1. TaxSmartMag Issue 1 Final:Layout 1 12/30/2008 11:15 AM Page 2
Ready to
Contents 14
BUILD YOUR PRACTICE?
TAX PROFESSIONAL
TAX PRO GAME PLAN Tax pros or any service industry, these 7
four fundamentals are necessary for growing your business.
THE INSIDIOUS NATURE OF THE AMT Managing the 8
tedious, complexity of the alternative minimum tax.
OIC–OH, I SEE Helping clients get rid of tax debt, not as 10
easy as we would like.
FEATURE
MAKE MORE MONEY RECESSION OR NOT Put more 12
money in your clients’ pockets and your pockets grow too!
BUSINESS OWNER
TAX PLANNING TIPS FOR THE BUSINESS OWNER 16
What you don’t know can hurt you. Make sure you read these
valuable tax saving tips.
S CORP WHY & HOW Understanding the entity that can 17
save you thousands of dollars in taxes.
SCOOPING UP ROCK-BOTTOMS The real estate investor 17
rally is around the corner. Learn how the Cost Segregation
method helps you keep even more of your money.
CONSUMER
THE SUBTLE EROSION OF WEALTH Wealth Series Part 1 of 4. 19
Upcoming issues include Wealth Accumulation (Part 2), Wealth
Preservation (Part 3), and Wealth Transfer (Part 4).
DREAM BIG PLAN SMART Thinking of starting your own 21
business? Make sure you keep these things in mind.
IF YOU ARE . . .
committed to providing exceptional service
dedicated to the highest degree of knowledge 11
determined to increase your business client base
EDITOR’S NOTE 4
WEBCLIPS 5
Join the Leader in Creating a New and Higher Standard for the Tax Industry TAX BULLETIN 6
Join TAXSMART AMERICA® BUSINESS CENTERS as We Raise the Bar SPOTLIGHT On Jay Chimayan 11
SPOTLIGHT On Diane Jara 14
PARSE WITH THE PRO Q&A 20
TAXSMART AMERICA 22
BUSINESS CENTER DIRECTORY
12
For An Alternative to Franchising
CONTACT OUR LICENSING DEPARTMENTTODAY ● 858 277-0775
www.TSABusinessCenters.com
Issue 1 I TaxSmartMag.com I Page 3
3. TaxSmartMag Issue 1 Final:Layout 1 12/30/2008 11:16 AM Page 6
Tax Professional
TAX BULLETIN The Tax Pro Game Plan
By Nick Angello
IRS Imposes New Taxpayer It happens in every industry. You've been working hard and putting in long hours, but you haven't been able to break through to the
& Preparer Fines and Penalties next level. Sometimes, however, hard work needs to be coupled with established fundamentals before success can be realized. Pro ath-
letes obviously spend a lot of time practicing, but they don't just practice hard, they practice smart. With the help of a coach, they work
toward a single goal by focusing on sound, proven techniques. For tax professionals, and really any service industry, there are four fun-
damentals that should be kept in mind to help you not only work hard, but work smart as you go about building your business.
By James Harnsberger
RELATIONSHIP learn the business of running a
The IRS has introduced a series of new penalties related on the issue of new penalties is advised as follows: FIRST business. Not only will your fi-
to the preparation of tax returns. With passage of “The Small As simple as it sounds, nances improve, but you will have
Business Work Opportunity Act of 2007” (The Act), a tax a) Adopt a procedure that ensures every client is clients are people first. Even if a deeper understanding of the
preparer may now face a myriad of penalties related to the interviewed in the appointment. you're the best tax pro in town, challenges your business clients
preparation of a tax return: accuracy, understatement, and b) Adopt a procedure to review all tax returns before people feel most comfortable face. Good or bad, word travels
negligent acts. providing them the client using a checklist. when you foster a solid work- sdradnatS pihsnoitaleR fast. When people mention your
ing relationship to accompany name, you want it to be for a
Section 6694 Penalties – The Act amended Section 6694(a) Provisions of these new penalty assessments are your skills. This means provide referral.
