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W-2 Scam Targets Small Business

Question-yikA5pBiEThe IRS has issued a new tax-related identity-theft scam warning to small businesses and human resources professionals.  The email phishing scam uses a business owner’s, corporate officer’s or human resource professional’s name in what looks like company or even official tax agency emails. The emails request copies of employee Forms W-2 from company payroll, internal accounting or human resources departments.

This is the second time the email scam has been identified as attacking businesses nationwide. The IRS urges business owners, internal accountants and company payroll officials to double check any executive-level requests for lists of Forms W-2 or Social Security Numbers.

The W-2 scam first appeared in early 2016. The IRS reports that cybercriminals tricked payroll and human resource officials into disclosing employee names, SSNs and income information. The thieves then attempted to file fraudulent tax returns to create fraudulent income tax refunds in a tax-related identity theft scheme.

This phishing variation is known as a “spoofing” e-mail.  It will contain, for example, the actual company chief executive officer’s name.  In this variation, the “CEO” sends an email to a company payroll office or human resource employee requesting a list of employees and information including their SSNs.

Crime investigators say some of the wording used in actual scam emails included:

  • “Kindly send me the individual 2016 Forms W-2 (PDF) and earnings summaries of our company staff for a quick review.”
  • “Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).”
  • “I want you to send me the list of Form W-2 copies of employees’ wage and tax statement for 2016.  I need them in PDF file type, and please send it as an attachment.  Kindly prepare the lists and email them to me asap.”

Working together in the Security Summit, the IRS, states and tax industry representatives have made progress fighting against tax-related identity theft.  However, cybercriminals continue developing more sophisticated tactics to impersonate taxpayers in their effort to steal even more data.

For more information about tax-related identity theft and other tax scams, click here to link to The Security Summit’s national taxpayer awareness campaign called “Taxes. Security. Together.


IRS Cuts Affect Tax Refunds and Audits

As we file 2014 individual tax returns and pay federal income taxes, it’s hard to imagine the IRS having on-going budget troubles. Yet, IRS Commissioner John Koskinen is requesting an additional $2 billion to keep up with service requests, timely refunds and enforcement actions such as tax audits on individuals and businesses.

1040 form with glasses and penniesIn a previous edition of The ReSource, we have given details of the delays and complaints associated with the decline in IRS customer service responses as the IRS has cut its staff and switched to more automated systems.  Now, political payback is cutting deep as the agency faces ongoing heat for mixing politics with taxes due to allegations of targeting conservative groups and paying for expensive “training” retreats.

Last month, Congress approved a $10.9 billion budget for the IRS for fiscal year 2015, which ends in June.  It is the lowest level of funding for the embattled agency since 2008 with total budget amounts declining $1.2 Billion in the last 5 years. 

Whether a taxpayer thinks there should be more or less of the IRS, the budget push-me-pull-you debate is affecting the taxpayer’s experience in a number of ways.  Commissioner Koskinen describes it as “changes” in how the IRS will do business with taxpayers this tax season.

Here are some of the issues that may impact you directly:

Refund Delays:  Nearly 8 out of 10 tax filers receive a federal tax refund. The average amount paid is close to $2,800, according to the most recent filing statistics.  Refunds from electronically filed returns are usually processed in about 3 weeks, but the IRS warns staff cutbacks have increased processing time up to an average of 5 weeks. Taxpayers who file paper returns are now being told their refund check might not be processed for 7 weeks.

Audit Declines:  The number of audits in 2014 declined 6% overall from the previous year while experts cannot agree on what the audit numbers will be in 2015.  The audit predictions range from roughly 1% to 6% of total individual and business tax returns. 

Some taxpayers may be relieved that the risk of being audited has decreased slightly, but the conclusions are based on the percent of audits compared to the number of tax returns filed.  More fraudulent tax returns are being filed each year due to tax-related identity theft.  Fewer audits may mean it will be more difficult to detect this kind of tax fraud just as new enforcement agencies are gaining steam.

Audit Hassles: Even though last year’s audit numbers report a decline, taxpayers complain they are receiving more correspondence audits, which are computer-generated letters triggered by an automated tax form-matching program.  The correspondence letters request timely answers, but there are mounting frustrations due to the inability to connect with a “live” IRS auditor.

