If you could wave a magic wand and work with any customer or client you wanted in 2012, who would they be and what would your business look like? It’s a fun exercise to think about right as we start a new year.

Let’s begin with your current customer or client base. You may want to create a report of customers or clients that you had in 2011 and list them by revenue collected. Who are your top revenue-producing customers or clients? Are they easy to work with? Do you love the work you are doing with them? If so, you may want to find out a little bit about the type of customer or client you enjoy working with so that you can find more of them in 2012.

Are they male or female? In a particular industry? Have a particular personality trait? Enjoy the same hobbies you do? Have kids? Are they from your alma mater? Do they live in a certain neighborhood that you enjoy?

Look to see if your top customers or clients have characteristics in common. You are beginning to make a picture of who you best work with.

The questions are endless, and you may need to ask quite a few of them before you stumble on what your top customers or clients might have in common. Perhaps they are all dog lovers, pilots, or football fans. Perhaps they have all been in business for less than five years. Perhaps they are all transplanted from the south. Once you see the connection, you will have some freedom and a clear direction to find more people just like them.

Also take a look at what services you like to deliver best. Once you’ve been in business for a while, you may have some work that’s not your favorite, but you keep doing it for the money. In 2012, think about how you can proactively attract customers or clients that need the type of work you love to do. Work that challenges you, is interesting, and is profitable will keep you from burning out. Plus, it will help your entire business and your other customers or clients to seek customers or clients that energize you because you will be happier.

Start by creating another report that shows you revenue by service or product line. What would the ideal 2012 mix be if you could wave your magic wand again?

The intersection of your ideal customer or client and your ideal service/product revenue mix is the sweet spot you want to aim for in 2012.

It’s simple exercise, yet a very powerful one. Take a deep breath, wave your magic wand, and think about what would really fulfill you as a business entrepreneur. Then take the first step to creating a business full of the ideal customer or client and ideal work of your dreams.

Hal Rosen, CPA, 5911 S. Fashion Blvd., Ste. 200, Salt Lake City , UT 84107, 801-288-1222, hrosen@halrosencpa.com

Here are a couple of IRS updates to be aware of for 2012, and for this tax filing season. Please pay attention of the article on scams by Cyber Criminals as they are very real. If you have any questions or receive a questionable e-mail please feel free to call our office.

IRS 2012 Standard Mileage Rates

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

Don’t be Scammed by Cyber Criminals

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things the IRS wants you to know about phishing scams.

1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.

2. The IRS does not initiate contact with taxpayers by email to request personal or financial information. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:

• Do not reply to the message.

• Do not open any attachments. Attachments may contain malicious code that will infect your computer.

• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term ‘identity theft’ for more information and resources to help.

3. The address of the official IRS website is www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.

4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious email to phishing@irs.gov.

5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at www.irs.gov. Click on “phishing” on the home page.

Hal Rosen, CPA, 5911 S. Fashion Blvd., Ste. 200, Salt Lake City , UT 84107, 801-288-1222, hrosen@halrosencpa.com

If your accounts receivable balances are edging up and getting older and older each month, then it might be a good time to bring out the aging reports. But what if we looked earlier in the cycle to see what we could do to collect the sales even sooner? Let’s take a look at five potential changes you can consider making that will speed up your cash flow, reduce aging receivables, and possibly reduce lending costs in your business.

1. Get paid in advance.

Getting paid in advance manifests itself in a number of ways:

• Prepaid gift cards
• Deposits
• Prepayment plans
• Monthly or project retainers

If it’s common to get paid in advance in your industry, then all you need to do is focus on doing more of it. If it’s not common in your industry, I encourage you to see how you might apply one of these ideas to your industry. You may be able to invent an entirely new way of doing business within your industry.

2. Increase your cash-equivalent payment choices.

If you’re not already able to take the following forms of payment, then it’s time to sign up for:

• Credit cards, especially MasterCard, Visa, Discover, and American Express
• PayPal
• Wire transfers
• Cloud-based bill payment systems

If you have overseas clients, being able to easily accept wire transfers keeps it simple if the client does not maintain a bank account in your country’s currency. And although most wire transfers still need to be handled manually, you can systematize and automate the process as much as you can by having written procedures for your clients.

