Does your office tend to look like our Fayette county landfill  with tons of old paperwork?

Although there is no single statute of limitations for the many categories of records a business needs
to retain, we can offer some guidelines.

Here’s our suggested schedule for record retention.
In the case of special circumstances, legal action(s), or unique contractual disputes,
you may need to hang onto the documents a bit longer.

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Some politicians in Washington may say American Exceptionalism doesn’t exist, but don’t you believe it!

Here’s some proof. The photo on the left is a new IBM computer (from 1954). It was considered exceptional because it could store 5 megabytes of data and had a cost (in 1954 dollars) that was beyond the reach of almost any small business.

The picture on the right is the smallest usb drive that I have in my office. It holds over 4 gigabytes (roughly 1,000 times more than the IBM computer) and costs about $9.

No nation has ever given as many people the chance to rise from poverty to riches as America. Your small business’ most valuable resource is intellectual capital not the size of your bank account.

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We took our SCA hidden camera inside the corporate boardrooms of America and, more often than not, found this reaction by upper management to the Federal incentives within the tax stimulus bills. Remember, if it doesn’t make good economic sense, it won’t matter how many tax incentives that a law may contain.

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  Our left-leaning friends are often quite surprised at our position on continuing the payroll tax cuts. The reasoning goes something like this, “you call yourself a fiscal conservative yet you want to keep on raiding the social security trust fund?  I just can’t believe you would do that!”

What most fail to understand is that, by any definition, there hasn’t been a trust fund since the 1960s. All the so-called trust funds are deposited into Washington’s general fund and spent even before they arrive. Clients can email us for specifics on how the accounting chicanery works.

The important thing to remember is that when you stand for tax cuts you are (albeit indirectly) forcing the government to live within its means by making them cut spending to do so. A tax increase of a dollar historically causes the deficit spending to increase by 3 dollars.

For those who would like a visual aid on how the so-called trust fund works vs. another governmental plan that is actuarially sound and a great benefit to its recipients, we offer the following. 

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  One of the tests to claim a dependent is that the person must be a qualifying child or relative.
  Like most things with IRS, the meaning of their terms is never simple.
  Here are some of the tests used to qualify your dependent as a write-off.

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  by Rick Viall (Guest Editor) 

  How safe is private information when stored electronically?

  You may not want to know the answer to that question. But if you’re just a bit curious, consider visiting privacyrights.org/data-breach.

The site allows you to scroll through a frequently updated chronological list of reported breaches of private data. Some data are lifted from large companies everyone’s heard of. What’s surprising is how many of the breaches occur at smaller organizations.

The information on this site should serve as proof that when it comes to the safety of personal data, businesses big and small must be on alert!

While it’s the large breaches that make headlines—think Citigroup or Bank of America—smaller businesses may be at a greater risk. They often lack the infrastructure and resources to protect from cyber criminals.

What does a cyber crime cost? According to the Ponemon Institute’s First Annual Cost of Cyber Crime Study, published in July 2010, a business can expect to pay an average of $204 per customer record that is lost or stolen.

Cyber Crime Defined
According to the Ponemon study, the list of cyber crimes is rapidly growing. While many are aware of common cyber crimes, such as identity theft, the list also includes other crimes that can cause damage to a business’s electronic infrastructure. Examples: theft of a business’s intellectual property, the creation/distribution of viruses and malicious code, and the publishing of private data in a public forum online.

Business owners may struggle to keep up with these often-sophisticated threats. Such threats place a tremendous burden on business owners to prevent these losses. Many states have turned to legislation that requires business owners to spend money notifying consumers when a potential breach has occurred.

And some such laws go as far as to require the business owner to help pay the cost of the consumer’s data recovery. In March 2010, Massachusetts became the first state to pass comprehensive legislation requiring business owners to take preventative measures to protect data before the loss happens. Failure to do so can result in fines against the business owner.
Business owners in other states also may be impacted by this law, as it’s designed to protect residents of Massachusetts regardless of where the breach occurs. That means your business, even if located in another state, may be subject to fine if your records contain private information on Massachusetts consumers and those records are breached.

Protecting Your Firm
There are a number of insurance products available to help business owners to deal with the cost of cyber crime. Policies may address both first and third-party losses.

What is a first-party loss? This is a cost the business owners may absorb to cover the firm’s own expenses caused by a cyber crime. Examples may include:

- Notification and credit-monitoring for compromised individuals. (Most states currently have laws in place requiring the business to pay the cost of notifying all consumers that may be victimized by a breach. Most laws require these costs to be paid regardless of whether or not the consumer has suffered financial damages resulting from the breach.)

- Cost to restore data that has been stolen or damaged.

- Lost income resulting from down time caused by a damaged network, lost information or data breach.

