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Learning Objectives (What You Asked) 

YOUR QUESTION(S):

1. This Topic OBJECTIVE is: 

2. What it does - how it works: 

3. Why or How it Works: 

4. Alternatives: 

5. Cost V. Benefits: 

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Dear Client:

Introduction

Topic - Objective - Purpose Why This Is Important: Usefulness General Benefits 7 Objectives: Type in this area an introduction to this topic.  State what it is about, state whether this is an introduction, beginner level, imd or advanced.  State whether any special knowledge is required - for example, law, mathematical, management, knowledge of a specific industry, etc.

Description / Scope  / Skill Level Pre-requisite Knowledge

What You Will Need  

Materials  - Equipment-Tools - Library Resources: Calculator, Computer, etc.

Who This Applies to: Entity and industry types

When to Perform: When

Special Circumstances: Warnings & Special Circumstances

Engagement Status Letter 

You have not engaged Bob Parrish CPA PC, Bob Parrish CPA, pro1040, Consulting on line, any related parties, or the ISP to perform any services for you or offer you advice.  This entire site is for educational or informational purposes only.   You are not to use the forms, concepts, strategies, or knowledge without assistance from a professional.   The author, the corporation, the ISP, Bob Parrish CPA, Bob Parrish CPA, P.C. or other parties related to those or this site do not guarantee or warrantee in any manner the suitability, usefulness, accuracy, timeliness, or results of any portions of this site, nor the links contained in this site which link to other areas.   At times, information is taken from other sources and is believed to be accurate, but no verification or confirmation is performed.  Furthermore, if any federal or state law invalidates a portion of this disclaimer, the other portions still apply.   In addition, any allegations or actions are restricted to arbitration only and must be arbitrated by the Better Business Bureau in Sarasota Florida.  Reading of these pages constitutes complete acceptance and agreement with all disclaimer provisions on all pages of this site. ....... Thursday, February 22, 2007 02:28 AM  

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Plain English Analysis What it does, Why it works - The Answer, Alternatives  

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• Plain English Analysis - Your Answers
  • What it Does
  • Why or How it works
  • Alternatives
  • Cost v. Benefits Analysis

YOUR ANSWERS

What it does, Explanation of this topic and how it may affect you:

Kinds of Records To Keep

The IRS does not require you to keep your records in a particular way. Keep them in a manner that allows you and the IRS to determine your correct tax.

You can use your checkbook to keep a record of your income and expenses. In your checkbook you should record amounts, sources of deposits, and types of expenses. You also need to keep documents, such as receipts and sales slips, that can help prove a deduction.

You should keep your records in an orderly fashion and in a safe place. Keep them by year and type of income or expense. One method is to keep all records related to a particular item in a designated envelope.

In this section you will find guidance about basic records that everyone should keep. The section also provides guidance about specific records you should keep for certain items.

Computerized records. Many retail stores sell computer software packages that you can use for recordkeeping. These packages are relatively easy to use and require little knowledge of bookkeeping and accounting.

If you use a computerized system, you must be able to produce legible records of the information needed to determine your correct tax liability. In addition to your computerized records, you must keep proof of payment, receipts, and other documents to prove the amounts shown on your tax return.

Copies of tax returns. You should keep copies of your tax returns as part of your tax records. They can help you prepare future tax returns, and you will need them if you file an amended return. Copies of your returns and other records can be helpful to your survivor or the executor or administrator of your estate.

If necessary, you can request a copy of a return and all attachments (including Form W-2) from the IRS by using Form 4506, Request for Copy or Transcript of Tax Form. For information on the cost and where to file, see the Form 4506 instructions.

Basic Records

Basic records are documents that everybody should keep. These are the records that prove your income and expenses. If you own a home or investments, your basic records should contain documents related to those items. This table lists documents you should keep as basic records. Following the table are examples of information you can get from these records.

FOR items concerning your...

KEEP as basic records...

Income

• Form(s) W-2
• Form(s) 1099

• Bank statements
• Brokerage statements
• Form(s) K-1

Expenses

• Sales slips
• Invoices
• Receipts
• Canceled checks or other proof of payment

Home

• Closing statements
• Purchase and sales invoices
• Proof of payment
• Insurance records
• Form 2119 (if you previously sold a home)

Investments

• Brokerage statements
• Mutual fund statements
• Form(s) 1099
• Form(s) 2439

Income. Your basic records prove the amounts you report as income on your tax return. Your income may include wages, dividends, interest, and partnership or S corporation distributions. Your records also can prove that certain amounts are not taxable, such as tax-exempt interest.

