Virtual Bookkeeping Services - February 2010

If you are a business owner, prepare to spend a lot more time collecting data, keeping records, and generating/sending paperwork. And if you have previously provided goods and failed to report income, know that that will change starting in 2012.

Currently, businesses must send 1099s to all individuals who provide more than $600 worth of services to that business in a calendar year. Independent contractors are used to receiving this form, and paying self-employment taxes on the income. Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

So if your gourmet basket-making business buys $900 worth of wine and cheese, you’ll have to send a 1099 to your supplier. As this Business Week article points out, the requirement will even apply to money you spend at places like FedEx or the local gas station. This is going to cause huge issues because even a small business may have to produce and send 100+ 1099s and report them to the IRS. 

The government hopes the changes in 1099 reporting will generate additional tax revenue on income that has previously gone unreported – and it’s in the health care bill because that revenue could potentially pay for some of the bill’s costs. More details will be known about Form 1099 changes when the IRS releases further provisions – a date when those provisions will be released is not yet known.

All businesses, whether small or large, require bookkeeping. If you have a small business, you need an accurate, organized and chronological system that readily provides reliable information when needed. Accurate financial reporting is the key to knowing whether your small business is successful or if changes need to be made. Any mistakes that are made can cost your company tremendously.

More and more, business owners are outsourcing their bookkeeping functions to improve accuracy, save time and save money. Outsourcing your bookkeeping system to an experienced professional will assure that your books are handled in the most efficient and productive way.

Also a third party can be more objective regarding financial decisions that you, as the owner, may need to make. More time will be available to focus on the core activities of running the business and the stress of managing the books will be removed.

Cost savings are instantly realized when you outsource as you will not have the administrative burden of hiring and training accounting staff or paying fixed salaries, insurance and benefits. An outsourced bookkeeper also saves you valuable office space that would be taken by another internal employee.

With all of the additional benefits, outsourcing a bookkeeper is more effective than doing it yourself or having one permanently in the office. Outsource today and start focusing on what matters!

As long as I keep track of everything, it doesn’t matter how the books are sorted – it will all work out in the end.” This sort of relaxed attitude will not give you a clear financial picture or help you make informed business decisions. I have seen entrepreneurs create expense categories that drill down to each specific client, which can mushroom uncontrollably as the list grows. On the other hand, I have seen such general categories created like “Travel Expenses” with everything thrown in, when it should have been broken down by categories such as “Business Meals”, “Entertainment” and “Transportation”.

A standard structure of your accounts is paramount to insightful bookkeeping. Creating an industry and business specific chart of accounts will provide a solid framework for establishing financial control of your business. If you are unfamiliar with the chart of accounts you should be using, your best option is to hire a professional bookkeeper or accountant. A proper chart of accounts will easily answer these three questions:

1. What are your variable costs?
2. What are your fixed costs?
3. What is your breakeven point?

One of the keys to running a successful business is truly understanding where your income is coming from and where your expenses are going.  Getting your books set up properly from the start with the aid of a professional bookkeeper will eliminate future nightmares and helps you know the answers to how your business is doing right away.

I have had countless small business owners over the years come to me at their wit’s end after trying to handle the books on their own. A business may start small and the owner buys into the old adage of “keeping the books myself keeps me closer to the numbers”. However, they don’t stop and ask themselves if they have proficient bookkeeping, accounting and tax training for a small business and, more importantly, if they should be allocating their time to this endeavor instead of focusing on their core business. It simply does not make sense from a financial standpoint for owners to spend their time doing tasks that can be outsourced at a lower cost, vs. the owner’s hourly cost, to someone who is trained in small business bookkeeping.

Trying to multi-task running a business while trying to stay on top of all the accounting functions can pull an owner in all directions. Wearing too many hats often leads to mistakes and omissions in record keeping. When you are too close to the numbers, it is hard to see the big picture objectively as it’s easy to get caught up in all the details and not spot mistakes.

In time, many entrepreneurs realize they cannot handle bookkeeping on their own. They often turn to an office assistant, or a friend, or even Aunt Sally to handle the books. Does this solve their headaches? More often than not, the answer is no! It actually causes the headache to grow larger.  In time, the business owner figures out that it was a bad decision, but feels bad firing a friend or family member so the cycle continues. 

We are working with a client now who fell into this trap and it ended up costing them thousands of dollars and trouble with the IRS.  You see, they had cash flow problems and their internal bookkeeper/cousin was having the owner sign the checks written to the IRS for payroll taxes, but wasn't mailing them because they were short on cash.  She felt guilty about not being able to manage the cash flow, so she just hid the checks.  This went on for months.  When the IRS came knocking, they owed over $75,000 in taxes.  Had the employee not been a relative, they would have terminated her, but since she was a cousin, they kept her employed.  Unfortunately, that wasn't the only mistake she had made and eventually her issues caught up to them and the company had to file bankruptcy and close. 
 