Hiring Freeze:  IRS officials say budget cutbacks and the resulting hiring freeze will result in nearly 4,000 fewer full-time employees at the agency by the end of June.  When those numbers are added to the headcount losses in the last 6 years, the IRS has lost nearly 17,000 full-time workers.

Less Taxpayer Help:  Officials’ statements warn that fewer than half the taxpayers that call the agency for help will be able to get through to an actual person.

Technology Timing:  Updates that were in line for streamlining IRS internal and processing systems are being delayed to avoid taking up staff time for training and testing the new systems.  Among the updates included the latest taxpayer protection tools against identity theft.

Possible Shutdown:  Commissioner Koskinen says the agency may implement a money-saving temporary shutdown as a last resort.  To minimize disruptions, he says the agency may close for two days after the main tax-filing season, possibly in May or June.

The best taxpayer defense is to make certain your federal income tax return and necessary documentation is mistake-free to avoid audits and delays. 

If you have questions about how the IRS cuts may affect your federal income tax filing, contact us at McRuer CPAs for more information.


How to Know When You Need a CPA

The DIY (Do It Yourself) industry is flourishing these days.  This trend also extends to accounting and income tax services.  The availability of affordable computing power, improved entry-level accounting and income tax software, and cloud-based applications and storage options are attractive because they may help you save money by doing it yourself.  Added to that is some very effective advertising claiming that at the push of a button your business accounting and income tax filings will be worry free.  However, be warned; our clients often turn to us when their experience with DIY solutions show the ease and efficiency of using these products has been oversold.

In today’s highly regulated environment, innocent omissions and mistakes from simply not knowing An-accountant-helping-clientshow transactions should be recorded, or how to properly comply with new federal, state or local tax
law, can be costly, and sometimes devastating.  Instead of spending time increasing sales, improving processes and growing their businesses, some business owners say they grow frustrated and waste time trying to learn to use and update the latest software as well as keep up with filing deadlines and regulations by themselves.  That’s when they call us.

Let’s consider how engaging professional help with your business accounting and finances can pay big benefits that will help your bottom line both short-term and long-term. 

For those business owners who have a solid accounting or bookkeeping background and a good understanding of business finances, with McRuer CPAs’ MyMcRuer/BackOffice service offering you may benefit by a combination of some DIY and some professional on-demand services.

MyMcRuer/BackOffice helps business owners control costs by personally managing their business’s books.  In addition, when a difficult issue or a question arises, they have access to a local experienced accounting professional who will view the issue real time to identify the problem and quickly provide a solution.  Then as the business grows and its operations need more of an owner's or manager’s time, a smooth transition can be made to full-time professional accountants and bookkeepers who already know the business.

If you intend to grow your business, the benefits of professional accounting services cannot be overestimated.  Is it time that you utilized a professional for your combined personal and business tax preparation?  When is it cost effective to hire an accounting firm’s experts to help with your business accounting and bookkeeping needs?

Consider the following as a mental checklist to help you find an answer to the question: 

How Do I Know When I Need a Professional Accountant or CPA?

You know you need a professional accountant or CPA when…

(circle the sentence numbers that apply to you and when finished add up the total number of sentences that describe your financial situation)

  1. You are considering investing significant time, money and passion into a business idea. Before you “take the leap” you want input about your business plan from an independent professional who will review the numbers and help you analyze your idea’s future growth potential.
  2. You are starting a new business and want to select the best business structure that fits the marketplace, your proficiency and your goals.  You have been told there are different types of business entities that may limit your personal liability for your business activities, but you don’t understand the tax consequences of this decision.
  3. Your income and deductions have changed and you no longer file a simple tax return, or you suspect you must make quarterly estimated tax payments.
  4. You need new or additional business financing, and your lender or insuror is requesting financial information that must be provided by a third party.
  5. You want to better understand your business’s financial information, and use it to improve profitability, inventory management, and cash flow.
  6. You need more information in order to prepare to sell your business.
  7. You are shutting down your business.
  8. You hire other people to help you, and you need information about employees versus independent contractors.
  9. You have become responsible for another person’s affairs, either during their life or after their passing.
  10. The IRS or another regulatory agency has contacted you about an upcoming audit or other collection actions.
  11. You wish to develop and act on a plan to provide for your financial future, including saving for retirement, your childrens’ education, and/or other obligations.
  12. You want to ensure you have the best estate plan in place by understanding the tax, financial and time-based consequences of that plan.
  13. You want to create a succession plan for passing your business on to the next person when you’re ready to retire or sell.
  14. You want to take responsibility for your business and personal financial affairs, and want a trusted advisor to help you succeed.
  15. You must prepare and file Forms W2 and 1099 annually.
  16. You need to understand your best choices on property purchase versus equipment leasing.

