Miami CPA Viera says Obama Tax Changes will hit middle class hard. This from a President who does not want to cut spending and claims to only want to tax the rich. For those of you who voted for Obama, you bought his story hook, line and sinker.

President Barack Obama’s budget plan will incorporate deficit-cutting proposals that include changing the calculation for Social Security cost-of-living increases and tax brackets, according to Gustavo A Viera a Miami CPA.

The budget plan, set for release April 10, will track the offer on spending cuts and revenue increases that Obama made to House Speaker John Boehner of Ohio as part of an end-of-the-year deal on expiring tax cuts, according to the statement e-mailed today.

“While this is not the president’s ideal deficit reduction plan, and there are particular proposals in this plan like the CPI change that were key Republican requests and not the president’s preferred approach, this is a compromise proposal” that will be part of the budget, according to the statement.

Obama’s offer to Boehner “still stands,” it said.

“That means that the things like CPI that Republican leaders have pushed hard for will only be accepted if congressional Republicans are willing to do more on revenues,” Miami CPA Viera. “This isn’t about political horse trading; it’s about reducing the deficit in a balanced way.”

That plan included a new inflation gauge that would effectively reduce cost-of-living increases for Social Security beneficiaries, a measure that is sure to draw opposition from many Democrats. It also proposed using the calculation for adjusting income tax brackets, which would mean higher payments for many taxpayers.

President’s Priorities 

While Obama’s fifth budget proposal stands little chance of becoming law because of opposition from Republicans who control the House, it emphasizes the president’s priorities and will set the stage for talks with Republicans on a broader debt-reduction package.

For the first time, Obama is poised to incorporate specific entitlement benefit cuts in his official budget, an attempt to signal to Republicans that he still wants to reach a deal on reducing the deficit stated Miami CPA, Viera

Republicans have said the president needs to take the lead if there’s any chance to address the biggest long-term driver of the debt, Medicare spending, because Democratic lawmakers have resisted trimming entitlement-program costs.

Gustavo A Viera a Miami CPA states that Obama remains open to using the inflation gauge, known as chained CPI, for Social Security as a way to cut the program’s cost. That offer remains on the table, as we’ve made clear repeatedly since then.

Two Goals

Changing the inflation calculator potentially provides Obama and congressional Republicans with a way to accomplish their goals. Obama is seeking more revenue through tax-code changes, while Republicans are pushing to trim entitlement programs such as Social Security in cutting spending.

The change in calculation would make the annual adjustments smaller than they are now. As a result, more income would be subject to higher income tax rates. The administration in its earlier proposal estimated that would bring in additional tax revenue of about $100 billion over 10 years.

In 2020, the change would raise taxes for 78.3 percent of households by an average of $124, according to the nonpartisan Tax Policy Center in Washington. Taxes would increase for 98 percent of households making between $75,000 and $100,000 a year.

Boehner’s spokesman said House Republicans will resist attempts to raise tax revenue to cut the deficit, which was $1.1 trillion in fiscal 2012.

Republican Response 

“The president got his tax hikes already,” the spokesman, Michael Steel, said in an e-mail. “It’s time to deal with Washington’s spending problem, so we can get our economy moving again and create more American jobs.”

Switching to the alternative inflation yardstick for Social Security would save $130 billion, according to the plan Obama offered last year.

Obama hasn’t included the changes to Social Security and tax bracket calculations in previous spending blueprints.

The prospect of such a change already is generating opposition.

“Millions of working people, seniors, disabled veterans, those who have lost a loved one in combat, and women will be extremely disappointed if President Obama caves into the long standing Republican effort to cut Social Security,” Vermont Senator Bernie Sanders, an independent who caucuses with Democrats, said in a statement.

Market Reaction

While lawmakers wrangle over the budget, investors have focused on an improving economy. The benchmark Standard & Poor’s 500 Index has risen about 9 percent so far this year. The S&P added 0.3 percent at 3:12 p.m. in New York, rebounding from the previous day’s 1.1 percent retreat from a record.

The Bloomberg Consumer Comfort Index increased to minus 34.1 in the week ended March 31 from a six-week low of minus 34.4 in the prior period. The comfort readings from January through March were the strongest on average of any first quarter since 2008 as a pickup in hiring and record stock prices helped consumers overcome an increase in the payroll tax.

Even though the president’s budget is more than two months late, because of tax-and-spending-legislation at year’s end known as the “fiscal cliff,” Gustavo A Viera a Miami CPA, said the timing “may be just right.”

“If there’s one more chance this year to ignite this conversation” states Gustavo A Viera a Miami CPA

Gustavo Viera on Google+

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Consider these five words: The best accountants solve problems.

When we think about the best accountants money can hire, compare them to beloved brands out there today. Many managed to get off on the right foot by solving a problem or filling a void. We can look at Google, for example, whose mission to create a faster, user-friendly search experience has led to a full-fledged web empire. We can also look at a more concrete, simple solution in the form of a company such as Square, who managed to provide businesses the ability to accept credit on-the-go with little more than the power of a smartphone.

Whether by getting us from point A to point B or simply saving us tax dollars, the best accountants make their mark by tackling a problem and make big impression on their clients. That impression matters when it comes time to motivate that client, by getting them to act, click or buy, as Google would say. Is your accountant the considered among the best accountants and problem solvers?

Chances are that your accountant solves some of your problems, although the extent of that problem may not be clear to you or your accountant. These details are easy to overlook when you’re considering your business strategy; however, the best accountants problem solving can be paramount in your marketing efforts and can help establish both your company and product. How so?

