1099 Changes Are Coming

Included within the 2010 Health Care Reform Bill were substantial potential changes to the current 1099 reporting requirements. Some of the key changes are as follows: • The corporate exception is ending and, with few exceptions, all corporations will need to be reported on Form 1099-Misc for payments made after December 31, 2011. • Payments for property (goods) will need to be reported on the 1099-MISC if at or above the familiar $600 annual payment threshold. These changes are effective for all payments made after December 31, 2011. • Establishment of Form 1099-K which aims targets currently hard-to-track payment stream: credit cards. Starting in 2011, financial firms that process credit or debit card payments will be required to send their clients, and the IRS, an annual form documenting the year's transactions.

So how large of an impact will this have on small businesses? No one currently knows; however, the accumulation of payee data will be the area where companies will need to devote additional time to comply. Assuming the $600 threshold is met, all vendors will have to provide their name and taxpayer identification number, generally on Form W-9. Currently, many companies required such information and report payments made for services. The new law includes reporting for amounts paid for goods. For instance, a 1099 will be required to be issued if you purchased a computer at a local retailer. However, there appear to be benefits of the change due to the $600 “bright line” for all payments. Another key change is that financial firms that process credit or debit card transaction will now be required to provide that information on Form 1009-K. What does this mean? All payment processors, including Paypal, eBay, Amazon, etc that service individuals and very small businesses will be providing information to the IRS regarding processed transactions. The goal of the new regulations is to capture income that is unreported to the IRS. This requirement has the potential to cause significant tax issues for various individuals and small businesses who conduct ecommerce transactions without reporting the income. Could the impact be as big as recent Foreign Disclosure (UBS, etc.) rules? Only time will tell.

Please note that final regulations are still be interpreted by the IRS and will likely not appear until next year. However, we have been guiding our clients at dbbmckennon to be aware as the reporting requirements will affect substantially all businesses in the US and doing business in the US. Please contact us if you have any questions.

dbbmckennon moves its Orange County office to a new location within Newport Beach, CA

Newport Beach, CA –dbbmckennon moved its Orange County office to: 20321 SW Birch Street Suite 200 Newport Beach, California 92660

All other contact information including phones and email will remain the same.

Our new building provides for our future growth, and enables us to incorporate the latest technologies and space efficiency to achieve cost effectiveness. For more information, contact dbbmckennon at 949-203-3010 or info@dbbmckennon.com.

dbbmckennon is a full service public accounting firm in which was established to provide tax, attestation and consulting services to individuals and businesses through our two offices located in Southern California. Our partners have represented hundreds of small businesses and audited over a hundred smaller reporting public companies in the United States and abroad. We deliver high-quality professional services, in a timely manner, and focus on providing value to our clients. Our technical skills rival those offered by our strongest competitors, which enable our clients comply with the rules and regulations of our profession. We take every engagement seriously with the expectation that our clients will be completely satisfied with our performance. In addition, the firm has a highly competitive fee structure for the Southern California market. We take every engagement seriously with the expectation that our clients will be completely satisfied with our performance and fees. Our rate structure is intended to be the most competitive in light of the current economic conditions.

dbbmckennon now registered with CPAB

dbbmckennon recently received notice from the Canadian Public Accountability Board ("CPAB") that it has been added to the CPAB's list of participating audit firms. The CPAB is Canada's version of the Public Company Accounting Oversight Board ("PCAOB") here in the United States. The CPAB was formed in 2003 and oversees auditors of Canadian reporting issuers. Generally their jurisdiction covers all companies that have raised funds from the Canadian investing public and who, for that reason, must file financial statements with one or more provincial securities commissions.

dbbmckennon is a full service public accounting firm in which was established to provide tax, attestation and consulting services to individuals and businesses through our two offices located in Southern California. To contact dbbmckennon click here.

Time Management and Small Businesses

As a small business owner your job description is likely, President, CEO, Chairman of the Board, Receptionist, Janitor, HR Manager, Payroll Manager, and Salesman.  To complete all these functions, one must be a master of time management or have the ability to function on little sleep.  Whether you live to work, or work to live, you can probably start with these basic principles and suggestions to start living more and working less.