Offering a cloud-based billing solution such as Bill.com eliminates the physical writing of checks, and you can approve and send payments from anywhere, even if you are on an airplane. The efficiency cannot be beat.

It’s surprising how many business-to-business payments come through PayPal, so if you don’t have this one as an option, you might want to consider it.

3. Streamline your time and billing system.

If you can bill faster, you can collect faster. Take a look at your processes and identify the bottlenecks in your billing system. Is it the partner who keeps the invoices on their desk for days before they are approved to be mailed? Is it an antiquated time system that is not real-time? Is it duplicate data entry that can be streamlined? Once you’ve determined your bottlenecks, you can take action to eliminate them.

4. Implement eCommerce.

An online shopping cart can help clients serve themselves and cut way down on your customer service. Today’s online shopping carts can handle one-time payments, recurring payments, and variable bills. The best of them offer a portal for clients to update their own credit card expiration dates, respond to declined card messages, and basically serve themselves. It’s quite fun to come into the office each morning and find loads of cash sales already in your cart from the night before, without any help from you or your staff.

5. Card on file.

For long-time clients, it makes sense to set up automatic approval on a monthly basis by having their card on file. Most busy and successful clients will appreciate the time savings when using this method, and you will have more control and be able to get paid faster. You can also use a hybrid of this method – semi-automatic approval – where a simple email exchange approves the current month’s amount.

Try one or more of these five tips to speed up your cash flow, simplify collections, and lower the amount you need to borrow from the bank to finance your business.

Hal Rosen, CPA, 5911 S. Fashion Blvd., Ste. 200, Salt Lake City , UT 84107, 801-288-1222, hrosen@halrosencpa.com

WASHINGTON — Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2011, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

• Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2011 count for 2011. This is true even if the credit card bill isn’t paid until 2012. Also, checks count for 2011 as long as they are mailed in 2011.

• Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, searchable and available online, lists most organizations that are qualified to receive deductible contributions. It can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.

• For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2011 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.

• For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

• If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

• And, as always it’s important to keep good records and receipts.

IRS.gov has Additional information on charitable giving including:

• Charities & Non-Profits

• Publication 526, Charitable Contributions.

• On-line mini-course, Can I Deduct My Charitable Contributions?

Hal Rosen, CPA, 5911 S. Fashion Blvd., Ste. 200, Salt Lake City , UT 84107, 801-288-1222, hrosen@halrosencpa.com

2011 Year-End Tax Planning for Individuals – Part 2 of 2

As 2011 draws to a close, there is still time to reduce your 2011 tax bill and plan ahead for 2012. This letter highlights several potential tax-saving opportunities for you to consider. We would be happy to meet with you to discuss specific strategies. This is only a summary of strategies that are available. If you need more information on specific topics please contact us.

Energy Incentives
Residential Energy Efficient Property Credit: Until 2016, tax incentives are available to taxpayers who install certain energy efficient property, such as photovoltaic panels, solar water heating property, fuel cell property, small wind energy property and geothermal heat pumps. A credit is available for the expenditures incurred for such property up to a specific percentage, except that a cap applies for fuel cell property. The property purchased cannot be used to heat swimming pools or hot tubs. If you have made improvements to your home or plan to by the end of 2011, please contact me to discuss the amount of the credit you may qualify for.

Nonbusiness Energy Property Credit. For 2011, property qualifying for the nonbusiness energy property credit includes windows (including skylights), exterior doors, insulation, metal roofs, advanced main air circulating fans, natural gas, propane, or oil furnace or hot water boilers, and other energy efficient building property that meets certain energy standards. For 2011, the credit is 10% of the cost of the improvement(s) up to a maximum credit of $500 (therefore, if you took any credit prior to 2011, your total cannot exceed $500). The property must be installed by the end of 2011 to qualify. For 2011, only $200 of the credit can be applied to windows. Also, for 2011, the energy standards are relaxed. The credit expires at the end of 2011.

Investment Planning
The following rules apply for most capital assets in 2011:
• Capital gains on property held one year or less are taxed at an individual’s ordinary income tax rate.
• Capital gains on property held for more than one year are taxed at a maximum rate of 15% (0% if an individual is in the 10% or 15% marginal tax bracket).

Please note that some taxpayers qualify for a 0% federal rate on capital gains – this is for taxpayers that are in the 15% federal bracket. I’ve been able to save my clients thousands of dollars by effectively planning and using this strategy.

