By Melissa Clary

It seems as though people will do anything to try and decrease their tax liability. Here is a list of 10 deductions that taxpayers were certain that they could write off;

1. No receipts from above - Putting a few bills into the church offering plate got a client of CPA James T. Campbell in a bind when the IRS asked for canceled checks or receipts to support his charitable deductions. Explaining why he had no such receipts, the taxpayer said he simply throws in cash “as the spirit moves me.” Campbell says the IRS agent paused to consider the taxpayer’s response, and then offered this advice: “I understand how the spirit can move you. So my advice to you is to always take your checkbook to church with you. When you feel the spirit coming on, just take out your checkbook and fill in any amount you think is right, whatever the spirit may dictate. It makes no different how much you give, just as long as you have a copy of the canceled check. This way both the spirit and the IRS will be pleased.”

2. Silence is golden … and deductible - Since we’re on the subject of charitable deductions, Allyson Baumeister, CPA, of had a prominent client who found a creative solution to a chronically noisy next door neighbor: He bought the house from the fellow, ripped it out of the ground and donated it to a local women’s shelter. He then claimed the value of the house as a charitable deduction. “The deduction was limited to a percentage of his income, but his income was such that that wasn’t a problem. From what I recall, the IRS may have adjusted the value somewhat, but it did allow the deduction,” says Baumeister.

3. He took Manhattan, the Bronx and Staten Island, too - When accounting software was in its infancy, a rookie CPA prepared a return for an individual with one small glitch: The software mistook the filer’s address “New York, N.Y.” for the name of a dependent. The mistake went unnoticed by the firm and the client, until one day they received a phone call from the IRS. The agent apologized that the deduction was being disqualified, even though, as the agent politely agreed, it might indeed be justified.

4. But you can write off the pimp hat - When does an entertainment expense exceed IRS criteria? Ed Mendlowitz, CPA had a businessman client wanted to deduct the cost of a call girl he hired to entertain some clients. When Mendlowitz told the businessman he’d have to present the so-called contractor with a Form 1099 to support this business expense, the client declined to do so and dropped the whole idea.

5. The ‘Zoolander’ deduction - Those who work in front of the camera for a living – like Derek Zoolander in the 2001 film comedy – are often inclined to work their accountant to deduct all manner of personal property and perks as business expenses, from full wardrobes to back waxing. “We have public speakers and we help them understand that they cannot deduct all of their clothing, even though they wear it onstage,” says Dallas CPA Ken Sibley. “Models can deduct a lot of makeup and certain pieces of apparel, but it has to fit the rules. We don’t let them deduct the pedicures, manicures and back waxing for therapeutic reasons.”

6. What are you, an Indy driver? New Jersey CPA Elihu Katzman couldn’t believe this deduction: “We had a client-salesman that was asked the number of miles he used his car for business that year. He insisted that he drove 60,000 miles, all for business in one year. We asked him if he had any time to sleep, in that he must have spent most of the day and night driving.”

7. The $50,000 business meeting - Imagine a tax preparer’s surprise when a client-attorney listed $50,000 in entertainment expenses on his tax return – quite a chunk considering the guy’s gross income was in the $300,000 range. The preparer questioned the client and he said, ‘Well, I threw a party for my clients. And the tax preparer said, ‘You didn’t invite me?’ Anyway, they started discussing the expense and the client informed the preparer that the cost was for his daughter’s wedding. But he did invite all his clients. However, he was not allowed to write off his daughter’s wedding.

8. The joys of being a parent – Clients are constantly asking their tax preparers if they can write off loans that they gave their children. The correct answer is, unless you have documentation verifying the existence of the loan and have taken legal action that resulted in a determination that the loan is not collectible, no deduction is allowed.

9. Inflating your assets - The story that is consistently brought up at CPA classes is where the topless dancer got breast implants and wrote them off as a business deduction. The IRS challenged her, it went to tax court and she won.