to now include a penalty if: retroactive back to May 26, 2007, for any such return. Finally, value, communicate that value, FEES
a) the tax return preparer knew or reasonably should
the IRS also ushered in a host of new penalties for
taxpayers regarding the following:
and educate your client. For
example, if your client is a sole
deeN Most tax offices are greatly un-
dervalued! Know your office.
have known of the position; proprietor that could benefit Based on your financial numbers,
b) there was not a reasonable belief that the position Taxpayer Requirements from forming an S-Corporation, figure out what you need to make
would more likely than not be sustained on its merits; then your job is to communi- a profit (and a salary) and charge
c) the position was not disclosed (to the IRS) as • RECORD KEEPING cate the value while educating fees accordingly. It's tempting,
provided in the section. • SUBSTANTIATION the client on entities and com- but DO NOT set fees based on
• PROPER REPORTING pliance and the tax conse- what you think your client will pay
The Act increased penalties under this section from $250 • FILING REQUIREMENTS quences involved. Your client or what you think the guy down
to $1,000 or 50% of the fee, whichever is higher. This • UNDERPAYMENT OF TAX can now make an informed de- the street is charging. Base your
penalty relates to reporting any item on an • UNDERSTATEMENT OF TAX cision. Also if you are preparing fees on business acumen. If you
information return (including any Form 1040) where the • FAILURE TO COMPLY WITH REPORTING AND FILING a return with the client sitting are truly practicing the above
return preparer knew, or should have known, that the item REQUIREMENTS across from you, stop it. You three fundamentals, your fees for
reported would more than likely not be sustained on its are doing little more than the most clients will be secondary.
merits. In addition a failure to disclose such an item to the Tax professionals are advised to provide the client with a client could do with a software program quence. If you are in touch with them, Many tax professionals have no idea
IRS using IRS Form 8275 or 8275-R will result in the FULL DISCLOSURE of the possible penalties they now face at home. This does nothing to build a re- you have the potential to help them with what they are actually trying to accom-
imposition of the penalty. Also, a second tier of penalties and advise the client of the requirements including lationship or justify the fees you are these decisions. As the professional, you plish, and even if they do, they don't
can be imposed if the IRS determines in any case that the interviewing the client, reviewing client records, worth. No matter how simple the return, actually have a better understanding of know where to start. Take some time and
conduct of such reporting is willful, or reckless in substantiation of items reported on any return, and a part of your value is preparing good their tax needs than they do. The ultimate decide where you want to be in three
disregarding the rules. The penalties in such a case will now the DISCLOSURE TO THE IRS in accordance with FORM 8275 work papers and substantiation in case goal is to become a trusted member of years. Reread everything above and
be $5,000 for each case or 50% of the fee, whichever is and 8275-R. there is an audit. See your clients periodi- their team. layout a timeline, recognizing that Rela-
higher. cally throughout the year for tax planning STANDARDS tionship, Needs, Standards and Fees are in-
In another example, the IRS will now impose penalties in Conclusion and updates. Start today building strong Set them high and don’t waver. Tax terrelated with multiple components that
any case where the return preparer fails or refuses to sign a The IRS announced that over the course of the next fiscal client relationships. professionals are required to receive 20 can be accomplished simultaneously.
return they have prepared. Under the old law the penalty year, starting October 1, 2008, it anticipates it will generate FILL A NEED hours of continuing education each year, Next work backward and set goals that
was $50 for each violation. Under the new law the penalty between $80 Million and $180 Million in new fines and As you build client relationships, you but that should be the bare minimum. will move you closer to your dreams.
has been increased to a maximum of $25,000 where a penalties. As an added problem the E&O insurance and will begin to discern their needs. There You should get at least 100 hours CE Think positively. Good luck!
preparer has failed or refused to sign the return. The new bond may not cover the preparer or their client in these are plenty of opportunities in your client through a quality CE program and by
penalty assessments are retroactive back to May 26, 2007 cases of the more serious penalties now imposed. base if you take the time to look and listen doing research on your own. With in-
for any such return. for them. An opportunity for both of you creased knowledge and a burgeoning Nick Angello holds a Bachelor’s Degree from
to benefit strengthens your symbiotic re- skill set, you build not only confidence Vanderbilt University. He is an accomplished writer
Tax preparers are advised to adopt a series of steps in living in San Diego.