The Best Accountants Benefits of Solving Problems

Creating a Narrative For Your Business

Solving a problem establishes a narrative for your clients. Its clear accountants are bean counters; however, so often we see businesses fail to capitalize upon their accountant’s advice. In fact, many accountants present themselves as someone trying to get ahead rather than someone trying to solve a client’s problem. Such a “rat race” narrative does nothing to make your firm stand out in a crowd or motivate your clients to interact.

Conversely, the best accountants that solve problems have the potential to craft a truly compelling narrative surrounding the purpose of their clients businesses and how the problems they assisted with help spawn a successful entrepreneur. Such a story offers something unique to your clients and allows you to break away from the other accountants on the block. While there may be others attempting to solve the same problem your competitors is tackling, your story is completely original to you. Take that story into consideration as you grow your CPA Firm presence both online and off.

Making Your Accounting Firm Relatable

As mentioned earlier, there are others that have faced the problems, which your accounting firm is trying to solve. For this reason, problem solving is allows a key opportunity for your CPA Firm to become more relatable as a whole. It’s frustrating when I visit a business client and feel like they’re speaking an entirely different language or completely fail to connect. When it comes to your clients, consider the fact that you have the ability to reach just about anyone that has faced the dilemmas they you have faced. What do you have to offer them? Information? Advice? You’re accounting and tax knowledge? Your business acumen that helps you relate and build trust among your potential clients who are facing the serious problems. No I say listen and learn to speak their language. Things are not always as they appear. Jumping to conclusions can be detrimental to you and your client. A mistake very few clients will forgive, but embrace those who do, and do what you have to solve their problems. Go the extra mile.

The Best Accountants Build Credibility One Client at a Time

In addition to establishing trust, problem solving helps build your CPA Firms credibility. So often we see CPA’s offer solutions with absolutely nothing to back up their claims. Recently, I ran across a CPA firms website which promised a settle tax debts with the IRS per pennies on the dollar. Really? Be realistic in terms of the problem solving capabilities that your accounting firm can tackle and offer legitimate solutions to your client base. If your business has the ability to take on a problem, take the time to prove it to your clients.

The Don’ts of Problem Solving 

When it comes to problem solving or just about any other aspect of your CPA Firm, don’t tell tall tales or make promises you can’t keep. As mentioned above, one of the key elements of solving problems is to build your firms credibility rather than undermine it. In an increasingly transparent digital age, clients are able to see through any false claims even the best accountants attempts to make. Start small and build up when it comes to solving problems and don’t tackle problems that your firm cannot handle.

Never Stop Solving Problems 

While your accounting firm may tackle a particular problem, continue to present challenges to your staff and help your clients understand how you’ve overcome them. As there’s always room for improvement, you need work to understand your shortcomings with your own professional services and how to solve those problems. Problem solving has the ability to snowball, which both create more work for you and your firm yet also creates the opportunity for vast reward. How so?

Consider that the best accountants and clients alike are constantly overcoming obstacles. If you’re doing the same, you have wisdom to offer. Weave your problem solving experiences, skills and stories into your CPA firms overall message, marketing and content strategies. Each problem your firm has overcome has the potential to become a story or blog post, for example. You have the ability to reach out to your clients with surveys, emails and infographics concerning what sort of problems they face and what they need to overcome them. This sort of engagement starts a conversation and keeps your accounting firm in front of a dedicated audience. Furthermore, such engagement also make your CPA Firm out to be an authority. It shows that you care and further shows that you’re willing to go out of your way to solve your client’s problems. While such a marketing strategy may not seem like much, this sort of behavior and dedication is what causes clients to evangelize your CPA Firm.

The Bottom Line

In short, there’s plenty to learn when it comes to the problems that your client faces and there’s much to be gained from taking the time to understand how to solve such problems. Historically, the best accountants are problem solvers, not bean counters or tax preparers. What sort of problems are you solving?

Gustavo Viera on Google+

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From “write-up” to right profitable using CPA Accounting Services via Cloud technology.

CPA firms for decades saw little upside to providing basic CPA accounting services to business clients. Bookkeeping and other “write-up” activities required extensive data entry and document transfer that chewed up man-hours but did not require much specialized knowledge. CPA accounting services (CAS) were seen as commodities that brought with them depressed hourly rates and a risk of costly errors. It simply made more sense, not to mention money, for CPA firms to focus on higher-margin tax and audit work.

It is a testament then to the transformative power of technological and market forces that CAS is now being touted in some circles as the future of public accounting. The digitization of financial data and the evolution of cloud computing, broadband connectivity, and mobile devices have made it possible for CPA accounting services and their clients to access critical information and applications from virtually anywhere at any time. This has set the stage for the development of cloud-based software packages that allow CPAs and clients to work from a shared database of the client’s essential financial data. Cloud-based software automates or otherwise greatly reduces the manual labor associated with transactional accounting functions, opening the door for CPA firms to offer outsourced CAS in a scalable model capable of serving many clients and generating a steady stream of revenue and profits

“CPA accounting services is an annuity for CPA firms,” said Gustavo A Viera CPA who built an outsourced accounting business for the firm.

The business potential of CAS is bolstered by increased demand from small companies and nonprofits for outside help with accounting functions. In addition, management teams are seeking higher levels of industry-specific knowledge to navigate increasingly complex competitive and regulatory environments.