10. Tax Benefits of Being Blind – This one is an old favorite. The government is going to give you a break if you are blind. Just check the box on line 39A. Huh? You are BLIND! Obviously, the idea is you are having someone else do the tax return, but it is still pretty funny at first glance.
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Melissa Clary, CPA is a partner of the Colorado-based C.P.A. Firm Kruger & Clary. For details on their firms services visit http://www.krugercpas.com/

Visit the Good Business Blog to learn more from Melissa and other Good Business Experts.

by CJ Arditi

You may not be familiar with its formal name - the Economic Stimulus Act of 2008 - but you’re almost certainly aware of its key outcome: a tax rebate. Now comes the big question: What should you do with it?

If you spend it, you will do your part to help stimulate the economy. But by investing the rebate, you could help speed your progress toward your long-term financial goals, such as a comfortable retirement.

Before we look at investment possibilities, let’s quickly go over the “nuts and bolts” of the plan:

How much? You can receive up to $600, if you’re filing as an individual, or $1,200, if you’re filing a joint return. Plus, you can get an additional $300 for each qualifying child. However, the size of your rebate will be reduced by $50 for every $1,000 you earn above adjusted gross income (AGI) limits ($75,000 for singles and $150,000 for married couples).

When? The IRS will begin mailing Stimulus Act rebate checks in May. If you’ve selected the “direct deposit” option for receiving your 2007 income tax refund, your Stimulus Act rebate will be placed in the same account that you’ve chosen for your refund.

Investment Choices

Here are a few possibilities for investing your rebate:

Traditional or Roth IRA - Suppose that you are a joint filer and did receive the full $1,200 rebate. If you put that $1,200 in an investment that earned a hypothetical 7 percent return, and that investment were placed in a traditional or Roth IRA, the money would grow to more than $9,000 in 30 years. (This figure does not include fees, commissions or expenses, all of which would reduce your investment returns.) Keep in mind that traditional IRA withdrawals are taxable, whereas a Roth IRA’s earnings have the potential to grow tax free, provided you don’t begin taking withdrawals until you’re at least 59-1/2 and you’ve had your account for at least five years.) All investments within these accounts do fluctuate in price, so it is possible to have more, less or the same amount when you sell your investments.
Section 529 savings plan - In a Section 529 college savings plan, you put money in a specific mix of investments. Section 529 plans are tax deductible in some states for residents who participate in their own state’s plan. All withdrawals will be free from federal income taxes if the money is used for a qualified college or graduate school expense of your child or grandchild. (Withdrawals for other reasons may be subject to federal, state and penalty taxes. Also, Section 529 distributions will appear as income on the child’s tax return, which could affect financial aid calculations.)

Emergency fund - It’s a good idea to put six to 12 months’ worth of living expenses in a liquid account for use as an “emergency fund.” Without such a fund, you might be forced to liquidate some of your long-term investments to pay for things such as a costly car repair or an unexpected medical bill.

A rebate like this one doesn’t come along every year - so put it to work for you. Someday, you may be glad you did.

CJ Arditi is a Financial Advisor for Edward Jones Investments. Please contact CJ at 914-962-2853

by Marty Smith

Are you “investing” your time working ON your business or “spending” it working IN your business?

The challenge I find a lot of Business Owners face today is that they are so busy working in their business that they cannot see the full potential of their business. So many times I look at a business and think the owner is doing well, only to discover on talking to them, that they are not even earning as much, (when their income is converted to an hourly rate), as their top employees.

A while ago, we had a client who owned a commercial cleaning business. This client used to work each week doing the cleaning himself. When asked how much would it cost to employ someone to do the cleaning he was doing, he replied “about $600 per week”. He was then asked how much extra business he could generate if he spent this same time in a week looking for new customers. He said he could generate about $5000 worth of new business in a week.

It’s obvious, looking from an outsider’s perspective that the logical thing for the owner to do is employ a cleaner to work in the business so that the owner can work on the business.

