Tag Archives: review

The IRS Is Not Always Right

A letter in the mailbox with the IRS as the return address is sure to raise your blood pressure. Here are some tips for handling the situation if this happens to you:

  • Stay calm. Try not to overreact to the correspondence. They are often in error. This is easier said than done, but remember the IRS sends out millions of notices each year. The vast majority of them correct simple oversights or common filing errors.
  • Open the envelope. You would be surprised at how often people are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category, try to remember that the first step in making the problem go away is to simply open the correspondence.
  • Carefully review the letter. Understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with its findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but its assessment of your situation is often wrong.
  • Respond timely. The correspondence should be very clear about what action the IRS believes you should take and within what timeframe. Delays in responses could generate penalties and additional interest payments.
  • Get help. You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.
  • Correct the IRS error. Once the problem is understood, a clearly written response with copies of documentation will cure most of these IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.
  • Use certified mail. Any responses to the IRS should be sent via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties and additional interest on your tax bill.
  • Don’t assume it will go away. Until a definitive confirmation that the problem has been resolved is received, you need to assume the IRS still thinks you owe the money. If no correspondence confirming the correction is received, a written follow-up will be required.

Payroll Fraud Schemes Every Business Should Know

According to the Association of Certified Fraud Examiners, nearly 30 percent of businesses are victims of payroll malfeasance, with small businesses twice as likely to be affected as large businesses. Here are four scary payroll fraud schemes you need to know:

  • Ghost employees. A ghost employee does not exist anywhere except in your payroll system. Typically, someone with access to your payroll creates a fake employee and assigns direct deposit information to a dummy account so they can secretly transfer the money into their own bank account.
  • Time thieves. Time stealing happens when employees add more time to their timecard than they actually worked. Sometimes multiple employees will team up to clock each other in earlier than when they arrive or later than when they depart for the day.
  • Shape-shifting commissions. In an attempt to bump up a commission payment or attain a quota, sneaky sales employees may alter a sales contract to their benefit. A typical tactic used by a dishonest salesperson is to make a booked sale appear larger than it is and then slide a credit memo through the system in a later period. Companies with complicated commission calculations or weak controls in this area are the most vulnerable.
  • External swindlers. A popular scam, known as phishing, starts with a fraudster impersonating a company executive through email or over the phone asking an employee with access to payroll data to wire money or provide sensitive information. These imposters can make the correspondence look very real by using company logos, signatures and email addresses.

Tips to combat payroll fraud

Being aware of the threats is a start, but you also need to know how to stop them. Here are some tips to reduce your company’s payroll fraud risk:

  • Better internal controls. While most employees are trustworthy, giving too much control over your payroll to one person is not a good idea. Separating payroll duties and formalizing an approval process protects both your business and your employees.
  • Review payroll records. Designate someone outside of the payroll-processing department to periodically review the payroll records. Have them review names, pay rates and verify that the total payroll matches what was withdrawn from the business bank account.
  • Perform random internal audits. During an internal audit is when you can really get into the details to look for potential payroll fraud. You can do an in-depth review of the whole payroll system or select a random sample of dates and employees. Keep the timing of the audit under wraps to prevent giving someone the chance to cover up their misdeeds.

Managing your business payroll is a daunting task by itself, and actively protecting against fraud adds additional complexity.

Zombie Billing: Automatic Payments Have a Life of Their Own

The turn it on and forget it nature of automatic payments can create “zombie billing” cycles that go on without being reviewed or challenged, even after the product or service you pay for is no longer of value.

Here are some ideas to keep this from happening to you.

Create a list. Make a list of the companies you authorize to use automatic bill payment. Include the account number each company uses, as well as payment amounts and frequency. When there’s a change in a card or bank account, you can consult the list to find the companies you need to notify.

Watch for fees. Make sure the bill-payment system you’re using is low-cost or no-cost. Some companies will charge you a fee for automatic payments. If your biller wants to charge you, pay them with a traditional check. Consider consolidating all your automatic payments within one bill-paying service. Your bank may even offer online bill payment with no fee.

Review underlying bills. Automated billing usually means you’re not getting paper copies of your bill. If you’re not receiving a physical copy, changes to your service may go unnoticed. If possible, opt to continue receiving email or paper billing statements. Review statements monthly to verify that your payment has not changed and there are no additional fees or errors.

Drop underused services. Periodically review all automatic payments. Drop products and services that are no longer of value.

Automatic billing is meant to simplify your life, but if you allow it to turn into zombie billing, it will have the opposite effect. Take care to review your accounts and statements to protect yourself and keep your finances under your control.

Your First Job: An Intro to Taxes

As school winds down, a number of students will hit the job market for summer employment. When this is a first job, it is often one of the first times you experience the world of taxes. Please use this information to help make the move to the workforce a little more understandable.

Form I-9 – When you get the job, your new employer will have you fill out tax form I-9, Employment Eligibility Information. This is a legal requirement to show you have the right to work and it confirms your tax information. You will be asked to provide proof of identity, including showing your Social Security card.