Expenses. Your basic records prove the expenses for which you claim a deduction (or credit) on your tax return. Your deductions may include alimony, charitable contributions, mortgage interest, and real estate taxes. You may also have child care expenses for which you can claim a credit.

Home. Your basic records should enable you to determine the basis of your home. You need this information to determine if you have a gain or loss when you sell your home. Your records should show the purchase price, settlement or closing costs, and the cost of any improvements. They may also show any casualty losses deducted, insurance reimbursements for casualty losses, and postponed gain from the sale of a previously-owned home.

For information on which settlement or closing costs are included in the basis of your home, see Publication 530, Tax Information for First-Time Homeowners. For information on basis, including the basis of property you receive other than by purchase, see Publication 551, Basis of Assets.

When you sell your home, your records should show the sales price and any selling expenses, such as commissions. For information on selling your home, see Publication 523, Selling Your Home.

Investments. Your basic records should enable you to determine your basis in an investment and whether you have a gain or loss when you sell it. Investments include stocks, bonds, and mutual funds. Your records should show the purchase price, sales price, and commissions. They may also show any reinvested dividends, stock splits and dividends, load charges, and original issue discount (OID).

For information on stocks and bonds, see Publication 550, Investment Income and Expenses. For information on mutual funds, see Publication 564, Mutual Fund Distributions.

Proof of Payment

One of your basic records is proof of payment. You should keep these records to support certain amounts shown on your tax return. Proof of payment alone is not proof that the item claimed on your return is allowable. You should also keep other documents that will help prove that the item is allowable.

Generally, you prove payment with a canceled check or cash receipt. If you do not have a canceled check because your bank does not return canceled checks or if you make payments by credit card or electronic funds transfer, you may be able to prove payment with an account statement.

If you make payments in cash, you should get a dated and signed receipt showing the amount and the reason for the payment.

Account statements. You may be able to prove payment with a legible financial account statement prepared by your bank or other financial institution. These statements are accepted as proof of payment if they show the items in the following table.

IF payment is by...

THEN the statement must show the...

Check

• Check number
• Amount
• Payee's name
• Date the check amount was posted to the account by the financial institution

Electronic funds transfer

• Amount transferred
• Payee's name
• Date the transfer was posted to the account by the financial institution

Credit card

• Amount charged
• Payee's name
• Transaction date

Pay statements. If you have deductible expenses withheld from your paycheck, such as union dues or medical insurance premiums, keep your pay statements as proof of payment of these expenses.

Specific Records

This section is an alphabetical list of some items that require specific records in addition to your basic records.

Alimony

If you receive or pay alimony, you should keep a copy of your written separation agreement or the divorce, separate maintenance, or support decree. If you pay alimony, you will also need to know your former spouse's social security number. For information on alimony, see Publication 504, Divorced or Separated Individuals.

Business Use of Your Home

You may be able to deduct certain expenses connected with the business use of your home. You should keep records that show the part of your home that you use for business and the expenses related to that use. For information on how to allocate expenses between business and personal use, see Publication 587, Business Use of Your Home.

Casualty and Theft Losses

To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Your records also must be able to support the amount you claim.

For a casualty loss, your records should show:

• The type of casualty (car accident, fire, storm, etc.) and when it occurred and
• That you were the owner of the property.

For a theft loss, your records should show:

• When you discovered your property was missing,
• That your property was stolen, and
• That you were the owner of the property.

For more information, see Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness). For a workbook designed to help you figure your loss, see Publication 584, Nonbusiness Disaster, Casualty, and Theft Loss Workbook.

Child Care Credit

You must give the name, address, and taxpayer identification number for all persons or organizations that provide care for your child or dependent. You can use Form W-10 or various other sources to get the information from the care provider. Keep this information with your records. For information on the credit, see Publication 503, Child and Dependent Care Expenses.

Contributions

The kinds of records you must keep for charitable contributions depend on the amount of the contribution and whether the contribution is in cash. For information on contributions, see Publication 526, Charitable Contributions.