lationship. Also, throughout the year but new services to provide your clients.
their practice to assist the client in understanding the new nearly every one of your clients is going to Make a commitment to your education.
requirements, as well as providing disclosure to the client of make a decision that has a tax conse- You should also set aside some time to Comments: Please visit TaxSmartMag.com/2cents.
these requirements. Adopting a Client Acknowledgement Comments: Please visit TaxSmartMag.com/2cents.
Issue 1 I TaxSmartMag.com I Page 7
4. TaxSmartMag Issue 1 Final:Layout 1 12/30/2008 11:16 AM Page 8
Tax Professional
THE INSIDIOUS NATURE OF THE AMT The road to
Business Success
By Susan Harnsberger
The Alternative Minimum Tax (AMT) was introduced by the Tax Reform Act of 7 ITEMS THAT CAN CONTRIBUTE
1969, and by 1970 it was up and running. This tax was originally intended to TO AMT LIABILITY
prevent a few wealthy families from paying little or no income tax using 1. Personal Exemptions
preferential tax treatment under the tax code of the time. The more you claim on your regular tax re-
turn, the likelier you will have AMT liability.
Now almost 40 years later, the AMT has the regular income tax. Effectively, the 2. Credits
Like personal exemptions, many of these are
become an extremely complex and insidi- higher of the two gets paid. Most people
not allowed when calculating AMT.
ous tax. In years gone by the AMT was are unaware they are even paying AMT. 3. State and Local Taxes
paid by the top 1% of taxpayers. However, Software does everything and many tax If your locale has high state and local tax, you
since its inception, it has never been in- preparers simply provide the client their are likely to owe AMT. AMT does not allow
dexed for inflation. Every year more and return and tell them how much they owe. these deductions.
more people owe AMT. By 2010 the Con- It is not always obvious. 4. Mortgage Interest
Mortgage interest to buy, build or improve
gressional Budget Office estimates that Efforts have been made to reform or re-
your home is allowed. Mortgage interest for
about 20% of all taxpayers and about 40% peal the AMT, but Congress has dropped anything else is not AMT deductible.
of married couples will pay AMT. Of those the ball time and again, year after year. 5. Incentive Stock Options
numbers most are middle class not the Instead they have done nothing more This is a timing issue that may cause AMT lia-
wealthy for whom this tax was originally than put forth yearly “patches”. The latest bility. (More details in the April Issue. )
created. Table 1 illustrates that within par- patch for 2008 was included in the first 6. Itemized Deductions
Many deductions when itemizing are limited
ticular income levels, some percentage of “bailout” measure last October, The Emer-
or not allowed under AMT rules.
taxpayers will likely pay AMT by 2010. gency Economic Stabilization Act of 2008. 7. Long-Term Cap Gain OWN A BUSINESS?
Table 1. This Bill, passed by the Senate and the This comes into play with large cap gain
% of Taxpayers Annual Income House and signed by President Bush on which pushes you over the AMT thresholds. STARTING A BUSINESS?
October 3, increased the exemption for
~ 30% > $500,000
married filing jointly from $66,250 to See Issue 2 in April for ways to minimize and
GROWING A BUSINESS?
~ 66% $50,000 to $100,000 $69,950, half that for married filing sepa- manage AMT liability.