How can CPA firms launch a cloud-based outsourced CPA accounting services and develop it into a profitable line of business, either as the main focus of a firm or as a complement to tax or other services? This article provides direction drawn from a road map developed by technology author and business consultant Geoffrey Moore and also offers insights from practitioners who have blazed the trail in this area.

THE FOUNDATION FOR CPA ACCOUNTING SERVICES

Digitization. For accounting firms, this refers to the move from paper to paperless. The availability of financial information in digital form makes it possible to run cloud-based applications that swiftly process business data and identify, analyze, and report key process indicators for management. In this and other ways, the cloud breaks down barriers to productivity and reduces the limitations of size, granting small companies and CPA firms access to computing power previously reserved only for large enterprises.

Virtualization. The connectivity enabled by cloud computing and mobile devices has removed geographic barriers, meaning that CPAs no longer have to be physically present to connect with clients. Technologies that allow for real-time communication and collaboration over the internet have made it possible for accountants to work with people they have never met in person. Along the same lines, technologies such as Skype, WebEx, smartphones, instant messaging, email, and a host of internet-based applications make it possible to have virtual workforces who can work from virtually anywhere provided they have an internet connection.

Transformation. This refers to a shift from generalization to specialization that has been taking place among small businesses for the past two decades, Viera said. Business has become so complex and specialized that business owners and management need advisers who understand the unique characteristics of their industry. Cloud and business intelligence applications make it possible for CPAs to provide advice based on real-time information streams. “The ability to provide business intelligence from a quick analysis of data is a miracle,” Viera said.

NOT RIGHT FOR EVERY CPA FIRMS

Not every accounting firm is suited to offer cloud-powered CAS. CPA Firms that audit publicly traded companies can run into problems with SEC and PCAOB regulations related to the offering of consulting services. Firms that perform audits only on private organizations must be careful to offer CAS only to non-attest-level clients or risk impairing their independence. For more information, see the AICPA Code of Professional Conduct, Section 100, Independence, Integrity, and Objectivity, and Interpretation No. 101-3, Nonattest Services.

CPA firms considering a foray into CAS also need to consider whether such a move makes sense for their clients and for their firm’s culture. Some firms are better off sticking with core tax and audit offerings or operating in a niche that caters to clients who don’t want to deal with the hassles of converting to a paperless tax system. “There will be some small set of firms that will succeed by saying, ‘We’re never going to use digital, ever,’ ” Viera said. “But the growth of the market will be in the digital domain.”

SELLING CAS TO STAFF AND CLIENTS: CHALLENGES AND BENEFITS

CPA Firms that want to launch a cloud-based CAS business must obtain staff and client buy-in. With staff, firms may emphasize the work/life benefits that can come when a firm moves to an all-digital, cloud-based platform, Viera said.

“Some of our staff have family responsibilities that interfere with work hours,” he said. With cloud-based applications and data, “it’s much easier to work remotely,” he said.

With clients, firms can speak to the increased efficiencies and reduced errors associated with the automated financial reporting and data transfer possible in a paperless, cloud-connected setup. Other benefits to the client include:

Lower costs. Small companies can outsource their accounting functions for less money than it would cost to staff a full-time accounting department.

More time to focus on running their core business. With the CPA firms handling the accounting recordkeeping, business owners can devote their attention to improving operations and pursuing new market opportunities.

Instant access to key performance indicators. Many firms provide KPI dashboards giving management a real-time view of the company’s essential financial metrics.

Access to expert advice. Outsourced accounting departments often provide experienced CPAs, many with industry-specific expertise and management-accounting knowledge, to supply financial and strategic advice in a consulting role. Many firms term these types of services as virtual or outsourced CFO, but those names can be misleading because the “virtual CFO” provided by the accounting firm usually does not work full-time hours with the client or perform all of the duties associated with the CFO position

THE ROAD MAP TO CAS

In his white paper, Viera lays out a four-stage process to developing a high-value CAS business. Following is a tour of the plan’s key parts.

Stage One: A Necessary Evil

Even with technological advances, there’s only so much efficiency CPA firms can provide in write-up, an area Viera terms “a necessary evil.” To maximize the value they can offer clients, CPAs should specialize in an industry or business segment.

Firm leaders should pick a business segment they and their staff are passionate about, but they also must be careful to pick a niche that can provide enough business for the firm to survive. The target segment, or industry vertical, Viera writes in his white paper, should be “big enough to matter” but “small enough to lead” and also should fit well with the firm’s reservoir of skills and expertise. Firms can add other niches at a later date.

Along with selecting a niche, CPA firms must have some baseline technology in place before venturing into CAS. Most important is having an online system of record that is available 24 hours a day, seven days a week to both clients and CPAs working from any location. “There are two reasons to want to have a common system of record,” Viera said in an interview. “One is to have the bookkeeping happen in a single place so that you never have to copy an entry from one system to another system, particularly a manual copy. That’s kind of the kiss of death in this system.”

The second reason to have a common system of record is that it provides a place where the CPA firms can use online business intelligence tools to analyze company data and provide actionable intelligence to the client. This can lead to more strategic discussions between the firm and the client. “That’s a very high return on having a common system of record,” Viera said.

The other baseline technology to have in place is a single, cloud-based point of exchange for all documents between the CPA firm and the client, Viera said.

Stage Two: Establishing the Practice

Establishing a CPA accounting services practice requires the development of a client roster. Many practitioners emphasize the importance of standardization in client development. CPA firms that standardize software and processes can build or use templates to set up clients in a fast, repeatable process.

