FAQs

• Standard Mileage Rate
• Lease or Buy
• Rebates vs. Special Dealer Financing
• Gifts
• Roth IRA
• Compilation and Review
• Evaluating Accounting/General Ledger Software
• CPA-411.com's Quick Overview of Accounting Software

General

Standard Mileage Rate:
Q: What is the standard business mileage rate?

A: The standard mileage rate for 2007 is 48.5 cents per mile.

Lease or Buy:
Q: Should I lease or buy?

A: The real question lies with the yearly projected mileage. We have developed a general rule of thumb. If a vehicle is projected to accumulate between 8,000 and 18,000 miles annually, it may be beneficial to lease. Less than 8,000 miles a year tends to indicate you do not utilize the vehicle enough to substantiate the lease payment and over 18,000 miles a year may result in substantially increased costs due to excess mileage penalties. It is always beneficial to compare the costs and benefits between leasing and buying.

Rebates vs. Special Dealer Financing:
A: The key factor is to analyze the total cost of each purchase option over the period of time you will finance the vehicle. This then enables the consumer to make a smart decision.

Individual

Gifts:
Q: Who pays the tax? I want to give my children some money. How much can I give them and will they have to pay taxes?

A: Any individual my give up to $12,000 a year to each and every person they choose without any tax consequences. The person receiving the gift has no tax consequence upon receipt of the funds. They are only responsible for taxes on the income those funds produce. If you need to exceed $12,000 to a specific person in any given calendar year, a husband and wife might consider gifting $12,000 each totaling $24,000. This is called gift splitting.

Gift tax returns must be filed annually by individual donors for gifts of more than $12,000 that do not qualify for gift splitting or qualify for an exemption. The donor is primarily liable for the payment of the gift tax. Keep in mind that the donor may chose to utilize their lifetime exclusion amount. This lifetime exclusion states that every individual may transfer upon their death to anyone an amount which is exempt from estate taxes. This exclusion amount is $2,000,000 through 2008.

Roth IRA:
Q: What is a Roth IRA?

A: A Roth IRA is an individual retirement account that has been specifically designated when it is established. Contributions are never deductible. Interest and dividends that build up within the account may be tax-free depending upon how and when the individual withdrew the money from the account.

Advantages:

• All qualified distributions are non-taxable including earnings (need to have a holding period of at least five years).
• Contributions to a Roth can be made even after age 70-1/2
• Qualified distributions from a Roth IRA are not subject to the additional 10% penalty for early withdrawals.
• May make contributions regardless of participation in employer retirement plan; subject to phase-out rules.

• Contributions to Roth IRAs are subject to income limits. Contributions begin to phase out for joint filers with adjusted gross income between $150,000 and $160,000.
• Individual or spouse must have earned income.

• Made on or after the date on which individual attains age 59-1/2
• Made to a beneficiary on or after the individual's death
• Attributable to the individual's being disabled
• A distribution to pay for "qualified first-time home buyer expenses."

Q: Should I Convert My Traditional IRA to a Roth IRA?

A: Amounts in a traditional IRA can be rolled over or converted into a Roth IRA, but only if:

• The Taxpayer's adjusted gross income for the tax year does not exceed $100,000; and
• The Taxpayer is not married filing separately.
• Generally, younger Taxpayers who qualify as indicated above, to convert traditional IRAs consider conversion for the benefit of the long-term growth in the Roth IRA that grows tax free. However, serious consideration must be given to the fact that amounts transferred or converted from a traditional IRA into a Roth IRA must be included in gross income in the year converted. Income taxes will be payable based upon the Taxpayers' current tax bracket for the year of conversion.

Business

Compilation and Review:
Q: What are Compilation and Review Services?

A: Most businesses must prepare reports on their financial performance. These reports help owners and management make operating decisions, enable creditors to evaluate loan applications, and assist individuals in making investment decisions. In order to serve clients’ varying needs, our firm provides Compilation and Review Services.

