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August 11, 2016 by Harlan Kahn CPA Leave a Comment

The IRS and tax problem resolution cases

If you owe the IRS back taxes, there are many possible tax problem resolution outcomes.

I find these days that the IRS is operating with a sub-par number of employees. Service is poor because of lack of staff and funding from congress.  Our office handles extreme cases of tax resolution and I’m going to share some strategies, cases, and outcomes.

Tax resolution outcomesAs background information, everyone should be aware that there is a statute of limitations.  This is the length of time the IRS has to challenge entries on your tax returns.  Most often it is 3 years from the date you filed (or 4/15) your return.  This statute protects you from many but not all later inquiries.  It does not protect you from tax fraud.

Do not ever write something on your return that would put you in tax fraud or even become suspected of tax fraud (wrongful or criminal deception intended to result in financial or personal gain).  Fraud is a crime and you will need an attorney in addition to a good CPA, if you are accused of fraud (which raises your costs considerably).

Many years ago a tax attorney sent us a married couple who needed to refile a couple of years of returns.  The husband was a self-employed painter and the wife an attorney.  The wife came to realize the husband had committed tax fraud on his self-employment form (his entire painting career).  Since a joint return holds both people liable, the attorney had inadvertently committed tax fraud.  Thus the couple went to a tax attorney which lead to ‘voluntary disclosure’ and me reworking 2 years of returns.

We had 2 cases of taxpayers coming to our office who haven’t filed tax returns in more than 10 years!  This kind of deliberate act is actually criminal.  Fortunately, the IRS is more gentle and kind than merely taking you to court immediately.  In 1 case the collection agent went to the taxpayer’s house after the taxpayer ignored a dozen threatening letters.  In the other case the IRS garnished 60% of the taxpayer’s salary.  Both of these acts motivated the taxpayers to come in and bring their returns up to date.

I’d like to point out that even after we filed all the missing returns, there were ‘substitute returns’ filed for several years for each of these two taxpayers.  A substitute return is a return the IRS prepares (often  creating more tax than the actual tax the taxpayer owes) and is hard to get removed!  The other important point is that the IRS (and NYS) do NOT have the same collection laws as a delinquent bill collector.  The IRS can garnish most of your wages!!!

Lottery

One woman came to us after winning $100,000 in lotto.  She withdrew $60,000 from her retirement funds and bought herself a house for $240,000 on Long Island.  This was at the advice of her friends who suggested she invest in real estate with her winnings.  The advice was very poor for this taxpayer.  This woman never earned more than $30,000/year.  No one mentioned the $100,000 was taxable or that the retirement withdrawal was taxable.  Combine her $30,000 salary, $100k of winnings and $60k of retirement withdrawal this woman was looking at $190,000 of earned income as a single person.  Taxes were about $60,000 federal and about $30,000 to NYS.  She of course had spent every dime she had on the property and had to pay a mortgage too.  The IRS garnished most from her $300 weekly salary.  We were able to get that number down to $100/month and later $50/month.  They say winning the lottery makes some people poorer; this case supports that notion.

The single most successful device NYS has been using to get deadbeat taxpayers to pay is preventing a driver’s license from being renewed.  If you owe $10,000 or more to NYS you will be surprised if you want to drive.  Although you can work with a temporary license, it is restricted and prevents you from driving for entertainment (some cases no driving at night) and certainly is not useful if you have to drive to buy food in the supermarket.

Generally, the IRS & NYS do not call you on the phone.  The number of fraudulent phone calls claiming to be the IRS (and about to sue you) are high; they are false calls and the IRS never threatens over the phone (they do it in writing many times before they act).

Lessons learned: Pay your taxes, file your taxes timely and avoid getting in the cross hairs of the government.  You will find the government’s requirements to ruin your life are merely sending certified letters of tax bills.  From there the government is allowed to lien, levy and garnish your money.  Don’t ignore the tax letters you get in the mail; seek out professional advice to counter them.

Harlan Kahn CPA


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Filed Under: IRS, tax

August 8, 2016 by Harlan Kahn CPA Leave a Comment

Wholesaler trade secrets

What can a wholesaler can do to improve his situation? After all, it isn’t easy being a wholesaler? 

Here are some critical facts a wholesaler needs to consider every day:

  • Knowing what goods to buy is the most critical thing.
  • Managing profitable inventory is the next most important thing, leaving administration (licenses, sales taxes, regulating costs & overhead) as the remaining important area.
  • Buying, managing/merchandising, and administration are three areas that can make you or break your business.

What is the best indicator of buying the right goods to inventory? Some wholesalers would say profit (or buying profitable goods), which is certainly important but I believe the correct answer is INVENTORY DAYS. Often items with low mark-up, if they turn fast enough, can turn a profit.
The least number of days you hold an item usually means the more profitable that item is. Certainly mark up (gross profit) is extremely important. Examples are all around us:

  • low priced coffee
  • doughnuts
  • used cars
  • pens
  • bottles of water
  • flavored ices
  • copper tubing

all the above are examples of items that sell (turn) quickly.