How much mundane work are you doing that could often be completed by a teenager after school? Think about your business. How much work do you do that could be done by a junior or a casual, or maybe even a semi-retired person?

What are your opportunity costs? What value do you place on your time? How much extra business could you generate if you employed someone to do the day-to-day work?

What would it mean to your customers and your business if you were “freed up” to follow-up enquires that haven’t been chased up, socializing with customers, encouraging them to come back, or phoning existing customers to see if there is anything they require? The bottom line is you could be spending time on vital sales and marketing, but you’re bogged down doing the day-to-day, time-consuming, physical work that someone else could be doing.

How much time do you spend developing new marketing strategies, analyzing Measure & Test results, instigating relationships with other businesses and the host of other necessary activities that make the difference between a successful business and an average business?

There are a lot of things that a Business Owner needs to get done in an average day. Successful Business Owners are those that do the things that are important in maximizing profit rather than concentrating on the “urgent problems” that arise every day.

Use professional advisors to help you in areas you aren’t an expert. Get yourself a competent accountant and hire a bookkeeper, these sorts of people will save you time and money.

For example, if you were to invest in a Real Estate Development, you would take it for granted that you needed to hire the services of a Project Manager to advise you or to co-ordinate the Architect, Draughtsman, Town Planner, Finance Manager, Construction Manager, Marketing Manager, Sales Manager, etc.

When we get involved in business, most of us do so with little or no assistance at all. Yet “a business” as an investment can and does, when well managed, out perform every other type of investment.

Take the challenge and look at your business as an investment. Look for a return on your invested capital as well as an hourly rate of pay in excess of your top employees.

Review what happened last year, analyse the results you achieved, see what adjustments you need to make to obtain the results you require, plan next year and look at what assistance you require to obtain the desired result.

Remember above all else, time spent working on your business is far more important than time spent working in it.

Marty Smith is an ActionCOACH Business Coach. To learn more about Marty visit www.actioncoach.com/martysmith.

by Pamela Muldoon

Do you know the numbers in your business? To get your business on a growth fast track, the first place to start is where you are right now. Like any plan, to get to your end destination, you have to know where you are starting from. Understanding basic numbers in your business does not have to be an overwhelming process.

With the “5 Ways” model you can begin to breakdown important numbers in your business today. Numbers that will allow you to make informed decisions on what activities to focus on for continued growth in your business. Let’s recap how the activity vs. result formula works:

5 Ways To Grow Any Business:

1. Number of Leads: the total number of potential buyers that you contacted or that have contacted you in the past year.

2. Conversion Rate: The percentage of people from your leads who bought your product or service.

Number of Leads x Conversion Rate (activities) = Number of Customers (result)

3. Number of Transactions: The average number of times your customers buy from you over a 12 month period.

4. Average $$ Sale: The average amount purchased by your customers; add up your total sales and divide by the number of sales.

Transactions x Average $$$ Sale (activities) = Revenue (result)

5. Profit Margin: This is the percentage of each and every sale that’s profit. In other words, if you sold something for $100 and $25 was profit, then you’ve got a twenty-five percent margin.

Revenue x Margins = Profit

Number Of Transactions: The third activity of this formula is Number of Transactions.

You’ve probably heard the statistics: It costs six to seven times more to get a new customer than it does to sell to an old one. How often do your customers buy from you? What is the lifetime worth of each customer to your business?

Number of Transactions is when you go through your current customer database and track how often each one buys from you in a 12 month timeframe. Some may only have bought from you once, perhaps others numerous times. The idea is to get the average so you have a place from which to gauge your current customer activity. This will allow you to decide how and where you can increase this activity amongst your current customer base. As an ActionCOACH Business Coach, I have over 50 different strategies that focus solely on increasing current customer activity for my clients to choose from. Here is a sample:

Underpromise and Overdeliver: This one may sound pretty simple, but underpromising can be a bit tricky. It means you need to be willing to create some modesty in your marketing. For example, if you tell your customers it will be in stock on Wednesday, get it on Tuesday, and call them on Monday afternoon to let them know it will be in early. Always do a little more than they expect. If you do as you promise, you will probably get them to return another time; if you go above and beyond the expectation you will have customers for life.