1. Delegate – Being lazy isn’t always a bad thing.  You hire employees to do work, so let them earn their paycheck.  When looking to delegate, ask “can someone else do 60% of this project”?  If the answer is yes, then try delegating the project.  If you only need to be a part of 40% or less of the total project time, then it is likely going to be beneficial to delegate the work.  Make sure to build in time to check-in, answer questions, and review along the way.  In addition, require a deadline for delegated work that gives you enough of a buffer to correct anything that was done wrong before the actual deadline arrives.  This will ensure success and timeliness of any project delegated.
2. Consolidate – If you have multiple businesses you may have multiple professionals you consult with for each company.  Instead of using multiple lawyers, CPA’s, insurance agents, PR firms, etc… use the same for all companies you own.  Try to find professionals who have close relationships with each other.  If you lawyer needs a tax return, wouldn’t it be easier if they called or emailed your CPA directly?  If you have a good relationship with a professional, ask for references to professionals they know and trust.  Creating a close network of advisors will save you time and anxiety.
3. Automate – Let technology work for you.  Eliminate paper time cards and reports and implement an electronic time tracking system that your payroll manager can efficiently review.  Leverage your workforce to create templates that will streamline processes.  Download financial transaction from your credit card companies and banks into your financial reporting system.  Anything that will save your employees time, will allow you to shift more responsibility to them and off of you.
4. Outsource – Tired of being on the phone with your IT guy every week about terms you don’t understand?  Server crashed?  Virus infiltrated your employee’s computer causing your system to crash?  Having to pay for new servers and firewalls?  Why deal with this headache and ultimately the associated expense.  Look into cloud computing. By outsourcing much of your technologic needs, you can reduce risk to your business, save money, and increase efficiency.  No more lengthy calls to the IT guy is like Christmas in July.
5. Stay Organized – A little up-front work will save you time down the line.  Clean work areas correlate to organized minds.  Being able to find something quickly will reduce frustration and inefficiency.  Create a filing system that is easy for both you and the people who assist you.  Try to end each day by organizing your desk, paperwork, email, etc.  This will help you start the next day smoothly.

With these tips, make sure that your time away from work is equally as important as your time at work.  Allowing yourself a little time off at night or on the weekends will help you to focus on work when the time comes.

At DBBM, we work with many small business owners who benefit from a few of these tips.  As trusted friends and advisors, we want to make all of our clients’ lives easier.

Mini golf, little kids, BIG VISION

On March 24, 2010, dbbmckennon joined other prominent San Diego businesses in sponsoring an event benefiting the One Small Voice Foundation. The event, which took place at the Strategic Business Communications, Inc.’s office, consisted of nine mini golf holes constructed by each sponsor. dbbmckennon was the sponsor of the first hole. The event was attended by approximately 80 golfers and raised over $2,500 in proceeds of which 100% was given to the One Small Voice Foundation. We would like to thank Jim Hernandez and Strategic Business Communications, Inc. for allowing us to be a part of this fun and unique event. The One Small Voice Foundation strives to give a voice to all children with Optic Nerve Hypoplasia and Hydrocephalus through the education of others regarding these disorders and through direct support of research efforts.

dbbmckennon moves San Diego office

Effective immediately, dbbmckennon has moved its San Diego location to: 12790 El Camino Real, Suite 130 San Diego, California 92130

Previously the San Diego office was based in Solana Beach. The new office is located in the heart of the Del Mar Business Park and will allow dbbmckennon to expand its staff and operations. The new office is centrally located amongst our clients and associates throughout San Diego County.

What’s the Cloud?

Cloud computing is Internet - ("cloud") based development and use of computer technology ("computing"). In concept, it is a paradigm shift whereby details are abstracted from the users who no longer need knowledge of, expertise in, or control over the technology infrastructure "in the cloud" that supports them. It typically involves the provision of dynamically scalable and often virtualized resources as a service over the Internet. The term cloud is used as a metaphor for the Internet, based on how the Internet is depicted in computer network diagrams and is an abstraction of the underlying infrastructure it conceals. Typical cloud computing services provide common business applications online that are accessed from a web browser, while the software and data are stored on the servers.