Contributions from which you benefit. Generally, if you make a charitable contribution that is more than $75 and is partly for goods or services, the organization must give you a written statement that you should keep.

Cash. Cash contributions include those paid by cash, check, credit card, or payroll deduction. For each cash contribution, you must keep one of the following:

• A canceled check or a financial account statement,
• A receipt from the organization showing the name of the organization, the amount, and date of the contribution, or
• Other reliable written records that are reasonable under the circumstances and that include the name of the organization, the amount, and the date of the contribution.

Contributions of $250 or more. You can deduct a contribution of $250 or more only if you have a written acknowledgment of your contribution from the organization.

Out-of-pocket expenses. You should keep records of your out-of-pocket expenses when you perform services for a charitable organization. You can record these expenses in a diary. For example, if you use your car when doing volunteer work, you should record the name of the organization and the unreimbursed gas and oil expenses directly related to the volunteer work. If you do not want to keep records of your actual expenses, you can keep a log of the miles you drove your car for the charitable purpose and use the standard mileage rate shown in Publication 526. You should also keep records of any parking fees, tolls, taxi fares, and bus fares.

Property. For each contribution of property, you must keep a receipt from the organization showing:

• The name of the organization,
• The date and location of the contribution, and
• A reasonably detailed description of the property.

A letter or other written communication from the organization containing the above information will serve as a receipt.

You also must keep reliable written records for each item of donated property. These records must include the:

• Fair market value of the property at the time of the contribution,
• Cost or other basis of the property, and
• Terms of any conditions attached to the contribution.

For more information on donated property, see Publication 526.

Employee Business Expenses

If you have employee business expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses, for a discussion of what records to keep.

Gambling Winnings and Losses

You must keep an accurate diary of your winnings and losses that includes the:

• Date and type of gambling activity,
• Name and address of the gambling establishment,
• Names of other persons present with you at the gambling establishment, and
• Amount you won or lost.

In addition to your diary, you should keep other documents. See the discussion related to gambling losses in Publication 529, Miscellaneous Deductions, for documents you should keep.

Individual Retirement Arrangements (IRAs)

Keep copies of the following forms and records until all distributions are made from your IRA(s).

• Form 5498 or similar statement received for each year showing contributions you made, distributions you received, and the value of your IRA(s),
• Form 1099-R received for each year you received a distribution, and
• Form 8606 for each year you made a nondeductible contribution to your IRA or received distributions from an IRA if you ever made nondeductible contributions.

Medical and Dental Expenses

In addition to records you keep of regular medical expenses, you should keep records on transportation expenses that are primarily for and essential to medical care. You can record these expenses in a diary. You should record gas and oil expenses directly related to that transportation. If you do not want to keep records of your actual expenses, you can keep a log of the miles you drive your car for medical purposes and use the standard mileage rate. You should also keep records of any parking fees, tolls, taxi fares, and bus fares.

For information on medical expenses and the standard mileage rate, see Publication 502, Medical and Dental Expenses.

Mortgage Interest

If you paid mortgage interest of $600 or more, you should receive Form 1098, Mortgage Interest Statement. Keep this form and your mortgage statement and loan information in your records. For information on mortgage interest, see Publication 936, Home Mortgage Interest Deduction.

Pensions and Annuities

Use the worksheet in your tax return instructions to figure the taxable part of your pension or annuity. Keep a copy of the completed worksheet until you fully recover your contributions. For information on pensions and annuities, see Publication 575, Pension and Annuity Income.

Taxes

Your Form W-2 shows the state income tax withheld from your wages. If you made estimated state income tax payments, you need to keep a copy of the form. You also need to keep copies of your state income tax returns. If you received a refund of state income taxes, the state may send you Form 1099-G, Certain Government Payments.

Keep mortgage statements, tax assessments, or other documents as records of the real estate and personal property taxes you paid.

Tips

You must keep a daily record to accurately report your tips on your return. You can use Form 4070A, Employee's Daily Record of Tips, which is found in Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips. For information on tips, see Publication 531, Reporting Tip Income.

