Archives for December 2013

The Liability of Assuming Responsibility

In many different professions, when you are hired you are handed a job description. For accountants and a few other independent contractors, the clients define the job description. This can create an unexpected liability for the independent contractors. For some responsibilities, the line can be fuzzy, which in turn causes an expectation gap. When this happens, the independent contractor could be liable for not covering this gap, even if it was never communicated.

There are ways to minimize the pitfalls associated with independent contractors. The following are a few steps to follow:

  1. Define the Duties: When writing the engagement letter, clearly define the duties and scope of the services rendered, and be sure to include any limitations on services.
  2. Perform Only Duties Listed: Performing only the duties agreed upon in the engagement letter is critical. If more duties are performed, get an additional letter or addendum to the agreement to define those new duties and limitations on the duties.
  3. Documentation: It is important to keep everything in writing. Any oral conversations should also be communicated through written communication. The communication should note the client’s responsibility for taking the action and the recommendations made. Be sure to date the communications to keep the records clear.
  4. Avoid Overstatements and Titles: When communicating with clients, creating marketing materials, or creating engagement letters, it is important to be clear. Do not imply that certain services will be included if they will not be covered. Clear communication is key. Also do not take on extra titles such as, interim, outsources CFO, or controller. Such titles give an importance that usually is not there.
  5. Request an Overseer: Have the company delegate an overseer, preferably at the executive level that has the time and expertise to oversee the services provided by the independent contractor.
  6. Assuming Responsibilities: Do not assume responsibilities that are not in the agreement letter or contract. Stay firm on responsibilities that are outlined and request a new agreement if more services are needed.
  7. Board Meeting Attendance: If it is mandatory to attend board meetings, try to be first on the agenda, and exit after you are done. Have it noted in the minutes of what you discussed and then the time that you exited. This will keep you from being drawn into responsibilities that are not in your contract.

Tax Tips for End of the Year

It is that time again, the end of the year is approaching and then it is tax time, but why wait to think about taxes in January, when there is still time this year for some last minute adjustments. By using last year’s tax return as a starting point, you can evaluate and make changes that could positively change your taxes for 2014. The following at steps and planning strategies to consider when review finances at the end of the year.

  • Double Check Withholdings: You do not want to pay the IRS anymore that you have to. Adjust your withholdings so just enough comes out and you break even. If you can live without the extra pay coming in, put it in a savings account or add it to you retirement account.
  • Refinance Debt: Lowering your mortgage interest rate, not only give you a lower interest rate and payment, but if you use any of the proceeds to make physical improvements to your home, the amount could be subjected to alternative minimum tax (AMT).
  • Prepay Taxes: If you are not subject to ATM, consider prepaying estimated quarterly state taxes and property taxes. If you are able to prepay, the deductions can be taken for the 2013 return if paid before December 31.
  • Avoid ATM: If you live in a high tax state, have a duel income, and have children you might want to look at your chances of paying the alternative minimum tax. To avoid paying this tax, you should talk to you tax professional, but also consider deferring payments of state and local taxes until the new year, and accelerate you income to the point where you are no longer subjected to the tax. In many situations, this is a multiyear planning, so now is a good time to start.
  • Check up on Portfolios: Harvest any losses to help offset capital gains, rebalance any tax-deferred retirement accounts by allocating funds for the accounts, and consider your cash flow.

It is important to act before the end of the year if you are wanting the deductions for January taxes, then now is the time to act. Anything paid on or after January 1 will be on next year’s taxes.


A Change to Flexible Spend Accounts

At the end of October, the Treasury Department and the Internal Revenue Services announced a change to the 29-year-old rule that requires participants of flexible spending accounts to use their balances or forfeit the balance at the end of the year. The much-needed change is a huge step forward for hard-working Americans who use the money to pay for health care expenses throughout the year.

The modification to the ‘use-it or lose-it’ rule now allows participants to rollover up to $500 at the end of each year. The Treasury Department predicts that this modification will cut back on wasteful spending at the end of each year. For many people, the rollover option will be very helpful because the accuracy of what goes into the account will not have to be so precise, they will have some flexibility.

Employers will be given an option at the end of the year. Right now, they have the option of giving flexible account participants a 2 ½ month grace period for their account. They will then lose all the money at the end of the 2 ½ months. The other option is the $500 rollover. The rollover does not have a limit on the time, and can be carried over each year as necessary.

There are a few critics of the new plan that include people who would like to see the entire balance rollover instead of just $500, but the overall response to the new proposal is surprise and pleasure. The Treasury Department and IRS are moving in the right direction, and many people are welcoming the change.


Types of Communicators

In the business world everyone communicates to get their point across, but it is important to know that everyone has a different communication style. There are five types of communication styles: assertive, aggressive, passive-aggressive, manipulative, and submissive. Each has their own characteristics and it is important to understand how each style can affect the conversation.

The assertive communicator is the easiest to communicate with because they are able to express themselves in an effective way without hurting other people’s feelings. The receiver can trust them, you always know where they stand, and they earn respect.  They maintain good eye contact and are socially gifted.

Aggressive communicators are demanding and only agree with someone who agrees with their opinion. They believe that they are always right and the only opinion that matter is theirs. The person on the receiving end of the communication feels humiliated, hurt, afraid, or resentful. This is the hardest to communicate with because they will never see someone else’s side.

The passive-aggressive communicator may appear to be passive, but underneath they are hiding their aggressiveness with sarcasm, complaining, and deviousness. There are not trustworthy and usually two-faced. The person communicating with them often feel confused, angry, hurt, or resentful.

Submissive communicators are very quiet and tend to agree with everyone. They will feel like a victim, are easy to get along with, and avoid conflict. They are soft spoken and the person talking with them often feels frustrated, guilty, and can discount them because they do not know what they want.

The last form of communicator is the manipulative communicator. These people are cunning, controlling of other in a devious way, and they can make people feel obligated to them. They can make the person they are talking to feel guilty, frustrated, angry, and they usually do not know where they stand with a manipulator.

Each style has its own challenge when talking to them. If you understand the style of communicator you are talking to you will have a better chance of being able to get your point across.