Year End Heads Up for BUSINESS CLIENTS

2009 continued the Congressional history of innumerable tax changes and many open ends remaining at the end of the year. You can be assured that we are monitoring Congressional action regularly and will utilize the latest changes as we prepare your return.

Problem Areas
The IRS continues this year to address actual physical inventory on hand at December 31. Please make sure to physically count your inventory, retain the records, and provide us with the accurate total cost of inventory on hand at December 31, 2009. Do not include consignments you are holding from other people in this number. In the event of an audit you must be able to provide copies of physical count sheets, so this year we are placing an increased emphasis upon obtaining correct year end physical inventory amounts.

We also want to remind you to make sure that your corporate minutes are maintained on an annual basis-we are not allowed to maintain these forms for you, they should be maintained by the officers of the corporation. Of course only S and C corporations are required to maintain minutes, LLC’s generally have no such requirement. If you have an LLC that is taxed as an S or C corporation, I suggest that you have minutes anyway, just for safety.

Sales tax audits continue to increase. In general you must pay sales or use tax on any item you purchase that is not re-sold including office supplies, equipment, online and out of state purchases. You need to charge sales tax on any items you sell (not always labor if separately stated on the invoice) except for those customers for whom you have a valid exemption certificate on file. Make sure that you file sales tax returns in all states in which you have an office, store, salespeople or other presence.

The write-off for equipment and building purchases continues to be a major tax-savings event for 2009. Please provide us with invoice copies of any assets you purchased that cost more than $500 on 2009.

The mileage rate for cars used in a business is 55 cents per mile for the entire year of 2009, so if we are writing off a portion of your business vehicle, please provide us with total mileage for the year, and with business mileage. You should be keeping track of this mileage with a log book, calendar or similar system.

With ever-increasing costs for health care, businesses need to closely examine their options. HSA insurance/savings plans, employee leasing and similar areas that we may be able to use to significantly reduce your health care fringe benefit costs. Additionally, we are finding that many employers are reaping tremendous savings from HRA’s which are an inexpensive way (about $250 per year) to save a minimum of $1,000 annually. Please contact us to establish an HRA.

Several new tax credits are available for energy improvements to your business, hiring of disadvantaged groups, old building rehabilitation (built before 1936), starting a first time company pension plan, and more. If one of these unusual situations affect your business, please tell us!

Tax Return 10-Point Information Needed
As usual we also need the following information to prepare your tax return for this year (Check off as completed) This information will need to go to your bookkeeper first, to be input in the bookkeeping:
__ Copies of any new bank loans obtained during the year,
__ Copies of any federal or state tax correspondence received during the
Year if not already provided,
__ Copies of any equipment purchase invoices over $500,
__ Loan payoffs, by loan number, of all business loans at December 31,
__ Copies of your year-end bank reconciliation(s),
__12/31/09 Year End Balances of:
Accounts Receivable $___________,
Cost of Inventory on Hand $_____________,
Unpaid Sales tax at December 31 $_____________,
Unpaid wages earned thru 12/31 $__________,
Accounts payable to suppliers/utilities at 12/31 $ ___________

If we do not prepare your W-2s and payroll returns we need this payroll information:
Unpaid 941 Deposit at December 31 $__________,
Unpaid Federal unemployment deposit (940) at December 31 $ ___________,
Unpaid state unemployment deposit at December 31 $ __________,
Unpaid state withholding deposits at December 31 $____________________,

__ The enclosed engagement letter needs to be signed and returned,
__ Year end summary of business activity-USB flash drive back up
(Quickbooks back-up, trial balance, etc. unless we maintain),
__ Sales breakdown by state and city if applicable (Call us to determine),
__ Information on any changes in ownership, stock holding, locations or
number of stores.

We once again thank you for your patronage and loyalty. If you have any questions regarding this letter or other tax compliance or planning issues please contact us at the office.

Sincerely, Deborah Sherwood, EA