> 90% $100,000 to $500,000 rate, and filing single or head of house- Let our experts help you plan. TaxSmart America® Business Centers are
Percentage of taxpayers in various income levels hold the exemption was increased from not been adjusted for inflation since it
to pay AMT in 2010. Data obtained from the $44,350 to $46,200. was enacted in 1986, essentially means dedicated professionals who specialize in business tax planning. Each
Congressional Budget Office. The AMT taxable income (AMTI) is, that any TMT over $150,000 will be taxed office is independently owned and operated and commited to more than
The AMT is a tax that, for certain taxpay- however, still taxed at 26% up to another 25%. This effectively pushes the
ers, for a combination of reasons, must be $175,000 and 28% for any AMTI above two tax rates, 26% and 28%, up to 32.5% 200 hours per year in small-business, tax-planning courses. We provide
calculated under an alternative set of $175,000. This calculation is called the and 35%, respectively. Very simply, up to a free consultation and business evaluation to assess your business and
rules. Any amount of AMT over the regu- Tentative Minimum Tax (TMT). The $150,000 AMTI, the rate is 26%; between
lar income tax must be paid along with
tax planning needs. Turn to page 22 to find the office located nearest you.
$150,000 phase-out threshold, which has $150,000 and $175,000 AMTI the rate is
32.5%; and greater than $175,000 AMTI
AMT TIMING◄►AMT MANAGING the rate is 35%.
HOW AND WHEN IS VITAL in managing AMT liability. Here is a heads-up list of For capital gains the rates are effec-
issues to be aware of and ask your tax professional to outline and manage tively 21.5% to 22% instead of just the
during your tax planning session. 15% calculated under regular income tax
1. Large capital gain rules. This is because for every dollar of
2. Dual Basis Assets cap gain, 25 cents more of ordinary in-
3. Exercising ISOs and timing come is subject to the 26% or 28% rate.
4. Business expense on Schedule C So, for example, for a $100 cap gain, you
5. SEP, IRA, Simple IRA, 401(k)
have $25 of the cap gain taxed at 26% or
6. Home office deduction
7. Some tax-exempt bonds
28% ($6.50 or $7.00 in tax) plus the $100
8. Timing real estate tax and state and local income tax cap gain taxed at 15% ($15 in tax). Adding
the two is $21.50 or $22.00 in tax, which
In Issue 2 in April, we really dig into timing, managing, and reducing AMT liability, addressing on a $100 cap gain is an effective rate of www.tsabusinesscenters.com
each of these issues and more. 21.5% or 22%, respectively.
TAX SERVICES | BUSINESS ENTITY | BUSINESS SUPPORT | REFUND RECOVERY | AUDIT PROTECTION
Page 8 I TaxSmartMag.com I Issue 1
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Spotlight
Things get really heinous if
the taxpayer happens to be
OIC – OH, I SEE
benefit from preferential tax By Susan Harnsberger ON TOP OF THE WORLD – My Accounting Center, Inc.
treatment not recognized A Certified TaxSmart America® Business Center
under AMT rules. Some of The Offer in Compromise (OIC) program is one They are required to submit $150 with the OIC
these include deducting ac- of the most complex, time consuming services application which is non-refundable. If they Nestled in the heart of Glendale, California, is MAC, Inc., a successful
celerated depreciation of a tax professional can offer with a very low cannot pay the $150, another slew of paperwork business advisory and consultation firm. The creative, business-savvy
business assets, incurring net probability of success. Simply stated the OIC is must be submitted and approved. They are also entrepreneur behind it is 26 year- old Jay Chimayan. A few doors
operating losses, receiving an IRS debt relief program for a very select required to determine if they will pay in full the down is Chimayan Financial Services, a business he and his brother
incentive stock options, group of taxpayers in which the IRS may agree amount offered in the OIC or if they will make Jevan are poised to take over upon the retirement of the Founder and
(ISO), etcetera. In addition to settle the taxpayer’s debt for less than what is payments throughout the IRS statutory President, Sirvard Chimayan. The two companies offer just about any
there are timing issues that owed. It is a program that is misunderstood by collection period. If it is the former, 20% of this service a business owner could need from a team of professionals in
need to be considered: when both taxpayer and tax professional alike. It is amount must be included with the submission many fields. This is what Jay has envisioned and produced. But he
to earn income, when to pay also fodder for scammers who promise to settle and is non-refundable. If it is the latter, the first hasn’t done it alone. He is fortunate to have a tight-knit, talented
for activities that may be de- the debt for “pennies on the dollar”. payment must be made and monthly payments family who support him and each other and specialize in their own
ductible, when to exercise The first step in submitting an OIC is to must continue to be made throughout the areas of expertise. Below Jay shares his story with us, how TaxSmart
ISOs, to name a few. These explore all other payment options. This is a two-year period the IRS has to decide. None of America® University and TaxSmart America® Business Centers have
timing issues can have a sig- submission requirement by the IRS. Pay close this money is refundable regardless of the IRS’s helped expedite the path to success and his dreams for the future.