These services are broadly divided into three categories: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). The name cloud computing was inspired by the cloud symbol that is often used to represent the Internet in flow charts and diagrams." (source wikipedia)

Why be in the Cloud?

The whole point of having a wireless enterprise infrastructure is to increase mobility, reliability, security, reduce hardware and IT consulting costs, and ultimately your software licensing costs. Yet for many enterprises, they use wireless LANs (WLANs) that require an on-site server(s) which occupy space, require field maintenance and repair, and can be stolen.

dbbmckennon and their preferred IT networking vendor is now aiming to change the wireless management paradigm with a new cloud-based Software-as-a-Service (SaaS) offering.  Can you imagine reducing your hardware costs by about 50% alone?  IT consulting costs too?  dbbmckennon will join this vendor to ensure client transitions seamlessly with integrity and security. 

Benefits of the Cloud!

• Improve company performance – Applications run real time and give your entire management team the ability to quickly view, understand and take action to respond to changing business conditions.  Improves effectiveness and efficiencies in the organization.
• Allows remote access – at high speed from anywhere in the world.
• Dramatically reduce IT and operating costs – Reduce your costs of servers and desktop computers, and probably printers.  You maintenance costs for computers and servers is substantially eliminated.  You will not need an air conditioned, dedicated server room once on the cloud.
• Reliability – In today’s data centers are extremely reliable.  These are the same data centers that fortune 100 companies utilize.  No more rebooting your company server and server downtime, as well as costly IT field maintenance.  A reliable internet connections can be found anywhere if your primary connection fails.  Back ups are imagined real time, thus no tape, disk or on-line back is needed.
• Security – Secure networks on offices are generally much more vulnerable to damage and theft. Redundant systems and data encryption protect data from loss and intruders.  The cloud greatly reduces documents sent via email, which are often not secure.  Netbooks, not  laptops, will be used by sales and field personnel; Netbooks have no confidential data stored on them if lost!
• Going Green – The cloud reduced paper, postage and handling costs.  Since you documents and files are maintained electronically, storage space is greatly reduced.

Please contact us if you have any questions or would like additional information.

Year of the…Roth?

The 2010 year presents a unique opportunity for high-net work individuals.  Prior to 2010 most individuals making over $100,000 per year, were restricted from converting a Traditional IRA or 401(k) to a Roth IRA.  However, 2010 presents an opportunity to those previously restricted. Not only will high earning individuals be able to complete these conversions during 2010, they will also be able to do so without incurring the normal 10% penalty for early withdrawal, and the tax burden can be deferred over a two year period (2010 and 2011 tax years). 

So why is this important to you as a high earning individual?

Let’s face it; taxes aren’t going down in the foreseeable future.  With increasing federal and state deficits and additional programs being proposed on a daily basis, there is more of a chance taxes will increase over the long-term as opposed to them decreasing.  Thus, taking a smaller hit now may be more beneficial than taking a larger hit down the road depending on the circumstances.

Also consider this: the market is still down from its high in 2007 and is at approximately the same level it has been for the past five years.  Taking that into consideration, any money put into a pre-tax account during that time frame, will likely have little if any capital gains to pay taxes on

So who would benefit from this most?

Not considering other factors unique to each individual, people that stand to benefit the most are:

• Wealthy Individuals
• Those seeking to reduce estate settlement
• Individuals who won’t need to draw income from converted accounts
• Young high-earners
• Those who believe their tax bracket will be higher in retirement

The kicker in all of this is (and golf fans will love this), you get a mulligan.  If for any reason you regret the decision or it becomes a bad decision due to market fluctuation, you can reverse the transactions without any tax consequence within six months of the tax return due date (i.e. April 15, 2011 due date would give you until October 15, 2011). 