Warehouse Inventory - wholesale, wholesaleWarehousing costs the company not only in rent (and heat and lighting) but also ties up funds available to purchase more profitable faster turning items. It also may take up warehouse space. And yet so few wholesalers look at inventory turns and inventory days.

How does a wholesaler manage inventory so that it is profitable? Certainly jewelers know the first rule of inventory, which is safeguard it (safeguard all assets). I remember a business that rebuilt and fixed (returned radios and other electronics) from Sears and the like in New Jersey. It didn’t take them much time to put up steel gates and security guards to protect the inventory from the employees who fixed, shipped and warehoused the newly fixed (refurbished) radios and devices.

Don’t just safeguard inventory from theft or acts of god, but measure the time you hold it and keep it free from being damaged. Some perishable foods and milk have such short shelf lives that inventory turns are the lowest and accounts receivable almost non-existent. We can all learn something from those industries about moving merchandise.

Administration often bogs down the small operator of merchandise. Discount stores, wholesalers of plumbing supplies, auto parts, jewelry, even coat hangers and airplane parts are sensitive to government regulations, registration, sales tax and other reporting. Here is an area where your CPA can help develop or improve your systems for recording sales, internal controls, compliance and reporting. In most businesses, cutting a cost usually results in bottom line profit. It’s the absolute best way to have your accountant pay for himself/herself. Even a $3,000 or $5,000 investment in streamlining the sales process through collection can save a company tens of thousands of dollars every year.

Harlan Kahn CPA


Don’t leave without downloading my free ebook here “Do you own your business – or does it own YOU!”
Great insights to revive the dream.

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Filed Under: business

June 7, 2016 by Harlan Kahn CPA Leave a Comment

Tips for the new generation of entrepreneurs

I really enjoy working with entrepreneurs – their passion is contagious. Typically their business model needs work.

A famous financial planner from Long Island, Alexander J. Mitchell, once said to me years ago, people will learn to develop a second or even a third career path.

More people in their 50’s are coming into our office ready to start a new career than ever before; many want to be entrepreneurs. It seems with large layoffs and a feeling of lack of job security have spurred many towards self-employment.

Self-employment is not easy, however, it should be simple and fun.  As a profitability consultant & a CPA it’s important to me that I have compassion for the clients our firm supports.

Self-employment should be simple.  By simple I mean a simple profit model.  Complicated profit models don’t usually work.  The simplest professional profit model is trading services for dollars.  It really doesn’t make a difference if you are filling a tooth,  drafting documents, or fixing a leaky faucet, you are indeed trading your skilled craft/service for dollars.  The hard part of self-employment is developing the craft or service and then marketing it.  The actual profit model is easy.

Entrepreneurs at workIf you are not having fun, we should stop right here and find out why.  Most of my clients have fun every day at work.  Some clients ‘used to have fun’ at least in the beginning.  Often the jobs of administering a business become drudgery for some.  But I truly believe in my heart, if you want to be successful you have to love what you do.  If you love it, finding ways to have fun at it are easy.

 

So where do so many professional firms go wrong? 

It usually starts with the first thoughts.  I believe all professional businesses should make money from day one.  Most people intern or work for another professional at the start of their career.  When you got the job you started making money the first day (in the form of a paycheck).  This money idea should carry over to self-employment.  Start with the tools you have and start performing your services immediately.  Remain at your job until you can find a path to leave to your own practice.  Start in your spare time.  Never should you be ashamed of your motivation to make more, do more and be more.

Most firms (law firms, cpa firms, architectural firms, developers) like people who can bring in business.  In your own business you have to be the rain maker.  Start at it early.  Practice and learn the tools of attracting clients to you.  One has to develop an attracting personality and lose a little of the repelling habits to be successful.

Differentiating yourself in the market place (standing out from the others in your field) are the new tools of professional success.  Ever go to a website where the firm touts how great they are, how many years they are in business and the years of knowledge accumulated?  Great, but shouldn’t you be talking to the client instead of the mirror?  Learn to listen to the customer.  What does the customer want and need?  How do my services and skills fit into the customer’s desires and goals?

Entrepreneurs successMost self-employed people love their job when they are making a lot of money.  They don’t care for their job when it creates pressures and loses money.

I look at my job as correcting their business model and improving my client’s quality of life.  It takes hard work and maturity.  It’s not for everyone.  For those that we match with, it’s just about everything they wanted in business life.

All the best. Harlan

 


This blog article was written to help professionals including (but not limited to) chiropractors, doctors and dentists, engineers, architects, opticians, physical therapists, veterinarians, plumbers,  pharmacists, developers, and the new and established self-employed entrepreneur.

 

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Filed Under: business

May 23, 2016 by Harlan Kahn CPA Leave a Comment

Retail can be difficult – but it can be profitable too!

Anyone following the news or in a retail store knows retail forecasts for the year are down; way down.