Photo: Nick Angello
nificant effect on AMT liabil- attention to the Partial Payment Installment final decision. BTW, the IRS must decide within
ity, (see the box on the Agreement (PPIA). This may be a good the two-year period or your client is TSA MAG: Jay, you have two offices here. Chimayan Financial Services and My the four tests (at the time of this interview). I expect to hang my license in late ‘09.
previous page for a summary alternative to the OIC. However, if your client is automatically approved for the OIC. The client is Accounting Center, Inc. (MAC). Tell us about the two and how they tie together.
of AMT timing issues). There still intent on submitting the OIC, the next step required to be on time and pay the full amount Jay: Chimayan Financial was started in 1996 by my Mom, Sirvard Chimayan. She TSA MAG: You were a student last year with TaxSmart University for professional devel-
are AMT rules specific to is to determine which type of OIC. There are of subsequent tax liability for the next five years does tax preparation, bookkeeping, and payroll for mostly start-up businesses up to opment and continued education. What is your impression of this school?
carry-forward losses, carry- three: or the agreement can be cancelled with the full three years. My Accounting Center started in 2006. It mostly deals with businesses Jay: Really impressive. We’re learning a lot of new things that we didn’t know before.
forward cost basis, carry-for- Doubt as to Collectibility – There is doubt amount owed and may include interest and after they’ve been in business for more than three years. Chimayan Financial Other programs talk about the laws, but they don’t explain the laws, how it affects
ward tax credits, and carry- the taxpayer could ever pay in full the amount penalties. All money paid to that point is specializes in tax returns. MAC is a business advisory and consultation. I’m the clients. TSU actually explains in full detail how to apply it to the client and how a
forward passive losses. Fur- of tax within the statutory period for collection. non-refundable. President of My Accounting Center. Sirvard Chimayan is the President of Chimayan client will benefit or be affected by it. We have also learned a great deal about
ther the portion of the tax Doubt as to Liability – Legitimate doubt At the end of the day there are five and only Financial Services. When she retires, my brother and I will take over. successfully managing a tax practice. The support we receive from TaxSmart is
considered AMT may be exists that the calculated tax liability is accurate five strategies for getting out of tax debt: invaluable.
used in future years as a min- due to examiner error; the examiner did not 1. Installment Agreement (IA) – IRS agrees TSA MAG: How many employees do you have?
imum tax credit. This is consider evidence submitted; or the taxpayer to a monthly payment plan Jay: Currently we have nine employees. TSA MAG: Most tax professionals take about 20 hours a year of continued
money all too often left on has new evidence. 2. Partial Payment IA – IRS agrees to education which is all that is required. Whatever possesses you to take 150 to 200 hours
the table. Effective Tax Administration – There is no long-term plan at a reduced $ amount TSA MAG: How long have you been in this business? per year?
“The tax professional who doubt as to liability or collectibility. Instead the 3. Offer in Compromise – debt relief Jay: I started in 1999 with my Mom, doing clerical work, a little bookkeeping, and Jay: It’s needed. Just reading the tax law and going to the lectures and workshops,
can successfully maneuver in taxpayer must prove that full pay would lead to program; see IRS form 656 then moved up to payroll. Then I started doing consultations and entity formations. it’s going to be over a hundred hours.