How about a third-party loss? When a cyber crime occurs against a business, other parties also could be impacted. A third-party loss describes costs that appear when others incur expenses that can be attributed to the cyber crime. Examples may include:

- Defense costs.

- Judgments and settlements for lawsuits brought by customers, employees and other third parties—such as a company claiming its network was damaged by a virus from another infected network.

- Costs associated with fines or penalties imposed by a regulatory body.

Why Coverage is Critical
Cyber insurance is designed to protect a business when costs are incurred due to a cyber crime. Business owners should note that common insurance policies such as commercial property, . business income, and general liability often restrict—and in many cases exclude—cyber-related damage.

Business owners beware: You should be skeptical of enhancements to such common policies designed to address the cyber exposure. These so-called “cyber enhancements” are often very limited and should not be relied upon without thorough examination of an insurance professional.

Final Note
If you’re a business owner, threats to your data come from a variety of sources. Whether you’re the victim of a random hack, disgruntled former or current employee, angry competitor or anyone else, cyber crimes can serious damage your business. Worse, if the crime results in a breach of private consumer data, state law may impose significant fines that could devastate your firm’s bottom line. For more information about insuring against these growing exposures, call Rick Viall CPCU, CIC at 770-487-8310 your Trusted Choice® independent insurance agent today.

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The ability to digitally sign a tax return and return the signed document to us can be a real time saver for clients.  It can save a trip to our office or the post office as well getting your refund to you much quicker. If you’ve never done this before, it’s quite easy. Just take a look at John & Mary Doe signing their return online.

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Before the anti-capitalists rejoice too much . . .

Just remember that, in our capitalistic system, all economic benefits for both rich and poor are driven by the formation of capital.
If it becomes harder to hang on to your capital, then there will be less fuel for the economy’s engine. That said, here’s where the 
highest capital gain rates are scheduled to go next year unless Congress intervenes.

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Payroll Tax Cut Extended for All of 2012

On February 22, 2012, the Temporary Payroll Tax Cut Continuation Act of 2011 was permanently extended for all of 2012. This extends the two percentage point payroll tax cut for employees, continuing the reduction of their social security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through December 31, 2012. This reduced social security withholding will have no effect on employees’ future social security benefits.

 As part of the legislation, the recapture provision, passed with the original legislation in December, will be repealed.
 [Editor's note: As soon as time permits, we'll elaborate more on some of these hidden provisions. Business owners should be aware that the quarterly payroll forms have been changed in light of the above.]

Unemployment Benefits

 In addition, the legislation signed by President Obama on February 22, 2012 reduces the number of weeks an individual may receive unemployment benefits from 99 weeks to 73 weeks for those living in states with an unemployment rate higher than the 8.3% national average.

For those in states with an unemployment rate under the national average, the number of weeks an individual may receive unemployment benefits will be reduced to as low as 40 weeks in some states. The legislation also includes a provision which allows states to drug-test unemployment beneficiaries, as well as a provision to prevent reductions in Medicare reimbursements for doctors.

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You can measure a nation’s relative economic strength by a ratio of debt per capita. This is not our proudest economic moment as a country.
(Source Senate Budget Committee) 

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Why wouldn’t we let them pay?  The non-payers (but still voters) have almost reached 51%

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The IRS has launched a new program that may help employers to resolve past worker classification issues (Independent Contractor vs. Employee) at a relatively low tax cost by voluntarily reclassifying their workers.

As regular readers know, IRS’ attitude on this issue has been less than helpful in the past. Personally, I do not know of even one instance where a client has obtained IRS consent to treat payments to a sub as contract labor. For the last five years, this has been a major area of exposure for clients even when the vast preponderance of evidence was in their favor.

According to our friends at IRS, “the new IRS Voluntary Classification Settlement Program” (a/k/a IRS’ Fresh Start) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government,” according to the IRS.

Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The IRS program is available to many organizations, tax-exempt organizations and government entities that now erroneously treat workers as non-employees or independent contractors, and want to reclassify them as employees.

To be eligible, an applicant must:

• Consistently have treated the workers in the past as non-employees.
• Have filed all required Forms 1099 for the workers for the previous three years.
• Not currently be under audit by the IRS, the Department of Labor, or a state agency concerning the classification of these workers.

Here are the results for employers accepted into the program:

• They will pay 10 percent of the amount of employment taxes that would otherwise have been due on compensation paid for the most recent tax year to the workers, calculated under the reduced rates of section 3509 of the Internal Revenue Code.
• No interest or penalties will be due.
• The employers will not be audited on payroll taxes related to these workers for prior years.
• Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Is this an “all or nothing” offer?

Not at all – the program permits taxpayers to reclassify some, or all, of their workers. However, once a taxpayer chooses to reclassify certain of workers as employees, all individuals in the same class must be treated as employees for employment tax purposes.