As you can see, choosing another untrained individual will only cost more in the long run.  The bottom line is to hire a qualified and experienced bookkeeper who will properly track your finances accurately the first time, which saves you time, money and headaches in the long run!

We’ve all been told that we need to reconcile our personal bank statements each month, but how many of us actually do it? If your funds are flowing just fine, you might just skip that step and assume that all is well. That assumption can be a huge mistake if you apply that thinking to your small business as well.

Reconciling your monthly statement with your books is a fundamental aspect of bookkeeping. It certainly can be time consuming and fairly tedious, depending on the number of transactions each month. I had one client bring me almost two years worth of unreconciled statements who wanted me to find out what went wrong. After much research, I discovered the error, but the solution was a much more difficult task as the mistake occurred over a year before!

Banks do make mistakes, although they would like you to believe otherwise; companies do double-charge whether in error or for unscrupulous reasons; debits continue from businesses even after you have discontinued service; and accounting entries get entered incorrectly from time to time. With the potential for these sorts of errors and overcharges, it is worth the time and effort to hire an experienced bookkeeper who can stay on top of your finances each month.

As powerful and advanced as computers are, they are not infallible. But how many of us rely on them completely for our businesses? We all know things happen – floods, fires, and the spontaneous malfunction or even death of our computers. There is really no excuse for failing to back-up your financial data. Your processes must include regular and routine back-ups of all your bookkeeping activities, whether they are online or on your local hard drive.

The last thing you want to happen at the end of the year or at any point for that matter is to lose all your numbers. Losing your financial data means to many businesses not knowing who owes you money, and this will mean in many cases, missing out on getting paid.  You may not be able to prevent a disaster or technical malfunction, but you should take precautions to lessen any damage these events could cause. 

There are many products in the market today that make backing up data virtually effortless, from online back-up services which run whenever your computer is idle to capture any new information you have input to online accounting software which houses your information on their secure servers for retrieval from any computer. Even in this increasingly paperless society, having hard copy print-outs of quarterly and yearly financials are important to have on hand to be ready for any situation.

We worked with a client who was getting ready to prepare their 2009 taxes when they lost all of their QuickBooks data.  It was unrecoverable.  They didn't have time to recreate the data file so they hired us.  It took us almost 80 hours to put together the information, which cost them about $4800. An offsite backup service can cost as little as $20 per month.

If you lack the confidence to use some of the accounting software packages available or don’t feel technologically savvy, hire an experienced bookkeeper and IT company to take care of it and to maintain your back-up of files.  We work with both 411 Technology Solutions (www.411ts.com) and LogicKey (www.logickey.com) and know they will help you devise a back-up and disaster plan that will alleviate your worry. 

Make backing up your financial data the one thing you don’t have to worry about, as there are sure to be plenty of other things to focus your attention on when running your own business!

Source: AchieveGuidance.com: Consulting, Guidance, Resources and Support for Non-Profits

It was only a postcard, but it caught my eye. A direct mail piece from a nonprofit organization, its sharp graphics and design enticed me to read it. Its well-written copy invited me to visit the organization’s website to donate. Impressed, I decided to check out the organization.

Let’s start the timer: After reading the postcard, (45 seconds – yes, I scanned it), I’m intrigued enough to go to the organization’s website for more information. So, I fire up the Internet (5 minutes – login to computer, open the browser, etc.) and type in the web address (something like, “organizationname.org/donate”) and wait for the window to open (1-2 minutes). Please note: Normally, I would circumvent this step by entering the organization’s name into Google and accessing the site through the search results, but this time I decide to follow the organization’s rules. (FYI to development directors: Not all donors follow your rules.)
 
At this point, I’ve invested a little less than 10 minutes in this exercise, and I’m waiting to be rewarded with something spectacular. But, before the screen pops up, I get a call from an Achieve staff member with a question that needs to be answered right away, and then I’m briefly distracted by a growing to-do list (5 minutes). But I’m committed to seeing this site. I mean, this postcard was wonderfully crafted, which means the site ought to be even better … right?
 
Finally, the page pops up and this is what I see (excluding graphics):

Donate
Thank you for your commitment to the cause. To make a contribution, please fill out the form below. If you have any questions, please call the development office at [phone number].
 
And that’s all.

My first reaction is, “There has to be more.” I poke around the web page, thinking maybe I’ve missed something. I mean, the postcard message was good, and I expect it to be backed up with something impressive. It isn’t. Just dry, boring copy. In the blink of an eye, I bail out, log off and move on to something else. Total time invested: roughly 15 minutes. Pay-off: zero.