How many of the above statements apply to you?

These are just a few of the practical reasons that you need a professional accountant on your business’ financial team.  If you circled 3 to 5 of the above business and personal accounting points, it’s probably time you considered using an upgraded business accounting tool that provides a live accountant when you need one.  If you circled more than 5, it’s time you connect with a professional accountant long-term with comprehensive services and experience to ensure business success.

Accountant over shoulderConsider using a CPA (Certified Professional Accountant) that is experienced and trained specifically to be your business and personal financial planner, management consultant, management information specialist, business consultant and more. 

Yet, don’t forget to consider whether the professional you bring on board is someone you get along with personally.  Financial decisions are a reflection of the production and goals of real people like you who are working to make profits in order to enjoy the life you love.  It’s important to find an accountant who will work well with your business team and shares your concerns about accuracy, reliability, efficiency, and long-term effectiveness.

When you know you need an accountant, we’re here.

At McRuer CPAs, we know business “numbers” are personal and we make the extra effort to match the personalities of our professional accountants with you and your business team.  You may discover the latest online tools with the on-demand help of a CPA are the best choice for you and your business.  Maybe it's time to have a full-time accounting professional join your team?  How do you what to do?

Let’s find out what will work best for you.  Contact us for a strategic planning session by calling 816.741.7882 or contact us through our confidential online resource.  We’ll review your goals and help you make the best choice.


Tax Cuts and Credit Woes: A Review of Kansas and Missouri Tax Bills

Tax Cuts GraphicKansas’ second credit rating downgrade by a bond rating agency has rekindled debate on how tax cuts affect budget bottom lines, taxpayer pocketbooks, and quality of life.  In August, Standard and Poor’s reduced the state’s credit rating from AA+ to AA. This follows last April’s credit and bond downgrade announced by Moody’s Investors Services citing a concern over revenue declines and a lack of budget cuts to make up the difference.

The 2012 Kansas tax cuts reduced the personal income tax bracket from 6.45% to 4.9%, and more importantly for some, eliminated the income tax on small business income.

Three months ago, the 2014 Missouri legislature overrode the Governor’s veto to enact more modest tax cuts of its own.  The Missouri tax cuts have a more gradual implementation format that will begin in 2017.  The Missouri tax changes include a reduction in individual income tax rates eventually bringing the top tax bracket down to 5.5%.  It also phases in a new 25% deduction for business income reported on personal income tax statements which is designed to provide tax relief to sole proprietors and owners of “pass-through” entities such as partnerships, S corporations and most limited liability corporations.

Ohio, Oregon and South Carolina have also passed laws to provide similar tax relief to some small business owners and individual taxpayers.

Though the Kansas tax cuts were initially promoted as a “shot of adrenaline” to the state’s economy, the rapid drop in revenues affecting the state’s credit and heavy media exposure is now affecting voter confidence as Governor Sam Brownback seeks re-election. Economists say it could be ten years before the actual benefits of the tax cuts will be revealed as it takes time for businesses to grow and new businesses to start.

Kansas Secretary of State Kris Kobach issued a statement that business formation has hit an all time high two years in a row.  Kobach said, “This is not a one-year outlier; it is a meaningful trend. Kansas is clearly becoming a great place to start a business.” But the release also said the increase is due to the fact that filing to become a business has been made easier and has little to do with the state’s tax laws.

Some small business associations say business owners see their number one problem is not income tax, but rather the lack of access to capital and the high cost of credit.

In Missouri, experts predict the new tax cuts say won’t be fully realized until 2022.  The Missouri tax cuts also can only be implemented if annual revenue thresholds are not achieved which could delay results even longer.

While taxpayers may wait a few years to realize the affects of tax cuts on their tax bill, state revenue collections have already dropped significantly in Kansas and it appears the power of politics and media influence is moving faster than legislative budget solutions. If the upcoming elections result in new leadership with different tax philosophies, Kansas’s income tax climate could again change.

