Managing work-related stress

Every professional has to deal with stress in some form. We are simultaneously juggling our careers, our family, and various clubs and activities. I discovered these helpful tips for dealing with stress from the website TargetWoman, which is an Award winning Information portal dedicated to Women. Here are some helpful ways to manage work stress:

• Don’t miss breakfast: Poor nutrition alters biochemical profile, start the day with nutritious low-fat breakfast. Eat regular balanced meals throughout the day.
• Effective time management: You have limited time in the day, so make the most of it.  Analyze core values, schedule activities, create realistic expectations, straighten priorities and divide time for different aspects of your life. Learning to say ‘no’ in a friendly but firm manner, requesting help when you certainly need it, and not desiring to meet unrealistic goals is also important.
• Breaks help: Take small breaks from work. Ensure you make use of lunch times and other break times. It helps to increase productivity.
• Take deep breaths: At times when you are feeling overwhelmed by the amount of tasks or if you face a confronting situation, take deep breaths. You body and mind will benefit from the extra oxygen and you will feel relaxed and cool.
• Choose your company: The company of optimistic and confident people will help in finding new dimensions to various issues that you are likely to face in work area. You will develop a positive attitude and will feel confident and less pessimistic. Keep away from negative company -- negativism sucks positive energy. Learn to take things lightly. Smile and laugh often.
• Use the gym: Exercise regularly for physical as well as mental benefits.  Exercise helps relieve stress.  Learning the art of meditation can bring about long lasting wonders for the psyche.
• Plan back-ups: Unforeseen domestic changes will add up to stressful situations. Develop strategies to face unexpected developments like backup ride for kids, plan for dinner etc.
• Network: Meeting new people outside work area, developing friendship with like-minded individuals, sharing views on current affairs, participating in social welfare programs improves your sense of social connection.

Carolyn Kobek, CPA

Financial Literacy – Never too early to learn

According to a phone survey conducted by the American Institute of CPAs, 61 percent of parents pay their children an allowance, averaging $65 per month.  However, only 1 percent of parents said their children save any of their allowance.  Teaching children financial responsibility early can have a huge impact on their financial habits as they become adults.

Along with another local CPA, I spent several hours this summer volunteering with girls aged 13-15 discussing topics such as balancing a checkbook, budgeting and saving, and credit cards.  We even talked about payroll deductions and examined a W-4 and W-2.  These are topics that are rarely mentioned in school.

Several of the girls had opened their own checking accounts, and they had overheard their parents talk about credit cards.  However, many of them were shocked to learn what is deducted from a paycheck.  And, they had never really thought about budgeting.

While I cannot say I kept them fully engaged each hour, many of the girls asked relevant questions.  Because the math skills varied among the girls, we kept examples simple.  We used a financial calculator in Excel to show the impact of paying more than the minimum payment on a credit card, which was surprising to girls who were paying attention.

I hope to continue this volunteer project in the future.  I truly believe the more children see good examples of financial responsibility, the more confident they will be to take control of their financial future.  In the meantime, I’m open to any ideas to make W-2s and budgets more exciting to teenagers.

Jessica Miles, CPA

Tax record retention policies

Have you ever wondered how long you should keep the documents and record that support the items included on your income tax returns? When determining how long to keep records, we typically look at the relevant statute of limitations period – the period of time a taxpayer can amend a return to claim a credit or refund or the IRS can assess additional tax. For most taxpayers this period is three years from the original due date of the return or the date the return is filed, if later. However, if a return includes a substantial understatement of income (defined as omitting 25% or more of the gross income reported on the return), the statute of limitations period is extended to six years.

A good rule of thumb for keeping tax records is to add a year to the statute of limitations period. Using this approach, you should keep most of your income tax records for a minimum of four years. Certain tax records should be kept longer. Records documenting the cost basis of property that could be sold (like investment property or business fixed assets) should be retained based on the record retention period for the year the property is sold. Tax returns, IRS and state audit reports, business ledgers and financial statements normally should be retained indefinitely.

Keep in mind there may be non-tax reasons to keep certain tax records beyond the time needed for tax purposes. For example, insurance policies, leases, real estate closing statements and employee payroll records might need to be kept longer. As a final note, with many businesses moving to a more “paperless” environment, the same recommendations apply to computer records and electronic storage systems, as to paper documents.