I wish I could say I was as surprised as I was disappointed, but I can’t. The truth is, many nonprofits’ web donation and support pages focus first on completing the transaction, and second – if at all – on continuing the story. That’s a big mistake.

This is unfortunate because a donation page offers the perfect opportunity for sharing the story of need, impact of gifts, profiles of donors and more. A well-crafted page will help seal the deal; one that focuses solely on the transaction will be transparent and uninspiring. Consider my chain of events: I committed close to 15 minutes and then walked away without taking action.
 
How do you avoid this mistake? By considering a few key factors when designing your donation page.

1. Tell the story. Provide visuals, links to video and graphs of impact on your donation pages. Provide ongoing support materials to guide the donor through the process of gifting. Reassure the donor throughout this process, letting him or her know how a gift will be used and the impact it will make. Remember: These people are online and might not have experienced your work in person. Bring your work and mission to life through your website.
    
2. Highlight donors. Let existing donors tell stories about the organization and its work. Videos or testimonial statements that focus on donors’ support and explain the work of the organization will help prospective donors connect with the impact their gifts can make.
    
3. Make impact visual. Create visuals on your site that explain where the money goes and promote the transparency of gifts. Accompany these visuals with information about opportunities for donors to get involved in volunteer opportunities, advocacy work and more.
    
4. Define donor communication. On the donation page, tell donors how the organization will continue to communicate with them. For example, explain how they can find updates on programs via social media, describe the communication processes surrounding volunteer opportunities, and highlight specific communications for donors.
    
5. Be specific. Donors like specifics; provide them. Be creative and describe where a $500 gift will go and how it can be used. Provide links throughout the donation pages – including the transaction pages – that allow a donor to get an idea about what a $500 gift can do in each program. Extend this idea even further by having an existing $500 donor describe what his or her gift is doing for the organization. This form of peer modeling can influence the thinking about gifts.
    
6. Provide Updates. Create a section on your donation pages for ongoing – at least quarterly  – updates to donors on the use of gifts and the state of the cause. This form of stakeholder communication will keep existing and prospective donors aware of potential opportunities to continue their support.

Sure, you want your donation page to facilitate the gift, but first you’ve got to inspire the giver. Use the tips above to engage a prospective donor, provide an experience rather than a transaction, and see if you can not only close deals but also encourage more and higher gifts. Do all that, and the transaction will take care of itself.

QuickBooks has added a document manager function which will make the audit process go much smoother for non-profit organizations.  You can now link documents to the accounts payable, banking and accounts receivable transactions.  What does that mean?

• To see a copy of a vendor invoice that was paid with a particular check, just click the link on the check screen and it will open up.
  
  
• To see copies of checks that were included in a particular bank deposit, just click the link the deposit screen.

What will this do for the audit process?  Cut the time involved in the audit process significantly because the organization representative and the auditor will no longer have to search through files to find the backup documentation. 

The cost of the actual service is pennies compared to how much will be saved.

This is a great enhancement and we hope all non-profits take advantage of this great service!

Jennifer Foster
 

After five years in business, I have watched over 30 accounting and bookkeeping companies come and go.  Since having consistency is critical in accounting, this can be a huge burden!  
 
When I meet with potential clients, I always tell them what makes us different, and recently I’ve started telling them what they should look for in an outsourced accounting company, even if that accounting company isn't us.   
 
Tip 1: Proof of insurance/bonding
Not only should an outsourced accounting company be able to tell you they are insured, but they should be able to fully explain their insurance and provide a Certificate of Insurance (COI) showing the client as an additional insured on their policy.  There are various types of insurances, and an accounting company should be able to prove Professional Liability, including Errors and Omissions, and General Liability, including crime as a rider.  Foster Results go a step further and provide Electronic Data Coverage, which covers you should someone hack your server or computer and steal critical information, including identity theft and bank/credit card information.  General liability doesn't reimburse you for your losses, but Electronic Data coverage does.  
 
Tip 2:  Consistency and Vacation/Illness Coverage
Consistency in both the books and the staff are vital in bookkeeping/accounting.  For example, you shouldn’t categorize subcontract labor for services provided as a cost of goods account one month, then categorize it the next month as an expense account.  You also need to know that your accounting company will provide you with the same point of contact, allowing you to work with the same individual daily/weekly/monthly.  In addition, the company should provide a backup accountant who knows and understands your account, so if the primary point of contact is sick or on vacation, another knowledgeable person is available for you.  I have seen many companies who are unhappy with their accounting company because the company consists of one sole individual who does not provide backup for their clients.  While using a sole proprietor may seem like a good way to save money since they may be perceived to be less expensive than a company, the necessary backup typically isn’t available.
 