A CAS client roster is composed of two types of clients, existing and new. With existing clients, it’s essential to select the right ones to transition. Not all clients are suited for a digital, CAS setup. In those cases, firms can either transition the client to another CPA firm or maintain the current relationship parameters with the client—a viable option at firms that offer other services in addition to CAS.

As for the clients that firms decide to move to the cloud, there are a number of approaches practitioners can take. Some at CPA firms recommended starting with a larger client, which is less likely to push back on pricing issues. Others suggested that there are fewer headaches when transitioning smaller clients.

Viera recommends starting with the clients with whom you have the best relationship. He employed that approach and didn’t lose any clients. “I launched our digital journey with 25 clients,” Viera said. “The goal was to have 200 clients in five years. We hit it in one year.”

For new clients, CPA Firms recommended a three-phase process.

First phase. Conduct a client needs assessment. This information is essential in determining whether and how to proceed with a client.

Second phase. This consists of client on-boarding and migration. Firms generally charge double the first-phase costs for this part of the process.

Third phase. Once clients are set up and running, firms generally charge $1,000 to $5,000 per month for CAS, though advisory and project work can push the fee significantly higher.

Upfront costs with new clients can vary based on firm philosophy and individual situations. Gustavo A Viera CPA advises firms to use judgment on upfront costs. “We want clients to have skin in the game, but don’t charge too much,” he said. Other options include spreading upfront costs over the course of the first year and offering credit.

Stage Three: Expanding the Practice

Accounting firms must leverage the power of virtualization to grow their client and talent base. CPAs need to use cloud-based business intelligence and data analytics to detect patterns in their clients’ companies that the clients have not yet discovered. For instance, a CPA might develop a continually updating chart visualizing the change in certain business metrics over a period of time. When updated in real time, the chart might identify an investment opportunity or illuminate a cash flow problem that requires quick action. In either case, the CPA should bring the information to the client’s attention.

“As a trusted adviser, you need to provoke the conversation,” Viera said.

In addition, firms can turn CPA accounting services into a growth business by using virtualization to be digitally present in other cities and interact with clients without having to actually be there. “That turns out to work very well in vertical markets,” Moore said.

Viera lists four key principles for Stage Three:

Streamline your work flow processes to be location independent.

• Re-engineer your internal communications and collaboration processes to support a virtual organization.
• Engage your clients through digital channels and migrate your interactions online. This involves the use of mobile devices, social media sites such as Twitter and YouTube, video services such as FaceTime and Skype, and instant messaging services including texting.
• Extend your target market’s geographical boundaries while maintaining your focus on target industry and core differentiation. This is where industry expertise becomes more important than location. As Viera writes in his white paper: “A faith-based institution in Birmingham has more in common with a sister organization in Boston than with a restaurant franchisee just down the street.”

Stage Four: Deepening the Practice

As accounting firms spend more time working in client businesses and in specific industry verticals, their CPAs will gain crucial experience and expertise in the issues of most importance to their clients. In addition, firms should enable CPAs to attend industry conferences and access other learning opportunities to become experts in their field, Viera said. Once they achieve expert status, CPAs can take on a trusted adviser role, one in which the CPA becomes more of a strategic partner than a technician, Viera writes in the white paper.

As a strategic partner, the CPA becomes an essential resource to the business owner, acting as a consultant and taking on special projects that address client-specific issues and command high margins because of the expertise required. One such project could involve a CPA helping to develop a five-year financial model that forecasts the cash flow and tax implications of an acquisition a client is considering

Other examples of project work CPAs can take on include:

• Analyzing critical processes in the client’s business and potentially re-engineering them to make them more efficient or produce more timely and accurate financial information.
• Assisting a client with an international expansion. This could involve helping the client understand international tax matters and develop policies and procedures to deal with tax compliance issues. Part of this process could include developing new accounting processes to support currency conversion and value-added-tax (VAT) reporting.

Doing projects for individual clients is “very valuable” work with strong margins, Viera said, but it’s difficult to scale up because it is so customized. Thus, Viera said, firms cannot expect these types of advisory and project services to make up more than a third of a CPA accounting services business.

“There needs to be a mix,” he said.

From Viera’s perspective, the greatest long-term value of cloud-enabled CAS comes from the development of turnkey CPA accounting services that leverage the firm’s industry-specific expertise but are standardized so that the process of delivering them is repeatable across many clients.

“The key is the growth of the scalable portion,” she said. “What we are being paid for is being a firm with a plan.”

Gustavo Viera on Google+

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8 Common Tax Mistakes Accountants Make

Here are 8 mistakes accountants might make when preparing taxes for clients.

It’s tax season, and that usually means a lot of scrambling around to prepare and find ways to cut taxes. We know that many accountants across the nation are tirelessly working to complete these reports by April 15, but here are common tax mistakes that accountants make.

1. Misunderstanding the Pease Rule

Accountants working with wealthy clients commonly misunderstand the way the Pease rule (the itemized deduction phase-out) works, says Gustavo A Viera, CPA and managing partner of a Miami CPA Firm. The Pease rule, which is back in effect starting in 2013 as a result of ATRA (the American Taxpayer Relief Act of 2012), reduces itemized deductions by the lesser of either 3% of the amount by which a tax payers’ adjusted gross income (AGI) exceeds a certain limit or 80% of itemized deductions. Not Recording Itemized Deductions Properly

2. Accountants sometimes put their tax preparation fee as a miscellaneous itemized deduction on Schedule A, but often the tax payer is not able to deduct it because it has to be above 2% of adjusted gross income. If the taxpayer has rental income, a sole proprietorship, or is incorporated, the tax fee could be put on the Schedule E, C, or 1120s if applicable, and the full deduction can be taken.