Target, Macy’s, Nordstrom and JCPenney are just some examples of big retailers losing out to Amazon and the internet.  Walmart too is being squeezed by Amazon as Walmart squeezes smaller retailers.

What about small retailers who own shops?  You smaller retailers have been beaten up by the big guys for 10 years now (or more).  I started this blog by mentioning the big guys are losing market share daily to the internet sellers.


reatail1What can the smaller business owner in retail do?  

First and foremost, there are no silver bullets! But there are many small things you can do to capture more than your “fair share” of your market! 

One of the most important thing you must do is “make your customers feel good about coming into your store”. People have many shopping options. They return to where it feels good and bring their friends. Train your staff in good customer relationship techniques and demand they use them. Use secret shoppers to share their experience. 

Retail was never an easy business. Here are some basic tips all retailers should know:  

1- move your merchandise around!  Your store has to look like your goods are always flying out the door.  If goods aren’t moving, move them around in the store.  Reposition your inventory EVERY WEEK.  Customers considering your product need to think if they don’t buy it soon it may run out.

2 – mind your inventory purchasing – many retail establishments have a very short lead time from suppliers.  If your suppliers can delivery in a few days or less, order less.  It is good to sometimes to run out of product!  Running out of some merchandise means you are ordering the right items for your store customers.

3 -get rid of what doesn’t sell! Last week I wrote about inventory turns so I don’t have to cover that here.  But what about dead stock?  Items that don’t sell in a year are probably worthless.  Items that don’t sell in season of a seasonal business (like winter clothes in May) are worthless.  Make a ‘sale bin’ and get rid of unwanted merchandise.  Customers like to find a sale, so a sale bin can attract business.  Retailers need the most space they can muster from their rented (or owned) premises.  Removing things that will never sell opens up room.

retail trade4-  get on the internet! The internet has changed the way we do business.  We can shop, cross shop and check values anywhere at any time.  Get your merchandise on line, with nice pictures, descriptions and presentation.  People have a tendency to check into things by googling you, your business and your merchandise.  Make sure your online representation is good, accurate and correct.  I have several wholesaler’s and retailer’s selling on line.  Sales in the beginning start slow (until your website catches on).  Yet these are still increases in sales, most often prepaid and a golden opportunity with no extra rent expense.

5- learn to purchase in quantity at a discount!  This concept is quite different from not buying too much.  This is buying a lot but at a deep discount from your vendors.  Let’s say you are opening or just opened a new store.  The best way to drive new customers into your business is to sell something at an obviously great price.  It doesn’t matter if it’s Johnnie Walker Blue, women’s yoga pants, gold earrings or a cold glass of beer.  If you sell a lot of it, you should be able to purchase at a better discount.

So make a deal with your vendors.  Normally I buy 100 units; how much if I buy 1,000 units or 3,000 units or 10,000 units?  If you can get a deep enough change in cost, you can sell below all your competition and attract business and traffic to your store.

All the best. Harlan

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Filed Under: business Tagged With: business, retail, retaining

March 29, 2016 by Harlan Kahn CPA Leave a Comment

New York State Department of Labor is assessing penalties to employers of ‘undocumented employees.’

I must write this to help protect all NYS/NYC employers:

The New York State Department of Labor is assessing penalties to employers of ‘undocumented employees’.

Please repeat the above sentence to yourself and substitute ‘illegal aliens’ for the last two words.

know the employment rules in NYC
Employers must know the employment rules in New York State (NYS)

We have more than one case already where a temporary worker, who never came forward with proper paperwork, and her illegal friend are suing a past employer.

Their claim, working 80.5 hours per week with no overtime rate, at a concierge station in a hotel lobby.

Further, the complaint was made against the client’s bussing company and not the concierge business at all.

This is not the only hospitality industry case.  There are many others. How about a diner where the employer paid the employee properly. So instead the lawyer for the employee has started a class action lawsuit. Employees from 5 & 6 years ago suddenly remember being underpaid? There is no doubt in my mind that many in the hospitality industry have trouble with undocumented workers.

New York State requires ALL employees to work under the same code, regardless of legitimacy of paperwork of an undocumented worker.

This means the practice of employees signing their time cards, paying payroll rates properly and the reviewing personnel files become the focal point of your defense against an investigation.

  • Everyone should have a time clock or a time register.
  • The employee should initial or sign each time they are paid that the hours are correct.
  • Rates should be updated on a systematic basis and reviewed for accuracy.

The bills that go with these cases become, pay the lawyer or pay the state or pay both. And typically I hate to report, it is pay both.


Before you leave, download our free report
“Do you own your business or does it own you“.

Get tremendous insights to revive the dream
and make this year the most profitable ever.
Get it here NOW.


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New York State Department of Labor is assessing penalties to employers of ‘undocumented employees.’

New Laws for NYC Businesses with 20+ FT Employees

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NYS Notices about unemployment expense surcharges and assessments

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Filed Under: business, New York Tagged With: New York State Department of Labor, undocumented employees

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