Tip 3:  Get References
You will probably think to ask for references from current clients, but I also recommend asking for references from past clients.  If an accounting firm can provide you with solid references of clients who no longer utilize their services, they are likely a quality organization.  When asking for references of clients, make sure the ones provided are similar to your company type, size and the services you will be receiving.  If you are looking for full service accounting, the references you speak with should not be from clients who were given training to do their own bookkeeping or accounting.
 
Tip 4:  Beware of Lower than Market Pricing
While you may think you are getting a deal because one accountant is charging $30 per hour while the other three you spoke with charge $60-70 per hour, remember just like other purchases, “you get what you pay for.”  An accounting company charging less than market pricing tells me a few things: it is a new company that hasn’t done market research which usually results in the actual work taking 2-4 times longer than an established firm (1 hour at $60 is less than 3-4 hours at $30), they are desperate for business, they don’t value their own abilities, and they probably started the business out of necessity because they lost their job and couldn’t find one (this is especially dangerous to clients because if a good job offer comes along, they will probably take the position and the client will be told either they can’t work for them going forward or they can continue to service them during the evenings/weekends.  What happens if you need something during the workday?
 
Tip 5:  Look at Pricing Structure (Flat Fee versus Hourly Billing)
Your accountant should be able to give you a reasonable monthly cost estimate or cost of doing a project.  If you are told just an hourly rate without an idea of how many hours the project will take, you should run away!  
 
Please note:  There are times a project runs over budget because new information is determined while working on the project.  In such a case, your accountant should be communicating to you as soon as an issue is identified (not when the project is complete).
If you do these five things, the accounting company you choose should be able to accurately and consistently manage your account and you will likely be happy with your choice.
 
Sincerely,
 
Jennifer Foster

Okay, I understand most people don’t get a thrill out of keeping track of every penny of their business.  I have a successful bookkeeping business because of this and can keep track their financials accurately every month.  What concerns me as I sit here making estimated tax payments for many of our clients are the many businesses out there just pushing all that to the side and deciding to deal with it later.

Too many small businesses don’t do the sometimes tedious work of bookkeeping and record keeping, and then the owner ends up with a huge tax bill at year end.  Then they have to devise a payment plan with the IRS - and the interest rate for the IRS is significantly higher than bank interest.  We have one client who, before having us work on his bookkeeping, pushed it aside to deal with it all later.  He is still paying his business’s 2007, 2008, and 2009 tax bills.  With interest, he will pay about 135% of what was originally owed.  I know I would rather use that money for something else than paying the IRS.  Wouldn’t you?

It is always fun helping our clients save money.  Here is an example of one cost saving measure we have implemented with a new elder client.

The first month we began paying bills for Tom, his assigned accountant noticed he had talked more than 300 minutes more than his cell phone plan allowed which cost him $90.  She spoke to him about it and he said it was a fluke that he doesn’t usually talk that much.  The next month, he exceeded his allotted minutes by 380 costing him $114.  She took the time to look up available plans from his carrier and let him know that he could add an additional 500 minutes for $15 more per month.  He once again insisted that he doesn’t speak that much and he would be sure to keep it under the next month. 

Month three rolls around and he is again over (although only by 250 minutes costing him $75.)  The next meeting the accountant had with Tom, she sat down with him and together they made the phone call to increase his package.  He was so appreciative that she kept on him until he made the change because he should’ve done it months ago…he actually said he had been over by a “few minutes” for several months “or maybe it has been a couple of years.”  He also said that his son had been on him to change the plan, but he doesn’t like when his son tells him what to do.  He is such a hoot!

Elder care is the fastest growing division of our company, and yet most of our clients and friends don’t even know we offer the service.  I have vowed to do a better job of getting the word out because there is a huge need for bill payment and financial management services for our parents…and the staff loves working with them!

Jennifer Foster, President
Foster Results, LLC
www.fosterresults.com

WASHINGTON — The Internal Revenue Service will host a special nationwide Open House on Saturday May 15 to help small businesses and individuals solve tax problems.

Approximately 200 IRS offices, at least one in every state, will be open May 15 from 9 a.m. to 2 p.m. local time. IRS staff will be available on site or by telephone to help taxpayers work through their problems and walk out with solutions.

“Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them,” IRS Commissioner Doug Shulman said. “If you have a problem filing or paying your taxes or resolving a tough tax issue, we encourage you to come in and work with us.”

IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues. At a previous IRS Open House on March 27, approximately two-thirds of taxpayers requested and received assistance with payments and notices.

So, for example, a taxpayer who cannot pay a tax balance due can discuss with an IRS professional whether an installment agreement is appropriate and, if so, fill out the paperwork then and there. Assistance with offers-in-compromise will also be available. Likewise, a taxpayer struggling to complete a certain IRS form or schedule can work directly with IRS staff to get the job done.

At the March 27 Open House, 88 percent of the taxpayers who came in for help had their issues resolved the same day.