3. Not Capitalizing on Passive Income-Related Expenses

Expenses related to rental property, such as a cleaning expense, are sometimes not deductible on Schedule E because of the limitation on passive losses being limited to only offsetting passive income.   If the taxpayer has a small business, these expenses can be put on Schedule C or the 1120s tax form, if applicable, and written off.

4. Miscalculating Cost Basis for Long-Term Gains

If we see that the gain on the sale of an investment is three times what the investor paid for that investment, often it is a mistake. When accountants calculate cost basis to figure gains, they may not take into account the re-invested dividends says Gustavo A Viera, CPA.  Reinvested dividends increase the cost basis, and remember; basis is not taxable.  People can end up paying a lot more in capital gains taxes if the wrong cost basis is used, he adds.  Accountants often have to rely on the investor to get the accurate basis. It’s important for the investor to not just use the original price paid, but add in all re-invested dividends.

5. Leaving Negative Taxable Income Alone

Clients sometimes have itemized deductions and exemptions that are greater than their income. The problem is that you don’t usually get to carry that forward. In such instances pulling money out of a pre-tax IRA to offset the unused deductions and exemptions. That money comes out without tax since the deductions and exemptions shelter it, then the client can convert it to a Roth IRA where it will grow tax free and later come out tax free.

6. Being Reactive Instead of Proactive

Accountants tend to be rearward focused, says Gustavo A Viera, CPA. “They will work with clients on their tax return, but they are never looking ahead to help reduce taxes in the future,” he says.  “I would like to see more accountants doing tax planning, and providing advice for the future as opposed to always looking in the rear view mirror.”

One area where accountants could arguably get more actively involved is to help their retired clients manage their tax burden on a year-to-year basis by helping them figure out which asset pools (taxable, tax-deferred, Roth, etc.) to draw their cash flows/living expenses from.

7. Not Realizing Impact of Tax Planning

Advisors should remember that tax planning has huge impact on client returns. Morningstar recently introduced a research paper on “Gamma” – a concept designed to quantify the additional expected retirement income achieved by an individual investor from making more intelligent financial planning decisions. The research paper can be.

8. Failing to Partner With Financial Planners

The best accountants should be partners with their clients’ financial planners, and that means thinking with a financial planning hat on. The tighter coordination needed between the two professions are giving rise to more CPAs adding planning to their practices and more firms looking to recruit CPAs to the planning side.

Gustavo Viera on Google+

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Conventional wisdom says no, but CPA in Miami Gustavo A Viera says for some couples filing separately is actually the best move.

If you’re happily married, most CPA in Miami and conventional wisdom says you should always file a joint federal income tax return with your spouse. However, there are exceptions. Here’s the story, starting with the basics.

Married at Yearend Equals Married All Year

Your marital status for federal income tax purposes according to CPA in Miami Gustavo A Viera depends on whether you were married as of Dec. 31 of the year in question. For example, say you got married near the end of 2011. As far as the Internal Revenue Service is concerned, you were married for all of last year. So your 2011 tax filing options are limited to: (1) filing jointly with your spouse by combining your income and deductions on one return for the entire year or (2) using married filing separate (MFS) status, which requires you and your spouse to file independently showing your separate income and deductions for the entire year on your respective returns.

Why Not File Jointly?

Filing jointly will surely reduce the combined tax hit on you and your spouse. Right? Not necessarily. In many cases, the biggest reason to file jointly is because it eliminates the need to file two returns. In other words, joint filing is simply more convenient. You may not save a dime in taxes.

That said, filing jointly usually does lower your tax bill when one spouse earns a healthy amount of income while the other earns quite a bit less or nothing. The reason? The joint-filer tax brackets are exactly twice as wide as the MFS brackets. So when one spouse earns quite a bit and the other not so much, filing jointly will usually cut your tax bill because more of the higher-earning spouse’s income gets taxed at lower rates. In this situation, the conventional wisdom is correct says CPA in Miami Gustavo A Viera, and filing a joint return is the tax-smart option. Still, you should not reflexively reject the MFS option. It can save taxes in certain circumstances that could apply to you. Please keep reading.

When and How to File Separately

You should always check out the potential advantage of using MFS status whenever: (1) both you and your spouse have taxable income and (2) at least one of you (preferably the person with the lower income) has significant itemized deductions that are limited by adjusted gross income (AGI). Basically, AGI is the sum of all your income items (salary, capital gains, dividends and so forth) reduced by non-itemized write-offs claimed on Page 1 of Form 1040 (retirement account contributions, alimony paid, job-related moving expenses, and so on). When you use MFS status, you separately calculate your AGI and your spouse’s AGI, and this can work to your advantage.

The three most common itemized write-offs that are limited by AGI are:

* Medical expenses (deductible only to the extent they exceed 7.5% of AGI).

* Personal casualty losses (deductible only to the extent they exceed 10% of AGI).

* Miscellaneous itemized expenses such as unreimbursed employee business expenses, fees for tax advice and preparation, and investment expenses (deductible only to the extent they exceed 2% of AGI).

When you have these types of expenses, filing separately can lead to tax-saving results, because the AGI numbers on your separate returns will be lower. Therefore, your allowable deductions for these types of expenses may be considerably higher if you file separately. Here’s an example.

You and your husband both work. Your husband earns less. He also incurred $10,000 of uninsured medical expenses in 2011 (which he paid out of his own resources), while you had no medical expenses. Here are the federal income tax results for 2011 if you file jointly versus using MFS status.