Nationally, eyes are on states who are working to pass some kind of tax reform even as federal individual income and self-employment taxes are on the rise and businesses face looming expense hikes due to health care reform mandates.  How things settle for Kansas and Missouri, especially through the 2014 and 2015 tax seasons, could determine how other states develop their own solutions for tax and revenue troubles.

Regardless of the tax environment, here at McRuer CPAs we constantly monitor these developments and advise our clients about the best strategies and actions to meet their individual and business tax planning goals.  Feel free to contact us for more information or set up an appointment to review how state and federal tax changes may affect your bottom line.


Worst States for Tax Rates

New “tax climate” rankings have been released giving a state-by-state view of the overall impact of all types of taxes on your pocketbook.   The range of the tax impact in the Midwest goes from average to not-so-good.

The Tax Foundation’s 2013 State Business Tax Climate Index compiles information for Upside down money out of pockets lawmakers and economists who use the results to compare their state’s tax rates to other states as they debate the effects of tax rate increases. 

The numbers are also used to see how attractive one state may be compared to another as competition to lure job-producing businesses heats up.

The new report shows overall (with #1 being the best ranking and #50 the worst) Missouri ranks #16, Kansas #26, Nebraska #31 and Iowa #42.

The rankings include the combined impact of individual income taxes, sales taxes, unemployment insurance taxes, property taxes and corporate taxes.  Some states benefit by not charging one or more of the major taxes.

The top ten states with the lowest overall tax impact are: #1 Wyoming, #2 South Dakota, #3 Nevada, #4 Alaska, #5 Florida, #6 Washington, #7 New Hampshire, #8 Montana, #9 Texas, and #10 Utah.

The states with the worst overall tax impact are: #46 Rhode Island, #47 Vermont, #48 California, #49 New Jersey and #50 New York.

The numbers show the state with the most improved ranking is Maine, moving from #37 to #30, which benefited in part from a repeal of their alternative minimum tax.  Michigan jumped from #18 to #12 following the implementation of a flat 6% corporate income tax replacing a complicated system that was accused of offering unfair tax preferences. 

As debates rage over how to increase jobs and turn around sagging economies, the Tax Foundation warns attention needs to be paid to what’s happening across state borders.  The report says, “They need to be more concerned with companies moving from Detroit, Michigan, to Dayton, Ohio, rather than from Detroit to New Delhi.”

To check out the overall tax ranking and an explanation of what you are paying in your state, click on these links for an individual summation:






Guns and Taxes

Gun trainingWhat do guns and taxes have in common?  More than you may realize.

Heated debate on gun control is causing a re-emergence of arguments on the effect of excise taxes, sometimes referred to as “hidden” taxes, as analysts determine the economic impact of changing laws.

Early on, excise taxes were termed “luxury” taxes affecting mostly higher income individuals.   Excise tax is based on quantity and is a flat amount per item.  Some excise taxes are called “sin” taxes.

The first excise taxes were on carriages and whiskey.  Excise taxes on gasoline and telephones were called “luxury” taxes when they were first imposed.  Now most Americans consider such items necessities.  Raising these tax rates can have dramatic affects on consumer budgets as well as trigger a downturn in consumption.

Consider today’s gun control debate:   The Alcohol and Tobacco Tax and Trade Bureau collects excise taxes on firearms and ammunition from manufacturers and distributors before the products are touched by a consumer.  Numbers show gun sales alone result in annual business and excise tax collections of nearly $2.07 billion.  

Some experts say just the threat of government gun control has been an effective means of raising tax revenues as fear motivates consumers to stock up.  In the last fiscal year, the ATTTB reports tax revenues on the sale of firearms and ammunition have risen 45 percent which is the highest annual increase on record.

Yet, if prices and taxes are too high, or products are banned from the marketplace, it limits the number of people who are able to purchase products, thereby cutting sales and decreasing tax revenues.

No matter which side of the firearms debate you may be on, it’s likely you can’t escape paying excise taxes.  Among hundreds of items that fall under federal excise tax mandates are:

  • tires
  • gasoline
  • coal
  • vaccines
  • firearms
  • communications services including your telephone
  • air travel
  • heavy trucks and trailers
  • "gas guzzler" vehicles and more… 

Currently, most federal tax rates on excise taxes range from 1 percent to 15 percent or higher, when coupled with other types of taxes.