Locations for the May 15 Open House are listed here. (opens in new window)

The Open House on May 15 is the first of three events scheduled through the end of June. The next two are planned for Saturday June 5 and Saturday June 26. Details regarding those events will be available soon.

If you have not filed a a form 990 for the last three years you may be in trouble. If you work with a nonprofit and have just asked yourself, “what is a 990?” read this and these, then come back. But since this is the Not-For-Profit Accounting blog devoted nonprofit accounting issues I’ll assume my readers know all about 990s. But there may be folks new to the sector out there, maybe you know a new board member, so please pass this information on to them.

As this press release from Guidestar says,

"The IRS will begin revoking exemptions on May 16, 2010, but will wait until 2011 to send revocation notices."

If you miss the first filing deadline for 2009 990s of May 15 2010 (the deadline for nonprofits who have calendar year fiscal years that end on December 31) the IRS will start pulling exceptions in six months or so. More about that from the IRS can be found here, and the details on filing thresholds so you know which form to file and dues dates for your returns can be found here.

(Links open in new windows.)

 

Medical Equipment Fraud:

Equipment manufacturers offer "free" products to individuals. Insurers are then charged for products that were not needed and/or may not have been delivered.

"Rolling Lab" Schemes:

Unnecessary and sometimes fake tests are given to individuals at health clubs, retirement homes, or shopping malls and billed to insurance companies or Medicare.

Services Not Performed:

Customers or providers bill insurers for services never rendered by changing bills or submitting fake ones.

Medicare Fraud:

Medicare fraud can take the form of any of the health insurance frauds described above. Senior citizens are frequent targets of Medicare schemes, especially by medical equipment manufacturers who offer seniors free medical products in exchange for their Medicare numbers. Because a physician has to sign a form certifying that equipment or testing is needed before Medicare pays for it, con-artists fake signatures or bribe corrupt doctors to sign the forms. Once a signature is in place, the manufacturers bill Medicare for merchandise or service that was not needed or was not ordered.

Some Tips to Avoiding Health Insurance Frauds

• Never sign blank insurance claim forms.

• Never give blanket authorization to a medical provider to bill for services rendered.

• Ask your medical providers what they will charge and what you will be expected to pay out-of-pocket.

• Carefully review your insurer's explanation of the benefits statement. Call your insurer and provider if you have questions.

• Do not do business with door-to-door or telephone salespeople who tell you that services of medical equipment are free.

• Give your insurance/Medicare identification only to those who have provided you with medical services.

• Keep accurate records of all health care appointments.

• Know if your physician ordered equipment for you.
   

 

Some Tips to Avoiding Counterfeit Prescription Drugs

 

• Be mindful of appearance. Closely examine the packaging and lot numbers of prescription drugs and be alert of any changes from one prescription to the next.

• Consult your pharmacist or physician if your prescription drug looks suspicious.

• Alert your pharmacist and physician immediately if your medication causes adverse side effects or if your condition does not improve.

• Use caution when purchasing drugs on the Internet. Do not purchase medications from unlicensed online distributors or those who sell medications without a prescription. Reputable online pharmacies will have a seal of approval called the Verified Internet Pharmacy Practice Site (VIPPS), provided by the Association of Boards of Pharmacy in the United States .

• Product promotions or cost reductions and other "special deals" may be associated with counterfeit product promotion.
   

Some Tips to Avoiding Funeral and Cemetery Fraud

 

• Be an informed consumer. Take time to call and shop around before making a purchase. Take a friend with you who may offer some perspective to help make difficult decisions. Funeral homes are required to provide detailed general price lists over the phone or in writing.

• Educate yourself fully about caskets before you buy one and understand that caskets are not required for direct cremations.

• Understand the difference between funeral home basic fees for professional services and any fees for additional services.

• You should know that embalming rules are governed by state law and that embalming is not legally required for direct cremations.

• Carefully read all contracts and purchasing agreements before signing and make certain that all of your requirements have been put in writing.

• Make sure you understand all contract cancellation and refund terms, as well as your portability options for transferring your contract to other funeral homes.

• Before you consider prepaying, make sure you are well informed. When you do make a plan for yourself, share your specific wishes with those close to you.

• And, as a general rule governing all of your interactions as a consumer, do not allow yourself to be pressured by vendors into making purchases, signing contracts, or committing funds. These decisions are yours and yours alone.
   

Some Tips to Avoiding Fraudulent "Anti-Aging" Products

• If it sounds to good to be true, it probably is. Watch out for "Secret Formulas" or "Breakthroughs."

• Don't be afraid to ask questions about the product. Find out exactly what it should do for you and what it should not.

• Research a product thoroughly before buying it. Call the Better Business Bureau to find out if other people have complained about the product.