the quagmire of the AMT is in- economic hardship or be unfair and inequitable. 4. Not Currently Collectible – IRS agrees
valuable. Our knowledge can One example is that the taxpayer is responsible not to collect for a year or so TSA MAG: Tell us what services you offer. TSA MAG: At the rapid pace you’re moving in the development of your business, and as a
mean thousands of dollars to for long-term care for a dependent child and 5. Bankruptcy – discharges tax debt Jay: Year ‘round we offer bookkeeping services, payroll services, amended returns, licensed TaxSmart America® Business Center, where do you see yourself in five years?
our clients.” will need to use the equity in assets to provide under the rules of chapter 7 and/or 13 and audit representation. We do tax planning, consultations and financial advisory, Jay: On top of the world (laughing)! Basically, running a successful practice, buying
– TaxSmart America for basic living expenses and medical care for Any one of these is likely to be more effective entity formation and compliance for corporations and LLCs, and living trusts. We also new practices, and continuing to grow with TaxSmart.
Business Centers the child. than the OIC for most people, including offer financial services, IRAs and such.
All three types of OIC require the taxpayer to bankruptcy, and should be thoroughly
fill out and submit extensive amounts of researched. TSA MAG: Where did you go to university, and what was your major?
paperwork. This should be thoroughly Jay: I went to California State University at Northridge, majored in accountancy,
researched in IRS form 656. For info on PPIA or
Comments: Please visit bankruptcy strategies go
graduated in 2005.
TaxSmartMag.com/2cents. Next your client needs to to TaxSmartMag.com.
understand how the Comments: Please visit
TSA MAG: What do you enjoy most in your business?
TaxSmartMag.com/2cents.
payments work. Jay: Helping clients get educated in the tax field and providing consultation and
TaxSmart America®Magazine is published m c
ya
quarterly by TaxSmart America® Inc., 8825 advisory for their businesses. It’s great because when we help out a client, we’re cco r in
unting cente
Aero Drive, Suite 103, San Diego, CA, giving them value and it makes us feel good.
92123. Opinions expressed herein are
solely those of the editors and
contributors. Readers are advised to take TSA MAG: What’s the biggest challenge for you? My Accounting Center is Located at:
special care in relying upon opinions or
Jay: Most businesses think they have to have a CPA to do their bookkeeping, payroll, 460 S. Central Avenue
recommendations. The reader is
responsible for verification of any or taxes. We have to explain to them that most clients don’t need CPAs and that we Glendale, CA 91204
information provided herein. can still help them out. I am currently pursuing my CPA license. I have passed two of (818) 500-0714
Page 10 I TaxSmartMag.com Issue 1 I TaxSmartMag.com I Page 11
6. TaxSmartMag Issue 1 Final:Layout 1 12/30/2008 11:16 AM Page 12
Feature Story
planning for small businesses that help reduce their taxes by im- Since a majority of the revenue is derived during tax season,
plementing fringe benefit plans, medical reimbursement plans perhaps you might consider expanding your services to offer
or accountable reimbursement plans that shift otherwise tax- mid-year and end-year tax planning and records-review serv-
able profits to deductible benefits tax free. In this manner you ices to your existing clients using FREE consultations. First, it
Make More help the client reduce taxable profits and at the same time pro-
vide a value-based added service for which the client is more
costs you no more rent since you are already paying rent and
not using the office as much as might be possible. As for your
Money
than willing to pay a reasonable fee. In the Service section below time, well you already have time where you are making no
value-based service enhancements are discussed. money, so perhaps you can use that time by creating opportu-
In summary, you need to guard revenue nity where you might be able to make money
to avoid losing ground and hopefully find a “If you desire to operate at a if a client has an additional need you can fill.
method to add to revenue by expanding 50% gross profit margin, As mentioned previously, you might offer
Recession or Not service and value at little or no additional then every dollar you spend
cost to your firm. Revenue is the life-blood
of any business, and if you lose income, it
tax planning tips or records review services
must produce two dollars in or perhaps a service that aims at tracking
more deductions using more efficient record
income in order to support keeping. In each of these areas you have a
takes a significant amount of time and
By James Harnsberger money to replace the lost revenue with new that one dollar in spending. value-based additional service that is in line
clients. Conversely, if you save one with the core service of your firm, tax prepa-
Expenses - Now we move to the second dollar in expense, it has the ration.