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Why or How it works - Both Sides of the Equation and Examples:

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Alternatives

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Cost v. Benefit Analysis

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Other

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Reserved

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Technical Analysis & Citations What It does, Why it works -

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• Technical Analysis

  • Law

  • Regs

  • Cases

  • Revenue Procedures

  • Revenue Rulings

  • Private Letter Rulings

Commentary

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Law

Start of Law Section

Start of Technical Analysis

Regs

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Start of Technical Analysis

Cases

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Start of Technical Analysis

Revenue Procedures

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Start of Technical Analysis

Revenue Rulings

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Private Letter Rulings

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Tax Killers  

This is about Activity Based Taxplanning - maximizing deductions, minimizing cash outlay and maximizing the amount of cash retained and the net worth.  Activity Based Taxplanning (ABT) is a methodology developed by Bob Parrish CPA, that assists people with the tax issues by focusing on the activity (or actions - events) that are being undertaken or contemplated (or have already taken place).  The,  research is compiled from the myriad of sources to help you complete the activity with the least tax cost, while maintaining compliance the tax laws, other laws and regulations and place yourself in a position to protect your objectives.

Tax is a subject that many view in order to cut costs.  Taxes are a cost just as any other cost.  It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control.  The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.

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Cost Killers   Management Info Sys, Cost Acctg, Activity Based Costing)

 This is about Activity Based Costing  - methods to cut costs, management accounting, management information systems, decision support systems - in general about being a manager.

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Preparing for your CPA, attorney, or preparing to start your own What to gather - 

  

How to Prepare For the CPA or Legal Counsel - Save the Professional Time - Save Your Money

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• What to gather - an Organizer and Prepare for your CPA, Attorney or Financial Adviser

  • Entrance Interview

  • Exit Interview

  • From Banking Records

  • From Customer Records

  • From Signed Documents

  • From Your Other Business, or Financial Records

  • From Corporation or Organization Records (meetings, etc.)

  • What to do

 Entrance Interview

1041 Organizer

Exit Interview

From Banking Records

From Customer Records

From Signed Documents

From Your Other Business, or Financial Records

From Corporation Records or Organization Records (meetings, etc.) 

What to do

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Forms - checklists, time-line to do, etc. Assistance - What To Do - 

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• How to do this - What to Do

  • Action Checklist - What To Do

  • OVERVIEW OF PROCEDURES

  • DETAILED STEPS

    • STARTING

    • PRINT ALL THE REQUIRED DOCUMENTS

    • PRESENTATION STANDARDS

    • OBTAIN THE STANDARD WORKPAPER FORMS NEEDED

    • OBTAIN THE DOCUMENTS FOR THIS JOB

  • FINAL OVERVIEW

  • FINAL STEPS

  • Forms - Checklists - Etc.

  • How to use the forms

Action Checklist - What To Do

OVERVIEW OF PROCEDURES

GENERAL SETUP & STARTUP

PRINT FORMS AND DOCUMENTS NEEDED

PRESENTATION STANDARDS

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DETAILED STEPS

STARTING

FROM CLIENT OR BUSINESS RECORDS

CONTRACTS, BILLS OF SALE, AGREEMENTS, ETC.

LIST OF DOCUMENTS NEEDED

ORGANIZER

ENTRANCE INTERVIEW

EXIT INTERVIEW

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OBTAIN THE ORGANIZER AND BE CERTAIN ALL INFORMATION IS AVAILABLE

GATHER AND SORT THE INFORMATION

OBTAIN THE WORKPAPER TITLE SHEETS

OBTAIN THE PRESENTATION TITLE SHEETS

OPEN ALL STANDARD DOCUMENTS

OVERVIEW THE ENTRANCE INTERVIEW FORM

OVERVIEW THE LIST OF INFORMATION AND CLIENT OR BUSINESS RECORDS NEEDED

START THE REQUIRED COMPUTER PROGRAMS

OBTAIN THE CHECKLISTS IF NEEDED AND WORK ON THE JOB BY EACH TYPE OF ACTIVITY OR EVENT

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PRINT ALL THE REQUIRED DOCUMENTS OR MAKE COPIES AS NEEDED

PRESENTATION STANDARDS

DETERMINE THE CORRECT PRESENTATION STANDARD TO USE

ENGAGEMENT LETTER AND DISCLAIMER

PRESENTATION IN GENERAL

WHAT THE ENGAGEMENT IS LIMITED TO

WHAT SERVICES WERE PERFORMED

HOW THIS HELPS & BENEFITS

4 WAY TEST APPLICATION

Is it the TRUTH

Is it FAIR

Will it build GOODWILL and BETTER FRIENDSHIPS

Will it be BENEFICIAL to all

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BEFORE FINALIZING THE WORK PROCESS CONSIDER THE FOLLOWING

Compliance

Paying Bills or other events

The professional should perform functions the client does not have time for

The  professional should perform necessary functions the client staff does not have training for