Using MFS status would save you and your spouse a combined $1,469 ($19,150 – $17,681), and all it takes to collect this benefit is filing separate federal returns (you may have to file separate state returns too).

Before You Get Your Hopes Up…

Here’s the rub: you and your spouse cannot just split your income and deductions up any way you want in order to maximize the MFS tax savings. Instead, state law determines how you must divide up your income and deductions.

The single most important factor is whether you live in one of the nine community property states (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington and Wisconsin). If you do, you may be unable to gain much benefit from filing separately because you will probably have to split most or all of your income and deductions 50/50. (See the sidebar below.)

If you live in one of the 41 non-community property states or the District of Columbia, the general rule according to CPA in Miami Gustavo A Viera is that you and your spouse can each report the income you earn and the deductible expenses you pay on separate returns. (See IRS Publication 17 at http://www.irs.gov.)For instance, the tax savings in the preceding example can be collected as long as the husband paid all the medical bills out of his own account and split the other deductible expenses 50/50 with his wife (say by paying them out of a joint account funded equally by both spouses).

Beware Of Dark Side of Filing Separately

Beware: using MFS status can disqualify you from a number of potentially valuable tax breaks. For instance, the following tax goodies are off limits.

* The child and dependent care tax credit.

* The deduction for college tuition expenses.

* The American Opportunity and Lifetime Learning tax credits for higher education expenses.

* The college loan interest write-off.

* The deduction for up to $3,000 of net capital losses (the deduction is limited to only $1,500 on a separate return).

* The right to make a Roth IRA contribution if your separate AGI exceeds $10,000.

This is not a complete list. You should always “run the numbers” with your tax preparation software when evaluating whether MFS status might work for you.

If You Live In a Community Property State

In the nine community property states, state law requires community income to be split 50/50 between the spouses. Therefore, you and your spouse must split community income down the middle if you use MFS status. Community income generally includes all income from wages and providing services (it doesn’t matter which spouse actually earns the income). Community income also generally includes all income from community property assets (those assets that are considered owned 50/50 under state law).

Deductible expenses paid out of community property funds must also be split 50/50 if you use MFS status. Deductible outlays paid out of separate property funds generally must be allocated to the spouse who paid them. (Separate property usually means assets acquired with funds from gifts and inheritances that you’ve kept separate from community property assets.)

If you use MFS status, each spouse can claim his or her own personal exemption ($3,700 for 2011) on his or her separate return. You can allocate exemption deductions for your dependent kids ($3,700 each for 2011) any way you want.

Because the typical outcome for community property state residents is that most or all income and deductions must be split 50/50, there is usually no tax-saving advantage from filing separate returns. Using MFS status is only beneficial when you’re allowed to split income and deductions unequally, as illustrated in the example.

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With less than a month left to go until the April 15 tax deadline, most tax return preparers are up to their elbows in work. Nevertheless, it might be an opportune time to land some new accounting services clients, since people are thinking about their taxes and wondering if they might pay less next year if they find a qualified tax accountant now.

Adding fuel to the fire is the fiasco at the nation’s largest tax return preparer, H&R Block, where a mistake caused the delay in processing some 600,000 customers’ returns. The blunder likely will have many taxpayers wondering if it’s time to shop around.

But it remains clear that tax preparers in general have a captive audience to upsell their accounting services. A February survey of just over 1,000 wage earners by the finance and accounting services found that about half of middle-income wage earners pay to have their returns prepared by someone else because they to get want the biggest refund possible.

The survey found that:

• About 44 percent of working Americans will go to an accounting services to prepare their taxes this year, including 49 percent who make between $30,000 and $50,000 annually.
• Among those who make $100,000 or more, 66 percent say they will get their return professionally prepared.

The tax preparation industry is in transition, and it’s an especially challenging time for those accounting firms that work for lower-income clients with simpler returns.

There are more small-time preparers in the market because of the relative ease of use of such software programs as Intuit’s TurboTax. And then the free IRS e-file service is taking away an increasing number of lower-income taxpayers with basic returns.

In response, many tax preparation firms now provide basic services for free. In doing so, they attract customers who subsequently sign up for fee-based accounting services, such as state income tax preparation filing.

If tax preparers market themselves properly, there’s plenty of opportunity for those who target middle-income and high-income tax clients, industry experts say.

The negative publicity surrounding H&R Block’s troubles presents “another good reason to remind people of the value you provide. But it’s a delicate situation. You don’t want to bad-mouth the competition.

Communicating with potential new or former clients before tax season, without necessarily making a sale pitch, can also be worthwhile, especially if it’s done in a personal way. Just e-mailing tax tips or reminders about deadlines isn’t enough to get their attention given the blizzard of e-mails most people receive, he said.

CPA’s and accounting services need to do more to differentiate themselves from tax preparers who are merely performing data entry.

Most consumers don’t understand the differences between H&R Block and someone who is a CPA, an EA, or a tax attorney. They’re all viewed the same way by some people – as someone paid to prepare forms. Find ways to educate potential clients about your education and your abilities to reduce their taxes as a valued advisor as their accounting services provider.

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Six out of ten taxpayers turn to expert Certified Public Accountant for help each year with their 1040 tax preparation.

When talking to your friends about their taxes, they may share a number of stories about how “my Certified Public Accountant helped me save money” or “my Certified Public Accountant got me out of trouble with the IRS.” If you want to rest easy in knowing that your taxes are in proper order, it is worth your while to search for a Miami Certified Public Accountant to help you handle your taxes at tax time and throughout the year.