Form W-4 – You will also be asked to fill out a tax withholding form. This form gives employers instructions on how much they should withhold from your paycheck to send in to taxing authorities like the IRS. By filling out the form correctly, enough will be withheld from your pay to ensure you do not owe too much in tax when you file your tax return.

Other Taxes – You will notice your check amount is also reduced for your contributions to Social Security and Medicare. Your paycheck will be reduced by 6.2% for Social Security and 1.45% for Medicare payments. You are not in this alone. Your employer matches your payments and sends both of them to the government.

Self-employed? – If you start up your own summer business like mowing lawns or providing nanny services you will have tax obligations similar to those as an employee. In addition to income taxes, you will need to file estimated tax statements to cover Social Security and Medicare taxes. These two taxes amount to 15.3% of your net income, so plan accordingly. But also remember to save receipts for your job related expenses. They can help reduce your taxable income.

Tips are taxed – If you receive any tips, these too are taxable. Most employers that have tip-earning employees will help you file the appropriate forms. If they do not, you will need to ask for help to ensure your taxes are paid on your tip income.

Review your pay – Remember to review your initial paycheck. There are often errors in setting up employee records. Should you find an error or need an explanation, feel free to ask your employer for help. Errors not caught early can become expensive surprises later on during the year.

Five Steps Managers Can Take to Improve Performance Reviews

Performance review meetings can bring stress to both sides of the table. But it doesn’t have to be that way. With the right planning by supervisors, the meeting can be a productive, stress-free event. Review these five steps before you review your next employee:

#1: Keep a performance log for every employee. How many times have you sat down to write a review and you can only remember what the person has done in the last few weeks or the last month? Or maybe you allow one single incident, either good or bad, to color your assessment. That’s why the best way to prepare is to take notes throughout the year. This can be as simple as notes on paper or in a Word document.

A few key points about performance logs: Include notes on both positive and negative work habits, avoid making references to protected characteristics, like race, age or gender, and don’t make assumptions about the reasons for a behavior or work habit — just stick to the facts, and assume that the notes could someday be read in court — because they could.

#2: Be aware of employees’ main concerns. Employees are understandably anxious about reviews. Does the employee know the expectations that he’ll be evaluated on? And were those expectations explained in advance? Will there be any surprises? Have you been giving the employee feedback throughout the year? Will the manager listen to what the employee has to say? And how does this review affect the employee’s pay? Be prepared for the employee’s questions and concerns, and you’ll be better prepared to handle them.

#3: On review day, create the right atmosphere. Your goal is to help the employee feel at ease. So hold the review in a private, neutral environment, such as a small conference room. You want a setting that supports discussion and cooperation, not confrontation. Sit next to the employee if possible, not across the table or across the desk. Schedule the time in advance with the employee’s input. Avoid meeting during a busy or stressful time for the person. And don’t squeeze it in between meetings or before a lunch. Finally, eliminate all interruptions and focus solely on that review.

#4: Cite specific examples of good and bad work. Stay away from broad generalizations about the employee’s work. Specifics will help you point out exactly what the employee needs to do to improve. For example, you don’t want to tell an employee, “You didn’t get your work done on time.” Instead, say something like, “Over the past six months, you’ve submitted six of your nine customer reports at least three days late.” Those specifics will really help the employee understand — and help your review stand up in court if it ever becomes an issue.

#5: Remember the ABCs of giving feedback.

A – Accurate: Offer objective, concrete examples backed by your performance log notes. You want to avoid words like “always” or “never.” Those are exaggerations that don’t usually reflect the realistic frequency of the way employees behave.

B – Business-oriented: Focus on the business reasons for the corrective comments. Stay away from any critiques about the employee’s personality or behavior.

C – Consistent: Remember to provide regular feedback throughout the year. Don’t dump it on the employee all at once during performance review time. It’s not fair to the employee and it’s not fair to you. Consistency is the key to improving performance.

Seven Ideas to Create a Satisfying Retirement

You’ve done your retirement homework. Your assets are reviewed, you have planned your financial needs, and your retirement tax plan is in place. Are you ready to enjoy retirement? Probably, but not without a plan to address what happens to many people after they retire – boredom.

Here are some ideas to make sure your retirement is everything it should be:

Go to school – Many colleges and communities offer classes for retired students. Pick topics of interest and take advantage of this cost effective way to stay alert through learning. Many classes can have built in activities. Examples could be local history classes with field trips, photography classes, writing, and gardening. As an added benefit, you will meet others with your shared interest while you continue learning.

Pick up part-time work – If you are outgoing, why not pick up a few hours at a local retail establishment?

Volunteer – Many retirees volunteer at libraries, museums, and parks. Others volunteer at their local church, deliver meals, and help young people with literacy. The possibilities are endless.

Schedule physical activity – Staying physically active will keep your body and mind in shape. Create a weekly routine that keeps you moving. Volunteer to take the grand kids to swimming lessons while their parents are working. Bike or walk to do everyday chores.

Look for combinations – With a little creativity you can combine some of these ideas. For example, if you coached your kids in soccer why not consider refereeing kids’ games? You might earn a little pay, stay connected with kids, and get some physical activity.

Get Connected – When you retire, many of your social connections will change. This is especially true for work connections and availability of friends that are still working. Look for other ways to make new connections. Use some of the ideas here to actively get connected with others that share your interests.

