Monthly Archives: August 2016

There’s still time for homeowners to save with green tax credits

Save with Some Green Tax Credits

TJCThe income tax credit for certain qualified residential alternative energy expenditures is still available through 2016.  The credit has been extended in part through 2021 by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). So, you still have time to save both energy and taxes by making some eco-friendly investments.

What qualifies
The tax credit for residential alternative energy expenditures equals 30 percent of qualified alternative energy expenditures through 2016.  Beginning in 2017 the credit is only available for solar electric property and solar water heating property.  The credit is 30 percent through 2019 then is reduced to 26 percent for year 2020 and 22 percent in 2021.

Examples of improvement investments potentially eligible for the 30 percent credit in 2016 include:
• Eligible solar water heaters,
• Solar electricity equipment,
• Fuel cell plants,
• Small wind energy property, and
• Qualified geothermal heat pump property.

The taxpayer’s basis in their home must be reduced by the amount of the credit allowed.  Also, the credit is a nonrefundable tax credit.  This means that it can only be taken to the extent of your income tax.  The credit is available against alternative minimum tax as well.  Any credit amounts in excess of the taxpayer’s tax liability are available for carryover to the next year.

Manufacturer certifications required
When claiming the credit, you must keep with your tax records a certification from the manufacturer that the product qualifies. The certification may be found on the product packaging or the manufacturer’s website. Additional rules and limits apply. For more information about these and other green tax breaks, contact Ciuni & Panichi, Inc. Partner Tony Constantine, CPA, at 216-831-7171 or tconstantine@cp-advisors.com.

© 2016

Fraud and Inventory Loss

Hunting for misplaced “goods”

Fraud experts can help recover lost items
ReggieNovakIf your inventory numbers are not adding up during your year-end physical inventory, it may be time to uncover the source of the discrepancy and a fraud expert can help. Before assuming theft, a fraud expert determines whether the items were really stolen or were simply misplaced. In many cases, employees keep sloppy records or fail to follow proper procedures, resulting in “missing” inventory. For example, a company without a location assignment for each item, which can be an effective method of keeping tabs on overflow stock and returns, is likely to misplace inventory.

If there’s no innocent explanation for missing inventory, then the fraud expert looks for signs in the environment conducive to fraud. For example, a company with poor internal controls over purchasing, receiving and cash disbursements is at high risk of inventory theft. In addition, one person performing multiple duties within any one area of the Company can easily commit and conceal fraud.

If the expert believes inventory could have been stolen, he or she combs the records for clues. Anything that doesn’t follow established inventory procedures could be a red flag — such as odd journal entries posted to inventory, large gross margin decreases or sudden problems with out-of-stock inventory.

Exposing irregularities
Next, the expert works to prove the fraud. Inventory fraud may leave a paper (or electronic) trail, so forensic accountants typically review journal entries for unusual patterns. An entry recording a physical count adjustment made during a period when no count was taken obviously warrants investigation. The expert follows up by tracing unusual entries to supporting documents.

Vendor lists also may show suspicious patterns, such as post office box addresses substituting for street addresses, vendors with several addresses, and names closely resembling those of known vendors. Even if they’ve found no evidence of nonexistent vendors, fraud experts look at vendor invoices and purchase orders for anomalies such as unusually large invoices or alleged purchases that don’t involve delivery of goods.

Discrepancies between the amounts due per invoice, the purchase order and the amount actually paid warrant investigation. Finally, experts familiarize themselves with the cost, timing and purpose of routine purchases and flag any that deviate from the norm.

Catching the thief
Although a count performed by employees may disrupt normal business routines, it’s an effective way to learn exactly what merchandise may be missing — and could lead directly to the thief (unless the thief is involved in the physical inventory count!). Fraud experts sometimes recommend hiring an outside inventory firm to perform the count and value the inventory.
Whether employees or inventory specialists perform the job, a fraud expert carefully observes warehouse activity once employees realize a count is imminent. Thieves may attempt to shift inventory from another location to substitute for missing items they know will be discovered.

It’s important to confirm physical inventory as well.  Inventory at remote locations also can disappear, so fraud experts often will confirm quantities with the storage facility or go with the client to inspect them personally. Whenever possible, it’s best to perform a count in person rather than delegate the job to someone who may not be trustworthy. Unfortunately, sometimes it’s theft. But now you have the knowledge and evidence to address the issue appropriately.

The best advice is, “Don’t go it alone.” Contact Ciuni & Panichi, Inc. Certified Fraud Examiner, Reggie Novak, CPA, at 216-831-7171 or rnovak@cp-advisors.com.

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© 2016

Getting Comfortable with the Home Office Tax Deduction

home officeHome Office Tax Deduction

by: Eden LaLonde, CPA, MAcc

One of the best aspects of working at home is the easy commute. The second best part is it may qualify you for a tax deduction.

IRS rules require that you generally maintain a specific area in your home for use regularly and exclusively in connection with your business. What’s more, you must use the area as your principal place of business or, if you also conduct business elsewhere, use the area regularly to conduct business, such as for meeting clients and handling management and administrative functions. If you’re an employee, your use of the home office must be for your employer’s convenience and benefit.

The Internal Revenue Code provides a standard method to calculate the deduction for your home office based on the percentage of your home devoted to business use. You deduct the percentage (proportionate to the percentage of square footage used for the home office) of indirect home office expenses, including mortgage interest, property taxes, association fees, insurance premiums, utilities (if you do not have a separate hookup), security system costs, and depreciation (generally over a 39-year period). In addition, you deduct direct expenses, including business-only phone and fax lines, utilities (if you have a separate hookup), office supplies, painting and repairs, and depreciation on office furniture.

The other option is an easier way to claim the deduction, known as the simplified method. Under this method, you multiply the square footage of your home office (up to a maximum of 300 square feet) by a fixed rate of $5 per square foot. You can claim up to $1,500 per year using this method. Of course, if your deduction will be larger using the standard method, that’s the way to go.

The best advice we can offer is, “Don’t go it alone.” Contact Ciuni & Panichi or Eden LaLonde, CPA, MAcc, at 216-831-7171 or elalonde@cp-advisors.com.

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