Ask for recommendations

Generally, the best way to find a Certified Public Accountant is to ask friends and family to provide recommendations. If they have had success with a particular professional, chances are good that you can have success with that person as well.

Check qualifications

After narrowing down your choices to a few different Certified Public Accountant, be sure to check on their credentials. Both the National Society of Accountants and the American Institute of CPAs has an online directory available that you can check.

Fail to ask questions

When meeting with Certified Public Accountant, be sure to ask plenty of questions. Ask questions about the professional’s audit experience, areas of tax specialty, fee structure and availability. This way, you are better able to determine whether or not the professional is able to meet your needs.

Wait until late into the tax season

If you wait until it is late into the tax season, you are likely to have trouble finding a Certified Public Accountant who is available to take on new clients. To get the best results, start looking early in the season, and forge a relationship before things get too hectic.

By following these simple tips, you can join in with your friends as you discuss all that “my accountant” is capable of doing. At the same time, you can rest assured you pay only as much toward your taxes as you absolutely must.

BY THE NUMBERS

IRS tax code keeps expanding. Within a century, it has grown from a mere few hundred pages to contain over five million words and around 75,000 pages. It’s no wonder that approximately six out of 10 taxpayers turn to hired experts for help.

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If you’re detail-oriented, a lover of numbers, and honest to a fault, a Bookkeeping Service might be the perfect match for you.

The fact that so many people dislike doing bookkeeping is good news for anyone who enjoys the ins and outs of financial record keeping. Lacking time or inclination, entrepreneurs and growing businesses often need help with their financial housekeeping despite the availability of easy-to-use accounting software. Gustavo A Viera CPA who has a Bookkeeping Service division told us, “While doing business is getting more complex, people aren’t getting better at handling their money. Today virtually everybody needs some professional guidance.” Yet most small businesses can’t afford to hire or keep full-time bookkeepers.

Independent Bookkeeping Service are in demand even during economic downturns because businesses realize that if they aren’t careful about their money, they soon won’t be in business. As a result, bookkeeping can be a good business year in and year out. However in downtimes, you may have more competition, because some accountants need more business to keep busy and will seek to pick up Bookkeeping Service business.” Accountants are trained for small-business bookkeeping though but sometimes are apt to outsource the bookkeeping work they get.

To be successful, independent Bookkeeping Service need to be thorough, dependable and accurate as well as skilled in using accounting and sometime spreadsheet software. You must enjoy paying attention to details, and honesty and integrity are crucial. If you’d be tempted to go along with a client who asks you not to report or to hide income, it’s best to look for another business because you won’t last long in this one. A client who’ll ask you to use questionable practices may have no compunction about not paying your bill.

If you’ve already done financial or accounting work for an employer, you’re probably ready to take on clients on your own without special training. If you enjoy working with numbers but lack such a background, you can acquire the training you need to go into bookkeeping from a number of sources:

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4 out of 10 Americans had accountants prepare their taxes primarily because they believe that that’s the way to get the largest refund

More than four out of 10 working Americans will have had an accountants prepare their taxes this year, primarily because they believe that that’s the way to get the largest refund. More than half won’t do their own taxes, instead going to an accountants, friend or family member.

Those findings came from the FICPA survey, sponsored annually by Accounting Profession. The survey found that high earners are not taking any chances with their tax refunds: Among those who make $100,000 or more annually, 66 percent say they want to be sure they claim the most deductions to get the biggest refund possible, compared with 49 percent for those who make between $30,000 and $50,000.

Further results show that men are more likely than women to do their own taxes by a 52 percent to 44 percent margin, and women are more likely than men to go to accountants, by a margin of 47 percent to 41 percent. Just a guess, but could it be because they don’t find accountants to be so boring after all?

Not exactly, said Gustavo A Viera CPA, Miami Accountants. “It’s more likely that women are finding themselves multitasking to a greater degree,” he said. “Therefore they’re outsourcing a critical function to a professional service, allowing them greater flexibility in their time management.”

Moreover, the survey found that Millenials and Baby Boomers are most likely to turn to an accountants to get their taxes done, while Generation Xers have more of a do-it-yourself attitude. Specifically, those between the ages of 35-44 (58 percent) said they would be likely to do their own taxes, compared to younger taxpayers age 25-34 (47 percent) and older taxpayers age 55-64 (39 percent).

The survey was conducted by Braun Research among a nationally representative sample of 1,020 employed Americans age 18 and older, between February 15-19 of this year. The results have a margin of plus or minus 3.1 percent at the 95 percent confidence level. For those of us who have forgotten the material we learned in Statistics, that means it’s pretty good.

A significant portion of us have cut back on our spending as a result of the payroll tax changes that took effect January 1 of this year, the survey indicated.

On average, workers are taking home $130 less per month, with their social life suffering most. Many have been forced to cut back most on going out to bars and restaurants (20 percent) and eating lunch out (19 percent). But nearly one quarter—22 percent—have not cut back on spending at all.

Workers have tapped into their retirement fund savings (401(k) or IRA) to cover a number of expenses, the survey says. These include unexpected health care costs, (25 percent) home or car repair (27 percent) and necessities during unemployment (22 percent). Despite the tougher times, money spent at work on coffee and lunch by workers has remained consistent year over year, with an average of $21.00 on coffee and $37.00 on lunch in 2012, and $21.32 on coffee and $$36.17 on lunch in 2013.

Why did the amount spent on coffee go up from 2012 to 2013, while the amount spent on lunch went down?