Blend in your dreams – If you’ve always dreamed of moving to a new place in retirement, you may want to test-drive it first. A dream move may turn out to be different than you anticipated. You may miss your kids and friends. Services and connections you take for granted may become a problem. By renting a place and staying in the new location prior to committing, you will be prepared with a fall back if it does not work.

Twelve Common Snags to Finalizing Your Tax Return – Part 1

The goal for every taxpayer is to have their return filed quickly and without error.  Here’s the first half of a handy list of items that are often overlooked and can cause all sorts of delays.

Review your tax return and return your signed eFile forms – Your tax returns can’t be filed until you have reviewed them and returned the signed eFile forms to your preparer. The sooner you do this, the sooner you’re filed.

Having proof of health insurance – You should receive a Form 1095 confirming you have health insurance. However, if your employer is one of those that received approval to send a delayed form, you still need to provide your preparer with proof of insurance before filing.

Missing W-2 and/or 1099 – One missing income form and the next thing you know, you’re paying to file an amended. Using last year’s tax return, or a tax organizer provided by your preparer, make sure all prior W-2’s and 1099’s are received and provided to your tax preparer.

Incorrect information on a W-2 or 1099 – Always double-check your forms to make sure the information is accurate – one wrong spelling of a name or one digit off on your SSN and the filing process comes to a screeching halt. Make sure 1099 income is in the correct box. Are you receiving rents and receive a 1099-MISC with the amount in the Non-Employee Compensation box? Then you face a choice – either try to get the form corrected or delay filing your tax return.

Missing or invalid Social Security Number – This one is sort of a given – if you don’t have a valid SSN, there will be no tax filing.

Dependent already claimed – Share joint custody of a child? Or, did your college student think they could file claiming themselves? Your return cannot be filed if there is a conflict in this area. Make sure it’s clear who gets to claim the dependents in your life.

Look for the second part of this article next week!

Tis the Season…for Review

As 2016 winds to a close, there are a number of tasks that should be reviewed. To help you plan accordingly, here are some things to consider.

Employee benefits – Most employer benefit plans have enrollment periods that coincide with the calendar. Please review your benefit options with your employer and make any necessary changes. Common areas of review include employer-provided health insurance, dental benefits, childcare benefits, Health Spending Account contributions, Flex Spending Account contributions, disability insurance and employer retirement account contributions.

Beneficiary review – Make it a practice to review beneficiary assignments on all your key accounts. This is especially important for your retirement accounts as the beneficiary assignment within the account can supersede a will.

Retirement plan contributions – Review and adjust your contributions to your retirement plans. At minimum, try to contribute enough to take advantage of any employer matching funds in your work sponsored plan.

Insurance review – Consider an annual review of your insurance policies. This includes health insurance, life insurance, disability insurance, home insurance and potential umbrella policies. Are the beneficiaries up to date? Are you happy with the coverage?

Automatic billing – Review your checking account’s automated billing transactions. This is a good time to identify what automatic monthly expenses should be reviewed, reduced or eliminated. You may also discover billing for services you thought were cancelled.

Withholdings – Sometime in December or early January you may wish to review your payroll withholdings. Many of us do this after our tax return is filed. However, if you file close to April 15th, you are losing four plus months of proper withholdings.

Develop your own list – The review suggestions mentioned here impact most of us. However, everyone’s situation is not the same. Use this time to develop a list of your own annual review items. It might include reviewing College Savings Accounts or having an annual sit down to go through an aging parent’s financial accounts.

The IRS is Not Always Right

Quotes from actual IRS correspondence received by clients:

“Our records show we received a 1040X… for the tax year listed above, We’re sorry, but we cannot find it.”

“Our records show you owe a balance due of $0.00. If we do not receive it within 30 days, appropriate collection steps will be taken.”

“Payment is due on your account. Please submit payments on or before June 31st to avoid late payment penalties and interest.”

It’s pretty tough to pay a balance due of $0 on June 31st when June only has 30 days. The message should be clear. If you receive a notice from the IRS do not automatically assume it is correct and submit payment to make it go away. The same is true for any state notices. They are often in error. So what should you do?

Stay calm – Try not to overreact to the correspondence. This is easier said than done, but remember the IRS sends out millions of notices each year. The vast majority of them correct simple oversights or common filing errors.

Open the envelope – You would be surprised at how often clients are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category try to remember that the first step in making the problem go away is to open the correspondence.

Careful review – Review the letter. Make sure you understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with their findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but it sometimes happens.

Respond timely – The correspondence received should be very clear about what action the IRS believes you should take and within what timeframe. Ignore this information at your own risk. Delays in responses could generate penalties and additional interest payments.

Get help – You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.

Correct the IRS error – Once the problem is understood, a clearly written response with copies of documentation will cure most of these IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.

Certified mail is your friend – Any responses to the IRS should be sent via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties, and additional interest on your tax bill.

Don’t assume it will go away – Until a definitive confirmation that the problem has been resolved is received, you need to assume the IRS still thinks you owe the money. If no correspondence confirming the correction is received, a written follow-up will be required.