Note that Congress did extend the reduced capital gains rates, through 2012.

Timing of Sales: You may want to time the sale of assets so as to have offsetting capital losses and gains. Capital losses may be fully deducted against capital gains and also may offset up to $3,000 of ordinary income ($1,500 for married filing separately). In general, when you take losses, you must first match your long-term losses against your long-term gains, and short-term losses against short-term gains. If there are any remaining losses, you may use them to offset any remaining long-term or short-term gains, or up to $3,000 (or $1,500) of ordinary income. When and whether to recognize such losses should be analyzed in light of the possible future changes in the capital gains rates applicable to your specific investments.

Dividends: Qualifying dividends received in 2011 are subject to rates similar to the capital gains rates. Therefore, qualifying dividends are taxed at a maximum rate of 15%. Qualifying dividends include dividends received from domestic and certain foreign corporations. Note that Congress did extend the reduced dividend rates through 2012.

Social Security: Depending on the recipient’s modified AGI and the amount of Social Security benefits, a percentage — up to 85% — of Social Security benefits may be taxed. To reduce that percentage, it may be beneficial to defer receipt of other retirement income. One way to do so is to elect to receive a lump sum distribution from a retirement plan and to rollover that distribution into an IRA. Alternatively, it may be beneficial to accelerate income so as to reduce the percentage of your Social Security taxed in 2012 and later years.

Education and Child Tax Benefits
Child Tax Credit: A tax credit of $1,000 per qualifying child under the age of 17 is available on this year’s return.
Credit for Adoption Expenses: For 2011, the adoption credit limitation is $13,360 of aggregate expenditures for each child, except that the credit for an adoption of a child with special needs is deemed to be $13,360 regardless of the amount of expenses. The credit ratably phases out for taxpayers whose income is between $185,210 and $225,210. For 2011, the credit is refundable. For 2012, the credit is scheduled to become nonrefundable.
HOPE Credit and Lifetime Learning Credit: Back in 2009, significant changes were put in place for the HOPE, including a name change to the American Opportunity Tax Credit. These changes continue for 2011. The maximum credit for 2011 is $2,500 (100% on the first $2,000, plus 25% of the next $2,000) for qualified tuition and fees paid on behalf of a student (i.e., the taxpayer, the taxpayer’s spouse, or a dependent) who is enrolled on at least a half-time basis.

Student Loan Interest: You may be eligible for an above-the-line deduction for student loan interest paid on any “qualified education loan.” The maximum deduction is $2,500. The deduction for 2011 is phased out at a modified AGI level between $120,000 and $150,000 for joint filers, and between $60,000 and $75,000 for individual taxpayers.

Kiddie Tax: For 2011, the kiddie tax applies to: (1) children under 18; (2) 18-year old children who have unearned income in excess of the threshold amount, do not file a joint return and who have earned income, if any, that does not exceed one-half of the amount of the child’s support; and (3) children between the ages of 19 and 23 and if, in addition to the above rules, they are full-time students. For 2011, the kiddie tax threshold amount is $1,900.

Other Tax Planning Opportunities: We also can discuss the potential benefits to you or your family members of other planning options available for 2011, including §529 qualified tuition programs.

Alternative Minimum Tax
For 2011, the alternative minimum tax exemption amounts will remain high enough to spare millions of taxpayers from the AMT effect. The exemption amounts in place for 2011 are: (1) $74,450 for married individuals filing jointly and for surviving spouses; (2) $48,450, for unmarried individuals other than surviving spouses; and (3) $37,225 for married individuals filing a separate return. Also, for 2011, nonrefundable personal credits can offset an individual’s regular and alternative minimum tax.

Some of the standard year-end planning ideas will not reduce tax liability if you are subject to the alternative minimum tax (AMT) because different rules apply. Because of the complexity of the AMT, it would be wise for us to analyze your AMT exposure.

If you have any questions, please do not hesitate to call. We would be happy to meet with you at your convenience to discuss the strategies outlined above. While we are getting very close to the end of the year, there is still time to implement these strategies to minimize your 2011 tax liability.

Hal Rosen, CPA, 5911 S. Fashion Blvd., Ste. 200, Salt Lake City , UT 84107, 801-288-1222, hrosen@halrosencpa.com