mail, the swindlers will pose as a company’s corporate officer – real name and all – and request employee Form W-2s from the company’s HR and/or payroll department. Once the thieves get their dirty paws on the W-2s, which include private details like employee SSNs, names, and income info, they use the info to file fraudulent tax returns for refunds.

In the first third of 2017, a whopping 870 organizations reported that they received a W-2 phishing e-mail. That’s a big number considering that only about 100 companies reported being the unlucky recipients during the same time frame last year. Even worse, whereas only 50 organizations fell victim to the scam and lost data in 2016, around 200 lost data this time around, which could translate into headaches for hundreds of thousands of taxpayers. The bottom line is that the scam got worse this year.

The problem is that the data breaches usually get discovered weeks or months after they first happen, at which point the criminals have already sold the data on the dark web or used it for their own nefarious purposes. According to Powell, identity theft criminals have a big budget and are technically sophisticated, and they start prepping for the filing season even before the IRS does.

The best defense against this phishing scam is awareness, so spread the word to all of your HR/payroll colleagues, friends, family, acquaintances that there’s a bad scam still on the loose!

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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State Board of Equalization (BOE) in Hot Water!

In Accounting & Finances,Business,Taxes on April 20, 2017 by Sufen Wang

CA Agency, that Collects $60 Billion in Taxes Per Year, is in Hot Water!

California’s State Board of Equalization (BOE) – the agency that collects one third of the golden state’s taxes – is due for a much-needed makeover. And that’s per someone who is currently the longest-serving member of the BOE. State Controller Betty Yee recently called for legislators to gut the BOE of most of its authority and to start fresh with a new state department that would oversee more than 30 tax and fee programs.

Yee’s proposal comes on the heels of the State Department of Finance’s recent audit of the BOE, which found the agency riddled with problems such as flawed accounting, increased spending on political/promotional events that are a far cry from tax collection, and staff afraid of defying elected officials.

The BOE, which collects around $60 billion in taxes each year, consists of four publicly elected members who each represent a district in four-year terms, and the State Controller, who is elected on a state-wide basis. Yee, currently serving in the latter post after almost a decade as a district member, stated “I look at the BOE and it’s entrusted with making sure our tax dollars get to the right place, and clearly its falling short in this critical mission.”

And she’s not the only BOE member calling for changes. At the end of March, Fiona Ma of the second district wrote a letter to Governor Brown requesting that he appoint a public trustee to manage the BOE, based on info from the same audit cited by Yee.

However, not all BOE members agree with the audit’s findings: Jerome Horton (3rd District) and Diane Harkey (4th District) have labeled the report as inaccurate. Interestingly, they’re the two Board members who were cited in the audit as arranging outreach events in their districts that were not related to what the BOE should actually be doing.

Yee’s proposal calls for more than just applying some concealer on the BOE’s issues and calling it a day. Under her plan, the agency would lose oversight of both sales and use taxes, along with 30+ revenue-generating programs it currently manages. The result would be approximately 80 percent of the agency’s portfolio and employees transitioning to a different revenue department. The BOE would still manage property taxes around California, which is what it was originally created to do back in 1879.

Whether this will actually happen is up in the air right now. Yee will have to persuade both lawmakers and Gov. Brown to enact her proposal. What is clear is that the California Board of Equalization needs to win back the trust of the state’s taxpayers and continuing down the same path just isn’t going to cut it.

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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“May I help you?” Said the IRS Agent…

In Accounting & Finances,Business,Taxes on April 9, 2017 by Sufen Wang

The IRS Swears that Its Help Line Record is Improving – And It Is, For Now

The IRS’s quality of customer service is finally on the up-and-up. According to John Dalrymple, the IRS Deputy Commissioner for Services and Enforcement, “so far the 2017 season has gone smoothly in terms of tax processing” and the “IRS’s customer service record has improved since 2015.”

But we don’t need to just take his word for it, even though he was testifying at the House Oversight and Government Reform Committee hearing on March 8. The Government Accounting Office (GAO) also issued a report digging into IRS services. In contrast to just 18.2 million calls answered by IRS assisters in 2015 – one of the most godawful tax service years in record – answered call volume for 2016 was around 25.5 million.

While this spike is welcome news, testimony from TIGTA’s Russell Martin confirmed the obvious – IRS staff cuts are still a huge problem in handling taxpayer inquiries. Still, the Assistant Inspector General for Audit went on to note that the $178 million in funding received from Congress in FY2017 really did increase the agency’s customer service responses (hint hint).

There’s always two (or more) sides to every story and Rep. Jim Jordan (R-Ohio), chairman of the Subcommittee on Health Care, Benefits, and Administrative Rules, wasn’t as enthusiastic about the IRS’s customer service record. He described it as “terrible” and suggested that misplaced IRS priorities could be the culprit behind such shoddy customer service. Then again, Jordan seemed to be unaware of the continued cuts to IRS funding since 2010.

What seems to be clear is that IRS customer service quality ebbs and flows with the agency’s available budget. While the agency’s telephone support for taxpayers is by no means perfect, everyone should be celebrating the small victory that in 2016, the number of taxpayers able to get through to an IRS representative was the greatest since 2011. The goal should be to keep up the improvement so that all hardworking taxpayers can get the service they need to efficiently and accurately handle their tax matters.

Also, don’t forget that the IRS website offers a slew of resources, with no wait time or phone call to a representative needed. Check out this  recent blog post for some of the highlights from IRS.gov!

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Pennsylvania Taxes Lottery Winnings $$$

In Accounting & Finances,Business,Taxes on March 5, 2017 by Sufen Wang

Take a break from the Tax Season and have a laugh about this article…

The Game of Chance Gets New Rules: Pennsylvania Taxes Lottery Winnings

johnny-automatic-money-bags-800pxAnyone who’s won big in the Pennsylvania lottery since 2016 may want to hold off on buying that extra flat screen, or start searching for the receipt if they already splurged. That’s because for the first time since the Pennsylvania lottery debuted in 1972, winners must pay state taxes on their cash winnings.

Pennsylvania lottery winners are now looking at a 3.07% personal income tax on all cash prizes. The bad news is that although the news arrived over the summer of 2016, any folks who got lucky since Jan. 1, 2016 are out of luck – the new tax applies retroactively. Winners from years past also aren’t in the clear – the income tax is in full effect on their annuity payments received in 2016 and into the future.

ball-165958_640The Pennsylvania Revenue Department will be mailing out more than 45,000 letters to cash prize winners of $600 or more, as a gentle reminder to report the winnings to them and to the IRS. Shrugging off this correspondence would be a very bad idea: the lottery is required to report someone’s winnings to both agencies at the $600 threshold.

After July 12, 2016, the Pennsylvania lottery began automatically withholding income tax on winnings above $5,000. So winners of all shapes and sizes of cash prizes between Jan. 1 and July 12, 2016 may want to look into making estimated tax payments to avoid some nasty underpayment penalties. Any out-of-towners who pass through the Keystone State and successfully play the numbers game need to know the new tax rules apply to their winnings too.

bet-1067021_640Note that federal taxes have always been collected on Pennsylvania lottery winnings, so nothing changes on that front. Also, only cash prizes are getting dinged: gift cards and other goodies are exempt from the tax. With Pennsylvania out, California is the last state standing that doesn’t tax lottery winnings. So if you’re placing all your bets on chance, it’s time to head out west!

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805