Inform Customers of Your Entire Range of Products/Services: Oftentimes, your customers only buy from you for one specific reason. Don’t assume that your customers know all of the products or services you offer simply because they have purchased one from you. They already trust you and your main product. Be sure to educate your clients regularly on the range of products and services you offer.

Socialize With Clients: Show you customers how much you value and appreciate them by inviting them out to dinner or have a client appreciation party at your home or special location. Make friends with your customers. Spend time with them away from the work environment. This will create a special bond that goes beyond business and consumer. People find it hard to change businesses after they’ve come to know the owner personally.

Send Out A Newsletter: This is a great tool to stay in consistent contact with current and future customers. Be sure to provide value to those receiving your newsletter. If you include enough good information, people will read, and more importantly, they will buy. A great e-magazine tool is GrowthPOD, which uses your current network of strategic business partners to reach thousands of people each month. Check out www.growthpod.com to learn more.

These are just a few of the strategies you could use to increase your customer transactions. The key is to find one or two that you are not currently using and try them out. But remember….Test & Measure your results! To understand which strategies work best for you and your business, you must be tracking the outcome of each strategy! And if it’s working, then keep doing it! Commit to working smarter this year, not harder. Grow your business, one strategy at a time!
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Pamela Muldoon is a Business & Executive Coach with ActionCOACH Business Coaching, the World’s #1 Business Coaching Firm.

Learn more about how the 5 Ways can change your business. Contact Pamela for your Complimentary Coaching Session by calling 763-670-7238 or go to www.actioncoach.com/pamelamuldoon.

Want to launch your own e-magazine? Go to www.growthpod.com for details.

by Dominic DesMarais

“It is in the fixed budget but I need to reduce the expense.”

This is the most common theme among business owners I meet with and help. They created a budget with fixed expenses such as building leases, mortgages, equipment leases, operating income loans, and other long term business financing that fit into their budget when they created it. Then, a business slow down or a cash crunch no longer allows the payment to fit comfortably in the budget. Even a business expansion can create this as a business owner wants to change the priorities of the business’ cash flow.

This challenge comes down to two choices.

The first choice is to eliminate the payment. This can be done by selling the asset behind the loan, or buying out a lease if need be. Selling an asset is usually not a quick fix. It takes time to list or advertise the asset, find a buyer, and sell it. This is why a loan on a fixed asset always should be included in your fixed budget versus your variable. The other consideration is how important is that asset to your business and the repercussions of not having that asset available anymore.

A lease on equipment usually has a buyout agreement. This is a negotiable item and should be negotiated with fervor to achieve the best outcome financially. Office space leases are very negotiable and I would strongly recommend involving a commercial real estate professional to negotiate that. The best part is the owner of building pays the leasing agent for working on your behalf. Even if your lease is not up, it is a great time to renegotiate if your payment no longer meets your budgeting plan.

The second choice is to refinance or reorganize the payments on your long term debt. This is the option where a professional financier will be of assistance. We ask for the following items:

Three Years Personal Tax Returns with all Schedules including W2’s and 1099’s

Three Years Corporate Tax Returns with all Schedules

Last Year’s and current Profit and Loss Statement

Last Year’s and current Balance Sheet for Operating Business

List and Description of all Equipment of the Business

Pictures and Description of the Lot and Building

With this information (free of charge), an analysis of your cash flow and possible financing can take place. With new longer amortization loans such as 30 years available, cash flow can be improved or take cash out of equity in your business and apply that towards expansion or other business needs. It is recommended that if you have a number of loans, you take the opportunity to visit this yearly.

Coming next month – examples of how cash flow can be improved.

Call Dominic at 612-247-8322 or visit www.yourcommercialfinance.com for more information.