level of effort and focus during a recession: economic effect of producing In this article we have looked into a few
the expenses you pay to operate your busi- areas where you might consider a more ef-
ness. First and foremost, a clearly defined
two dollars in income. “ fective method to shield against adverse im-
and detailed list of the total monthly business expenses is re- pacts that often come in any recession—increasing revenue,
quired. On this first round of analysis you are simply looking at cutting expense, and adding services. Think of how much more
the nature and amount of each expense to determine what they valuable and financially sound your firm will be using these and
are and then determine if in fact they are within a range that al- hundreds of other ideas after the tide turns again and we move
lows a safe operation of your business in order to generate a rea- out of the recession. You will benefit greatly in that you have not
sonable profit. only survived and perhaps even grown in a recessionary period,
Many items on the expense side of your business can be im- but you are stronger than ever financially for the good economic
proved if you take some time and evaluate your business and times that always follow a recession and down turn.
DURING TIMES WHEN OUR ECONOMY heads toward recession, it is important to know there are the expenses involved in the operations. By reviewing what you Also consider the importance of assisting clients in doing the
spend money on and how much you spend, you can begin to same for their financial concerns. By always adding value to the
some things we can do to help the financial pinch. There are three areas that should be relationship, you can be certain that in most cases the client will
see your performance. Using this information you can next
considered for review especially during an economic recession: begin looking to see if there are some types of expense where appreciate your expertise and dedication even if your fees are
in fact you can trim your spending. slightly higher. Never approach the relationship by simply ad-
• Income (these are revenues) Once you analyze the data and begin drafting a budget, you justing your fees for the sake of generating additional revenue.
• Expense (what can be done) can then apply discipline in your spending habits in order to pre- If the value is not present first, last, and always, the client will
serve your hard-earned capital. If you desire to operate at a 50% not be there for long either. At the end of the day your most
• Services (building opportunity) valuable asset is your client, and you want to do all that is pos-
gross profit margin, then every dollar you spend must produce
two dollars in income in order to support that one dollar in sible to safeguard that important relationship.
Income – Many are tempted to begin slashing prices in the hope of attracting new clients or out spending. Conversely, if you save one dollar in expense, it has Small business owners are the life-blood of our economy. Our
of fear of losing existing clients. Don’t panic. Slashing fees will only accelerate your demise. Here the economic effect of producing two dollars in income. So ex- free-market system has many cycles, and it may be the reces-
are some IMPORTANT TIPS regarding your fees. First, communicate value, never sell price. penses are very important, and budgeting your spending be- sion we are in will worsen. Those who thrive and grow are those
comes critical. who plan and prepare and execute well-defined plans. These
When you sell the price for a service, you communicate to a client that there is little or no value, plans should insulate and protect the business in downturns
Services – One of the most important things that can be
and the client then moves to find a competitive price lower than yours. Worse yet, you also com- done in a recession is to add value-based services to your prac- and position it to grow in the upturns of each cycle.
municate that your previous prices were over-stated and that these new lower prices really are tice.
what your service is worth. Instead you can communicate to your client that you will provide “ad- What are value-based services? They are services that en- Finally, remember the three rules in any recession.
ditional” value-based service for the same or slightly higher fee, and invite them to take advan- hance the firm’s offering to clients and thereby increase the
value of the firm. Important in this process is to look at the core 1. Don’t panic.
tage of cost-cutting tax tips by offering free consultations after tax season. 2. Don’t panic.
services you might now offer and review these services to de-
Another strategy during a recessionary period is adding new value-based services to your office termine what additional value-based add-ons can be imple- 3. DON’T PANIC!
that compliment your tax preparation core business. For example, you may wish to offer small mented at little or no cost to the firm but that communicate
business clients record keeping/organizing or bookkeeping services. Or perhaps offer tax value to the client. This in turn opens up opportunities for the James Harnsberger has been in the tax industry for over 23 years.
client to use the firm in new or improved ways. He is the Founder of TaxSmart America® Business Centers and TaxSmart America®
Let’s examine how you might use this approach if yours is a University where he has taught almost 5000 tax professionals. 1998.
firm that offers tax preparation for individuals and perhaps has Comments: Please visit TaxSmartMag.com/2cents.
some number of small business clients.