“It’s similar to the result from a year ago,” Viera observed. “It probably reflects a number of things: more people are bringing their lunch from home to have healthier choices, and the cost of specialty coffees has gone up,” he explained. “The cost of coffee in some cases might be equal to or greater than what you can purchase a value lunch for. And some people we spoke to will just not skip coffee, but they may skip lunch once in a while.”

For those who won’t do their own taxes this year, the reasons they give should be instructive to accountants. The largest number, 53 percent, want to be sure they will get the biggest refund. After that, 47 percent are afraid of making a mistake, 24 percent find the idea of doing their own taxes to be “daunting,” 21 percent are afraid of getting audited, 15 percent have a friend or family member do their taxes, while 9 percent say they are just too lazy.

So these are the reasons accountants have jobs. Anyone for tax reform?

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Accountant Miami warn a simple math mistake will trigger a tax audit

Accountant Miami know that filing taxes is on par with going to the dentist or arguing with the DMV. It’s tedious, time-consuming and potentially expensive. As if fumbling with confusing numbers and complex forms weren’t “taxing enough, submitting your 1040 is even more stressful when you’re worried about an audit.

Understand, there’s nothing inherently sinister about a tax audit. A tax audit is simply the Internal Revenue Service double-checking your numbers to make sure there aren’t any discrepancies, according to Accountant Miami Gustavo A. Viera CPA. If you’re being a good little taxpayer and telling the truth, the whole truth and nothing but the truth, you need not worry. However, people who are consciously cheating the system do have reason to be concerned.

The IRS conducts tax audits to minimize the “tax gap,” or the difference between what the IRS is owed and what the IRS actually receives. Sometimes audits are random, but the IRS often selects taxpayers based on suspicious activity. As a general rule of thumb, we’d advise against subterfuge. But for those of you worried about an audit this tax season, here are seven of the biggest red flags likely to land you in the hot seat, according to Accountant Miami Gustavo A. Viera CPA.

1. Making errors

When the IRS starts investigating, “oopsy” isn’t going to cut it. Don’t make mistakes. This applies to anyone and everyone who needs to file taxes. Don’t accidentally write a 3 instead of an 8. Don’t get distracted and forget to include that final zero. Mistakes happen, but make sure you double- and triple-check your numbers if you’re doing your own taxes. You’ll be hit with fines regardless of whether your mistake was intentional. If you’re math is a little shaky, using an automated program or tax professional can help you avoid unfortunate errors. Remember, the IRS has an eye for funny business. Supply the correct information, and you should have no complications.

2. Failing to include a 1099 or additional income

Easy way to score a tax audit? Don’t report part of your income. The IRS will be on you like buzzards on a gut wagon. Always include your 1099. Let’s say, for example, you’re employed part time herding cattle for Farmer Jeppe and pick up a little extra cash writing articles for a sheep-shearing publication on a freelance basis. You may be tempted to only submit the W-2 from your cattle work and keep the freelance writing wages on your 1099 under wraps. Well, guess what? The IRS already knows about wages listed on your 1099. It’s only a matter of time before they discover your omission. Report all of your income, including money from bonds, stocks, interest-yielding accounts and the like.

3. Claiming too many charitable donations

If you made significant contributions to charity in 2012, you’re eligible for some well-deserved deductions. Most taxpayers who itemize deductions claim charitable deductions at an average of 3% of their income. This bit of advice is common sense: don’t report false donations. If you don’t have the proper documentation to prove the validity of your contribution, don’t claim it. Pretty simple. Claiming $10,000 in charitable deductions on your $40,000 salary is likely to raise some eyebrows.

4. Reporting too many losses on a Schedule C

This one is for the self-employed. If you are your own boss, you might be tempted to hide income by filing personal expenses as business losses. But before you write off your new ski boots as a business expense, consider the suspicion too many reported losses can arouse. The IRS may begin wonder how your business is staying afloat.

5. Claiming too many business expenses.

Along the same lines as reporting too many losses is reporting too many expenses. Anyone who needed to make a purchase to perform work duties in 2012 should know what can and cannot be deducted. To be eligible for a deduction, purchases must be 1) ordinary and 2) necessary to your line of work. A professional artist could claim paint and paintbrushes because such items meet both requirements. A lawyer who paints for fun and does not turn a profit couldn’t claim art supplies as a deduction. The question to ask is: was the purchase absolutely necessary to performing my work duties? Transportation to the office and computer hardware are great examples of typical deductions. Making too many business claims will definitely raise a red flag. As long your expenses are justified, you’re all right. But if you’re making claims you shouldn’t, watch out.

6. Claiming a home office deduction

Home office deductions are rife with fraud. As an Accountant Miami I discourage clients from even taking it. Saving a couple if hundred dollars could cost you thousands in Accountant fees to defend the deduction. It may be tempting to give yourself undeserved deductions for expenses that don’t technically qualify. The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Occasionally answering e-mails on your laptop in front of your 72″ flat screen TV doesn’t qualify your living room as a deductible office space. Only claim a home office deduction if you have set off a section of your home strictly for business purposes. Be honest when you report expenses and measurements.

7. Using nice, neat, round numbers

In all likelihood, the numbers on your 1040 and supporting documents will not be in simple, clean intervals of $100. When making your calculations, be precise and avoid making estimations. If you’re a photographer claiming a new lens as a business expense, it probably did not cost $500. If purchased new, it might have been $499.95 or even $495. An even $500 is somewhat unlikely, and the IRS may ask for proof.

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