“Cooking the books” is a term that most people have heard, but few really understand what it means. Of course, the obvious implication is it occurs when a company provides misleading (or flat out incorrect) financial information to make their position look better than the reality. But just how does it happen?
Well, for those really interested, here is a recent article that gives some of the ins and outs of how it is usually pulled off. For those that aren’t interested in diving that far into it, I think a good summation of it is that this does not happen by accident. To make a big difference, it takes the knowledge of multiple people to make it happen. One person in a sizable corporation, for example, cannot suddenly decide to report a bunch of income at another date and not have someone else notice that it happened. This is also why it doesn’t take much for these schemes to fall apart. The more people involved in the scheme, the more people who can ruin it.
We work with smaller businesses than those with their own accounting departments, but all the same rules apply, including the potential for everything crashing down around you.
To see this, one must think about just what financial information is meant to show. To many, this may just be that you need to pass along numbers to someone at the end of the year so they can file your taxes. But that sounds like it’s not quite enough, doesn’t it? They must do more, right?
Yes, they do more than this and your financial information should be the place you go to when making decisions about your business. Are you spending too much money in any area? Are you earning enough money on all your services? Is the money you’re spending resulting in increased revenue? If you are keeping good records, you can answer these questions and those answers can move your business forward.
If you are fudging numbers to make yourself feel better (or have that tax return be more beneficial to you), you are still only a small step away from everything falling down around you. After all, what you do to make things seem better today is going to come back and get you tomorrow. That tax return may look better at the moment, but you have probably shifted things that are going to make the next one worse.
There is power in those numbers and there is power in being honest with them. The more you stay on top of them, the quicker you can fix things so that those distant moments of comeuppance do not have to come. So in this time when there are many going through the worst times their business has seen, if you legitimately operate the best you can, you are setting yourself up for long-range success.
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We may just be coming off the tax season that would never end (hey, those extra three months felt like a long time), but it has left some loose ends that still need to be tied up.
First, the IRS is letting people know that it still has a backlog of mail to go through. This means if you mailed a payment to the agency and it has not yet been cashed, do not cancel the check, and ensure funds are still available to pay it. The chances are higher that the agency just hasn’t opened your envelope yet than that the check got lost in the mail. The IRS also promises that you will receive credit for the payment on the day it was mailed and not on the day that that mail actually gets opened.
And if you try to call the IRS to find out about any payments, the chances are also high you are going to be waiting an annoyingly long time to get anyone on the line. (The mail is not the only part of the agency still playing catch-up, after all.) Many questions about payments (and you can even make online payments) can be done via the internet on the webpage, www.irs.gov/payments.
Conversely, if you filed by mail and are waiting for a refund check or deposit, that backlog of envelopes means you may have to just keep waiting a little longer. Electronic filing is not experiencing the same level of delay, so if you did things that way and are still waiting on your money, the easiest way to check on the status of any refund is also done online at www.irs.gov/refunds.
Also still at a bit of loose ends is the receiving of some Economic Impact Payments. One of the big issues still lingering is many people not receiving the $500 per child that was to be part of the payment. If you have missed out on part of this payment, the IRS is allowing certain people (“Those eligible to provide this information include people with qualifying children who receive Social Security retirement, survivor or disability benefits, Supplemental Security Income (SSI), Railroad Retirement benefits and Veterans Affairs Compensation and Pension (C&P) benefits and did not file a tax return in 2018 or 2019.”) to use the non-filers tool through September 30 to get this money. It is expected that these catch-up payments will be made by mid-October.
If you have any other questions on where the agency stands with its operations during this time, the IRS is maintaining an extensive webpage here. This is also a good resource to use no matter the question you have concerning the agency, for it will point you to the best places to attempt to get the information you need in the fastest manner.
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The last week was certainly not a good one for getting definite answers as to the direction the government is taking as we continue to weather the coronavirus pandemic. It went from Congress talking about a new stimulus package, Congress being unable to reach agreement on a deal, to the president passing some measures himself, and then some inevitable sniping against a background of two sides that still say they want to pass major legislation.
The biggest news out of this for many people is that there are no current plans for another stimulus payment check. This does not mean one will never come (both Democrats and Republicans say they want this to be part of a larger package) but it means it is not something you can currently count on.
For people then looking for a little extra bit of money elsewhere, the president’s executive order to delay collection of payroll taxes for those making less than approximately $100,000 a year could sound great. This may be a good temporary band-aid, but it must also be acknowledged that this does not mean those taxes will never come due. So sure, if someone needs money now to keep the lights on or put food on the table, that little bit of extra money can help. Just keep in mind that it will be owed at some point in the future, so save for that as soon as possible to try to keep the issues from snowballing.
This deferment of taxes could turn into complete forgiveness (and there is language in the executive order saying that doing this should be explored), but until that becomes official, one should not count on it happening.
The rules for the Paycheck Protection Program (PPP) have also not been good for definite answers, having changed many times since the program was first instituted, and there is certainly a chance that they will change again. The Small Business Administration has put out a recent series of FAQs concerning the program, though, (which you can access by clicking here), so this is the best place to go for the latest word on how forgiveness will be calculated.
Granted, some of this is not the easiest read and probably qualifies as legalese, but it is always good to have access to source information and not just utilize another’s interpretation of it. And to that end, the White House runs a web page where you can view the actual text of all executive orders.
All these issues point to how we have to live within the rules that are in operation at any given time. This can become very frustrating when they keep changing as often as they do, but it also prevents you from running into a tough situation at the end of the road. And when you commit to operating as well as you can during difficult times, that is when such moves as receiving stimulus money stand the best chance of really helping you move forward.
In closing, here is to hoping that you are doing the best you can in this current situation and may a combination of grace, common sense, and good policy carry us further forward.
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