Employers Must Now Report Health Care Benefits

Under the Affordable Health Care Act, employers are now required to report the value of health care benefits. Beginning in 2011, employers must report the value of health care benefits for each employee. This amount will appear on the new 2011 form W-2 to be issued in 2012. This is a reporting item and will not affect taxable income.

To give employers more time to update their payroll system, the IRS has made this requirement optional for 2011. For small businesses with fewer than 250 employees, it will remain optional for 2012.

If you have questions about this requirement, please contact our office.

How to Spot an IRS Impersonation Scheme

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations, or personal tax issues. If you receive such an e-mail, most likely it's a scam.

IRS impersonation schemes flourish during filing season. These schemes may take place via phone, fax, Internet sites, social networking sites, and particularly e-mail.

Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (a virus) that infects your computer or directs you to a bogus form or site posing as an IRS form or Web site.

Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

If you want to know whether a site is legitimate or you think you have been the victim of fraud, please contact us.

Rhode Islander Chairs AICPA Executive Committee

Click on the link below to read about DiSanto, Priest & Co. Partner Bill Pirolli's experience as current Chairman of the AICPA PCPS Executive Committee.

Rhode Islander Chairs AICPA Executive Committee

AICPA Service Feeds Leah Szlatenyi’s Love of Learning

Leah Szlatenyi, partner and director of Bentley Consulting Group, LLC, is featured in the Rhode Island Society of Certified Public Accountants What Counts online newsletter.

Click the below link to read her story!

AICPA Service Feeds Leah Szlatenyi’s Love of Learning

Cash Management Tips for Small Businesses

Cash is the lifeblood of any small business.  Here are some tips to help your business maintain a sufficient cash flow to meet its financial goals and run efficiently:

Toughen up your credit policies.  Review the payment terms you offer to customers and tighten them up if slow payment is a problem area for your business.  For instance, how long are customers given to pay? What action will be taken if a payment is missed? Be sure your credit terms are communicated effectively to customers before transactions are entered into.

• Tip: Consider requiring advance payments - at least in part - for new customers.
• Tip: For many businesses, a routine credit check should be performed before a sales or service transaction is entered into with a new customer.

Come up with a budget - and stick to it.  Surprisingly, many small businesses do not engage in the budgeting process.  A budget can be extremely effective in helping you keep track of whether cost - and revenue-related goals are being met.  Depending on the size and complexity of the business, the budget process might be informal or formal, lengthy or simple.  Projected revenues and expenses should be broken down by months.

• Tip: If you don't already do so, budget for next year's revenues and expenses near the end of each year.  Review budgeted to actual results monthly.

Tighten up billing.  If collecting bills has become a problem for your business, you might want to consider increasing the intervals at which customers are billed--e.g., from three months to one month, or from one month to two weeks.

• Tip: Review your accounts receivable weekly or even daily to make sure slow payers are not allowed to slide.

Spring Cleaning: Tax Records You Can Throw Away

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.

Let's start with your "safety zone," the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.

The concept behind it is that after a period of years, records are lost or misplaced and memory isn't as accurate as we would hope. There's a need for finality. Once the statute of limitations has expired, the IRS can't go after you for additional taxes, but you can't go after the IRS for additional refunds, either.

The Three-Year Rule
For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you're looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:

• If you don't report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.
• If you've claimed a loss from a worthless security, the limitation period is extended to seven years.
• If you file a "fraudulent" return, or don't file at all, the limitations period doesn't apply. In fact, the IRS can get you at any time.
• If you're deciding what records you need or want to keep, you have to ask what your chances are of an audit. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.

Assuming that you've filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.
Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.

Here's a checklist of the documents you should hold on to:

1. Capital gains and losses. Your gain is reduced by your basis - your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you've been reinvesting those dividends and capital gains over the last decade. And don't forget those stock splits.
   You don't ever want to throw these records away until after you sell the securities. And then if you're audited, you'll have to prove those numbers. Therefore, you'll need to keep those records for at least three years after you file the return reporting their sales.
2. Expenses on your home. Cost records for your house and any improvements should be kept until the home is sold. It's just good practice, even though most homeowners won't face any tax problems. That's because profit of less than $250,000 on your home ($500,000 on a joint return) isn't subject to taxes under tax legislation enacted in 1997.
   If the profit is more than $250,000/$500,000, or if you don't qualify for the full gain exclusion, then you're going to need those records for another three years after that return is filed. Most homeowners probably won't face that issue thanks to the 1997 tax law, but of course, it's better to be safe than sorry.
3. Business records. Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That's a long time to hold on to receipts, but you may need to validate those numbers.
4. Employment, bank, and brokerage statements. Keep all your W-2s, 1099s, brokerage, and bank statements to prove income until three years after you file. And don't even think about dumping checks, receipts, mileage logs, tax diaries, and other documentation that substantiate your expenses.
5. Tax returns. Keep copies of your tax returns as well. You can't rely on the IRS to actually have a copy of your old returns. As a general rule, you should keep tax records for 6 years.
   The bottom line is that you've got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.
6. Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they're wrong, you'll need your W-2 or copies of your Schedule C (if self-employed) to prove the right amount. Don't dispose of those records until after you've validated those contributions.
   You can confirm your payments and estimate your future benefits by filing Form SSA-7004 with the Social Security Administration. You can download the form, or apply online.

Contact us by phone or email if you have any questions about what records you need to keep this spring.

DP&Co. Client Benefits From SBA's Increased Loan Guarantee

VR Industries, Inc, client of DiSanto, Priest & Co., benefits from SBA’s increased loan guarantee. 

Karen G. Mills, administrator of the U.S. Small Business Administration, and Gov. Lincoln D. Chafee announced a newly proposed initiative to encourage lending to small businesses during an SBA breakfast today, March 30, 2011.

The initiative would see the state designate $5 million of its $50 million in Job Creation Guaranty Program funds to create a state guarantee of 15 percent to complement the SBA guarantee on 7(a) loans. The 15 percent state guarantee and 75 percent SBA guarantee combined will see a total of 90 percent of each loan backed by government resources.

Pictured: Brian Pestana, vice president, VR Industries, Inc.

Pictured (L-R): Brian Pestana, Mayor Scott Avedisian, Governor Lincoln D. Chafee, SBA Administrator Karen G. Mills, RIEDC Executive Director Keith Stokes, and District Director of SBA RI District Office Mark Hayward.