Reduce Costs

Reduce Risks

Setting Goals or objectives

Setting methods for monitoring

Setting dates, methods & procedures for follow-up

Setting guidelines for defining when variances from the guideline warrant policy or procedure changes

Identify the policies or procedures that need to be changed to accomplish the goal or objective

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OBTAIN THE STANDARD WORKPAPER FORMS NEEDED

LIST OF THE STANDARD FORMS AND W/P NEEDED

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OBTAIN THE DOCUMENTS FOR THIS JOB

PLACE BLANK FORMS IN THE CORRECT SEQUENCE

GENERAL & FOR ALL JOBS

Instructions for finalizing and completion - for example instructions for the mailing of forms to the IRS

Actions Checklist

Report Cover Letter

Required Documents and attachments

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FINAL OVERVIEW BEFORE THE JOBS IS ENDED & CLOSED

LOOK AT THE ORIGINAL QUESTION - has it been answered, were more questions added?

THE ANSWER - limit the answer to a short paragraph of about 7 sentences.  Did this solve the issue?  The ANSWER is not considered the SOLUTION

THE SOLUTION - understand the objective or goal and restate it.  Were the goals met?  What might prevent obtaining the goals. Do the benefits outweigh the costs?  Reduce Costs?  Reduce Risks?  Setting Goals or objectives:

Setting methods for monitoring

Setting dates, methods & procedures for follow-up

Setting guidelines for defining when variances from the guideline warrant policy or procedure changes

Identify the policies or procedures that need to be changed to accomplish the goal or objective

ACTIONS - checklist, calendar, columnar presentation showing separate columns for Client, CPA, Broker, Bookkeeper, Lawyer, Insurance Agent, etc.

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COST v. BENEFITS ANALYSIS

PROPOSAL

FACTS DISCOVERED & USED

COMPUTATIONS & REPORTS

TECHNICAL ANALYSIS WITH CITATIONS AND AUTHORITY

FORMS - agreements, contracts, trusts, tax forms, financial reports, management information reports, policies or procedures

REQUIRED ATTACHMENTS

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FINAL STEPS

Overview - look at the steps required and the steps performed.  Are there unusual items?  Are there exceptions or adverse results of the procedures performed?  Find resolutions for all unusual or adverse items.

Compliance - has compliance "substantially" been met.  That is no "material" adverse results?

Math Check

Proof and spell check

Theory & overview by someone not performing the procedures

Close the case and archive it.

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Forms and checklists

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How to use the forms

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Financial Accounting: Bookkeeping & Financials 

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• Financial Accounting

  • Financial Statement Presentation

  • Notes to Financial Statements

  • How to Make Entries

  • What Kind of Records to Keep

  • Bookkeeping Methods - Cash, Accrual and Other

  • How the Business Entity Affects the Recording

Financial Statement Presentation

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Notes to Financial Statements

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How to Make Entries

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What Kind of Records to Keep

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Bookkeeping Methods - Cash, Accrual and Other

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How the Business Entity Affects the Recording

Sole Proprietor

Corporation - C & S

Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company

Trusts

Tax Exempt

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Compliance - what is required for protection, defense, etc.  

Compliance Checklist

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Alerts & Dangers - Risks, Asset Protection, IRS Defense 

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• Alerts - Dangers - Risks - Asset Protection - Defenses (IRS, Etc.)

  • Action Checklist

  • Alerts & Dangers - Risks

  • Asset Protection

  • Your Defense

Action Checklist

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Alerts & Dangers - Risks

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Asset Protection

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Your Defense

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Tools - Spreadsheets - Documents - Reports - Checklists

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• Tools

  • Spreadsheets & Math

  • Contracts, Trusts, etc.

  • Reports Required

  • Checklists - Deployment

  • Checklist - Monitoring

Spreadsheets & Computations 

Spreadsheet #1

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Contracts, Trusts, etc. 

Agreement #1

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Reports Required 

 Report #1

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Checklists for Deployment  

 Checklist #1

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Checklist for Monitoring  

 Checklist #1

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