Jim Story, Manager - Tax Department

Converting your C-Corp - It may be now or never

You may have recently considered the pros and cons of converting your C Corporation to an S Corporation or LLC.  The Tax Adviser recently included a detailed article emphasizing that now may be the time.  So why is now a critical time?  I'm so glad you asked:

• Due to the extended Bush tax cuts, tax rates are currently at historic lows.  These rates once again are set to expire at the end of this year.  With great uncertainty in a presidential election year, we cannot count on the tax cuts being renewed.
• Unfortunately real estate values are also at historic lows.  Because converting a C corporation to a passthrough entity (partnership or S Corporation) can trigger gain based on the fair market value of the corporation’s assets, lower real estate value can be a good thing from a tax standpoint. 

Once you come to the decision (and work up the nerve) to convert your C Corp, you must decide between an S Corporation or LLC.  Both forms are passthrough entities - meaning income will be passed through to the individual level and will be reported and taxed when you file your individual tax return.

Converting to an S Corporation is easier and less costly than converting to a LLC.  I’m assuming you are now thinking “OK - stop right here.  Why would I even consider converting to a LLC?”  Depending on your corporation’s current needs and future goals, converting to an S Corporation may not be desirable (or even possible).  Here are a few basic rules for becoming an S Corp:

• It must be a domestic corporation.
• The corporation cannot have more than 100 shareholders.
• Shareholders can only be individuals who are US citizens or residents, certain estates, certain trusts, and certain tax-exempt organizations (i.e. partnerships cannot be a shareholder in an S Corp).
• The corporation can only have one class of stock outstanding.  Special allocations of earnings to certain shareholders can create a separate class of stock, which will revoke the corporation’s S election.  Generally, all shareholders will need to have identical rights to distributions and liquidation proceeds.

Usually the “one class of stock rule” is the most challenging limitation for our small C Corp clients.  Transactions such as compensation arrangements and leases between the corporation and shareholder can violate the "one class of stock" requirement.

Every business is unique.  This brief discussion by no means describes all of the issues you will need to consider when converting your C Corp.  If you have any questions, please don’t hesitate to contact one of our tax specialists at Robinson Grimes.

Jessica Miles, CPA

Five lessons in leadership from Mongolia to Antarctica (or, What I did on my summer vacation)

On a recent trip to the Gobi Desert in Mongolia, my husband and I and a group of 25 other people participated in an Astronaut Leadership Experience Program through the International Space School Education Trust (www.isset.org).  I learned some important truths about myself on the trip, but it was a recommendation at the end our excursion that inspired me.   Hazel, a magistrate from Wales, introduced me to the book Shackelton’s Way:  Leadership Lessons from the Great Antarctic Explorer by Margot Morrell, Stephanie Capparell, and Alexandra Shackelton.  This book is a roadmap for effective leadership.

Many know that, against all odds, Shackelton didn’t lose a single crew member during the grueling Endurance expedition to Antarctica.  Shackelton’s Way tells the story of Shackelton’s leadership journey and how he embraced practical leadership principles that ultimately saved his crew.  Five of these principles resonate with me as I continue on my own leadership journey.  They are:

Lesson 1:  A leader knows that optimism is contagious and important to productivity and harmony.  Shackelton was an optimist and he insisted on optimism from his crew.  The authors observed, “Shackelton kept malcontents close to him to contain their effect and to try to win them over.”

Lesson 2:   A leader uses celebrations and good humor to unite his team and create loyalty.  Shackelton was intentional about celebrating holidays and honoring birthdays, and he believed in balancing work and fun.  One of his crew wrote, “it was a rule to hold a concert on Saturday nights and this rule was seldom broken.”  Shackelton’s efforts to unite his crew paid off during the most trying times of the expedition. 

Lesson 3:  A leader understands that all team members need challenging and meaningful work and that sharing the load, including the least desirable chores, breaks down social  and status barriers that create cliques.  A crew member wrote, “I must say that I think scrubbing the floors is not fair work for people who have been brought up in refinement... but it humbles one and knocks out of one any last remnants of false pride... and for this reason I do it voluntarily.”