• Be wary of products that purport to cure a wide variety of illnesses (particularly serious ones) that don't appear to be related.

• Testimonials and/or celebrity endorsements are often misleading.

• Be very careful of products that are marketed as having no side effects.

• Products that are advertised as making visits to a physician unnecessary should be questioned.

• Always consult your doctor before taking any dietary or nutritional supplement.
   

Telemarketing Fraud

If you're age 60 or older, you may be a special target for people who sell bogus products and services by phone. Older women living alone are special targets of these scam artists. Telemarketing scams often involve offers of prizes, low-cost vitamins and health care products, and travel offers.

 

 

There are warning signs to these scams, including promises of "free" or "low cost" vacations and get rich quick schemes. If you hear these--or similar--"lines" from a telephone salesperson, just say "no thank you," and hang up the phone:

• "You must act 'now' or the offer won't be good."

• "You've won a 'free' gift, vacation, or prize." But you have to pay for "postage and handling" or other charges.

• "You must send money, give a credit card or bank account number, or have a check picked up by courier." You may hear this before you have had a chance to consider the offer carefully.

• "You don't need to check out the company with anyone." The callers say you do not need to speak to anyone including your family, lawyer, accountant, local Better Business Bureau, or consumer protection agency.

• "You don't need any written information about their company or their references."

• "You can't afford to miss this 'high-profit, no-risk' offer."

 

 

Remember, if you hear the lines above, or similar "lines" from a telephone salesperson, just say "no thank you," and hang up the phone.
 

 

Some Tips to Avoiding Telemarketing Fraud:

 

It's very difficult to get your money back if you've been cheated over the phone. Before you buy anything by telephone, remember:

 

• Don't buy from an unfamiliar company. Legitimate businesses understand that you want more information about their company and are happy to comply.

• Always ask for and wait until you receive written material about any offer or charity. If you get brochures about costly investments, ask someone whose financial advice you trust to review them. But, unfortunately, beware -- not everything written down is true.

• Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, state Attorney General, the National Fraud Information Center , or other watchdog groups. Unfortunately, not all bad businesses can be identified through these organizations.

• Obtain a salesperson's name, business identity, telephone number, street address, mailing address, and business license number before you transact business. Some con artists give out false names, telephone numbers, addresses, and business license numbers. Verify the accuracy of these items.

• Before you give money to a charity or make an investment, find out what percentage of the money is paid in commissions and what percentage actually goes to the charity or investment.

• Before you send money, ask yourself a simple question. "What guarantee do I really have that this solicitor will use my money in the manner we agreed upon?"

 

You must not be asked to pay in advance for services. Pay services only after they are delivered.

 

• Some con artists will send a messenger to your home to pick up money, claiming it is part of their service to you. In reality, they are taking your money without leaving any trace of who they are or where they can be reached.

• Always take your time making a decision. Legitimate companies won't pressure you to make a snap decision.

 

Don't pay for a "free prize." If a caller tells you the payment is for taxes, he or she is violating federal law.

 

• Before you receive your next sales pitch, decide what your limits are -- the kinds of financial information you will and won't give out on the telephone.

• It's never rude to wait and think about an offer. Be sure to talk over big investments offered by telephone salespeople with a trusted friend, family member, or financial advisor.

• Never respond to an offer you don't understand thoroughly.

• Never send money or give out personal information such as credit card numbers and expiration dates, bank account numbers, dates of birth, or social security numbers to unfamiliar companies or unknown persons.

• Your personal information is often brokered to telemarketers through third parties.

• If you have been victimized once, be wary of persons who call offering to help you recover your losses for a fee paid in advance.

• If you have information about a fraud report it to state, local, or federal law enforcement agencies.
   

Internet Fraud

 

As Internet use among Senior Citizens increases, so does their chances to fall victim to Internet Fraud. Internet Fraud includes non-delivery of items ordered over the Internet and credit/debit card fraud. Please visit the FBI's "Internet Fraud" webpage for details about these crimes and tips to protect yourself.
 

 

Investment Schemes

Senior Citizens, as they plan for retirement, may fall victim to investment schemes. These may include Advance Fee Schemes, Prime Bank Note Schemes, Pyramid Schemes, and Nigerian Letter Fraud schemes. Please visit the "Common Fraud Schemes" webpage for more information about these crimes and tips for protection.
 

Reverse Mortgage Scams

The FBI and the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) urge consumers, especially senior citizens, to be vigilant when seeking reverse mortgage products. Reverse mortgages, also known as Home Equity Conversion Mortgages (HECM), have increased more than 1,300 percent between 1999 and 2008, creating significant opportunities for fraud perpetrators.

 

Reverse mortgage scams are engineered by unscrupulous professionals in a multitude of real estate, financial services, and related entities to steal the equity from the property of unsuspecting senior citizens aged 62 or older or to use these seniors to unwittingly aid the fraudsters in stealing equity from a flipped property.