Compilation: A compilation is useful when limited in-house capabilities for preparing financial statements exists. CPAs prepare financial statements from information provided by management. Compilation standards permit accountants to omit footnote disclosures as long as the omission is clearly stated in the compilation report and there is no intent to mislead users. However, if a business needs to provide some degree of added assurance that its financial statements are reliable, it may need the performance of a review or audit engagement.

Review: A review engagement is when a business needs a CPA to review and issue a report that provides limited assurance that material changes to its financial statements are not necessary. In a review engagement, a CPA applies analytical procedures to company prepared financial statements to identify unusual items or trends in financial statements that may need explanation. A CPA remains independent of the client during the review and is required to include all appropriate footnotes in the reviewed statements.

Evaluating Accounting/General Ledger Software:
Q: What Questions Should I Ask the Software Vendor?

A: Here are some questions to consider:

• What program features do you offer? Contact the vendor directly for literature and other information. Also ask if the software program is customizable.
• What about industry-specific features?
• What does your support team offer? Inquire as to the cost/charges for support calls. Ask how long is the average wait time and is there support hours for evenings, weekends and holidays.
• Do you have any references? Ask for names and contact numbers for some customers. Call, ask their opinion, discuss problem areas and areas for improvement.
• What about package updates? Ask about the ability to update and enhance software programs. Check if you will have to repurchase the entire package when a new version is issued. Inquire if latest releases are backward compatible, that is the latest release can read information from previous versions of the software.
• Do you offer a demo or trial version? A demo or trial version is not a complete version of a package, however it should allow you to work with the program for a period of time so you can determine if it meets your needs.
• Do you offer internet-based versions and what are the monthly service fees as well as those fees for on-line memory utilization (usually $/byte)?

CPA-411.com's Quick Overview of Accounting Software:
Q: What Software is Best for My Business?

A: Choosing an accounting software requires a bit of forethought and background knowledge. Using the questions above, contact the software vendor and find out if the software is applicable to your particular industry and needs. CPA-411.com lends a bit of insight into the following applications:

Quickbooks/Quickbooks Pro: This program is great for small businesses. It was designed to be simple and easy to use. It is not necessary to have any accounting background. If you can keep a checkbook, you’ll be fine. There are many drill-down capabilities. The program is user friendly and very forgiving. The only area where corrections are not permitted is in the bank reconciliation. Training seminars are offered several times a year throughout the country. Note: Intuit does charge for support calls.

Beware of the Quickbooks on-line version, specifically the internet-based version. Preliminary reports indicate that this version, which was intended to compete with mid-sized internet-based accounting packages, is significantly slower than previous versions.

Peachtree: This program is another good option for small businesses. It offers strong sales order modules with multiple pricing structures for inventory items, bill of materials processing capabilities, support for billing labor and import/export capabilities. Peachtree also offers a fixed asset module. Users of the program need a basic bookkeeping background with an understanding of debits and credits. This program’s drill down capabilities are a little cumbersome, however, keep improving with each new release. Note: Prior experience has shown that newer releases do not read prior version information without conversion. In order for you to submit data disks to your accountant, your accountant must have the exact version and release you are utilizing in order to read and retrieve data.

MAS90: This program has been a long-time favorite for companies in the $2 to $50 million range. This product features a long list of modules to meet a wide range of business needs, such as bill of material processing, work order processing, point of sale, Electronic Data Interchange (EDI) and bar coding. The product offers a custom office module which seamlessly integrates with Microsoft Office.

Great Plains Dynamics: This program provides a solid solution with a user-friendly design, good customization capabilities, good end-user support, however consideration has to be given to expandability through the compatibility of third party add-on applications.

Solomon: This program has depth with more than 45 modules. It includes project costing, financial reporting, distributions, service and manufacturing which can meet a variety of industry niches. The product features a strong general ledger and has flexibility and customizable features.