Lesson 4:  A great leader is selfless.  “Shackelton always put the well-being of his crew first.  He always weighed the cost of a goal against the expense of reaching it.”  The authors’ observation contrasts Shackelton’s leadership style with that of Robert F. Scott --with whom Shackelton had served in an earlier, failed expedition.

Lesson 5:  An effective leader plans, plans, and plans but remains flexible.  The authors note, “Shackelton was bold in his plans, but cautious in their execution, paying close attention to detail.”  At one point in the expedition when the ship could not be saved, a crew member observed, “As always with him, what had happened had happened; it was in the past and he looked to the future...  Without emotion, melodrama or excitement he said, ‘Ship and stores have gone, so now we’ll go home.’”

Many leaders -- from CEO’s to entrepreneurs to the US Secretary of the Navy -- have successfully utilized Schackelton’s principles to lead their own organizations.  The next leg of my own leadership journey includes the GSCPA Leadership Academy.  Rest assured this “roadmap” will be among the tools in my arsenal as I move toward the goal of effective leadership.

Daria Cruzen, MBA, CPA; Manager, Audit Department

A different way to think about “the cloud.”

The cloud (using servers, services, or applications located somewhere on the Internet - a.k.a the "cloud”) is a somewhat polarizing subject.  Many (but not all) IT folks are wary of it for varied reason (security concerns, implementation complexities, fears about what it will mean for their job).  Many executives and business owners are enthusiastic about it because of the many touted benefits (lower cost, better uptime, less day-to-day hassle). One reason for these differing feelings is that many view the cloud as an all-or-nothing proposition. It doesn't have to be this way.

I am not convinced we'll see great success in total cloud migration for the masses any time soon. In many cases the move to the cloud is better as a calculated, application-by-application endeavor - a "hybrid" approach, if you will - with some applications remaining in-house and some moved to the cloud.  Perhaps it’s cloud backup where you begin your migration.  Or maybe it's outsourcing your spam filtering or even your entire e-mail server. Perhaps it’s an online financial or line-of-business application.  

By choosing a specific area that makes sense for moving to the cloud (backup is a great first step), an organization can move, evaluate, and then plan the next step in its cloud migration.  This gradual migration approach permits IT to better address and get comfortable with security and other technical considerations.  It can also give management an opportunity to measure and assess each move before going “all-in.”  Finally, this gradual approach allows an organization’s culture to adjust, which just may be something that nobody is thinking about (but should be).

Craig Rhinehart, Director of IT Services

Notices from the IRS and State Taxing Authorities

Have you experienced the dread of opening correspondence from the IRS or from a state taxing authority even though you were confident that your return was prepared correctly?  Letters of this sort that indicate that you owe additional tax, and sometimes even penalties and interest, can be very unsettling.

Although to you, receiving a letter like this can be intimidating, the reality is that this type of correspondence is very routine in the course of these taxing authorities administering the collection of taxes.  Many of the letters are simply requesting clarification of an item that you reported, or additional information that is readily available to you.  Most of the notices our clients receive can be resolved by providing the requested information within the time allowed (usually thirty days).  Often, the notices received are clearly in error, and require basic documentation to resolve.

Here are a few suggestions if you receive a notice:

1. Seek to resolve the issue as soon as possible (note the deadline to respond).
2. Don’t assume that the notice is correct and pay the amount requested, without investigating further.  Many notices are simply incorrect.
3. If you paid someone to prepare the return in question, make sure the preparer receives a copy of the notice as soon as possible. (You will also need to sign a Form 2848 Power of Attorney to authorize the preparer to talk directly with the IRS.)
4. Secure any documentation requested.  Cancelled checks, bank statements and acknowledgements form charities regarding charitable contributions are among the most common documents needed.
5. Send a letter (or have your preparer send a letter) addressing the issues raised in the notice.  The letter should be courteous, but business-like and should be directed to the issues at hand without providing information to any unrelated issue. (Respond to only the information requested.)
6. Attach documentation that supports your position.
7. If the amount of tax is significant, you might consider mailing your letter certified mail or use some sort of certificate of mailing.

We correspond with the IRS and state taxing authorities on behalf of our clients, and find that by following these steps, most issues can be resolved without the need for additional stress or frustration. 

David Payne, Manager, Tax Department