 

In many of the reported scams, victim seniors are offered free homes, investment opportunities, and foreclosure or refinance assistance; they are also used as straw buyers in property flipping scams. Seniors are frequently targeted for this fraud through local churches, investment seminars, and television, radio, billboard, and mailer advertisements.

 

A legitimate HECM loan product is insured by the Federal Housing Authority (FHA). It enables eligible homeowners to access the equity in their homes by providing funds without incurring a monthly payment. Eligible borrowers must be 62 years or older who occupy their property as their primary residence and who own their property or have a small mortgage balance. See the FBI/HUD Intelligence Bulletin for specific details on HECMs as well as other foreclosure rescue and investment schemes.

Seniors should consider the following:

• Do not respond to unsolicited advertisements.

• Be suspicious of anyone claiming that you can own a home with no down payment.

• Do not sign anything that you do not fully understand.

• Do not accept payment from individuals for a home you did not purchase.

• Seek out your own reverse mortgage counselor.

If you are a victim of this type of fraud and want to file a complaint, please submit information through our electronic tip line or through your local FBI office. You may also file a complaint with HUD-OIG at www.hud.gov/complaints/fraud_waste.cfm or by calling HUD's Hotline at 1-800-347-3735.
 

Resources:

• FBI/HUD Intelligence Bulletin

• Related Links: USA.gov for Seniors | United States Special Committee on Aging

The reverse mortgage program, designed by HUD to allow senior citizens to get cash for their home equity and then live payment free in their homes, has been popular with cash-strapped seniors. But, history teaches us that where senior citizens and cash are involved, scammers are not far behind. Two major fraud cases in recent weeks may be a signal that senior should be on guard.

Most of the focus and warnings have been to make seniors safer from what the FBI calls, “unscrupulous professionals in a multitude of real estate, financial services, and related entities.” But, the scammer may be just someone like a next door neighbor.

It has been the experience of the FBI that the elderly are targeted for fraud for several reasons:

1) Older American citizens are most likely to have a "nest egg," own their home and/or have excellent credit all of which the con-man will try to tap into. The fraudster will focus his/her efforts on the segment of the population most likely to be in a financial position to buy something.

2) Individuals who grew up in the 1930s, 1940s, and 1950s were generally raised to be polite and trusting. Two very important and positive personality traits, except when it comes to dealing with a con-man. The con-man will exploit these traits knowing that it is difficult or impossible for these individuals to say "no" or just hang up the phone.

3) Older Americans are less likely to report a fraud because they don't know who to report it to, are too ashamed at having been scammed, or do not know they have been scammed. In some cases, an elderly victim may not report the crime because he or she is concerned that relatives may come to the conclusion that the victim no longer has the mental capacity to take care of his or her own financial affairs.

4) When an elderly victim does report the crime, they often make poor witnesses. The con-man knows the effects of age on memory and he/she is counting on the fact that the elderly victim will not be able to supply enough detailed information to investigators such as: How many times did the fraudster call? What time of day did he/she call? Did he provide a call back number or address? Was it always the same person? Did you meet in person? What did the fraudster look like? Did he/she have any recognizable accent? Where did you send the money? What did you receive if anything and how was it delivered? What promises were made and when? Did you keep any notes of your conversations?

The victims' realization that they have been victimized may take weeks or, more likely, months after contact with the con-man. This extended time frame will test the memory of almost anyone.

5) Lastly, when it comes to products that promise increased cognitive function, virility, physical conditioning, anti-cancer properties and so on, older Americans make up the segment of the population most concerned about these issues. In a country where new cures and vaccinations for old diseases have given every American hope for a long and fruitful life, it is not so unbelievable that the products offered by these con-men can do what they say they can do.

In 2009, many tax credits were augmented and created. Tax credits can help you lower your total tax bill and increase your chances for a tax refund. Below are some of this year's most important tax credits. Some are new, some changed, and some became part of the American Recovery and Reinvestment Act (ARRA).

For those of you who are unsure of the difference between a tax credit and a tax deduction, a tax credit lowers your total tax bill directly, whereas a tax deduction lowers your taxable income (indirectly taxes dollar for dollar), sometimes placing you in a different income tax bracket.

Consumer Energy Tax Credit
This tax credit is a good one. If you have made repairs to your home (non-business) to improve energy efficiency you will be able to get up to 30% back from that investment but no more than $1,500. This would include better insulation through the installation of more efficient windows, doors, roofing and even the installation of water heaters, solar thermal technologies, natural and oil furnaces and so on. If you are unsure whether your recent energy efficiency investment qualifies, contact a CPA or the IRS directly.

