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by Stephen Parezo

Randy Penn

April 24, 2006—Things went pretty smoothly this season for Fiducial’s tax professionals which came to a close when the final returns were sent out last week. They cited the lack of any sweeping changes in the tax code and increased electronic filing that made the difference in boosting efficiencies for both company and franchise offices across the country.

“There weren’t any surprises this year,” said Randy Penn, branch manager of Fiducial’s Arvada, CO, office. “There wasn’t anything clients were doing less well than in the past.”

One area that did catch some taxpayers off-guard was the domestic production deduction which came as a pleasant surprise for several of Penn’s clients. Perhaps his client that benefited most from the deduction was the owner of a company that makes kitchen equipment.

“It turned into an $18,000 deduction on his personal return based on the total amount of revenue and W-2 wages he pays to all his employees including himself,” said Penn of the kitchen equipment maker. “The whole idea of that production deduction is to encourage U.S. companies to produce and manufacture and that’s his line of work.”

The manufacturer’s credit also helped three partners of a Michigan stone cutting operation who were each able to get about $4,000 back thanks to help from Dale Ellery, Fiducial’s district manager for the Detroit region.

“Most small business owners weren’t aware of the deduction,” said Ellery.

E-filing pays dividends

Each year Fiducial advisors stress the importance to clients of being more organized when it comes to keeping their financial records. Penn says a few new clients decided “to come clean” because they haven’t filed taxes for the last three years.

“They are told to pay what they owe so they are caught up as far as the IRS will take a return that doesn’t have other issues,” he said.

In Greenland, NH, Fiducial franchisee Van Ballantyne indicated that the single biggest improvement made to his tax operation two years ago continued to pay dividends this season with just about all his clients committed to e-filing.

“That’s added efficiencies in-house and in terms of streamlining the process we had a lot fewer pieces of paper to deal with,” said Ballantyne. “And we’ve had some cost savings, too.”

Ballantyne noted that both state and federal tax agencies were turning around refunds to clients in short order as clients were receiving e-file refunds within a week of filing their return.

If he had to grade his clients, Ballantyne says he would probably give his monthly write-ups “a solid B or B-minus.”

“It all comes back to fundamental recordkeeping,” he said. “I advise my clients that for the shoebox that they all talk about for keeping records, all you need to do is put a little bit of organization behind it in an A-Z pendoflex [zippered binder] with medical receipts in one slot so at the end of the year it’s categorized by the type of deduction. That helps significantly.”

Fewer last-minute filers

Once again, the Alternative Minimum Tax (AMT) caught a number of taxpayers unaware, according to Larry Recor, a Fiducial franchisee in Boonville, NY.

“When clients were using net operating losses from prior years they had incurred losses from their start-up business and they were making money and able to use these losses,” said Recor. “However, the AMT tax didn’t let them use it. Basically, if net operating losses are above a certain threshold they either have to pay the AMT or regular tax.”

The reason why the pace for filers never got frantic at any of his upstate offices including Old Forge and Utica, Recor says, is because of the lack of substantive changes in the tax law this year. Consequently, there weren’t a lot of surprises or concerns of clients for a change.

In a departure from past tax seasons, there were also fewer last-minute filers to contend with since clients came in earlier this year due to the milder weather. His offices were busy from Feb. 1 through the middle of March before things got back to a more normal pace. For Recor, gearing up for tax season crunch is a key planning and preparation operation.

“It gets everyone focused on the humongous task at hand and makes sure everybody is organized and they have their personal matters taken care of so nearly all of their time can be devoted to doing taxes,” he said. “I’m very flexible other times of the year but not during tax season.”

Breathing sigh of relief

Down in Port Orange, FL, Fiducial franchisee Dallas Ward was able to e-file this year for all but four of his individual tax clients. He says clients like the idea of not having to run to the post office and waiting in line. Like Recor, Ward also noticed the AMT taking its toll on unsuspecting small business owners.

“It’s definitely become more prevalent,” he said. “It’s the change of the tax codes and rates that people are just simply falling into it [AMT] that didn’t used to.”

Fortunately, Ward didn’t have to deal with any shoeboxes full of financial records this season which is unusual. Of course, it helped that he spread the word repeatedly to clients about keeping good records.

“I got the message through to them,” he said. “They don’t want to see that big tax bill.”

All Fiducial tax pros agreed that when the books were finally closed on tax season, they breathed a collective sigh of relief.

“It’s a great feeling to walk out on April 17th knowing that you got everybody taken care of whether they are completed or extended,” Penn said.

Ward admitted that he’s glad the filing deadline has passed. “Now we need to clean up a few things and get through quarterlies in April,” he said. “In May we can really breathe again and start digging up new business.”

Added Ballantyne, “We’ll gear up and do it again next year.”

Stephen Parezo is the Media Manager for Fiducial.

Whatever your small business needs, your Fiducial tax and financial professional can analyze your situation and recommend an appropriate action plan. To locate a Fiducial office nearest you on fiducial.com, see the Zip Code Locator located in the upper right hand corner of the page. Do you have a particular topic that we should be writing about that can help your business? Please send your suggestions to: stephen.parezo@fiducial.com.

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