For example, a construction firm currently contracts with drywall installers, electricians and plumbers to perform services at housing construction sites. The company wants to voluntarily reclassify its drywall installers as employees. Once a closing agreement is executed with the IRS, the company must treat all drywall installers as employees for employment tax purposes.

As with all tax moves, be sure to contact us before you contact anyone else.

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This initial podcast was intended for doctors but it’s applicable to others as well.

Asset protection expert Martin Shenkman gives advice on how to keep your net worth secure.

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Security professionals advise changing passwords from time to time. Here’s how you do it with the client portal that we provide. The first screen appears when you login.

There are only two steps.

• Click on my account
• Then replace the current password and you’re done. (The screenshots can be enlarged by clicking on them.)

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Our tongue-in-cheek humor as we look at the reporting and sale of investments.

A great time to invest?

What some stockbrokers really think

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Clients with S-Corps – Don’t forget that you cannot deduct your health insurance costs without loading them onto your W-2. Here’s how to do it.

Download (PDF, 661.2KB)

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Image via Wikipedia

For clients using Quickbooks, here’s a useful tip from one of our most trusted sources for software training. The instructors at K2 Enterprises will walk you through the process of limiting your Quickbooks data file to the current year. This will make QB run faster and more efficiently, but this does not solve the IRS problem we wrote about at this link.

It may be a helpful feature to know, but clients are strongly advised to call us for a better way to deal with this problem.

How to limit Quickbooks data to your current year

Good idea but not a solution to the IRS problem

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We’ve known for some time of the IRS’ stated intent to educate at least one member of every audit team with advanced knowledge of Quickbooks and Peachtree Accounting. Given that these two programs have over 80% of the small business software market, one could understand this goal.

The unsettling news is that IRS intends to routinely demand a backup copy (and the administrator’s password) of your Quickbooks or Peachtree file on any business audit!

Just consider what’s in that backup file:

• Administrative passwords that are often duplicated on your business server and other programs,
• Credit card information on your customers,
• Employee’s social security numbers, birthdays, and other personal data,
• Trade secrets via special product vendors, patent amortization data, customers lists, etc., etc.

We have firsthand knowledge of this request being made to some clientele.
SCA has developed some specific ideas on how you should handle this request. Current clients should email us for details.

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Confused by all the new twists and turns in technology? Tech-wizard and author Terry Brock gives a summary of the newest
tech applications for your business!

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by Guest Editor
Rick Viall  rviall@viallins.com

Millions of Americans donate time—their most valuable asset—to serve as a volunteer board member on non-profits, booster clubs, churches, PTAs and civic organizations, just to name a few. The decisions these folks make can have a dramatic impact on their respective organization—and not always for the better. If a volunteer endeavor goes bad, would a volunteer board member have coverage against a lawsuit under his or her homeowner’s policy?

Homeowners’ Insurance
The last thing volunteers want to consider is what would happen if their favored organization file suit against them as a result of their efforts. But it happens, and not infrequently. This does happen, especially when volunteers make decisions that directly influence the finances of an organization. Often, the only insurance these volunteers have to back their efforts is a homeowner’s policy. Unfortunately, this policy may be of little assistance.

The reason homeowners’ policies do not usually cover liability stemming from actions as a volunteer is the nature of the claim. The policy is designed to cover claims of “bodily injury,” such as someone slipping on cracked pavement in your driveway; and/or “property damage,” such as accidentally setting your neighbor’s house ablaze when burning some brush on a windy day.

Claims against board members do not usually involve bodily injury or property damage. Rather, they involve bad decision making that results in financial loss to the organization, such as the decision to invest in an IT system that turns out to be a debacle, costing the organization tremendous time and money.

There is another problem. Homeowners policies do not cover “professional services.” This is important to note, because board members are often asked to serve in a capacity consistent with their profession. For example, a church member who is a CPA may be asked to serve on the church’s board as finance chairman. Even though he is not paid for his services, the “professional services” exclusion under his homeowner’s policy would still apply.

In addition to the above, homeowners policies do not cover claims of personal injury unless this coverage is specifically added. Personal injury insurance is added to the homeowner’s policy to cover claims such as libel, slander, wrongful eviction, and false advertising.

What to Do
Events causing claims are unpredictable. While the reasons shown above prove it’s unlikely, not all claims against volunteer board members are excluded by a homeowners policy. Decisions to purchase personal injury coverage and a personal umbrella policy will increase your ability to find coverage for a suit against you.

The best method for insuring the actions of board members is for the organization to purchase a directors and officers (D&O) liability policy. These policies are relatively inexpensive for most non-profits. Before volunteering, request information on the organization’s D&O policy. The absence of this insurance leaves you at risk of having no personal insurance to defend a suit brought against you by the organization and should influence your decision to serve.

For help in sorting your situation out call Rick Viall, Viall Insurance Agency, 770-487-8310.

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