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Spotlight
BEST OF THE BEST – TAX-411
A Certified TaxSmart America® Business Center
Business owner, entrepreneur, wife, and mother: Diane Jara of
Downey, California, somehow manages to do it all and do it success-
fully. From the vibrant decor to the innovative branding, Diane’s
business, Tax-411, a Certified TaxSmart America® Business Center, is an
office that exudes professionalism and expertise. But while the
marketing and branding bring clients into Tax-411, it’s Diane’s
warmth, knowledge, and honesty that keep her clients returning for
the high quality tax and business services she provides. Here Diane
shares a bit about herself, her success, and her vision for Tax-411.
Photo: Nick Angello
TSA MAG: Tax-411 is a great name. How did you come up with it? TSA MAG: What do you think about the TaxSmart America Business Centers concept and
Diane: Since my husband is in the marketing business, he came up with the name the professional development?
TAX-411. He wanted a name that would be understandable by all people of any Diane: I have learned so much from them. I believe in the concept of TaxSmart. It is a
language. Everyone understands what 411 means. My goal is to educate my clients well-put-together organization, and I am so excited to be a part of it.
about their taxes. I do my best to provide extraordinary service, honesty, and
integrity in all I do. TSA MAG: You mentioned you worked for the IRS. How has that helped you in your
business?
TSA MAG: I know you’re a full-service, year-round practice. What services do your offer? Diane: When I worked at the IRS, it gave me valuable experience and knowledge to
Diane: My office offers a variety of business services, such as tax returns, corporate better understand my clients’ needs. This has been a great asset when representing
returns, business returns, estimated payments, bookkeeping, refund recovery, them in audits.
property tax, sales tax, entity formation and compliance and audit representation.
TSA MAG: What made you finally say, I’m going to start my own practice?
TSA MAG: Is there any one service that you feel is your specialty? Diane: I wanted to make a change in people’s experiences when dealing with a tax
Diane: Audits are my specialty. I have a great deal of knowledge and experience with professional. Also it is my desire to educate and provide a unique service.
them. Having worked for the IRS for a number of years, I have the advantage of
understanding the process and successfully helping my clients save money. TSA MAG: How do you juggle family and business?
Diane: I understand how to use time management and prioritize my life. Also my
TSA MAG: What is most rewarding in your work? husband and I raised our children to be flexible because it is what life requires. As a
Diane: Saving my clients money and educating them about their taxes. Also result, I have the support of my family. This makes my family and business life more
providing a solution to their problems and helping them succeed. I love that. successful. One minute I am a soccer mom, the next minute I am an IRS tax
professional with an audit. Life is good.
TSA MAG: What is the biggest challenge?
Diane: It was finding the right place to continue my education in tax law. There was TSA MAG: What are some of your plans over the next several years?
really nothing out there to assist me in growing my practice until I found TaxSmart Diane: I am excited to make the transition from a tax preparation office to a practice.
America University. As a professional, I want to continue expanding my knowledge That is going to be one of my greatest accomplishments for 2009. My success comes
and being up to date with the many tax law changes. Knowledge is value. from being dedicated to my clients and helping them succeed in their financial future.
TSA MAG: Most tax preparers spend only the required 20 hours per year in continued
education. Last year you will have spent between 150 to 200 hours through TaxSmart
University’s lectures, workshops and coaching. For the next 18 months as a licensed
TaxSmart America Business Center you will have spent that much time if not more in
education. That’s dedication.
Diane: Twenty hours is not enough to allocate to this business. My commitment to
clients is why I continue my education, which allows me to master my profession and
deliver extraordinary results.
TAX-411 is Located at:
11455 Paramount Blvd. Suite A
Downey, CA 90241
(562) 869-4000 • www.tax-411.com
Page 14 I TaxSmartMag.com I Issue 1