Here at dbbmckennon we would be more than happy to answer any questions you may have about these conversions, the tax consequences, and discuss what is in your best interest as a unique individual.  We can also refer you to one of our trusted financial advisors, who can assist you in a Roth conversion; even if you don’t have one set up yet. 

Plan today, to give yourself a brighter future tomorrow.

Should I care about my firms PCAOB inspection report?

To audit public companies our Firm must be registered with the Public Company Accounting Oversight Board (“PCAOB”), the watchdog of the public accounting industry. For us smaller firms, the PCAOB is required to inspect our audit work papers at least once every three years. Believe us, these inspections are not very easy as the inspectors critically analyze and challenging key areas of the audit work papers. The process is time consuming and stressful. At the end of the process, a report is issued identifying their findings. The report is available to the public through the PCAOB’s website. Although the PCAOB members have repeatedly stated that the inspection reports are not designed or intended to rate accounting firms according to a scorecard. We at dbbmckennon believe that at times these reports can provide a rough bearing as to the quality of your independent auditor, especially for the small/medium firms. You can find your firms inspection report here. The most important area of the report is section A “Review of Audit Engagements”. Within the section, the PCAOB highlights areas in which they have identified audit deficiencies. Meaning areas in which the firm did not adequately document their audit procedures. Generally, a firm might expect to get one or two comments regarding its work papers. Anything in excess of this might be a cause for concern.

Being a member of the PCAOB is a privilege not a right. The PCAOB has the power to rescind a firm’s registration within the PCAOB. Upon rescinding, all of the firm’s audit reports will be deemed invalid, thus requiring the company’s financial reports to be re-audited by a new firm.  For an example of an action against a firm, see the disciplinary release on Moore & Associates.

The answer to our questions is YES!  At dbbmckennon we pride ourselves on the timeliness and quality of services we provide.  If you have any questions regarding your firm’s report or the inspection process and how it might impact you, feel free to contact us.

Audit, Review and Compilation – What is the difference?

The difference in each is significant. In most cases, audits, reviews and compilations are necessary to comply with the requirements of banks and lending institutions, suppliers, regulatory agencies or others who rely heavily on the information contained in your financial statements. Depending on the level of assurance required will determine the type of report needed.  The services discussed below may only be performed by certified public accountants, which are registered to do so.  Such firms are subject to quality review inspections.  dbbmckennon, certified public accountants, are registered to perform these services. An Audit provides the highest level of assurance involving gaining an understanding of the internal controls, a critical review of financial analytics, the testing of source documents such as sales orders and disbursements and an independent verification of financial information through third party confirmations. An audit results in an independent opinion from a certified public accountant attesting to the fairness and accuracy of your financial statements and the representations they contain. Audits provide the "highest level of assurance" about the reliability of your financial statements.

A Review is an evaluation of your financial statements through obtaining knowledge of the business and industry, making management inquiries, analytical procedures, and in some cases performing a limited amount of substantial testing. The scope of a review is less than an audit, and thus, the report issued provides "limited assurance" that nothing came to the certified public accountants attention that would require modification. In addition, the financial statements are clearly marked “unaudited”.

A Compilation requires the certified public accountant to obtain an understanding of your business in which your company operates, as well as the basic accounting function and those involved. A compilation is the assembling of financial data from your accounting records and presenting, in the form of financial statements, information that is the representation of management without undertaking to express any assurance on the statements. A compilation provides the assistance needed for you to prepare meaningful financial statements in which the certified public accountant provides no assurance. In addition, the financial statements are clearly marked “unaudited”.

A compilation may be prepared on a basis other than generally accepted accounting principles, such as a cash-basis financial statement.  A compilation may include notes to the financial statements or no notes at all.  The form of compiled financial statements depends on the requesting party or your particular needs.

Please contact us to assist you in evaluating your financial reporting needs and determining which level of service you require.

Is SOX 404 dead?

