The tax filing deadline is almost here. We went to Larry Kopsa CPA, of Kopsa Otte CPAs & Advisors, for some last-minute tax strategies. With more than 35 years of experience and an intimate knowledge of the beauty business, he regularly speaks to groups at beauty trade shows.
"The more information that the preparer has, the better he can find deductions and determine you are not overpaying your taxes." Kopsa recommends looking for someone who can do more than just fill in the blanks and hit send. "You really need to be looking for a professional that will help you with your tax plan."
One of the late-breaking changes is the 2010 Tax Relief Act. "First, there is the provision that allows for expensing of equipment (Section 179). This provision says that any equipment purchased in 2010 or 2011 can be written off in the year of purchase." Kopsa explains: "Normally, equipment is written off over five to seven years. There is a limit of $500,000 that you can write off." The second part is "a bonus depreciation provision that allows you to write off 100% of leasehold improvements [alterations to a building made by a tenant to make the space more usable]. Normally, leasehold improvements are written off over 39 years."
This is an amazing opportunity for salons that may have moved or upgraded during the year. If you are thinking of expanding or upgrading your business, discuss the tax implications with your advisor to determine if 2011 will be the year to do it.
Having a tax advisor who stays up-to-date with the multitude of changes that are relevant to the beauty profession is a must. He will know the questions to ask. The IRS recommends that you check the preparer’s qualifications. It also advises asking about professional affiliations with organizations that provide continuing education. All paid tax preparers, including CPAs, attorneys, and enrolled agents must apply for a Preparer Tax Identification Number before preparing any federal tax returns for 2011 — even if they already have one.
It may be worth your time to get a second opinion. Looking at last year’s prepared return may alert a professional to potential missed deductions or credits on this year’s return. Another plus may be the potential to amend a prior year and recoup the potential lost dollars.
We asked Kopsa to identify the top five potential areas for missed deductions and credits:
1. Not keeping good records and therefore missing deductions.
2. Thinking that by giving your numbers to a preparer, the preparer will be able to determine what deductions you are missing. It takes good communication and that takes time.
3. Choosing a tax preparer based on the person who will do the return for the cheapest price.
4. Not keeping track of business mileage.
5. Making sure you are operating in the correct form of business. There are several types of business entities from sole proprietorship to S Corporation to C Corporation to LLC. It is not "one size fits all." Different taxpayers have different needs.
You might be thinking, "Yikes, I’ll never be able to get all of this done in time!" Talk with your tax advisor about the possibility of an extension. Kopsa points out, "It is possible to file an extension that will make the return due in October. Realize that this is an extension of time to file but not an extension of time to pay the tax due."
Keeping data up to date throughout the year with software programs such as QuickBooks gives the preparer easy access to your information in real time. It’s easy to use; just set aside a block of time each week to enter the data. Check the list of frequently missed deductions [see sidebar] and update your information (if needed) before having your preparer file your 2010 taxes.
"It’s never too early to start tax planning. Tax planning should be an ongoing process," says Kopsa. Check out the free blog at www.kopsaotte.com to stay up to date with industry tax issues and know what questions to ask your tax preparer.
Three More Days to File
Taxpayers will have until Monday, April 18, to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until October 17 to file their 2010 tax returns.
Frequently Missed Deductions
Are you missing out on any of these routine deductions many salon owners miss?
> audiotapes and video tapes related to business
> bank service charges
> business association dues
> business gifts
> business-related magazines and books
> casual labor and tips
> coffee and beverage service
> office supplies
> online computer services related to business
> parking and meters
> petty cash funds
> promotion and publicity
> seminars and trade shows
> taxi and bus fare
> consultant fees
> office in the home
> shoes recommended by doctor
> telephone calls away from business
> salon laundry