The excise tax on firearms and ammunition is generally 10 and 11 percent.   Many states collect excise taxes on top of these rates.  This is before sales taxes are calculated at the time of sale.

At a time of critical economic conditions and concerns for the country’s fiscal future, experts urge that debate about changes regarding taxation be as carefully considered as the compassion-motivated moral arguments.


Married Business Partners and Filing Status

Many married couples enjoy the satisfaction and control of running their own business together.   In time, the question of operating the business as a partnership or a sole proprietorship arises. 

There are number of factors to consider, but generally, a “sole” proprietorship must be “solely” owned by one spouse.  The other spouse would be considered an employee and would be paid to work the business.

When both spouses are working the business together and that business is jointly owned by both spouses, then that business is generally classified as a partnership for Federal tax purposes.  

A partnership classification requires both spouses to follow more stringent record keeping and filing requirements including filing a partnership separate income tax return. 

Sometimes married co-owners fail to file properly as a partnership by reporting on a Schedule C in the name of one spouse.  The result is that only one spouse receives credit for Social Security and Medicare coverage purposes.

In order to work out the issues for couples who jointly own, but want to avoid some of the partnership filing and record keeping requirements, spouses can elect to be treated as a Qualified Joint Venture.  This follows the provisions of the 2007 Small Business and Work Opportunity Tax Act.

The Qualified Joint Venture classification provides that each spouse separately reports a share of all of the businesses’ items of income, gain, loss, deduction, and credit.  Under the election, both spouses will receive proper credit for Social Security and Medicare coverage.

Each spouse must file a separate Schedule C (or Schedule F) to report profits and losses and, if otherwise required, a separate Schedule SE to report self-employment tax for each spouse. 

Sound complicated?  It can be.  It depends upon the kind of business you own and operate, and your goals.  This issue is first a strategic tax planning consideration.  Here are just a few of the many questions to answer before making a choice:  What are your long-term goals?  What would happen if one spouse leaves or dies?  What kind of record keeping system works best for you and your spouse?

These issues are best resolved with the advice of an experienced professional.   Contact us for an appointment today at McRuer CPAs where we will help you find the solution that best fits you.  Call us at: (816) 741-7882.

Here's more information from the IRS:  http://www.irs.gov/businesses/small/article/0,,id=177376,00.html


Give Yourself a Chance to Think

So often, busy people like you are too consumed with putting out fires to step back and consider the big picture.  It’s vitally important to give yourself a chance to think. 

Let’s face it, today we often have more to do than the day’s time allows.  It’s affecting our ability to think things through clearly and make the right decisions when it comes to our money.

There are more considerations than ever before about how we use our money and where we place it to make it grow.  Our resources are limited and varied, and there are different methods to determine how well our choices are working.  It’s confusing and hard to plan and execute how things work together.

That’s why McRuer CPAs is offering our new service package called Decision Maker Plus. It gives you the ability to gather together all your financial data and strategies in one place at the same time, to ensure everything works together to meet your goals.

Take a look at our introductory brochure on Decision Maker Plus.

Through Decision Maker Plus our team of CPAs can provide you a way to coordinate all your plans and present them in a way that makes sense to you.  We can help you analyze, plan and implement strategies to meet your goals while coordinating with your other approved professionals.

Using Decision Maker Plus gives you access to our experienced team and…

*proactive planning and strategy implementation,
*priority response communications,
*cutting-edge and highly efficient information sharing technology,
*secure online data storage and data sharing portals,
*and flexible scheduling for after hours or weekend appointments.

Our Decision Maker Plus Services include:

  • Income Tax Planning
  • Estate Tax Planning
  • Wealth accumulation and Protection Services
  • Business Startup, Planning and Expansion Services
  • Generational and Spousal Wealth Transfers assistance
  • Financial Services Incident to Divorce
  • Services for Liquidity Events
  • Education Finance Planning
  • Retirement planning and more.

Think about it. 

Do you really know if everything works together to help you?  If not, call us for a confidential consultation about your goals and we’ll give you a half hour of that consultation for free.

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