On November 4, 2009, the House Financial Services Committee approved the Investor Protection Act (H.R. 3817). Included within the Act was the exemption from SOX auditor attestation requirements for small businesses. Specifically, the Act was amended by the committee to exempt permanently companies with a market capitalization of less than $75 million from the Sarbanes-Oxley Act requirement that auditors attest to management's declaration that their internal controls over financial reporting are effective. However, the legislation still has to move through the House and Senate. We immediately provided a hopeful update to our clients, before many Registered Public Accounting Firm were even aware of the Committee approval.

Although it appears the requirement for auditors to attest to management's declaration that their internal controls over financial reporting are effective is well on its way to the grave. The Act does not change the requirement that all public companies must document, test and report on the adequacy of the company's internal control over financial reporting.  Sorry!  Until further notice, SOX 404 is still required for smaller reporting companies with fiscal years ending after June 15, 2010.

Since 2004, members of dbbmckennon have been assessing, documenting and testing internal controls. Our members have worked with some of the largest companies in Southern California. Please contact either Michael McKennon or Russ Boyer if you have any questions.

Introducing dbbmckennon

Former members of the audit and attestation practice of McKennon, Wilson & Morgan LLP have combined forces with the income tax preparation and planning services of DixonBrambila to form dbbmckennon. dbbmckennon serves clients from their offices in Newport Beach and San Diego with a highly competitive fee structure for the Southern California market. “We take every engagement seriously with the expectation that our clients will be completely satisfied with our performance and fees,” said audit partner Michael McKennon in a statement. “Our rate structure is intended to be the most competitive in light of the current economic conditions.”

The combination is a reunion of sorts. Andy Dixon and Thomas Brambila were formerly tax managers at McKennon, Wilson & Morgan LLP for six years until forming DixonBrambila in 2005. McKennon will manage the global audit and assurance practice, and Russ Boyer will manage the San Diego audit and assurance practice. Dixon will service the firm’s global tax practice and Brambila will service the Southern California tax practice.

McKennon was previously employed with Arthur Andersen and PricewaterhouseCoopers. Boyer and Dixon were formerly employed with Deloitte.  dbbmckennon is a member of the Public Company Accounting Oversight Board and American Institute of Certified Public Accountants.

dbbmckennon provides the following services, not inclusive:

Audit & Accounting

• Private and Public Company Audits
• SEC Services
• Review and Compilation Service
• Audits of Employee Benefit Plans
• Agreed Upon Procedures
• Internal Audit Services Including Documentation and Recommendations / SOX 404
• Forensic Accounting
• Fraud and Financial Investigations

Tax Services

• Tax Compliance and Preparation
• Tax Planning
• IRS/State Tax Representation
• Accounting for Income Taxes for Financial Reporting (SFAS 109 and FIN 48)

Business Consulting & Management

• Business Consulting / Coaching
• Financial Reporting
• Bookkeeping and Internal Management Reporting
• Transactional and Technical Accounting Assistance

Our Disclaimer

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, you are informed that nothing in this website is intended to be used as or construed as rendering any United States tax advice and is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed on this website. Links to Other Sites: Some web pages may provide links to other internet sites for the convenience of users. This website is not responsible for the availability or content of these external sites, nor does the website endorse, warrant, or guarantee the products, services, or information described or offered at these other internet sites. Users cannot assume that the external sites will abide by the same guidelines to which this website adheres.

Information Contained On This Website - Disclaimer Of Liability: All data and information provided on this site is for informational purposes only. We make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis. Accordingly, this website should not be relied upon as a substitute for independent research to original sources of authority or independent consultation with a qualified individual. This website and all contributors to this website expressly disclaim all liability to any person in respect to any consequences of anything done or omitted to be done wholly or partly in reliance upon the whole or any part of the website or the materials. The website and the materials including blog posts are for informational purposes only and may not reflect the most current developments in a field.

Your Consent: These terms and conditions of use apply to you when you view, access or otherwise use our website. The website is owned by dbbmckennon. We grant you a nonexclusive, nontransferable, limited right to access, use and display the blog and the materials provided hereon, provided that you comply fully with these terms and conditions of use. If you do not accept these terms, do not use the website. The website reserves the right to change the policy at any time without notification.