American Opportunity Tax Credit
The old Hope Tax Credit was expanded for 2009 with the new American Opportunity Tax Credit. As a parent, for each student in college now, you can save up to $2,500 in taxes. There are income limitations with this credit though. Once you start to make over $80k as a single parent (or $160k for married couples), the credit begins to phase out. Realize though that you cannot claim the Hope Tax Credit and this credit in the same year for one student.

Home Buyer Tax Credit
This credit applies to new home buyers and even existing home buyers that meet certain guidelines. First time home buyers who purchased after January 1st, 2009 and before April 30th, 2010 can take up to $8,000 ($4,000 if married and filing separately) off of their tax bill. This tax credit is completely phased out once you make over $145k (individual) or $245k (for a married couple).

For existing home owners, who moved primary residences, the credit is $6,500 (individual) or $3,250 (if filing jointly) but you must have lived in the home for five consecutive years. Furthermore, it only applies for homes purchased after November 6th, 2009.

Making Work Pay Tax Credit
With this credit, you can claim up to 6.2% on earned income from wages but no more than $400 for individuals or $800 for married couples filing jointly. However, this really only applies to those that are self-employed as your employer should have reduced withholding for this during the year. Realize that does not apply to those receiving a pension, or unemployment.

Electric Motor Vehicle and Electric Plug-In Vehicle Tax Credits
These tax credits differ slightly in a few different ways if you went "green" in 2009.
* The Electric Motor Vehicle tax credit ranges from $2,500 to $15,000 depending on the capacity of the battery and how heavy the vehicle is.
* The Electric Plug-In Tax Credit is 10% of the vehicle cost capped out at $2,500. To take advantage of this your vehicle had to go into service after February 17th, 2009.

Adoption Tax Credit
This tax credit increased to $12,150 for 2009 but the tax credit is only applicable if the adoption expenses were paid this year (unless they are a special needs child).

Government Retiree Credit
This tax credit is $250 ($500 if filing jointly) for 2009 if you received a government pension payment or annuity in 2009. Realize though this credit becomes invalidated for you if you took an economic recovery payment.

Earned Income Tax Credit
This credit applies to low-wage earners and it had a few changes in 2009. One change is that the credit increased for individuals with 3 children or more and for married couples filing together. Also the income limit to qualify for this credit has increased as well.

For more details on any credit, visit IRS.gov.

Bonus: Use Your Tax Refund To Buy US Series I Savings Bonds
By utilizing some of these tax credits above you can increase your refund or your chances of getting a refund. Starting this year, the IRS is you purchase US Savings Bonds with your refund. Although these US bonds offer low rates of return during these economic times, they are great investments.

The IRS for this year's filing will allow you to take up to $5,000 of your tax refund to buy U.S. Series I Savings Bonds in multiples of $50 by selecting this on Form 8888.

If you purchase more than $250, the denominations of the bonds should get larger. Anything over $5k or that be divided by a multiple of $50 will need to be deposited into a savings/checking account. 

With the Federal government spending at all time highs, and with my belief that inflation is on the horizon, US savings bonds can be a very attractive hedge against inflation. Taxes on these bonds are due when redeemed but you will not be responsible for state or local taxes with these bonds. One drawback to these bonds is the fact that they cannot be redeemed until a year has passed from their issuance so be sure to check with your investment adviser.

This is a guest post by Manny Davis of Back Taxes Help.

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WASHINGTON - Want to keep IRS auditors away? Keep your earnings under $200,000 and they won't bother you 99 percent of the time. IRS enforcement numbers, released last week, show that returns under that amount have a 1 percent chance of getting audited.

Returns showing income of $200,000 and above have a nearly 3 percent audit chance. The percentage jumps to more than 6 percent for returns showing earnings of $1 million or more. The percentages apply to both individual and joint returns.

The number of audits jumped 11 percent from 2008 to 2009 for returns with earnings of $200,000 or more, but rose 30 percent for returns showing earnings of $1 million or more. For those under $200,000 the number of audits remained steady.

 The IRS conducted 1.4 million audits in the financial year ended Sept. 30, with more than 1 million conducted through correspondence with the taxpayer. The others were conducted through face-to-face meetings with IRS auditors.

The IRS does not do random audits, but does conduct "research audits" that will test compliance in business tax categories. In 2010, the target will be payroll taxes, according to Steve Miller, deputy commissioner for enforcement.

By Larry Margasak, Associated Press 

BY THE NUMBERS: IRS AUDITS OF TAX RETURNS

- The number of audits jumped 11 percent from 2008 to 2009 for returns with earnings of $200,000 or more.
- The IRS conducted 1.4 million audits of individual returns in the financial year ended Sept 30.
- The total revenue collected from IRS enforcement actions, $48.9 billion in 2009, is a drop from $56.4 billion in 2008.